IN THIS EDITION: Free trade pilot in Beijing, China’s corn shortage and barley, COVID-19 vaccine, farm receipts, Spotlight Q&A feature

We are experimenting with a new feature at the end of the brief to help us and our readers in Canada and abroad better understand key issues in Western Canada’s relationship with China. Once a month, we’ll ask a question designed to tap into the wisdom of the Canada West Foundation network. The intent is to provide unique insight that goes beyond institutional positions. Scroll down for our first question which looks at the agricultural trade relationship from the view of farmers and agricultural organizations in Western Canada. 

We would like to thank our colleagues at the Inter-American Dialogue in Washington D.C. for providing advice and guidance from their decades of experience producing the daily question in the Latin American Advisor (https://www.thedialogue.org/latin-america-advisor/) 

Free trade pilot in Beijing 

A free trade pilot in Beijing for digital economy and service sector industries? President Xi supported the possibility in remarks at the Global Trade in Services Summit of the 2020 China International Fair for Trade in Services. Read the full English translation of the President’s remarks here. 

China’s corn shortage and barley 

Estimates place China’s corn shortage for 2020-2021 at 30 million tonnes or 10 per cent, the first large shortage in years. China has previously supplemented corn feed with barley from Canada and other countries, predominantly Australia. However, China recently put tariffs on Australian barley and found alternative sources to meet demand (see China Brief 046). With predictions of strong Canadian barley output this year, China’s corn shortage could be a boon for Canadian barley producers and exporters.  

Canada pulls out of China vaccine, looks to US

The National Research Council (NRC) of Canada has announced it has pulled out of the vaccine project with CanSino Biologics in China over shipment delays. Phase III trials were scheduled to start in Canada but shipments of the trial vaccine were never received. The NRC has signed deals with American companies Novavax, Johnson and Johnson, Pfizer, and Moderna to receive COVID-19 vaccines. 

Farm receipts up for canola and pork despite interruptions in trade with China

Statistics Canada quarterly farm receipt data for Jan-Mar 2020 show an overall rise in farm cash receipts of 5.5 per cent – totaling $16.9 billion – with the strongest gains in peas and lentils, crops sold abroad predominantly to China. In fact, dried shelled peas export to China has increased by 91 per cent between the first quarter of 2019 and 2020 as China now accounts for 52 per cent of all dried shelled pea exports from Canada. Canola receipts also saw a 5.8 per cent rise for the quarter while hogs saw a 14.4 per cent jump. 

Everything Else

• China says that Canada, out of multiple countries the U.S. approached, was the only western country willing to arrest Meng Wanzhou. 

• The Chinese embassy’s statement corroborates earlier reports that Mexico, Meng Wanzhou’s final destination when she changed planes in Vancouver and was detained, had made clear that it was not going to detain her despite being in the middle of negotiations with the U.S. for the new NAFTA agreement. 

• Direct flights resume between Beijing and Canada, other countries as COVID-19 travel restrictions ease. 

• François-Philippe Champagne, Minister of Foreign Affairs, met with China’s Foreign Minister Wang Yi. The conversation primarily focused on the two Michaels and other detained Canadians. 

Spotlight: Agricultural community’s views on China-Canada

THE QUESTION  

From your interactions with the agricultural community out west, what is your sense of the dominant mood and outlook towards trade with China by farmers, producer organizations, businesses, etc.? (i.e., those in the agricultural community with whom you interact.) Generally supportive? Apathetic? Helpless, no choice but to stick with status quo? Favouring limiting or cutting back trade relations with China despite the cost? Some combination of these factors or some other view? Why do you think this view is dominant? Are farmers and others you are familiar with acting on this view? 

THE INSIGHTS

The views expressed in this section are opinions and do not necessarily reflect the views or positions of the Canada West Foundation or the China Brief authors. 

Farmers feel incredibly conflicted on China relations and how the Canadian government should approach the economic super power in the future; they understand that China is the final destination but the logistics in between farm and the Chinese port are understood quite vaguely.    

China represents a critical customer for Canadian commodity exports yet also is the poster child for human rights violations, gangster-like diplomacy and disregard for rules-based trade. I believe that the Canadian ag community would like to see Canada take a tougher stance on China’s activities without risking agricultural trade, which is incredibly difficult to accomplish based on the past experiences of Australia and Canada in comparison to the United States. The possibility that an action prompts putting the two Michaels in more danger weighs heavily over anything Canada does. Australia has been outspoken but they don’t have any citizens being held hostage. 

As we have seen in the U.S., a conservative government would be given much more rope by farmers to take tougher action based on farmers’ traditional conservative leanings. For the current liberal government, farmers are not very confident in the party’s ability to minimize trade disruption. I think the Canadian government is definitely contemplating but without a clear path they are hesitant. 

— Shaun Haney, Founder, Real Agriculture and Host, RealAg Radio 

At the end of the day, money talks and BS walks. China remains an important market for Canadian cereals, pulse crops, oilseeds, oil and meal. Because of the manner in which China deals with its trading partners, it is also a risky market and there will be a risk premium included by exporters in doing business with Chinese buyers. It also means that exporters have re-doubled efforts to developing new, more stable markets for our produce such that, when one factors in the risk, even selling at marginally lower prices to other countries becomes preferred. Right now, it’s a conundrum. As responsible businesses – and in order to compete to attract grain from producers – grain exporters need to extract as much value as possible out of the global marketplace in the short term. On the other hand, what is in our best interest in the current environment, isn’t necessarily in our best interest over a longer time horizon. Exporters are each finding their own balance between the next quarter and the next decade.  Hopefully, as a result of what we’ve learned from China, the entire grain sector will be better diversified and better positioned globally to withstand the buying whims of any single jurisdiction at any moment in time. 

— Wade Sobkowich Executive Director, Western Grain Elevator Association, Winnipeg, Manitoba 

Rightly or wrongly, the mood right now in rural Western Canada is anti-China. People who a couple of years ago would have given little consideration to where something was made are now vocally boycotting products — particularly food — that originated there. For example, a buyer seeking locally grown garlic commented she hadn’t realized until recently that the grocery store garlic she had been buying came from China. She now refuses to buy it because she said she has no idea how it is produced. Her motivation for buying local was not so much about supporting local as it was avoiding Chinese product. Farmers feel victimized by the same brand of “hostage diplomacy” as is being used to detain Canadians Michael Kovrig and Michael Spavor. They are paying the price in a macro-political-diplomatic drama over which they have had no input or control. Farmers are well organized and vocal, so they have in a sense become co-opted into pressuring the Canadian government on behalf of China in order to restore their market access. Because of the political demographics in Canada, western farmers have been actually been angrier at the federal Liberals in power for not doing more to pressure China than they have been at China for its actions. It isn’t clear what exactly they expected the government to do, but whatever it was doing, wasn’t good enough.  

— Laura Rance-Unger, Vice President, Content, Glacier FarmMedia, Winnipeg, Manitoba 

There’s wide recognition in the agri-food industry that China looms large in global ag and food markets. Two economic themes emerge from discussions with business leaders across the entire supply chain, highlighting the dual role China plays for Canadian agri-food exporters: First, China’s economic growth and expansion of its middle class represent a significant opportunity to grow and diversify Canadian ag/food exports. This is a trade relationship that we just can’t ignore even if there has been significant disappointment in the stance that China adopted on recent trade issues. It would be desirable to have China follow a rules-based approach to trade and rely on science. Some successful export strategies entail being very focused on specific Chinese regions/metropolitan cities. Second, China’s economic weight has a large influence on global ag commodity and food prices. For this reason, the role of China needs to be considered in a multilateral setting, and not strictly through a bilateral lens. U.S./China trade tensions have been particularly disruptive by creating volatility and depressing prices in some North American supply chains. Trade disruptions involving China are increasingly important to consider in business risk management plans.     

— Jean-Philippe Gervais, Vice-President, Ag Economics and Valuations & Chief Economist, Farm Credit Canada, Regina, Saskatchewan.  

Whether you’re selling grain, beef, potash, or oil, having a reliable market is clearly ideal. Both China and the United States have been our largest customers for a long time, but trade disputes and diplomatic crises are creating a lot of stress and uncertainty for agricultural producers. Managing and improving our trading relationships with China and the U.S. remains a top priority for both the federal and provincial government, but as a trade-dependent country we need to get serious about further diversifying the markets we sell into. While dabbling in diversification has been a popular national pastime (and political sound bite) for decades, Canada still finds itself tightly bound to these two behemoths – either we’re not trying hard enough, or we need to upgrade our diversification strategies. Let’s face it, selling to huge established markets is the path of least resistance. Despite periodic trade spats over the years, selling products into the U.S. has been relatively easy – they’re just across the border, we know they can pay, and they’ve mostly adhered to the rules-based trading system. China isn’t as conveniently located, but a huge demand for resources has made them an attractive market. As tensions continue to rise between Canada and both countries however, we need to speed up our diversification plans accordingly. Selling into smaller markets will take more effort, but future generations will be thankful we did the work. 

— Curtis Hemming, Assistant General Manager, Agricultural Producers Association of Saskatchewan, Regina, Saskatchewan 

Farmers (spread throughout central and southern Saskatchewan) that I deal with everyday predominantly think of China relations as well out of their control. They have a general knowledge of the canola issues with China, but have come to realize that demand has been steady to upwards and therefore has allowed farm gate prices to remain stable and even rise depending on supply/demand. Perhaps, China’s unwillingness to buy whole seed canola has not hurt them as much as originally thought. 

Most of the concerns around China from farmers seems to be whether or not other ag commodities could be affected should tensions escalate between Canada and China. 

I have not heard this group suggest that we need to give in to China’s demands in order to facilitate more canola trade. They are aware of the international law that created this situation and are generally supportive of governments stand to not give in to China’s bullying tactics.   

Because there are lives that hang in the balance in the China/Canada relationship or perhaps to a lesser degree, some trepidation about future trade negotiations, farmers are loathe to push too hard to correct the ag trade issues. Perhaps in this case, human rights trump trade issues. 

— Jean Harrington and her husband John farm in Glenside, Sk. and own and operate PFB Inc., an ag marketing consultant service 

We get it that China is a big country, a huge market, but they do not need to be our No. 1 customer at all costs. Way too many of our eggs are in one basket; a basket which is bottomless and pays the minimum amount for our eggs. Our basic trade theory should be diversify, diversify, diversify – both with who we sell to and who we buy from.  

Some organizations feel helpless (and apathetic) saying “we can’t very well ignore our biggest customer.” We’d like to do business with China, but do we continue to turn a blind eye to their human rights abuses, intellectual property abuses, food health and safety abuses? COVID-19 has fed a groundswell of “buy local,” “support Canadian production,” and “distrust Chinese imports” among consumers; businesses are listening, but it remains to be seen if support is temporary or long term. 

Despite varied opinions about Trump, many farmers wish Canadian politicians would stand up to China the way he has with trade. We are not helpless, but the current federal government does not appear to be giving it their best or full effort. Why can we not increase inspections of goods coming from China to prevent drugs, illegal imports, etc.?  

So what if we upset the Chinese? [The solution] may be short-term pain for long-term gain. We have been led to believe China has admiration for backbone, we seem to be made out of spaghetti. 

— Alison and Michael Ammeter farm in Sylvan Lake, AB; Alison is Chair of the Plant Protein Alliance of Alberta 

China is a huge trade market and one that cannot be ignored. Unfortunately, China is not a fair-trading partner. Because their market is so large, and politically-driven, they have become a bully in the trade world – punishing those who disagree with them. 

Many sectors within Canada have relied too heavily on the Chinese market, without fully recognizing the political risks. Unfortunately, when China decides to change the rules, Canada’s export commodities suffer. I was personally a bigger proponent of trade with China a few years ago than I am now. My distrust for China has grown. I want to trade with them as a producer of export crops but am not convinced they will play by the same rules we do. 

The quality of our goods remains amongst the highest in the world, however, trade challenges have been artificially placed as barriers to China’s access. It’s bad enough that Canadian farmers are losing economic opportunity. It’s even worse that China’s dishonesty implicates the quality of what we grow and sell. This smear job has the potential to damage our reputation with buyers in other countries. 

Through all of this, our current federal government has not strongly supported the Canadian agriculture industry by resolving trade disputes, not only with China but with many other countries around the world. Canada has also failed to make much progress in gaining greater market access in alternative markets. The end result is that Canadian farmers are getting lower returns for our products at a time when we should be earning top dollar. 

— Cherilyn Jolly-Nagel farms with her husband and family near Mossbank, SK;  Cherilyn serves on the Western Canadian Wheat Growers Association Board of Directors. 

 

Stephany Laverty, policy analyst

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.

 

 

 

Banner photo by Katherine Volkovski on Unsplash