EU Approves Elimination of U.S. Lobster Tariffs

On November 26, 2020, the European Union approved a deal with the United States that eliminates tariffs on all U.S. lobsters for the next five years, with the possibility of permanent elimination in the future. The deal was a result of negotiations between outgoing U.S. Trade Representative Robert Lighthizer and European Union Trade Commissioner Phil Hogan. In exchange for the elimination of tariffs on U.S. lobsters, the U.S. will reduce tariffs by 50% on EU exports, including glassware, ceramics, disposable lighters, and prepared meals. The deal will apply retroactively to August 1, 2020 and provides for reimbursing companies that have been subjected to lobster tariffs since that date. This deal, which covers roughly $200 million worth of goods, is a significant sign of progress because it is the first EU-US negotiated tariff reduction in over 20 years.

For several years, the European Union accounted for over 15% of U.S. lobster sales. The U.S. exported $111 million worth of lobster to the EU in 2017. However, in 2017, Canada and the European Union implemented the Comprehensive Economic and Trade Agreement, which reduced tariffs on Canadian lobsters to zero. This disadvantaged U.S. lobster exporters, who were facing tariffs of between 8 and 30 percent to sell into the European Union. The new agreement is expected to place U.S. lobster exporters on the same level as Canadian exporters.

The deal is a welcome sigh of relief for the U.S. lobster industry, which has recently experienced significant setbacks. In the first half of 2020, U.S. lobster manufacturers endured a 44% decrease in sales compared to the first half of 2019. Tariffs imposed by China on U.S. lobsters are a major contributor to this trend. Total U.S. exports of lobsters were valued at $638 million, $687 million, and $598 million for 2017, 2018, and 2019, respectively. The decline after 2018 is due to China introducing a 25% tariff on U.S. lobsters in July of that year, on top of an existing 5 to 7 percent tariff. As a result, U.S. exports of lobsters to China fell from $148 million in 2018 to $86 million in 2019, sinking even further—to only $26 million—in the first half of 2020.

A further burden on the industry is the COVID-19 pandemic. The imposition of protective measures to combat the spread of the virus eventually extended to the partial or total closure of restaurants around the country, which account for nearly 70% of the demand for seafood. This has caused severe losses across the industry, including for lobster. Due to the pandemic, global U.S. lobster exports cratered to just $73 million for the first half of 2020.

Although numerous burdens remain for the U.S. lobster producers, the elimination of the EU’s tariff could revitalize the once-thriving industry. The deal is expected to substantially increase sales of Maine lobsters to European countries. And, with the rollout of COVID-19 vaccinations underway nationwide, there may even be cause for cautious optimism about the U.S. lobster industry’s future.