Washington’s big, ugly clams caught up in trade war. It’s hurting businesses, state
Roughly 650 million pounds of them rest below Puget Sound. They can live to be 150 years old.
In China, they’re a coveted delicacy, often enjoyed for their crisp texture and purported aphrodisiac qualities.
They’re just not much to look at, admits Cody Mills, the 35-year-old president and owner of Alaska Ice Seafoods.
“Geoduck, realistically — if you don’t look at it — is one of the best foods you’ve ever eaten,” Mills says, with a straight face, from his office along the upper turning basin of the Hybelos Waterway at the Port of Tacoma.
If there’s one thing Mills knows, it’s geoducks, which are native to to the Pacific Northwest, British Columbia and Alaska. Last year alone, he says, 1.6 million pounds of the burrowing, phallic bivalve made its way through Alaska Ice Seafoods’ nondescript facility on the Tide Flats.
The vast majority was shipped live to China, reaching plates just days after it was dug up.
In Asia, and particularly China, geoduck is “explosively in demand,” Mills explains. There, a 2-pound geoduck — which is a standard size — can sell for more than $100 on the open market, he says.
For Alaska Ice Seafoods, it’s been a lucrative racket. Over the last three years, the company has gone from doing $14 million in annual geoduck sales to more than $30 million, Mills says.
There is, however, a significant catch — which is the reason Mills agreed to talk with me in the first place.
He’s worried about the trade war between the United States and China and its impact on an industry he’s watched blossom and prosper over the last decade-plus.
“I stay awake at night, every night to be honest, thinking about this. It’s an emotional, personal answer,” Mills responds when asked what the future holds. “Do I think my business is at risk? I do. And I’ve given this thing everything I have. That’s a tough place to be.
“But if you just go back 18 months, and you ask me that question, I would say, ’We’re taking over the world.’”
‘Crushing’ geoduck tariffs
For Mills, his business and others in Washington like it, what altered the previously rosy economic outlook is the 35 percent tariffs on the import of U.S. geoducks.
Over the last two years, China has invoked the tariffs in retaliation for tariffs the Trump administration placed on a host of Chinese goods.
The result for Washington’s geoduck industry, Mills says, has been “crushing.”
The Chinese tariffs, Mills explains, drastically cut the amount of local geoduck exporters like him are able to get for their product in China. That’s particularly true when it comes to geoducks harvested in the wild, which account for more than a third of his geoduck business.
The tariffs put companies like Alaska Ice Seafoods at a competitive disadvantage with British Columbia-based exporters, Mills adds, lowering the price they’re able to fetch.
Complicating matters, Mills notes, is the fact Chinese demand for geoduck has begun to diminish recently, though he largely attributes this to the trade war as well. As the economic staring contest has stretched on and China’s economy has slowed, the Chinese are simply buying fewer geoducks, he believes.
Mills, though, says he’s most concerned about the industry-wide impact of the trade war.
It will hit smaller harvesters and farmers — many of whom Alaska Ice Seafood has long-term partnerships with — the hardest, he says.
“I think some of the companies are going to go out of business if it doesn’t end soon. And when I say soon, I mean in the next 90 to 180 days,” Mills says.
Mills spoke to The News Tribune on the same day last week the United States and China announced a new trade agreement, so there was cautious optimism in the air. Details of the deal remain limited. The United States, at least, has said it will be signed by early January and go into effect 30 days later, according to Bloomberg.
According to state economist Steve Lerch, it’s too early to tell what the deal might mean for the state, including the geoduck industry. Anything that “ratchets down the trade war” would be “generically positive for Washington,” he says, while also noting that the two sides have appeared close to a deal before only to have it fail to materialize.
Mark Gibson, an economist and expert on international trade at Washington State University, agrees.
“My understanding is that the trade deal is far from finalized yet. There are a number of issues to hammer out,” Gibson says. “I think the hope is that it would lead to a halt in the trade war, and that will avoid the next wave of retaliatory tariffs.”
Lerch and Gibson both highlighted preliminary details of the announced deal, including a pledge by the Chinese to purchase more agricultural goods from the U.S., which could be good news for geoducks.
“There’s reason for optimism, but ... we’ll have to see what happens when they hammer out the details,” Gibson says.
Mills, meanwhile, tempered his optimism like a businessman who prefers the bottom line over false hope.
“The news we saw this morning was incredibly positive,” Mills says. “But until ... it’s actually done, I try not to hypothesize too much.”
Falling prices
If Mills is closely tracking the Chinese geoduck market, so are the folks at the state Department of Natural Resources.
For good reason.
Every year, the agency auctions off the rights to harvest wild geoduck from fertile beds on public lands across Puget Sound.
Split equally with local tribes, it’s an annual haul of roughly 5 million pounds, according to Joe Smillie, a DNR communications consultant for aquatics.
All told, including farmed geoducks grown on tribal, state and private tidelands, the state exports 11 million pounds of geoduck to China every year.
According to information provided by DNR, wild geoduck harvest-rights auctions have regularly earned the state more than $21 million annually. As Hal Bernton of the Seattle Times reported in October, in 2018 it totaled nearly $28 million.
According to state economists, next year it’s expected to be less than half that — largely because of Chinese tariffs. The economic forecast for 2020, which was recently revised, now predicts revenue of roughly $13 million from geoduck harvest rights, according to Smillie.
The reason is simple. The geoduck tariffs mean the price harvesters and others are able to pay per pound has dropped substantially, the state says.
According to Smillie, in 2018 the average bid price for geoduck harvest rights at auction was $11.31 per pound.
At the most recent auction, last week, that price had fallen to an average of $4.06 per pound.
While DNR officials note that the most recently auctioned geoduck harvest rights covered February and March of next year, which is the last harvest period of the fishing year and typically when the lowest-quality geoducks are sold, the drop-off was still notable.
“What we are now seeing is one of the quickest, fastest drops in the value we are getting for our geoducks,” Commissioner of Public Lands Hilary Franz says.
Restoration funds cut in half
State geoduck auctions occur four or five times a year, Franz explains, with the money generated going to important projects across the Puget Sound, including salmon habitat restoration.
The impacts of the trade war have been felt here, too, she says.
Purchasing the geoduck rights allows you to harvest a specific weight quota of geoducks in a specific location during a specific period of time, all of which is monitored closely by the state.
About 15 percent of the DNR’s geoduck harvests are in Pierce County, according to the agency.
Having purchased more geoduck harvest rights than any other company in the state over the last 25 years, it’s a system Mills and Alaska Ice Seafoods know well. The company alone has annually spent millions of dollars securing the harvesting rights, Mills says.
Franz says the loss in revenue from geoduck harvest rights directly and substantially impacts the state’s ability to protect and rehabilitate its aquatic lands, including in Pierce County.
Specifically, Franz highlighted a shoreline conversion project on Anderson Island and the Ancich Waterfront Park project in Gig Harbor as two that have benefited from the state’s sale of geoduck harvest rights.
Franz also points directly to statewide salmon habitat restoration projects, many of which are funded with revenue generated by geoduck harvest rights.
These projects, she says, play a critical role in efforts to support the region’s endangered southern resident orca population.
“This is going to have an impact there,” she says.
Like nearly everyone, Franz is uncertain how to respond to recent news regarding a potential trade deal between the U.S. and China.
Mainly, she stresses the importance of ending the trade war.
“As the nation’s most trade-dependent state, Washington has suffered disproportionately from the president’s rhetoric and empty pledges,” Franz said in a statement emailed to The News Tribune.
“This trade war is hurting Washington’s blue-collar workers, and they need relief now,” she continued. “If we’re going to work on their behalf, my advice to the president is: don’t talk about it, be about it.”
Weathering the storm — for now
Standing in front of a giant, towering stack of square tanks, many of them full of live Dungeness crabs from the previous day’s haul, Mills — the president of Alaska Ice Seafoods — can’t help but beam.
He’s proud of the company he’s pushed to expand over the last three years and believes the time and resources he’s invested have been worth it.
Mills describes Alaska Ice Seafoods’ modular taking system — which keeps seafood, including geoducks, alive and healthy for longer than conventional live seafood tanking systems — as state of the art.
“I do believe, at this point in time, that I’m the best in the world at it,” Mills says with pride.
Still, there’s reservation in his voice, and that’s unusual, Mills says.
He’s an optimist by nature and believes in guiding his company with energy and enthusiasm.
The trade war, however, weighs on him.
Compared to a lot of companies, he’s in a position to weather the storm, he believes. Alaska Ice Seafoods is a well-known brand that sells to markets outside China, including New York, San Francisco and Seattle, he notes. Expanding the business to crabs, oysters and clams has helped, he adds.
At least for the time being.
What Mills is less certain about is the fate of everyone else in the state’s geoduck business, particularly the small-time harvesters and farmers Alaska Ice Seafoods contracts with and depends on.
Mills doesn’t know what’s going to happen, and that’s what bothers him most.
If the trade war doesn’t end soon, “It’s going to get harder, and there’s going to be job loss,” he believes.
“I think about those 60-year-old farmers who do it from their house, and this was their retirement plan,” he says.
“It’s just bad. It’s just going to be bad.”
This story was originally published December 19, 2019 at 6:05 AM.
