February 17, 2017

POLITICO: Commerce nominee Ross’ pet project: Reducing seafood imports

By Megan Cassella

There are two big things Wilbur Ross wants to help President Donald Trump get done if confirmed Monday night by the Senate as the next Commerce secretary: Reduce the trade deficit and cut government regulation.

But those goals could clash when it comes to another of Ross’ pet projects: reducing the United States’ reliance on seafood imports.

“If there is one consistent message I got as I met with the various members of the [Senate Commerce] Committee, it’s just how important fishing is,” Ross said at his confirmation hearing last month. “I didn’t really understand quite how intricate an industry it is. I think I now have some fundamental grasp of it.”

The billionaire businessman, who lives near the ocean in Palm Beach, Fla., also has set his sights on reopening Russia’s market to U.S. seafood for the first time in three years. But that’s an area where he could get little traction as long as the United States has sanctions on Moscow as a result of its actions in Ukraine.

Russia’s trade ban, which includes U.S. agricultural products, is a sore spot for Alaska fishermen, who congressional aides estimate have lost $200 million in sales to their Bering Sea neighbor.

“Russia undoubtedly and unfairly used seafood as a response to our sanctions,” Ross said in a written response to a question from Sen. Dan Sullivan (R-Alaska). “We need to find a way to deal with it.”

The 79-year-old equity investor, who faces his confirmation vote at 7 p.m. Monday, made his fortune turning around distressed companies in sectors such as textiles and steel and is expected to be a key architect of Trump’s more nationalist approach to trade. He told senators he was surprised to discover the United States ran an $11 billion deficit in seafood trade.

“Given the enormity of our coastlines, given the enormity of our freshwater, I would like to try to figure out how we can become much more self-sufficient in fishing and perhaps even a net exporter of fishing,” Ross said.

Pulling that off would be an enormous accomplishment. The U.S. is the world’s second-largest seafood market after the 28-nation European Union, but 85 percent of the seafood it consumes is imported, according to the National Fisheries Institute, a group that represents a broad cross-section of the seafood industry.

Last year, the United States imported close to $20 billion worth of seafood from nearly 150 countries, including $5.7 billion worth of shrimp. Canada is the United States’ biggest foreign supplier, exporting $3.2 billion worth of salmon, lobsters and other seafood to the U.S. in 2016, followed by China with nearly $2.6 billion in shipments. Russia, the bane of Alaska fishermen because of its import ban, supplied $411 million of seafood, including $260 million of king crab.

There are limited opportunities to increase U.S. seafood production without raising fishing quotas intended to keep fisheries in good health. One action Ross could take to curb the amount of seafood the United States imports each year, however, is to follow through on the new Seafood Import Monitoring Program put in place by the Commerce Department’s National Oceanic and Atmospheric Administration during the waning days of the Obama administration.

That regulation, which is supported by environmental groups like Oceana, is aimed at reducing billions of dollars of illegal, unreported and unregulated (IUU) fishing each year by creating a traceability program to track imported seafood from where it is harvested to its entry into the United States.

Importers face a Jan. 1, 2018, deadline to comply with the regulation for 11 priority species, including Atlantic cod, blue crab, dolphinfish, grouper, king crab, Pacific cod, red snapper, sea cucumber, sharks, swordfish and tuna. The compliance date for two other species, shrimp and abalone, will be phased in at a later date. Eventually, the plan is to extend the regulation to all fish imports.

Alaska crabbers say they are concerned the Trump administration, in its zeal to cut regulation, could undo the traceability program, which is already being challenged in the court by the National Fisheries Institute and several seafood importers as too costly and burdensome.

“We’re a little worried that with this fervor of tossing out everything the Obama administration did, that some very good things would get thrown out, including the IUU traceability rule,” Tyson Fick, executive director of the Alaska Bering Sea Crabbers, told POLITICO.

A few years ago, trade statistics clearly indicated that Russian crabbers were exceeding their national catch limits by huge amounts. More recently, “it seems the Russian government has decided it’s too hard to police [crab catches] so they just raised the quotas to match the actual harvests,” Fick said.

Still, the issue left an impression on Ross, who told Sullivan he was “very mindful of the discussion we had about king crabs coming in from Russia as part of our trade problem” and promised he would look into the matter if confirmed.

Ross was not asked about the Obama administration’s traceability program during his confirmation hearing, but made clear that he shared Trump’s view that American businesses are overregulated.

“So many, many new things that have been put in have never had a cost-benefit analysis,” Ross told the Senate panel. “It would be very useful to conduct that kind of analysis as part of the process for determining which things should be rolled back and what should be preserved.”

Sullivan, who was elected to the Senate in 2014, played a leading role in helping to pass the Illegal, Unreported and Unregulated Fishing Enforcement Act of 2015, which boosted the Coast Guard and NOAA’s enforcement abilities. But he and other members of the Alaska delegation raised concerns about the Obama administration’s plans for the Seafood Import Monitoring Program before a final rule was issued in December.

“The agency was unresponsive to those concerns,” Michael Soukup, Sullivan’s spokesman, said in an email. “Now that it is final, the senator is taking a hard look at the regulatory proposal and digging into the implementation to ensure the requirements aren’t an undue burden on Alaska’s industry.”

The National Fisheries Institute and other groups make a similar point in their lawsuit to block the Seafood Import Monitoring Program. They estimate the cost of the traceability rule could exceed $1 billion per year, outweighing its benefits.

“The rule, were it to go into effect, would remake the way in which seafood is caught, processed and imported around the world,” the industry coalition said. “These changes to food processing practices in every nation would reduce exports into the United States and would dramatically increase the cost of catching, processing and importing seafood.”

NFI is also not keen on Ross’ goal of reducing imports, which it views as unrealistic.

“We pull as much fish out of U.S. waters as we possibly and sustainably can. But that is not enough to meet the demand for seafood in the U.S,” Gavin Gibbons, a spokesman for the industry group, told POLITICO in an email. “We have to bring in imported product to meet that demand. And that … raw material is the lifeblood of jobs here in the U.S.: longshoremen, cold storage, processing, packing, distributing, all the way to restaurant and retailers.”

Fick, of the Alaska Bering Sea Crabbers, also didn’t think much of the goal of the United States becoming self-sufficient in seafood. Much of what U.S. fishermen catch can only be sold in overseas markets “unless Americans are going to start eating millions of pounds of Pollock roe,” he said.

However, the federal government could help Alaska crabbers by mandating country-of-origin labeling that makes clear whether a crab was caught on the U.S. side of the Bering Sea or the Russian, Fick said.

Meanwhile, Alaska pollock fishermen would like to see a change in the way USDA administers the school lunch program so that American youngsters eat more fish caught in U.S. waters, rather than imported from abroad.

“The Russian product undercuts us in the marketplace because of their method of production,” said Jim Gilmore, a spokesman for the Seattle-based At-Sea Processors Association. “They don’t have the same environmental regulations, they don’t have labor protections that we have here in the U.S.”

“Most of their pollock is caught on board vessels that would just freeze the product or maybe head and gut it, then freeze the product. Then they would ship it to China for processing into fillets,” Gilmore said.

In contrast to that twice-freezing process, Alaska pollock fisherman process their catch on the boat and only freeze it once before it’s shipped to the customer, Gilmore said.

Last year, the industry got a helping hand from Congress, which ordered the FDA to change its labeling requirements for Alaskan pollock to ensure it was caught in U.S. waters rather than Russian. But a significant amount of Russian pollock still ends up in the school lunch program because it is priced lower than the Alaskan pollock.

“We’re seeing right now U.S. tax dollars being used to buy Russian pollock for our school lunches, and we think introducing kids to low-quality white fish products doesn’t help us in the long run and in the meantime we can’t even sell our products over in Russia,” Gilmore said.

The industry backs the “American Food for American Schools” bill introduced last year by Rep. John Garamendi (D-Calif.), which would legally require schools to seek a waiver from federal Buy American provisions to use foreign commodities and products in their lunch programs, he said.

That would take some of the sting out of the fact that Russia can freely sell its seafood in the United States, while Alaskan fishermen currently have no hope of selling their product in Russia.

“We’re certainly not out there trumpeting let’s drop our sanctions so that they drop our sanctions, that’s not our place to do,” Gilmore said. “But … the current situation is just inequitable. The school lunch issue is particularly grating because it’s tax dollars going to support our competitors.”