Lobster has become a symbol of Canada’s economic courtship of China

Free trade with Beijing and the advent of lobster diplomacy

by Justin Ling
Jul 10 2017, 2:28pm

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In the Halifax airport, right after the check-in desk but before the usually modest line for security, there is a curious shop. Its logo, which has been more or less the same for decades, reads: Clearwater.

For locals of Atlantic Canada, the shop doesn’t seem out of place. For those visiting the airport for the first time, it’s extraordinary.

The corner shop is lined with big blue tanks, full of red crustaceans crawling over each other, their claws bound with blue elastics. For about $8 a pound, you can get a box of lobster to take home with you. Since ice packs are deemed a security risk by the airport, the lobsters have packs of frozen vegetables to accompany them for the flight.

For as long as it’s been there, the Clearwater shop has been as much a Nova Scotia embassy as it is an actual store.

The lobster industry, integral to parts of unemployment-plagued Atlantic Canada — still suffering from the collapse of the cod industry and the decline of manufacturing and mining — was valuable, but stunted. Through much of the early 2000s, lobster sales were flat. A few years ago, that changed.

From 2013 to 2014, the Atlantic lobster industry increased sales by nearly 40 percent, according to the Canadian Department of Fisheries and Oceans. The year after, it would grow another 25 percent. Surging sales continued into 2016, and are expected to boom this year. The lobster industry now posts more than $1 billion in sales annually.

There’s a big reason why: China.

In four years, Canadian lobster exports to China and Hong Kong have more than tripled, according to data from the Canadian government. China alone is Canada’s second largest export market for lobster, after the United States.

“Canada has been selling seafood in China for decades, we’ve been there for a long time,” says Geoff Irvine, executive director of the Lobster Council of Canada. “But lobster is relatively new.”

Irvine says that the rise of the Chinese middle class has opened up a consumer base that “yearns for premium products.”

In 2012, Canada exported just over $60 million in lobster to the Asian country and its semi-autonomous territory. That number hit more than $200 million by 2016, and is expected to grow. Most of that is live lobster.

Companies like Clearwater, the ones with the lobster market in the Halifax airport, are seeing the dividends. Over the 2017 fiscal year, the company saw nearly a 25 percent jump in exports to China over the year prior. The company has a dedicated Chinese sales representative and it, like every lobster retailer in the country, is eyeing ways to break into the huge market in a more meaningful way.

The lobster boom is an intersection of so many different stories: The more lucrative lobster season fueled by climate change; a rising China with a growing, wealthy, elite; online retailers who are making the globalization of food all the more easy. But, most importantly for Canada, it’s an important tale of lobster diplomacy — and symbolic of political outreach to the Chinese.

An unlikely agreement

Dealing with China hasn’t always been easy for Canada. Successive governments have oscillated from chastising the repressive dictatorship to trying to forge closer economic ties. Bilateral trade has been strong, but targeted — Canada purchases consumer goods from China, and exports agricultural goods and raw minerals.

But the next big move for the two countries is something that would have been unimaginable a year ago: a free trade agreement.

In an era where free trade has become a dirty word, where even a deal between Europe and Canada was taking flack from all sides, the prospects for an agreement with China would seem dim, if not impossible.

But, strangely, the opposite seems to be true.

Members of Trudeau’s team have spoken openly about Canada’s rapprochement with China being all the more relevant in the era of Trump — although his team are more candid when the recorders are turned off, noting that a closing door to the American market may require an open window to China. While the American election was not a catalyst for the decision to launch exploratory talks with Beijing about the possibility of a deal, it was undoubtedly a driver.

Last August, Trudeau boarded a flight for a whirlwind tour of Beijing, Shanghai, Hangzhou and Hong Kong. Since then, a volley of high-level state visits have gone back-and-forth as part of a diplomatic tango. Just this week, Governor General David Johnston, flanked by the ministers of small business and sport, departed for a four-day trip to China. On Tuesday evening, they’re scheduled for a traditional meal with Canadian-sourced seafood.

Last year, focus was still on the Trans-Pacific Partnership, a deal originally aimed at isolating China in the region. Now, however, with America withdrawing from that agreement and with countries foregoing the tough diplomacy of multilateral deals, China is an attractive partner in the region.

Whatever you think of the new Beijing — the new guard of the communist regime that has supported free trade and fought for action on climate change — Canada’s interest is obvious: Trade.

Rising demand

The advent of long-haul shipping and rising Asian middle class has meant that Canada can finally get serious about large-scale exports of just about anything.

Rapeseed oil (wisely rebranded for marketing purposes as Canola oil) has become wildly lucrative for Western Canada, thanks to its status as a food staple in China. Canada is looking to find a steady demand for lumber in China, as it faces off on yet another trade dispute with the White House on raw lumber. Cars, metal ore, chemicals — all growing fields.

But it’s special products, like lobster, that have become the cause célèbre for the Chinese ruling class and their unlikely friends working the traps off the coast of Nova Scotia.

Case-in-point: Every Monday, a Korean Airlines cargo plane leaves Halifax, capable of carrying 100,000 pounds of lobster, much of it will end up in China. But demand in advance of the Chinese New Year, last January, was so high that Yangtze River Airlines conscripted a second jet full of lobster to fly directly to China.

A big marketing driver for the crustacean exports is the rise of e-commerce in the quasi-capitalist nation. While lobster can be found in supermarkets, it is websites like that have become popular. The Lobster Council of Canada even hired a China-based consultant, with an eye to improving Canadian lobster’s presence on online markets.

Irvine says nobody has quite figured out how to deal with the Chinese market — whether it’s more efficient and profitable to find distributors, export directly to re-sellers, or to try and go direct to e-commerce. But companies are definitely making the investment.

“You’ve got the branded companies who have offices in Chinese cities,” he says. And many of those companies have a dedicated sales force.

Online, lobster usually go for anywhere from 200 to 400 yuan per pound ($38 to $76 CAD.) That’s not exactly cheap for a country where, according to the state statistics bureau, average salaries in major cities hover below 40,000 yuan for private sector workers and 50,000 yuan for public sector ones ($7,600 and $9,500 CAD.)

Sina News reported in 2010 that the burgeoning demand for the lobsters pushed one hungry gang of youth to steal some 80 pounds of the unaffordable shellfish in the city of Pingyang.

The lucrative market is pushing the Canadians to take risks, too. A 2013 report from the Lobster Council of Canada reported that two Canadian brokers had dumped a “large quantity” of lobster into the Chinese market for one to two dollars less than the price paid. The report concluded: “We believe these actions were deliberate and calculated.”

Justin Trudeau with Alibaba chairman Jack MaThe Canadian Press/Adrian Wyld

But business is still generally good.

The Chinese Ministry of Agriculture reported last month that the Chinese purchased 800,000 tonnes of lobster in 2016 — about nine times more lobster than Atlantic Canada catches in a year — which amounts to a one-third increase from two years prior.

Trudeau himself has lent some star power to the Canadian lobster market, handling Canadian lobster with Jack Ma, the chairman of online marketing giant Alibaba, while at the web retailer’s Hangzhou headquarters. He was there to launch the Canadian pavilion of Tmall, which sells goods directly to consumers in China, Hong Kong, Macau, and Taiwan.

The Canadian pavillion, much like the Clearwater shop in the Halifax airport, offers live lobster.