Export trade has been an important part of Canada’s agriculture and food economy. Half of what we produce in this country is sold in international markets at a value of $56 billion. Trade is also important for food processor representing about 1 in 4 jobs. One of the drivers for developing new trade agreements and partnerships is to expand opportunities for Canadian products.
In the past we have had trade disputes with a variety of countries. There have been complaints about Canada’s protection of its supply managed commodities (milk, chicken, turkey, and eggs) as there was when the Trump administration pushed to renegotiate NAFTA. We have also complained about protectionism from other countries which have used tariff and non-tariff barriers to our products. These disputes have, however, been largely focused solely on trade. The Trump administration’s aluminum and steel tariffs (under the pretext of national security) were largely intended to protect the domestic industry. Canada responded with a variety of targeted tariffs in response. The Canadian tariffs, selected to minimize pain for domestic consumers, were put in place as a tit for tat response. They were even targeted at the districts of specific politicians to send a political message about trade.
In recent days, however, we have seen trade action used as a political weapon in an attempt to leverage concessions in a non-trade issue. The arrest of Hauwei Chief Financial Officer (and daughter of the founder) Meng Wanzhou at the request of the US Government has created an irritant with the Chinese Government at a time when we are trying to negotiate a trade agreement with them. The Chinese have complained vociferously about the detention and have responded in a variety of ways – including the detention of Canadians in China.
More recently, however, China has banned the import of canola from Canada. There has been concern about this in the past – China has complained about the risk of disease from Canadian canola. The concern relates to dockage, the non-seed part of shipments having traces of a fungal disease which could bring it into China. Experts argue that this risk is very low and that the Chinese were historically just trying to protect a growing domestic production. China has prioritized increasing self-sufficiency in food.
The current timing suggests that China is now flexing its muscle as an importer to put pressure on Canada to release Meng Wanzhou. This weaponization of the trade relationship is a dangerous development. The idea has previously been floated by President Trump as a means to achieve political objectives. In fact, the President has even suggested that he might intervene in the Meng Wanzhou case if the US and China make progress on resolving their ongoing trade dispute. This compromises the rule of law and complicates Canada’s position in the case. This weaponization of trade has the potential to hurt exporting countries and to challenge sovereignty by putting economic pressure on them.
Canola is unlikely to be the only product. An escalation could affect seafood, cereals, beef, pork and other products. It is unfortunate that this is happening but it is clear this is not just about disease risk, Chinese food self-sufficiency, or even trade.
Canada is stuck between economic pain and the international rule of law. As a result, Canadian food producers are feeling the brunt of the pain.
Recommended citation format: von Massow, M. “The weaponization of trade will hurt Canadian Ag and food industry”. Food Focus Guelph (18), Department of Food, Agricultural and Resource Economics, University of Guelph, April 1st, 2019.