China is not a market Canada can rely on

In terms of export markets, China has been the holy grail for agricultural commodity producers. Whether it’s pork, beef, canola or wheat, the demand that China’s growing middle class offers presents massive opportunities for Canadian farmers. Likewise in the U.S., farmers south of the border have relied heavily on export growth into China as domestic productivity has risen.

According to Statistics Canada, Canada’s agri-food and seafood exports to China were valued at $8.1 billion in 2017. Top exports were canola seed, soybeans, canola oil, dried peas, and canola oil cake. In 2017, Canada registered an agri-food and seafood trade surplus of $6.5 billion with China. According to author and China expert Michael Pillsbury, the Chinese economy will be twice the size of the United States by 2050. With that expanding middle class and economic power comes dependance for exporters.

We are being taught a lesson.

“We probably made a mistake, frankly, I’d say in hindsight, in becoming too dependent on that huge China market,” Sonny Perdue, U.S. Agriculture Secretary told a gathering of the North American Meat Institute forum in Washington, October 2018.

Canada thought it was different.

Canada was attempting to be the first G7 nation to negotiate a free trade deal with China. Back in November, Canada announced it planned to double agricultural trade with China by 2025. In comparison, at the time the U.S.was ratcheting up its tariffs and political rhetoric on China. Canada looked to be another source for soybeans, peas, wheat, beef, and pork.

Things have changed.

As I have called around to different commodity groups, everyone is running for cover to avoid being the next commodity targeted by China. It’s very smart thinking in my opinion.  There does not look to be a quick technical solution to this canola “hazardous pests” issue, and the political path could be even longer depending on how the extradition trail of Huawei CFO Meng Wanzhou proceeds.

Although China provides purchasing power, many exporters accuse the communist country as being an opportunistic buyer at best. As one Canadian industry official, who did not want to be identified stated, “this is not a market that we can rely on.”

It is a market that Canadian agriculture needs to continue to pursue, certainly, but coming to grips with how the Chinese do business will help Canadians be prepared for situations like canola’s mysterious yet-to-be-proven hazardous pests.

Canada has gone through twenty-four months of learning that even the most predictable trade flows can be disrupted. The NAFTA renegotiation should have solidified that for us.  The trouble is that China is not Japan or the United States  in politics, economic system, or behaviour. For Canada, trade diversification is not easy but is necessary as global trade falls under greater populist scrutiny.

Canada cannot afford to rely on China to be a constant customer because clearly it is not a market we can rely on.

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