Trump’s Trade Policy Is Lifting Exports. Of Canadian Lobster.
by Ana Swanson (feat. John Weekes)
New York Times
Nov 12, 2017
CENTREVILLE, Nova Scotia — This lobster factory on a windswept bay in eastern Canada is so remote that its workers have to drive for miles just to get cellphone service. But Gidney Fisheries is truly global, with its lobsters landing on plates in Paris and Shanghai through trade agreements hammered out in far-off capitals.
Of late, these trade pacts have been shifting in the factory’s favor, giving it an advantage over its American competitors.
A new trade agreement between Canada and the European Union has slashed tariffs on imports of Canadian lobsters. That means more 747s filled with Christmas-red crustaceans will depart from Nova Scotia for European markets this winter — and more revenue will flow to Gidney Fisheries. The factory, which in the 1800s sent its lobsters to Boston by steamship, is flush with potential as it gains access to new markets and plans to increase its work force by roughly 50 percent, adding dozens of positions to its current payroll of around 85 workers.
“For us, free trade is a good thing,” said Robert MacDonald, the president of Gidney Fisheries, which processes 10,000 to 15,000 lobsters a day.
The Trump administration has adopted a skeptical view of trade deals, promising to scrap or renegotiate global agreements that it believes put American companies and workers at a disadvantage. Among them is the North American Free Trade Agreement, which the United States is trying to renegotiate. It will join its partners in the agreement, Canada and Mexico, for a fifth round of talks in Mexico City that officially begin on Friday.
Some trade experts, though, say America’s get-tough approach is dissuading foreign partners from jumping into talks. Other countries, like Canada, are forging ahead with their own trade deals as they balk at the tough terms the United States is demanding in its trade negotiations. Over the weekend, a group of 11 countries including Canada announced that they were committed to moving ahead with the Trans-Pacific Partnership, a sweeping multinational trade deal negotiated by the Obama administration.
As these deals progress, American companies, particularly exporters, are finding themselves on the losing end of global trade as their competitors abroad gain easier access to foreign markets.
“We live in such a low-margin world, where industry after industry is engaged in fierce global competition,” said John G. Murphy, senior vice president for international policy at the U.S. Chamber of Commerce. “There is a sense in which the United States is standing still, while countries around us are moving forward.”
It’s a historic shift for the United States, which has long led the charge for free trade and open markets. The United States has traditionally been the global leader in forging trade pacts, including during the Obama administration, which negotiated an earlier version of the Trans-Pacific Partnership and began talks with Europe on an agreement known as the Trans-Atlantic Trade and Investment Partnership.
Skeptics in the current administration criticize these pacts as a global race to the bottom that has cost American jobs and depressed wages. President Trump condemned the Trans-Pacific Partnership as one of the worst deals ever negotiated and officially withdrew the United States from the pact on his fourth day in office. Talks with Europe over the trans-Atlantic trade pact have stalled.
When Americans think about lobster, Maine often comes to mind. But Nova Scotia has emerged as a fierce competitor in exporting lobsters, particularly to Europe. Last year, American lobstermen sold only slightly more to Europe than their Canadian counterparts.
That balance could soon shift given the Canadian-European trade pact, which eliminated an 8 percent European tariff on live lobster when it went into effect in September. Tariffs on frozen and processed Canadian lobster will be phased out in the next three to five years as part of the agreement.
The elimination of European tariffs is “the single most challenging issue” for the American lobster industry, said Annie Tselikis, the executive director of the Maine Lobster Dealers’ Association, which represents companies that buy lobster from Maine fishermen. “This trade agreement does give Canada a huge leg up in the European marketplace,” she said.
Ms. Tselikis said the pact was encouraging American companies to invest in new facilities in Canada to qualify for the lower European tariff.
“If the argument is you’re not going to develop this trade policy because you’re worried about outsourcing jobs — well, here we are, potentially outsourcing jobs due to an absence of trade policy,” she said.
Gidney Fisheries, which exports live and frozen lobster, is poised to take advantage of the changing terms of trade. Last year, in anticipation of increased demand, the factory invested in state-of-the-art technology to set itself apart.
The company imported a German machine, sometimes used to make cold-pressed juice, that creates pressure of up to 87,000 pounds per square inch. The machine compresses the lobster in its shell, breaking the connective tissue, killing the lobster in seconds and allowing the meat to be extracted entirely raw — a selling point for chefs and consumers, as the process is considered relatively humane.
On the factory floor in September, a worker in a gray smock covered by a shiny rubber apron loaded lobsters into a plastic tube to feed into the machine. A dozen workers smashed claws, used tiny air hoses to remove entrails and sorted peachy-pink lobster meat into various packages to be flash frozen.
“A decade or two ago, there would be very few players who would have been shipping internationally,” Mr. MacDonald said. “We now ship live lobsters all over the world.”
Once mostly confined to the plates of the rich, lobster has gone mass market. A glut in the global catch roughly five years ago — the product of overfishing cod, a natural lobster predator — caused the price to plummet. Lobster rolls and lobster mac and cheese suddenly appeared on menus of fast food chains like Pret a Manger, Au Bon Pain, Quiznos and even McDonald’s locations in New England.
Better packaging and faster freight services allowed American and Canadian exporters to expand into Europe and Asia. Exporters found a promising new market in China, where newly affluent diners were eagerly adopting Western luxury products like wine, caviar and lobster as a marker of taste and distinction.
Gidney Fisheries sought to tap into that market, with the help of Duan Zeng, Mr. MacDonald’s colleague. Ms. Zeng, who has a master’s degree in fish biology, does much of her work on WeChat, a Chinese mobile app, where she sells its wares. Last December, the company teamed up with Alibaba, the Chinese e-commerce company, to sell premium lobsters online.
Gidney Fisheries’ largest market by far is still the United States, where the company supplies restaurants and hotel chains with Nova Scotia lobsters. But given the changing dynamics of trade pacts, Europe could soon be its fastest-growing market, much to the chagrin of American lobstermen, who were hopeful the United States would sign its own agreement with the European Union.
The Trump administration has not said whether it will continue trade talks with Europe. But other trade pacts under discussion, including Nafta, have shown little progress. In mid-October, Jyrki Katainen, a high-ranking European Union official, said Europe was “negotiating with all Nafta countries, and with all TPP countries, except one” — a not-so-veiled reference to America.
John Weekes, Canada’s Nafta negotiator in the 1990s, said he initially believed Canadian companies might have just a narrow window of advantage over their American competitors. Now, that window looks quite a bit larger.
“It does open up a number of opportunities for Canadians that clearly aren’t going to be available to Americans in the foreseeable future,” Mr. Weekes said.