Canada’s canola industry and the federal government were surprised when China abruptly stopped buying canola from two Canadian exporters in March.
But a new report prepared for the Canadian Agri-Food Policy Institute (CAPI) suggests they shouldn’t have been. China has, for socio-economic and political reasons, had been planning to reduce imports of canola from Canada for some time — and Canada should have seen it coming.
“Tracking the evolution of China’s agricultural policy, it is clear that China planned to limit canola imports, due to its concerns over food security and self-sufficiency, long before the unexpected ongoing Canada-China tensions,” reads Canola Disputes in Canada-China Agricultural Trade: A Chinese Policy Perspective, written by Zhiduo Wang and Patrick Leblond of the University of Ottawa’s Centre for International Policy Studies.
The pair concede Meng’s arrest at the request of U.S. authorities plays a role in the latest dispute, but they contend the dispute really reflects “…deeper structural trends in China’s agricultural policy.”
“This means that canola trade between Canada and China is unlikely to resume its previously long-term growth path once the current dispute is resolved,” they wrote.
They also say the industry and government missed the opportunity to proactively mitigate the effects on the canola sector because they weren’t paying enough attention to long-term policy developments in China.
Why it matters: China was Canada’s top canola seed customer accounting for 40 per cent of exports worth more than $4 billion in 2018. Since China stopped buying from the two largest exporters, canola prices have dropped about $1.50 per bushel.
The Canola Council of Canada and the Canadian Canola Growers Association, don’t agree with the report’s conclusion that the disruption in canola trade is linked to changes in China’s food policy. They say China still needs Canadian canola to meet its increasing demand for quality vegetable oil.
Council vice-president of communications Brian Innes says the council is well connected with Chinese government officials and Chinese canola processors.
Canola exporters Richardson International and Viterra declined comment.
Agriculture Minister Marie-Claude Bibeau’s office said in an email it’s working hard with the canola industry to restore canola exports to China, but didn’t respond to the CAPI paper.
“We appreciate the interest and understanding more about what’s behind China’s concerns,” Innes said in an interview. “We don’t see the current actions against Canadian canola as having any link with Chinese agriculture or food policy.”
Nor does Canadian Canola Growers Association CEO Rick White.
“I don’t see it myself as a long-term policy move by China at all,” White said.
If China wanted to encourage increased domestic rapeseed production to replace Canadian canola it wouldn’t have quit buying Canadian canola overnight, he said. Instead China might have gradually introduced tariffs on imported canola to stimulate domestic rapeseed production over time.
“Their farmers cannot respond to this,” White said. “They aren’t going to grow four million tonnes in canola replacement in one year. That’s why this doesn’t seem to add up.”
Food security is a top priority in China, the paper says. Since the run up in global food prices in 2008-09, China wants to increase food self-sufficiency as well as food import diversity through its Belt and Road Initiative, which has seen China investing in other countries to boost their food production and the infrastructure need to ship it to China.
“Chinese people’s rice bowls must be firmly held in their hands at all times…” the paper quotes Chinese president Xi Jinping as saying in a 2013 speech. “Our rice bowl should be mainly loaded with Chinese food.
“Safeguarding food security is an eternal issue for China and cannot be ignored at any time.”
The paper, citing a 2013 report to China’s Ministry of Agriculture, documents proposals to use non-tariff trade barriers to bolster domestic rapeseed Chinese scholars suggested that China should study and adopt technical barriers to trade like other countries such as India, Brazil, Japan, and the EU, to build Chinese rapeseed production.
They pointed to a brief ban on Canadian canola imports from late 2009 to mid 2010 as “…a successful case to safeguard the Chinese rapeseed industry…” and supported the practice.
The canola council and Canadian canola exporters have worked for years with Chinese government officials and Chinese processors, Innes said.
“We have an in-depth understanding of the Chinese government’s policy goals as well as the physical and practical constraints for their agricultural production,” he said.
By way of example, he pointed to “canola dialogues” in Beijing the last two years that included senior Chinese officials, Canadian exporters and Chinese importers.
“At our last meeting in November we had a Chinese central government official communicate that China will be importing more canola oil, seed and meal for the foreseeable future,” Innes said.
For the last three years the council, in addition to its regular interactions with Chinese officials, has had local Chinese people representing it in Beijing.
“They are local residents who have strong connections with government and an understanding of the language and the culture and government structures and through their regular interactions with Chinese government officials and industry we are well aware of Chinese agri-food policy goals,” Innes said.