Canadian farmers have been caught in the crossfire of the strained U.S./China/Canada trade relations. Several crops, such as wheat and peas, have avoided being impacted negatively, while canola, pork, and beef exports have been targeted by the Chinese. Farmers have lashed out at the federal government for not forcing change, talking tougher, or being vocal about behind the scenes discussions.
This week, China threw Canada a bone by announcing the resumption of imports of Canadian pork and beef after a four-month ban (due to forged CFIA paperwork). This decision brings more questions than answers, but in my opinion we should not mistake this softening stance on Canadian meat imports as a warming of the relationship between Canada and China.
Since the beginning of the China/U.S. trade war, Canada has been a pawn and caught in the middle. Canada’s lot has been used as an example of Chinese power, while simultaneously being cornered by the U.S. During all of this, for the most part, Canada’s Canada’s diplomatic relationship with China has been deteriorating with the country even putting two Canadians in Chinese prison.
My speculation is that Canadian officials were just as caught off guard by this decision as Canadian farmers. After Prime Minister Justin Trudeau announced the re-opening of markets via Twitter, there were no immediate press releases from organizations or comments except, “we will have a statement shortly.”
So, if even Canadian officials were caught off guard, then why did China make this decision at this time. Why now?
The easy answer is, I believe, African Swine Fever (ASF), and the detrimental impacts that it has had on protein supplies domestically within China.
Up until the ban, exports to China of Canadian pork were were up 52% at $172.3 million (146,000 tonnes) for 2019. China has been importing increased amounts of pork due to ASF, and all exporting countries are looking to get a piece of it. In August 2019 alone China imported 162,935 tonnes of pork which was a significant increase over a year ago, but only represents one day’s consumption, according the South China Morning Post.
Canada has made some inroads with China including the appointment of Dominic Barton as ambassador, but has that been enough to start reopening trading lanes to the country? If so, why not canola seed? The why not is easier to answer, in my opinion. China is getting access to Canadian canola through the oil market instead of seed and there is not a strong enough motive to lift the ban yet.
Sticking with my earlier thread on Canada being a pawn in the middle, I have another theory on why Canadian meat is finding relief now.
Just like Canada has been punished by the Chinese for the Huawei CFO arrest as an example of their economic power, China is now showing the U.S. they have options. This week, China demanded that they want U.S. tariffs removed in the Phase One trade truce. Tariff removal for commodity purchases is the ask but the U.S. has historically been leery of removing tariffs and instead use them as an enforcement mechanism. There is a chance that China is attempting to remind the U.S. that they can get North American Ractopamine- and tariff-free pork from Canada.
This temporary feeling of a warming relationships with China may be short lived as Canada is still being pushed and pulled by the two largest global economic powers. For example, just one day after the announcement on Canadian meat, China was once again reminding Canada to release the Huawei CFO.
Once again, Canada could just be caught in the middle, but this time in regards to meat exports, it’s a positive move — at least for now. This is a high-stakes game and Canada continues to be a chess piece.