Canada, China explore trade talks

Eliminating tariffs could increase annual exports to China by $1.2 billion

Farm groups are excited that Canada has launched exploratory free trade agreement talks with China.

The Asian country accounted for $5.6 billion in Canadian agri-food exports last year, making it Canada’s second largest market after the United States.

China buys one-third of Canada’s canola exports and is an important market for soybeans, pulses, wheat, barley, beef and pork.

A study commissioned by the Canola Council of Canada found that eliminating tariffs could increase exports of seed, oil and meal to China by up to $1.2 billion per year.

That would be the equivalent of shipping an extra 1.8 million tonnes of canola per year to that market, or 10 percent of annual production.

“We see incredible opportunity for growth in China and part of that opportunity hinges upon better market access,” said Brian Innes, vice-president of government relations with the council.

China’s tariff on imported canola seed is nine percent, which is three times more than the tariff applied to soybeans. In 2016, that made canola $32 per tonne more expensive than it would have been if the crop had the same three percent tariff as soybeans.

China also charges a nine percent tariff on canola oil and five percent on canola meal, which is the same amount charged on soybean oil and meal.

Innes said China eliminated all tariffs charged on oilseeds and oilseed products in free trade deals it signed with Chile and New Zealand.

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“Our expectation in entering a free trade agreement with China would be for the complete elimination of all tariffs on canola and canola products,” he said.

Ron Davidson, director of international trade with the Canadian Meat Council, said his organization is more concerned about non-tariff trade barriers, such as China barring imports of bone-in beef as well as fresh, chilled meat products and offal.

China bought $581 million of Canadian pork and $62 million of beef in 2016, making it the third largest market for pork and the fifth largest for Canadian beef.

“It’s already a very important market, a very important market, and there is substantial opportunity for growth,” he said.

China announced last September it was restoring access for Canadian frozen bone-in beef products, opening the door to an estimated $10 million in new sales to that market.

There have been no shipments yet. Davidson expects trade to resume soon, once a Chinese delegation visits Canadian processing plants in the coming weeks.

“Hopefully that will be the final step in getting the bone-in beef in,” he said.

The big remaining technical barrier is China’s reluctance to buy fresh, chilled meat products, which are higher value than frozen meat products.

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“In China they do not have as reliable a cold chain as we have here, so they are concerned about food safety,” said Davidson.

However, some buyers are equipped to handle fresh, chilled product. The Australians already have pilot projects underway with some of those buyers in China.

China slaps a 12 to 25 percent duty on Canadian meat products, which is the same as what exporters in the United States and the European Union are paying.

“The tariffs aren’t a big thing,” he said.

“We do want the tariffs removed, but our biggest constraint at the moment will be progressing on the technical side.”

Canada has already had one round of exploratory talks with China and earlier this month announced it would be seeking public input on the proposed free trade agreement.

Interested citizens and organizations have until June 2 to provide feedback either by attending scheduled consultation events or through written submissions as detailed on the international trade and investment website.

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  • bufford54

    Any improved trading with China would be beneficial to Canadians. Currently Canada suffers from a $46 billion trade deficit with China. It is unknown the impact Chineese real estate investment on medium to low income earners in this country has had, but it is significant. Foreign residential investment from countries like China create housing and rental prices that are unaffordable to many Canadians.