IN THIS EDITION: China’s involvement in personal protective equipment (PPE) and what this means for Canada’s fight against COVID-19; Canada and China all talk, little action on canola; and China’s impact on global supply chains during COVID-19.

China, Canada, and Personal Protective Equipment (PPE)

First of all, what is PPE?

Medical PPE consists of those items that protect medical professionals and patients from exposure to infection. These items include gowns/scrubs to protect clothing, facial protection such as face shields or respirators which filter out particulates from the air, masks including surgical and N95, which act as respirators to filter particulates, gloves and eye protection.

PPE is important because it acts as the primary defense for front-line workers from exposure to COVID-19 through coughs, sneezing and other particulates.

Canadian PPE sent to China

As we saw in the previous China Brief, the Canadian government donated 16 tonnes of personal protective equipment to China at the beginning of February to help with the COVID-19 response. The Canadian government is now facing criticism for sending materials as the number of cases in Canada rises and warnings of PPE shortages emerge.

While the Canadian government is working with Canadian companies to ramp up supply production, experts are still predicting shortages in at least the short term.

Chinese Response

Huawei, the company at the centre of the dispute between China and Canada, has donated a combined total of almost one million masks, including N95, to B.C. health care workers. The company has reached out to other provinces to see if donations are welcome but not all have accepted the offer. The B.C. government did not publicize the donation and the company itself has made it clear that they do not want to publicize their donations. However, there are reports that Huawei plans on sending six million masks to Canada.

The Chinese government has also donated 30,000 medical masks, 10,000 sets of protective clothing, 10,000 goggles, and 50,000 pairs of gloves as it looks to become a global leader in the response effort.

Additionally, Prime Minister Trudeau said this weekend that Canada is going to be receiving millions more medical masks from China within 48 hours. These masks will be going to Quebec, where the most cases of COVID-19 are. This was announced the day after U.S. based manufacturer 3M got direction from the American government to stop exporting N95 respirators to Canada and Latin America.

Supply-Chain Concerns

Amid Dutch, Turkish, Spanish, and Australian recalls of faulty Chinese-donated materials including masks and tests, Trudeau has promised that officials will ensure donated materials are up to standard for Canadian use.

The Chinese government has also taken steps to prevent the export of faulty products through the use of export controls. These measures ensure that only those companies with proper medical products registration can export supplies to other countries. However, with increased red-tape, exports could effectively stall at a time when Canada and other countries have an emergent need for PPE and China produces 50 per cent of world supply. Canada is not alone in its reliance on Chinese supplies, China controls between 70 and 95 per cent of the U.S. market for vitamin C, ibuprofen, hydrocortisone, and acetaminophen and 97 per cent of the antibiotic market.

At the same time, medical supplies from other countries are in decline as 68 countries have announced they are restricting supply exports – Canada is not currently one of these countries. Due to increased demand from limited suppliers, cargo flight rates are significantly impacted, with 100,000 kg of freight between Beijing and Vancouver typically costing $300,000 but could see prices as high as $800,000 this week.

Bottom line

Canada is taking steps to mitigate any shortages in PPE through domestic efforts to ramp up production. Until these efforts reach maximum output, Canada is still reliant on importing PPE to backfill usage, which is the role of the federal government under the Federal/Provincial/Territorial Health Response Plan for Biological Events. As exports are stopped, the global medical supply chain, of which China is a major contributor, looks increasingly unstable. The supply chains for raw market materials to produce PPE are also unstable due to increased global demand.

Trade economists have suggested that establishing higher rates for equipment for fixed-time periods may be a better solution as it will incentivize companies to start or continue to produce medical supplies while keeping supply chains open. It remains to be seen whether countries such as China will have an appetite to support such a move or if protectionist policies will continue to spread.

Canola updates

At the end of March, reports surfaced that the ban on canola seed to China had been lifted (the China team at CWF was very excited!). However, it seems that these reports are not true. The ban – which, specifically, is only against Viterra and Richardson International, Canada’s two largest canola exporters – against canola seed is still in place.

What has changed?

Even though the big news story turned out to not be true, there have been some changes in the China-canola story.

1. More stringent dockage requirements: On March 31, the standard of dockage allowed in canola exports to China from Canada was changed from 2.5 per cent to one per cent.

Dockage: things found in canola seeds (or other crop) that are not canola seeds – such as damaged or broken seeds, small rocks, weeds, etc.

• Dockage has been a point of contention for both countries for over a decade. China cites the risk of blackleg contamination coming from canola imports going into Chinese canola fields. In 2009, China temporarily blocked imports of Canola over dockage, and again in 2016. In 2016, the countries agreed to jointly investigate concerns and allow 2.5 per cent dockage for the next four years. This agreement expired at the end of March, and China reverted to a one per cent dockage standard.

2. Ongoing talks: On March 30, officials from the Canadian and Chinese governments had a call to discuss canola trade between the two countries. Experts on the issue took this as a good sign.

• A proposed reason for why China may be looking to re-engage on the issue is that, with global trade slowing down because of the coronavirus, China may be running low on inventories of oil and protein.

Why is this so important?

• Canola is a major part of the agriculture industry: In 2018, Canada exported nearly $12 billion worth of canola – about 1.5 times the amount of seafood exported in the same time period. The Prairies, which produce almost all of Canada’s canola, are particularly exposed. In 2018, Canada sold nearly $4 billion worth of canola seed and oil to China alone.

• According to the Canola Council of Canada, canola typically delivers a $26.7 billion impact a year through jobs and spending.

What happened with canola last year?

• A little over a year ago, the canola seed export licences of Viterra and Richardson International – Canada’s two largest canola exporters – were revoked. Chinese officials said this was because pests were found in canola exports. Many analysts argue this has more to do with the arrest of Huawei CFO Meng Wanzhou than anything else. (For a deep dive into this, see the China Brief, Edition 019, or check out this podcast with Kelsey Johnson from Reuters).

Other Stories

• China and the United States announced continued trade progress under the Phase 1 agreement around agriculture. This includes new rules for American chicken producers, and more access for U.S. pork, beef and animal feed exporters. Nearly 1,000 pork and beef facilities in the U.S. can now ship to China.

• Additionally, China made a major wheat purchase – 340,000 tonnes. This is the first purchase since China implemented retaliatory tariffs against the U.S. in March 2018.

• The Asia Pacific Foundation, in an edition of the Asia Watch newsletter, analyzed how China’s new travel restrictions on foreigners entering the country will impact global supply chains.

• “Because about half of the world’s freight is actually transported through the bellies of passenger aircraft, this ban on passenger flights is likely to have implications not only on China’s foreign trade, but also on the flow of protective medical gear, notably masks and respirators, that is urgently needed around the world.”

• There have been rumours that China downplayed the extent of the coronavirus in China, this has implications for countries using this data to model impacts on their own countries.

• Canada Health Minister Patty Hajdu says that there is no evidence that any under-reporting in China happened.

• There are also concerns about Beijing’s relationship with the World Health Organization (WHO), and how this influenced the WHO’s early messaging about the coronavirus.

• This has implications for Canada: “The trustworthiness of the WHO is a particular concern for countries like Canada, where public-health leaders have sought to follow WHO recommendations despite internal warnings about the reliability of information coming from China.”

• A Chinese oil company has announced the delay of a drilling campaign in Flemish Pass, N.L., because of COVID-19. This is a significant blow to Newfoundland and Labrador’s oil industry.

• Tentative signs of economic recovery in China are helping some Canadian companies weather the storm, particularly for Canadian companies with factories in China and those who are using moderately growing Chinese demand to stay afloat.

• Chinese state media Xinhua reported that Northwest China exported grains to Canada for the first time ever – 13 tonnes including red beans, mung beans, millet, and sorghum.

– Sarah Pittman and Stephany Laverty, policy analysts

The China Brief is a compilation of stories and links related to China and its relationship with Canada’s West. The opinions expressed in the links are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates.