Trouble for Canadian canola exporters has been brewing for weeks in China, with reports of long customs inspections, delayed import permits and nervous buyers.
Now, the Chinese government has abruptly stripped Winnipeg-based Richardson International Ltd. – Canada’s largest grain handler – of its licence to sell the oil-rich crop in China, alleging the presence of weeds in recent shipments.
Beijing and Ottawa won’t say so explicitly, but it sure looks as if China has elevated its diplomatic feud with Canada over the detention of a top Huawei executive into a full-blown economic fight.
Richardson is convinced it has nothing to do with weeds.
“Whether it’s Huawei or other issues, I don’t know,” said Jean-Marc Ruest, Richardson’s senior vice-president of corporate affairs and general counsel. “But the timing suggests it’s something much greater than a quality issue that pertains to Richardson. It’s an attack on agriculture generally, and Canada specifically.”
China is going after a quintessentially Canadian export as a warning to Ottawa about the economic consequences of standing in its way.
Canola isn’t just Canada’s No. 2 export to China, worth $2.5-billion a year and accounting for more than 10 per cent of everything we sell there. It’s also a proud symbol of this country’s agricultural prowess – a crop variety developed in Canada, with Canada in the name. Canola is a cornerstone of the farm economy, particularly on the Prairies.
And that status made canola an easy target after Canadian authorities detained Huawei executive Meng Wanzhou in December. Federal officials have given the green light for hearings on whether to hand her over to U.S. authorities, who have charged her with fraud related to efforts by the company to circumvent U.S. sanctions on Iran.
Canada is also poised to make a decision on whether to ban Huawei telecom gear in the next generation of mobile networks over cybersecurity fears.
Analysts say the canola problem has all the hallmarks of Chinese pressure tactics related to Huawei.
“It’s probable there is a linkage,” said Gordon Houlden, director of the China Institute at the University of Alberta. “It fits the pattern.”
But connecting the dots between Huawei, the flagship of China’s tech ambitions, and canola, the standard-bearer of this country’s agricultural exports, won’t be easy. China cleverly applies its laws and regulations in an opaque way to make it more difficult for Canada to retaliate, Mr. Houlden explained.
“At the end of the day, they are a great power and they hold more ways to hurt us than we have to hurt them,” he added.
It won’t be the first or last time that China uses its immense purchasing power to inflict pain on countries that stand in its way.
Beijing is embroiled in a distressingly similar showdown with Australia, which is facing long delays and other restrictions on exports of coal to China.
Last year, the Australian government banned Huawei gear in its 5G mobile network. And like Canada, it has taken a hard line on Chinese investments in the country.
And now it’s paying the price.
For China, dubious trade restrictions, unfounded travel alerts and arbitrary detentions are all apparently fair game in the pursuit of broader geopolitical and economic goals. No matter how ludicrous.
Richardson officials said China’s allegations about weeds in its canola are bogus. Chinese officials said they found weed seeds that don’t even grow in Western Canada in the company’s canola shipments.
“This underlies that when you’re dealing with China, all the levers are in play,” Mr. Houlden said.
The dilemma for Canada is that beyond shaming China, its options are limited. Contesting the canola ban through legal means could take years.
The challenge now for Canadians with business in China is to brace for future waves of retaliation – particularly if a Canadian court sends Ms. Meng to the United States, or Ottawa bans Huawei technology from the 5G network. China has demonstrated that it’s ready to inflict pain at every step of the way.
Among Canada’s other top exports to China are pulp and paper, coal, oil, vehicles, fish and pork. Exporters of all these items should fear possible retaliation. Another possible target is the massive population of Chinese students that is a lucrative revenue stream for Canadian colleges and universities.
Canada-China relations won’t be poisoned forever.
Unfortunately, for now it’s the way it is.