Ag trade expected to escape Huawei fallout

A sign in support of Huawei chief financial officer Meng Wanzhou is displayed outside of a British Columbia Supreme Court bail hearing for Meng last month. Meng’s arrest has raised tensions between Canada and China.  |  REUTERS/David Ryder photo

China reacted strongly when Canada honoured an extradition request from the U.S. but isn’t expected to stop imports

In the second week of November, a delegation of federal ministers and Chinese officials announced plans to double agricultural trade between Canada and China by 2025.

That optimism now seems like ancient history.

December was a horrific month for Canada-China relations and any talk of expanding exports, or a free trade deal, could be on hold for months or years.

Last month, Canada arrested an executive from Huawei, a Chinese telecom, at the request of the United States. Meng Wanzhou is now out on bail, at her home in Vancouver, awaiting the next legal steps of her potential extradition to the U.S.

The U.S. Justice Department claims that Wanzhou and Huawei defrauded several banks, including HSBC and Standard Chartered, by concealing payments from Iran — violations of international sanctions.

China responded by jailing two Canadian citizens, who were still in detention as of press time.

Most Chinese believe the charges against Wanzhou are unjust and politically motivated, so detaining Canadians is a reasonable response.

“Those who accuse China of detaining some person in retaliation for the arrest of Ms. Meng should first reflect on the actions of the Canadian side,” Lu Shaye, Chinese ambassador to Canada, said in a Globe and Mail opinion piece.

Jailing Canadians living in China is disturbing and agri-food industry leaders are worried about what happens next. Will China amp up the pressure by rejecting imports of canola, pork and other Canadian commodities?

“My sense is that China, right now, doesn’t want to expand this tension … in to the business area,” said Alex He, a China expert with the Centre for International Governance Innovation in Waterloo, Ont. “For now, it’s still safe for the agricultural and other exports from Canada.”

Chinese leaders are worried about economic growth and are reluctant to take any action that could harm trade, so tariffs or other tools to disrupt trade between Canada and China seem unlikely, he said.

Hugh Stephens, distinguished fellow with the Asia Pacific Foundation of Canada, has a similar outlook. China wants to maintain normal trading relations with Canada. As evidence, in mid-December Bombardier won a US$453 million contract to build rail cars for a state railway in China.

“That’s good news. It (the Wanzhou affair) is not changing the whole relationship in China,” said Stephens, who had a 30-year career in Canada’s foreign service and was an executive with Time Warner, in Asia, for a decade.

Nonetheless, many agri-food exporters are watching to see what happens next. Brian Innes, Canadian Agri-Food Trade Alliance president, said it’s important to look at the bigger picture.

Canada and China have had formal relations for nearly 50 years, since former prime minister Pierre Trudeau visited Beijing in 1970.

“Canada has a long history of its own relationship with China, independent of the United States,” Innes said from his office in Ottawa. “The perception of Canada in China has been built up over many, many years.”

Canadian ag exporters of things like canola, pork and beef also have many relationships in China. Those business ties don’t evaporate overnight.

Still, the Wanzhou issue could dominate Canada-China relations for all of 2019.

Her legal case is scheduled to re-start Feb. 6 as Canadian courts decide on her extradition to the U.S.

If she loses, an appeal is likely, which means the controversy will persist, increasing the risk of China retaliating against Canadian companies and products.

“Depending on what happens, the Chinese will look for other pressure points,” said Stephens, who compared the situation to a scab on a wound.

Picking at the scab only makes it worse.

His advice for Canada’s agricultural sector is simple: lie low and avoid controversy.

“Don’t give the Chinese an excuse to pick on them,” he said. “They have to be cautious. There’s always the potential to get sideswiped, to become collateral damage.”

Innes, during an interview with The Western Producer, adhered to that advice and said repeatedly that Canada has a long-term relationship with China.

“Countries often have disagreements. We have diplomats and politicians to sort out (such issues)…. There are difficulties that arise. This is one difficulty.”

The challenge of this difficulty is that it’s complex. Telus and Bell are considering using Huawei technology to build their 5G wireless networks. Many experts and countries like the U.S., Australia and New Zealand believe that’s a terrible idea because the Chinese government may use the Huawei technology for espionage or to disrupt the networks.

Huawei maintains it is independent from the Chinese government, but that claim is debatable.

“To be fair to Huawei, they are a very large company … they have a lot of investments in Canada,” Stephens said. “They have a major R&D centre in Ottawa. In fact, a lot of their 5G work … is centred in Canada.”

If the federal government imposes a ban on Huawei 5G technology, the Wanzhou-Huawei affair could get much uglier. And the notion of a free-trade deal between China and Canada could be mothballed for a long time.

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