Canada-China ag trade better but remains precarious

Canada’s export agriculture sector held its breath last week, worried that China’s increasingly volatile government would use trade to again strike at this country after a British Columbia Superior Court judge allowed Huawei executive Meng Wanzhou’s extradition case to continue.

As this column was written May 29, China had so far angrily denounced the court’s decision but had not acted to impose new trade hurdles or make things even worse for the two Canadians it has jailed on what appear to be groundless allegations.

China’s ire was heightened further when Canada joined the United States, the United Kingdom and Australia condemning Beijing’s advancement of a law that would further constrict Hong Kong’s quasi-independent status, its freedoms and its position as a global financial centre.

All this comes as China had lightened up a bit on previous restrictions on Canadian agricultural trade.

Meat shipments resumed late last year and China is now buying record amounts of Canadian pork.

And although canola trade remains severely constrained, it was notable that exports of the oilseed to China in March were the largest since December 2018.

Canada shipped 367,800 tonnes of seed to China in March, more than three times the previous month’s total. Monthly shipments in this crop year had previously ranged from a low of 64,500 tonnes to a high to 199,200 tonnes.

Shipments of crude canola oil in the month, at 109,000 tonnes, were the largest since March 2019.

You can’t determine much from one month’s trade, but the movement was a welcome departure from the experience since March last year when China blocked canola imports from Richardson International and Viterra, squeezing direct movement to a trickle.

I should note however that analysts believe China is getting some canola in an indirect way.

They say the reason that crushers in the United Arab Emirates are buying much more canola than normal is that they process the seed and sell a lot of the oil to China.

To the end of March, the UAE has received about 760,000 tonnes of Canadian canola in the crop year, more than double the 305,000 tonnes shipped there at the same point in 2018-19.

Were the strong direct-to-China canola exports in March an unstated thawing or merely a one month anomaly? April trade numbers are expected June 4.

At any rate, I think we should consider our trade relationship with China as increasingly precarious. And we are not alone.

China’s relations with most western nations are more tense.

Many countries are criticizing its handling of the coronavirus outbreak and condemning its oppression of the Uyghurs, its handling of Hong Kong, its use of mass public surveillance and general assault on political freedoms.

I am not alone in believing we are well on our way to a new cold war, this time with China. And the difference between China and the old Soviet Union is China’s strength is far more economic than military, although its military is far from inconsequential.

Canadian canola and livestock farmers have felt the pain from its economic weapons and in the last month Australian producers have also suffered.

In apparent retaliation for the Australian government calling for an investigation into China’s handling of the coronavirus outbreak, Beijing has stopped accepting beef from four large Australian packers, alleging labelling and health certificate issues, and slapped an 80 percent tariff on its barley following an anti-dumping investigation.

Markets braced for further conflict when United States President Donald Trump condemned China in a May 29 speech.

But surprisingly, he did not rip up the recent trade deal, which he had promoted as a signature achievement of his administration, nor did he issue new tariffs. He cut off American funding to the World Health Organization, which he said was China-controlled, and ended favourable trade and economic relations with Hong Kong.

With economies in the U.S. and around the world in free fall because of COVID-19, Trump might not have wanted to reignite the China-U.S. trade war.

But expect Trump to remain belligerent toward China as we move toward the November presidential election and as polls show Americans increasingly distrustful of China.

And so with political and trade relations so tense and tightly entwined, we never know which sector will next be disrupted.

Any good monthly trade totals can only be viewed as a bonus that can quickly disappear.

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