Maine Lobster Tastes Best With Dash of Supply Side

Aug. 17 (Bloomberg) — History repeats itself, first as tragedy, then as lobster. Or so you might think from reading this summer's news in Maine, which speaks volumes, or crates, about the farcical nature of North American trade policy.

First, to the dark side of the story, which involves, if not a tragedy, a tragically long dispute over the lumber trade. For decades, the U.S. has been alleging that Canada unfairly holds down the price of timber for its producers, squeezing out the noble U.S. lumberman, hurting his industry and therefore harming the American economy.

In the latest spat, the U.S. accused Canada of intentionally misclassifying good timber as salvage quality, or Grade 4, to sell it at the lower price permitted for such wood under the 2006 Softwood Lumber Agreement.

Humiliatingly, an international arbitration court found no conclusive evidence for such cheating.

That didn't deter U.S. authorities."The Obama Administration is committed to continue vigorously enforcing" the softwood agreement, said Nkenge Harmon, the deputy assistant U.S. trade representative, in a statement.

Not content with just lumber, President Barack Obama has also established an Interagency Trade Enforcement Unit to police other trade agreements and bring to justice any nation it deems a shirker. "We are looking at problems in at least a half-dozen countries and that number is going to grow," said Tim Reif, general counsel in the office of the U.S. trade representative, in a speech.

Fishing Expedition

The underlying presumption of this fishing expedition is that economic growth would be stronger if only other nations could be policed and forced to price fairly. The absurdity of this position is clear when you consider the Canadian point of view in a newer dispute over lobsters.

This year's lobster crop has been enormous, probably because of warmer water temperatures this past winter and spring. For New England lobstermen, supply is now outstripping demand. As a result, lobster processors, most of which are in Canada, are paying very low prices to fishermen — $2.50 or $3 a pound, compared with the $4 a pound the lobstermen want.

That's hitting Canadian lobstermen hard. Because of regulations that aim to sustain lobster supply — which seem pretty unnecessary now — the Canadians are permitted to harvest lobsters for only part of the summer, unlike their U.S. counterparts. They thus need to earn more per pound.

Embarrassed American lobstermen keep reminding anyone and everyone that, heck, there are so few processing plants in Maine they had to come to Canada, and it's not fair to punish them for trying to sell their catch.

Still, like the lumbermen of the Great Northwest, the Canadian lobstermen are furious. They're picketing the processing plants that buy from the New England tricksters (or they were, until a court order stopped them). They tossed lobster traps into the office of the Canadian fisheries minister. Last month, they formed blockades to halt delivery of those heinous Maine lobsters.

This time the "unfair trade advantage" is allegedly on the U.S. side. But U.S. authorities aren't exactly riding to the rescue of Canadian lobstermen. They're siding with the dumpers, and ostentatiously. "Snowe Welcomes Canadian Court Injunction in Lobster Dispute," Maine Senator Olympia Snowe posted on her website after Canada's courts stopped the lobster protesters. Snowe also wrote to Secretary of State Hillary Clinton to call attention to the crisis.

Government's Role

It's doubtful that Clinton or any other American official could do much to solve such problems in the long term. After all, it wasn't government policy but some mystery of the Atlantic environment that led to the market glut. And, of course, the Maine lobster wouldn't be so cheap for Canadian processors if the Canadian dollar wasn't so strong.

Federal authorities typically concern themselves with making sure the lobster catch is sustainable and that domestic processing plants are sanitary — not with whether the creatures are priced properly.

If this lumber-lobster parable has a hero, it's a young entrepreneur named Kyle Murdock, who is starting a new processing plant in Maine, called Sea Hag Seafood, and even hiring inmates from a nearby prison. That's the kind of supply-side thinking that leads to creative business solutions.

The main point is that in every industry, including lumber and lobster, economic challenges are as numerous as lobster legs. Sorting them out is beyond any man or woman, and, certainly, beyond a trade diplomat in Washington. When governments turn into overly meddlesome enforcers of trade law, rather than promoters of trade freedom, they are no longer helping growth; they are laying anti-growth traps.

(Amity Shlaes is a Bloomberg View columnist and the director of the Four Percent Growth Project at the Bush Institute. The opinions expressed are her own.)

© Copyright 2012 Bloomberg

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