IN THIS EDITION: Canadian diversification of food and beverage exports, experts comment on stories that did not make the news this year
Canadian diversification of food and beverage exports
One of the key questions has been where and how should Canada diversify trade. A new Farm Credit Canada report, Trade Rankings 2020: Opportunities and Challenges to Diversify Canada’s Food Exports, provides some suggestions. In terms of Canada-China, the report contains recommendations on trade areas in which Canada should diversify away from China, one of the largest recipients of Canadian goods such as canola and pork, and where Canada could increase exports to China such as potatoes. Read the full report here.
While diversification is important, our Trade and Investment Centre’s recent publication, When interests converge: Agriculture as a basis of re-engagement with China, demonstrates the difficulty in fully displacing and reallocating Canadian agricultural exports to China. Canada has attempted to reallocate $2 billion of canola seed export to 10 countries in 2019 as a result of China’s 2018 shut out. However, the displacement was still $542 million short in the year. The limited success in replacing China for the canola market is similar to Canada’s limited success in moving overall softwood lumber exports away from the U.S. This demonstrates the difficulty in walking away from engaging China on trade.
Frozen food and beef exports held up
Canada opposes China’s testing of frozen imported foods for COVID-19 at the World Trade Organization and called the tests “unjustified trade restrictions.” Australia, Brazil, Mexico, Britain and the United States supported Canada’s comments. The World Health Organization (WHO) has said that there are no reports of transmission coming from food or packaging. China has ramped up testing in recent weeks.
Chinese beef importers and exporters to China feel the crunch from increased testing. Chinese restaurants say they must make their orders three months in advance rather than a typical month to accommodate increased import procedures. Importers have started to slow and cut purchases as costs rise. Domestic pork production has also picked up after African Swine Fever slowed Chinese production earlier this year, which has also cut into beef demand.
Canada’s plan for ASF outbreak
With outbreaks dominating pork headlines in China and then Europe, Canada should take precautions to prevent an ASF outbreak says Dr. Catherine Filejski, President of the Canadian Animal Health Institute. China saw production fall by a third at the peak of the outbreak. As the third largest pork exporter in the world, an outbreak would cost Canada an estimated $50 billion while a national ASF plan would cost $50 million. Sniffer dogs to detect illegal meat imports, early-detection training, clear communication mechanisms with producers across the country, and coordination between animal health and veterinarians as well as industry and government are all key components of such a national plan.
MPs vote for tougher stance on China
The House of Commons voted 179-146 on a motion for the federal government to deliver the following by mid-December:
- A plan to handle Chinese relations based on the Australian model to restrict foreign interference and espionage.
- A decision on Huawei’s involvement in Canada’s 5G network.
Minister of Foreign Affairs Francois-Philippe Champagne cautioned against such an approach as such a move could have repercussions for Canadians detained in China.
Gold, copper and rare earth minerals
The federal government’s review of Shandong Gold Mining’s purchase of TMAC Resources and the Hope Bay gold mining project has been extended 45 days. The national security review is required under the Investment Canada Act as the Chinese government is a partial owner of Shandong Resources.
New copper contract opens Chinese market to domestic and international copper investment. The Shanghai International Energy Exchange’s contract comes at a time when copper is recovering from the pandemic and will allow China to gain influence over global copper prices.
Canada’s lag behind China in terms of key rare earth and other mineral resources is the subject of this op-ed from former Member of Parliament, Steven Fletcher. The op-ed pushes for Canada to consistently apply the Investment Canada Act on foreign asset acquisition and do more to protect these resources.
- After months of work to get the proper permits, the Calgary Zoo announced the two giant pandas are on their way back to China. The COVID-19 pandemic disrupted the fresh bamboo supply chains for the two pandas requiring them to go back to China sooner than anticipated.
- This headline says it all: “Fists and pig guts fly as Taiwan politicians fight over pork imports.” With the Taiwan President’s announcement that Taiwan will accept U.S. pork containing ractopamine, the opposition Kuomintang party demonstrated against the move by throwing buckets of pig organs onto the parliament floor and causing a brawl.
- The decision to sail the HMCS Ottawa through the Taiwan Strait required private meetings and discussions at the highest levels of the Canadian government. The strait provided the fastest route to Bangkok for the ship but discussions show that the move was also a show of support for regional security, partners and allies, as well as the rules-based international order.
- The two Michaels received an in-person visit from Canada’s Ambassador to China, Dominic Barton. The Canadian Embassy in China did not release details on where the two Michaels are detained or what conditions they are in.
- Former Canadian Ambassador to China John McCallum said he made efforts to improve the two Michaels’ living conditions while serving as ambassador. Mr. McCallum also said he regretted his comments about the 2019 Canadian election which were made to Chinese officials.
What is one (or two of) important stories affecting Western Canada and China that were not in the news at all, or not covered extensively in the Canadian media this year? Not canola, not Meng, no Huawei, what beyond these types of issues, was missed?
The Consul General of the People’s Republic of China in Calgary and the Embassy of Canada to China were both invited to respond to this question. The Embassy of Canada to China could not meet the publication deadline for this issue but the China Brief will publish the comments if made available in future. 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.
Brett Stephenson, Policy and Government Relations Chair, Canadian Chamber of Commerce in Hong Kong
In late October, China’s Communist Party Central Committee held its 5th Plenum to deliberate on the 14th Five Year Plan (FYP) for 2021-2025 and the economic goals out to 2035. Full details won’t be released on the plan when China’s legislature meets in March 2021, but some initial info has impacts on Western Canada.
In the FYP, expect to see much ink on “dual circulation”, an economic policy that refers to leveraging China’s dual forces of both domestic and global demand by means of developing domestic capacity while pursuing openings in global markets. The focus is to utilize China’s domestic economic strength and seek to transfer and localize foreign technologies into Chinese technologies.
For Western Canada, this will impact our top export, agriculture. China plans to utilize foreign biotechnology to help produce better domestic yields and seed production to create crops that China needs and help to find its livestock. This means that Chinese biotech companies and farmers will increasingly be able to grow more canola, wheat, and barley. This will mean decreasing market share for Canadian ag exporters, and the words “we have what they want” slogan by Canadian trade and business people will no longer resonate as much as it did.
For more R&D intensive companies in general, it’s going to make them more attractive for investment or takeovers by Chinese companies. But this also means it will attract Federal government attention on takeovers by Chinese companies given the geopolitical environment that is setting in for the 2020s.”
Chuck Chiang and Hayley Woodin are both reporters for Business in Vancouver
There has been ample international media coverage of the 15-country Regional Comprehensive Economic Partnership (RCEP), but little on what the world’s largest trading bloc means for Canada. It would be useful – and wise – to further consider the significance of the agreement from a Canadian trade perspective.
RCEP is China’s first multilateral agreement and includes many of Canada’s allies. It marks a step toward greater regional integration at a time when Canada-China relations are at an all-time low, and stands as an example of how countries such as Australia can set issues aside to engage more deeply with China. As CWF recently wrote, “RCEP is an additional blow to Canada’s trade future with China.” Further media coverage of that future is warranted.
Closer to home, Chinese state-owned energy giant CNOOC Group’s acquisition of Nexen in 2013 was seen as a watershed moment for Ottawa creating limits for further investment from China in the oilsands. Something similar could happen for the Arctic shipping and mining sectors at the remote post of Hope Bay, Nunavut.
In June, the right-holder to the 1,101-sq. km. property (TMAC Resources) agreed to sell the potential high-grade gold district to China’s state-owned Shandong Gold Group. The deal is now under Canadian national security review – a process recently extended by at least another 45 days.
Beijing has made clear it intends to be a player up north – economically, scientifically and militarily. Given Chinese SOEs’ tendency to take military applications into account when building civilian infrastructure, what Canada does with the Hope Bay decision will signal the federal government’s openness to Chinese investments in an age where such investments would come with more geopolitical strings than ever before.
Gordon Holden, Director of the China Institute, Professor of Political Science and Adjunct Professor of the Alberta School of Business at the University of Alberta
A handful of stories are dominating Canada-China relations in 2020. For good reason the fate of our two Michaels, Meng Wanzhou, canola, and a Canadian decision regarding Huawei and 5G. However, the very dominance of this reporting obscures important aspects of Canada’s 2020 relationship with China, especially economic and trade factors.
While the Chinese economy swooned in the first two quarters of 2020, the third quarter statistics show a sharp “V-shaped recovery” that should produce a modest net growth for the of almost 2% for 2020 while the North American and most European economies will contract in 2020. This is good news for almost all Canadian commodity exporters, even if they are not currently exporting to China, as the Chinese recovery has the potential to help sustain global pricing.
Canadian trade with China experienced a slight uptick in the third quarter of 2020, continuing an upward trend towards recovery to pre-pandemic levels. This flies in the face of the crisis in bilateral relations. The value of Canadian pork exports to China is rising rapidly and even exceeding levels prior to the four-month 2019 export ban – which was lifted in early November 2019. Pork exports to China are up 157.77% on a year-to-date basis (January to September) when compared with 2019, for a cumulative value of $1.27 billion (making it the top export destination when ranked by value – ahead of Japan and the United States).
Counter-intuitively, despite the wave of negativity in the US China relations, US investment flows to China have accelerated in 2020, including both direct investment and portfolio investments. As well, despite the talk of “decoupling”, few American companies have shown much interest in re-locating to the US. The attraction for US corporations of maintaining or expanding a position in China’s own supply chains, including those that link the China with its Asian trading partners, is unlikely to diminish in 2021.
Madam Lu Xu, Consul General of the People’s Republic of China in Calgary
In early February and March this year, a letter from the Chinese Consulate General in Calgary to the provincial and major municipal governments of Alberta, Saskatchewan, and the Northwest Territories, expressed the willingness to donate medical supplies to contain the local outbreak. The Consul General promoted bilateral COVID-19 research collaboration on her tour to Li Ka Shing Institute of Virology in the U of A, where she and the Chief Health Officer of Alberta, Ms. Deena Henshaw had exchanges with the in-house scientists.
The Chinese cities of Heilongjiang and Anyang donated medical supplies to their sister cities Edmonton and Lethbridge, respectively.
CNPC, CNOOC, and Sinopec doubled down their inputs in Canada while the world’s major oil and gas companies were leaving. In total, they injected 1.2 billion CAD to ramp up the local operation and contributed 2.2 million CAD to help the local communities in the time of challenge.
The Edmonton-based Siwin Foods Ltd, a winner of 2018 Leadership Award for Canada’s food industry, with products sold in all major supermarkets in Canada, kept its sale record high during the pandemic. A expansion project has been on the drawing board.
Another Edmonton-based Chinese company, Huali Smart Ways Tec, raised 20 million CAD in China, and completed the pre-production research in collaboration with Shanghai Automotive and Beijing Automotive to add fresh momentum to commercialization in automated driving, intelligent transportation, and smart cities.
– 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 Erwan Hesry on Unsplash