By Sarah Pittman
Toronto Sun, Edmonton Sun, The Province, Winnipeg Sun

March 28, 2019

Any farmer in Western Canada will be able to tell you that China’s decision to cut off imports of Canada’s canola is alarming.

The Prairies are particularly exposed — in 2018, Canada sold nearly $4 billion worth of canola seed and oil to China alone.

But beyond the threat to this massive industry — which delivers a not insignificant $26.7 billion in jobs, spending and other economic impacts to the Canadian economy — there are implications, both political and economic, for the overall relationship as a whole and going forward.

China is Canada’s second-largest trading partner, after the United States — and the volume of this trade is growing. A deteriorating economic relationship with China carries risk for all of Canada.

Prime Minister Justin Trudeau said this week that Canada is considering sending a high-level delegation to China over the canola dispute. The delegation should consider several questions about the scope and nature of this problem if it is to make any headway.

First, to what extent is this dispute actually about canola?

Political tensions between Canada and China have been simmering for months since Canadian officials arrested Huawei CFO Meng Wanzhou upon request of American officials. China has exerted significant political pressure on Canada because of this, as it has in trying to get Canada to allow Huawei to be part of building Canada’s 5G network.

So far, the pressure has largely been in the political and humanitarian realm. If the canola ban has to do with Meng, or Huawei generally, it would be the first real economic fallout Canada has suffered because of it. Indeed, a Chinese foreign ministry spokesman seemed to make the link when holding a press conference on the canola issue, saying Canada should “take practical measures to correct the mistakes it made earlier.”

The delegates will also need to consider the vulnerabilities of canola to Chinese pressure. This is not the first time that China has put pressure on canola: In 2016, China cut the allowable dockage (organic debris in canola that is not canola, i.e., weeds) from 2.5% to 1%. That was a nearly impossible limit to reach – in effect, a ban that was ostensibly about preventing the spread of a canola disease, but in reality was about China’s surplus of canola and an attempt to drive down prices.

China does not ban imports that impose headaches for itself. China relies on Canadian canola imports. In 2017, Canada provided 98.7% of China’s canola seed supply, and unlike other crops that China imports like soy — which has at least two major global suppliers — for canola, Canada is the only large-scale global producer.

Perhaps the most difficult question to resolve is what Canada’s policy response should be. With the last canola dispute, Canada and China reached an agreement that guaranteed access to the Chinese market until 2020. This worked, but clearly not for long. Perhaps another short-term solution is possible, but we should be under no illusion that this will guarantee continued access.

The final question delegates need to consider are the impacts on the future of the Canada-China relationship. It is a transformative moment for the relationship, as China is exerting its strength globally.

While this is a critical moment for Canada’s massive canola industry, it will also be crucial in determining where China and Canada go from here. Our response has to deal not just with the current impasse but how to prepare for the next one — and hopefully next time, Prairie canola producers won’t be caught in the middle.

Sarah Pittman is a policy analyst at the Canada West Foundation.