Thank you. The Wi-Fi is a little unstable.
That's with restaurant chains, independent distributors, retailers and other importers that value high-quality Canadian seafood.
Our exporters have developed really strong and important brand recognition in live lobster, processed lobster and value-added specialty products in the U.K.
Since coming into force in 2017, our trade has benefited from the free and open access provided by CETA, the comprehensive economic and trade agreement between Canada and the European Union.
As the U.K. moves toward leaving the European Union very shortly, it is vital to our industry that an interim agreement be finalized—and the good news is that it seems like it has just to be ratified—and then a permanent trade agreement be negotiated that will provide equal or better access than CETA gave us between our two countries.
Between 2015 and 2019 the export value of live and processed lobster to the U.K. has remained very steady at about $32 million per year, with strong growth in lobster meat, a return to demand for whole, in-shell frozen lobster and steady live lobster values.
With the closures of restaurants worldwide and the fact that, typically, 70% of Canadian lobster is consumed in the food service sector, lobster exporters have had a tough 2020, like most exporters have. However, many have been able to pivot to directing sales through retail and e-commerce verticals, which has proven to be encouraging and beneficial to everyone in the value chain that I just talked about.
This change in market focus, a significant drop in market demand due to the pandemic, and price decreases on the shore and in the market have dramatically impacted the export value of lobster products to every market, and the U.K. is no exception. Lobster export value for the nine-month period to the end of September 2020 was down 52% from the same period in 2019.
For our live lobster shippers, the pandemic has also impacted air freight options. We take our product to market by plane for live lobster and in container for frozen. Major air carriers have cancelled their flights due to lack of passengers, and our major competitor, the U.S., currently enjoys better air freight options and a shorter transit time to Europe. The benefits of the CETA agreement have helped our live shippers overcome this freight and time-to-market challenge, and we would not want to go backward with a lapse in tariff-free access.
Given that our major competitor is the United States, which also is negotiating with the U.K. on a trade agreement, the Canadian negotiating team should exercise all effort and speed so that Canadian seafood will benefit from being first to secure a favourable trade deal with the United Kingdom.
Another concern noted by lobster exporters involves documentation and certification. It will be vital to our industry that there be a seamless transition to a replacement document certification regime between Canada and the U.K. that will involve the relevant federal agencies.
The largest issue facing our sector is the risk of no interim deal with the U.K., which would mean a return to the MFN tariffs at the beginning of next year, and be in place until an agreement can be reached. Hopefully that's not going to be a problem since it sounds like we have an arrangement already figured out.
Just for reference, though, to put this in clear and easy-to-understand terms, if we don't have a deal, customers of our exporters would be facing an 8% tariff on live lobster, a 16% tariff on whole, in-shell frozen lobster, and a 20% tariff on lobster meat. Both of those last two items are very close to their phase-out, down to zero within the next year.
Given the importance of the market to Canadian live lobster shippers and processors and the ongoing negative market impact of the pandemic, it is critical that an interim agreement with the U.K. be made before the end of the year, and that a more formal agreement be negotiated in 2021.
Thank you very much.