4 reasons you should care about canola's role in Canada-China relations
There's a $2B market at stake for Canadian canola producers, and it has broader trade implications
Prime Minister Justin Trudeau is making his first official visit to China this week, hoping to bolsterrelations with the Asian economic giant that is Canada's second-largesttrading partner.
Trudeau's trip, however, coincides with a Sept. 1 deadline that China set for Canadian producers to tighten their screening of our canola exports to the country.
Saying they want to prevent the spread of a disease calledblackleg to their own crops, the Chinese want thedockage rate the amount of stems, pods, weeds, and other matter that ends up in shipments cut to one per cent from 2.5 per cent.
Given that backdrop, hereare four reasons to care about the politics of canola:
1. Big market slice
Statistics Canada says Canadian farmers anticipate producing17 million tonnes of canolathis year. That is down about oneper cent from last year, butproducers are said to beon track for the second or third biggest harveston record.
Canada shipsabout 40 per cent of itscanola seed exports aboutfour milliontonnes to China. The countryisthe biggest foreign consumer of our canola exports, and it represents a market wortharound $2 billion to Canada.
2. Costing farmers
At the same time that a big harvest is putting some downward pressure oncanolaprices, the Sept. 1 deadline set by the Chinese is also said to be playing a part. On Monday, the Novembercanolafutures contract dipped $3.50 pertonneto settle at $456.20.
If China doesn't budge, prices may drop further, although some observers expect price shifts to be moderate, saidSylvain Charlebois, dean of management and professor in food distribution and policy atDalhousie University, in a commentary this week.
WardToma, the general manager of the AlbertaCanolaProducers Commission, said there isno evidence thatlowering the dockage rate will lead toareduction in the risk of diseasetransmission.
"All it's going to do to is push costs on to the Canadian industry," he said, adding that theenhanced screening being demanded by the Chinese will alsoslow down shipments.
"It takes a lot longer to clean these seeds," hesaid."We have to remember that we're talking about a seed that is the size of a poppyseed. It is very small a third the size of a peppercorn."
3. Too perfect to pass up
If thecanolascreening issue remains at an impasse, both countries could wind up looking elsewhere to satisfy their needs.
China could look to its domestic market and to Australia, although reports suggest that wouldn't be enough to make up for the loss of Canadian sources.
Canada, meanwhile, could sell its excesscanolasupplies to the European Union, the Middle East and other parts of the world, Charlebois said.
"Trades go both ways and whatever the outcome with China, market conditions will adjust. It isthe beauty of global trades.Canolais too much a perfect commodity to pass up," he said.
4. The bigger trade picture
Canolais expected to be a central issue in trade discussions between Canadian and Chinese officials.
Both countries have saidthey want to resolve the matter, though Chinese officials have accused Canada of being unfair in its position on the issue. International Trade Minister ChrystiaFreeland has said the matter needs to be settled before the relationship between the two countries can grow.
"Regardless of how well you plan, there is always an issue thatat leastinfluences the tone [of the meeting], and this is one of them." said David Mulroney, Canada's ambassador to China from 2009to 2012.
In the context of the broader global trade picturewhere questions remain about Brexit, and both Donald Trump and Hillary Clinton say they oppose theTrans-Pacific Partnership former ambassadorMulroney seesgetting something moving with China asveryimportant for Canada.
"Nobody says we have to go out and negotiate a bad deal, but simply sitting down with the Chinese and looking at the breadth of the trading relationship, focusing on some areas where we want to makesure that we've good improved and fairer access, is not a badidea at all," he said in an interview with Peter Armstrong, the host of The Exchange.
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