Maine’s traditional industries would take a hit from higher taxes if the Trump administration makes good on a threat to withdraw from a trade deal with South Korea, a major market for the state’s lobster and blueberry industries.
“Lobster companies could be in jeopardy if this [pact] is stopped,” said Tom Adams, CEO of lobster wholesaler Maine Coast of York, one of a half-dozen lobster wholesalers in Maine selling to South Korea. “It could impact the lobster industry at home from staff to the boat.”
The president hasn’t acted yet, but he recently told his advisers to prepare to withdraw from the pact. Each year the United States now imports from South Korea goods worth nearly $28 billion more than what it exports to that country. That imbalance is more than double what it was when the agreement went into effect in 2012. U.S. negotiators had intended the pact to have the opposite effect.
In April, Trump called the agreement “a horrible deal” that has “destroyed” the United States, The Washington Post reported.
But withdrawing from the 2012 U.S.-Korea Free Trade Agreement, known as KORUS, could cause the current low taxes to revert back to those of five years ago — 20 percent for lobsters and 40 percent for blueberries. And that would make Maine goods more expensive and less competitive than those of Canada, which has a similar deal with South Korea.
Lobster wholesaler Adams has 48 employees, one dedicated to business with South Korea and another three that handle South Korea and other Asian countries. Ten percent, or more than $5 million, of his company’s total $55 million in revenue last year was from live lobsters sold to South Korea, which is in the top five of the 20 countries to which he sells, he said.
Lobsters top the list of Maine exports by value, according to the U.S. government’s foreign trade statistics. South Korea also is the state’s sixth-largest trading partner by value.
The United States currently supplies 55 percent of South Korea’s lobsters, followed by Canada, according to the U.S. Embassy in Seoul. And Maine has a trade surplus in goods with South Korea, with $18.7 million in fish, lobster and other marine goods topping the state’s exports in 2014. Navigational and measuring instruments were the top imports at $8.5 million, according to Maine Korea Connect, a Korean Embassy publication.
Frozen wild blueberry sales to South Korea also have been robust, rising 65 percent from 2014 to 2016, the Wild Blueberry Commission of Maine estimated. That translates into 2.5 million pounds of frozen wild blueberries worth $2.5 million, according to U.S. Census Bureau trade data. Without KORUS, those sales also would be at risk.
“This will eliminate the trade tariff advantage that Maine currently has for exports of [frozen] wild blueberries and it is likely that export sales to South Korea will decrease significantly and favor cultivated blueberry producers in South America and Canada,” said Patricia Kontur, director of programs at the commission.
If the full tax on blueberries is reinstated, it could top 40 percent, said Chad Bown, senior fellow at the Peterson Institute for International Economics in Washington, D.C.
The numbers may be startling, especially for smaller exporting states like Maine, but Bown said what worries him worse is picking a fight now with South Korea, in the wake of nuclear threats from North Korea.
“This is beyond an issue of international trade,” he said. “South Korea is an important strategic partner.”