China's Canadian Canola Probe Consolidates A Trade War

Under the WTO framework, members can take action against dumping to protect their domestic markets . However, such actions must follow the established WTO protocols, including filing complaints through the organization's dispute settlement mechanism.

The WTO's Anti-Dumping Agreement outlines how countries can respond to dumping. In this case, China would need to prove that Canada is dumping canola, quantify the extent of the dumping and demonstrate that it is causing or threatening harm to Chinese canola farmers.

If China's investigation uncovers evidence of dumping, it has the right to impose anti-dumping duties. These duties are applied when dumping is proven and shown to have harmed the domestic industry.

The threat or imposition of such duties could significantly disrupt Canada's canola exports to China, which would have serious implications for Canadian farmers who rely heavily on global markets to sell their products.

Canada exports 90% of its total canola production , with exports of canola seed, oil and meal amounting to $15.8 billion in 2023. China is Canada's second-largest importer of canola, after the US, with imports totaling $5 billion in 2023.

This means China accounted for nearly one-third of Canada's total canola export value that year. Notably, China is the largest market for canola seed, while the US is the largest market for canola oil and meal.

Canola is predominantly exported to China in its primary form (seed) rather than as processed products (oil and meal). The data shows there were stable exports to China from 2014 to 2018, but there was a sharp decline in canola seed exports starting in 2019, which persisted until 2023.

This drop coincides with a period of diplomatic tension between Canada and China, suggesting that trade disputes can have a significant negative impact on bilateral trade. Thus, signalling the current trade war could have devastating effect for canola farmers, especially as China accounts for about 65% of Canada's canola seed export.

Additionally, Canada's canola exports have shown limited diversification, relying heavily on just four countries: the US, China, Mexico and Japan. Together, these countries accounted for 98% of Canada's total export value in 2023.

The US led with imports worth $8.6 billion, representing 54% of Canada's total exports, followed by China with $5 billion (32%), Mexico with $1 billion (6%), and Japan with $883 million (5.6%).

This heavy reliance on a few markets heightens Canada's vulnerability to trade disruptions. If China imposes anti-dumping tariffs, this could make Canadian canola uncompetitive in the Chinese market, Canada could risk losing 30% of its canola export value to other potential suppliers.

The Canola Council of Canada has acknowledged China as an important and valued market for Canada's canola.

Like many advanced economies, Canada seeks to shield its domestic market from the influx of low-cost Chinese products, such as electric vehicles. However, Canada must exercise caution, particularly when adopting trade policies from larger economies like the US and the European Union.

These larger economies hold greater leverage in international trade negotiations, unlike Canada, a small, open economy that faces greater risks in engaging in a trade war with China.

Moreover, to support a swift transition to a green economy and help Canada meet its climate target of achieving 100% zero-emission vehicle sales by 2035 , it is essential that electric vehicles become more affordable for the average Canadian.

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Instead of escalating trade tensions with China, Canada should explore alternative measures such as safeguards or tariff rate quotas on Chinese electric cars. Those approaches could be mutually beneficial and less likely to provoke tit-for-tat retaliation.

Imposing a prohibitive tariff on electric vehicles from China would come at the expense of other Canadian sectors that rely on Chinese buyers. Canada must tread carefully to avoid sacrificing jobs in the agricultural sector while trying to protect those in the automobile industry.

Canola farmers, in particular, would likely bear the cost of Canada's unilateral tariff on China. Numerous other sectors could also be targeted, as China would likely retaliate by matching the impact on its own exports.

Canada must strive to minimize diplomatic tensions and avoid trade wars with major global market players, as such conflicts are becoming increasingly frequent. Recent trade disputes, including those with the US during the NAFTA renegotiation , Saudi Arabia over human rights issues and China following the detention of a Huawei executive , can significantly undermine Canada's export competitiveness.

Sylvanus Kwaku Afesorgbor is an associate professor of agri-food trade and policy at the University of Guelph .

This article is republished from The Conversation under a Creative Commons license. Read the original article .

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