Canola School: Trade Deal with China Holds Huge Potential for Canola

As the Canadian government contemplates moving forward on a free trade agreement with China, the canola industry sees tremendous potential to increase exports to the country that already imports more canola seed than any other.

That’s because Canadian canola seed headed to China currently faces a nine percent tariff, whereas the tariff on soybeans is only three percent. In 2016, this made canola about $32 per tonne more expensive than if it had the same tariff as soybeans.

“That has a huge impact on the competitiveness of canola in China, but also more broadly around the world,” says Brian Innes, vice president of government relations for the Canola Council of Canada, in this Canola School episode.

The council recently commissioned a study by Dan Ciuriak, former deputy chief economist with the federal trade department, who found that eliminating China’s tariffs on Canadian canola could increase exports of seed, oil, and meal by up to $1.2 billion per year. That’s the equivalent of 1.8 million tonnes of canola or about 10 percent of Canada’s annual canola production.

“That’s just taking away the tariff. That’s not looking at future growth potential in China, which our industry also sees as quite significant, both on the healthy oil side, but then also on the protein side for canola meal that feeds fish and livestock in China,” notes Innes. (continues below)

Non-tariff trade issues could also be addressed through an FTA, although some current matters, such as China’s concern about blackleg in Canadian canola, will have to be addressed much earlier than the timeline for completing a trade deal (The China-Australia FTA took 10 years from when negotiations formally began.) Three new canola traits, approved in Canada since 2012, have also been on hold, awaiting Chinese approval.

“Our trade with China has been growing but can still be unpredictable and hampered by barriers,” says Innes. “A free trade agreement would bring more stability to our trading relationship.”

China has grown to be the second largest export market for Canadian canola and canola products, behind only the United States (which imports more meal and oil). China imported 4.8 million tonnes of Canadian canola in 2016, including 3.5 million tonnes of seed, 600 thousand tonnes of oil and 660 thousand tonnes of meal, worth $2.7 billion.

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