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Lobster and Tariffs

Who Has The Edge In The Lobster Trade War?

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Lobster traps in Rockport.
Meredith Nierman
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Lobster and Tariffs

There are few New England scenes as iconic as the ol’ lobster shack. Local crustaceans being served up fresh and delicious in whole or in roll form. Well, it turns out that “just-off-the boat” experience has pretty broad appeal ... like as far away as China.

"There’s always been a demand for it, but they wanted the live lobster," said Arthur Sawyer, a Gloucester lobster fisherman and President of the Massachusetts Lobstermen's Association. "Live lobster — ya know — it's like a 36 hour thing to get to China."

A decade ago, the Chinese market for U.S. live lobster was essentially nonexistent. But a few years back, shippers finally worked out how to reliably get fresh live lobster to China. It was a game changer. Last year, the country imported nearly $150 million worth.

"There’s a whole lot of exporters that have gotten into the lobster business strictly because of China," said Sawyer.

But live lobster got swept up in the trade war this July, when Beijing slapped a 25 percent tariff on U.S. imports. And just three months in, it's already having an impact here. Vince Mortillaro, a local wholesaler, said China has stopped buying from him completely, and he’s has had to lay off three employees.

"They’re affecting me a lot," he said of the tariffs. "We’re losing like 40,000 pounds of sales a week."

For now, the pinch wholesalers are feeling has yet to trickle down to lobster fishermen on the boats, who sell to the wholesalers, or the lobster-craving public. As for why? Well, it’s complicated. Live lobster exports are an important part of the equation. But a sizable chunk of New England total haul each year gets sold off to be processed.

"Most of the lobster, a lot of it gets processed for the lobster meat," explained Sawyer. "Most of the processing goes on in Canada."

"We buy half of Maine’s lobster, and a bunch of Massachusetts lobster, to process here," said Geoff Irvine, Executive Director of the Lobster Council of Canada. "And then we sell it all around the world."

Indeed, Canada buys millions of pounds of U.S. lobster each year, processes it, and sells it internationally as a product of Canada.

"I don’t think there’s any industry where free trade is more important than lobster," said Irvine.

Asia, including China, and Europe are important markets for that processed Canadian lobster. But their single biggest buyer?

"America," said Irvine. "The U.S. is our biggest customer. We sell lobster meat to all the major chains and the retail sector, so the U.S. would be No. 1."

Thanks to NAFTA, all that buying and selling of lobster between the US and Canada is tariff free — at least for now. Renegotiating NAFTA has been a priority for President Donald Trump. And talks with Canada are currently at a bit of a standstill.

"We don’t expect to have it impact lobster," said Irvine. "But we don’t know."

Of course, Canada is also in the live lobster game. So not only are they a crucial buyer of U.S. lobster and a crucial supplier of processed lobster to the U.S., but also our chief competitor.

Ya know, your classic "frenemy."

"For 20 years we’ve been able to develop this business back and forth together," said Irvine. "Now it's … there’s just a lot of uncertainty."

That’s in part because the two countries are moving in different directions on international trade. Those Chinese tariffs don’t extend to Canada. And last year, Canada entered a new trade deal with the E.U. that eliminated a 7 percent tariff on live lobster imports that is still in place for U.S. exporters.

"The tariff going away in Europe has been beneficial and we’re selling more live lobster there," said Irvine.

With Canada now enjoying a competitive advantage in two crucial overseas markets, they could be poised to take a bite out of the U.S. live lobster export business. How big a bite — and what that means for prices, jobs and the overall health of the lobster industry here — remains to be seen.

"Canada’s not fishing," said Sawyer. "Canada has closed seasons up there. The majority of the fishing that goes on in Canada starts in December. So that’s when we’re going to find out how bad this tariff situation’s going to be."

So, at least in this battle — a critical one for us here in New England, but just one of thousands in the growing U.S. and China trade war — the ball may actually be in Canada’s court.

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