New trade deals offer hope for more diversified markets

Political relations with China are about as frosty as the Polar Vortex and worries are rampant that China is stalling canola imports so it is hard to believe that just a few months ago Canadian and Chinese officials were talking about doubling agricultural trade by 2025.

In November Finance Minister Bill Morneau and Minister of International Trade Diversification James Carr were in Beijing for what was called the Canada-China Economic and Financial Strategic Dialogue with Chinese officials.

Agriculture was high on the list of topics and there was a nod to the feel good goal of doubling trade.

That might still be possible: China’s food demand should still increase and it can’t produce it all by itself.

But the path forward is a lot more rocky now that Beijing has arrested Canadian citizens to retaliate against what it sees as an attack by the West against its high tech champion Huawei.

And similar frictions are likely to increase in the future as China tries to more forcefully make its presence felt internationally as the world’s most populous country and second largest economy.

So it is good that Canada is working to diversify its trade through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

When fully implemented, it will become a trading bloc of 11 countries representing 495 million people who generate 13.5 percent of the world’s gross domestic production.

It will give Canada’s farmers an advantage over their American counterparts because that country backed out of the negotiations.

One of the prizes is improved access to Japan. Canadian agriculture has a large and long relationship with that market but that does not mean things can’t get better.

For example, Japanese demand might lead to the need for another big canola crushing plant in Western Canada.

The Western Producer’s Sean Pratt in December interviewed Brian Innes of the Canola Council of Canada, who said that as Japan’s tariffs on canola oil and meal wind down, its imports of the processed products should increase.

Japan could eventually import 700,000 tonnes of canola oil. That would require about 1.65 million tonnes of canola seed to be crushed, creating the potential for one or two big plants of the type recently built in Yorkton, Sask.

Pork producers should also benefit from increased access to the bloc’s members.

Global Affairs Canada forecasts that improved access to Japan alone should cause its imports of Canadian pork to rise by $639 million or almost 36 percent. That means improved demand for pigs and more employment in hog processing plants here.

The Pacific trade deal also gives improved access to up and coming economies Malaysia, Vietnam, Peru, Chile, Brunei and Singapore. The other members are Mexico, Australia and New Zealand.

For many decades Canadian governments have made efforts to diversify the country’s trade, which is so tied to our giant neighbour to the south.

This country now has 14 international trade agreements and it is time to make a push to capitalize on them.

In the fall economic statement, the federal Liberals set out a new diversification strategy that among other things plans to invest $1.1 billion over six years to finance infrastructure to support trade, enhance trade services for Canadian exporters and provide business with resources to help them execute their export plans.

Building export markets is a tricky thing. You can skillfully tap into growing demand and become a major supplier, like pulses to India or canola to China, but then wind up burned if those markets turn away because of domestic reasons or international political battles.

So developing a large roster of buyers is ideal so that no one importer dominates.

Luckily that is the case of the wheat market.

Last crop year no individual buyer took more than 11 percent of the Canadian export total and overall there were 54 buyers.

By contrast in the canola seed market, there were 11 buyers and China was the destination for 44 percent of the total.

Compared to wheat, which is the most traded crop in the world, canola is a niche market and so its potential buyers are more limited, but still efforts to expand the range of buyers would be valuable.

The trade agreements are in place. It is now up to Canadian agricultural companies and trade promotion groups to redouble efforts to tout the benefits of Canadian products and sign supply contracts.

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