U.S.-China deal tackles non-tariff trade barriers

American success in constraining China’s use of phytosanitary regulations could be a blow for Canadian exporters

The Phase One agreement between China and the United States is a big deal for Canadian farmers.

China has committed to purchase at least $40 billion worth of U.S. agricultural and seafood products a year, which could shut the Chinese door to exporting countries such as Canada.

The purchase agreement isn’t the most troubling part of the deal, says Carlo Dade, director of the Trade & Investment Centre with the Canada West Foundation.

The agreement features dozens of specific provisions, which may give U.S. farmers a “structural” advantage in the Chinese market because it could eliminate many non-tariff barriers to agricultural trade.

“The Americans have taken 15 years of being frustrated with non-tariff barriers … and the manipulation of rules by China, and have applied that learning to constrain China, and to keep China from doing that to American exporters,” said Dade.

“The 121 specific concessions that the Americans got, 51 … are hyper-specific.”

For years, China has used sanitary and phytosanitary (SPS) regulations on agricultural commodity imports as a weapon. Canadian canola growers are living through this reality right now.

Last March, China suspended canola seed imports from Richardson International and Viterra, claiming that Chinese inspectors detected pests in canola shipments.

That’s the official reason for the ban. Many believe China is punishing Canada for the detention of Meng Wanzhou, an executive with Huawei, a Chinese telecommunications firm. The U.S. is trying to extradite her so that she can face charges of violating international sanctions on Iran.

Guy Saint-Jacques, who served as Canada’s ambassador to China from 2012-16, witnessed many similar actions during his time in Beijing.

“With China … I’m always skeptical when they (use) phytosanitary reasons,” he said in November.

“I lived 13 years in China, I’ve seen all kinds of (things) in terms of dirty tricks.”

The Phase One agreement should restrict China’s abuse of SPS regulations, at least against U.S. products.

China will streamline its regulatory processes to “facilitate” imports of food and agricultural productions from America, says a U.S. Department of Agriculture summary of the deal.

As an example, China will immediately recognize U.S. Department of Agriculture oversight of U.S. meat processing facilities, the USDA says.

That’s completely different from the arrangement between Canada and China, said Dade, in which Canada submits a list of beef processors, certified by the Canadian Food Inspection Agency.

Then China takes the list and says, “we’ll get back to you,” Dade said.

“Then we wait…. They get back to us (much later) and say, ‘we think these couple of plants are OK,’ ” Dade said.

“Then we wait for them to publish on (their) customs website. And we wait for them to actually grant (access).”

The Americans have achieved more certainty with China.

The Phase One deal spells out in detail a timeline and rules around Chinese approvals.

“You will take that list (of meat processors) … and with X number days of receiving that list, you shall publish it on the (Chinese customs) website,” Dade said.

“Within a number of days of publishing it, you will start taking imports…. It’s given the Americans a structural advantage.”

American negotiators wrote similar language for many other commodities and ag products, including dairy, potatoes, blueberries, barley, alfalfa pellets, hay, feed additives and pet food.

“I would argue this substantially changes the nature of the game,” Dade said.

“It gives a (greater) certainty that allows you to invest … (for) the Chinese market.”

Dade came to this conclusion after he read the Phase One deal and counted 121 concessions by China on non-tariff barriers.

He shared his analysis with Parliament Feb. 24, when he testified before the House of Commons special committee on Canada-China relations.

Dade told MPs that Canadian ag exporters also need market certainty with China — otherwise it will be difficult to compete with the Americans.

He proposed that Canada offer the Chinese food certainty to get market certainty from China. In other words, China needs reliable sources of food imports because it doesn’t produce enough to feed itself.

This means it needs unfettered access to Canadian food and Canadian agricultural production, free of political interference.

“In exchange for market certainty … we will not restrict your access to Canadian agricultural (goods) for political reasons,” Dade said.

“We will guarantee it’s the market that dictates what you’re able to get.”

Dade admitted the idea is nebulous and needs to be “beaten up a few times.” However, it could be a starting point for a better relationship with China.

“I don’t know if this will move China … but it’s a way to reset the conversation and maybe advance something.”

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