It’s tempting to ask the Chinese government to pull the other leg now.
As anyone who grows canola is likely aware by now, Canada’s largest single customer for canola, accounting for 40 per cent of this country’s exports, threw a monkey wrench into Prairie export canola.
Officials quietly banned imports from Richardson International, Canada’s largest wholly Canadian grain exporter on phytosanitary grounds, as of March 1. So far, the effects on prices have been muted, but it has the whole sector on edge.
The Chinese government is claiming officials have found a laundry list of pathogens in shipments, including blackleg, bacterial leaf spot, wild oat, cocklebur and Palmer amaranth.
The company and the Canadian Food Inspection Agency (CFIA) say their own testing reveals none of these issues, causing widespread speculation that the issue is a political one.
Relations with China have been frosty, to say the least, since the late-2018 arrest of Meng Wanzhou, the CFO of Chinese telecomm giant Huawei. She was picked up at the behest of the U.S. government, which alleges she committed fraud by using a hidden subsidiary known as Skycom to skirt U.S. sanctions against Iran.
Ordinarily a business executive accused of some behind-the-scenes skulduggery wouldn’t necessarily garner the sort of over-the-top reaction seen from China. But this case is a bit different.
She’s not just the CFO of the company. She’s the daughter of its founder, Ren Zhengfei, a billionaire who’s said to be the 83rd richest person on the planet.
As a scion of China Inc., Meng Wanzhou’s arrest was sure to set up a major international showdown between the U.S. and China. Stuck between two heavyweights is a tough spot for a middleweight like Canada.
China’s response has been short, sharp and decidedly undiplomatic. It has called the Meng arrest illegal, it’s questioned Canada’s human rights standards, it’s arrested Canadian citizens in retaliation and accused Canada of being in the back pocket of the U.S.
Some international affairs observers have called out the Middle Kingdom for this over-the-top reaction, saying the actions are harming its broader global interests.
Writing in the South China Post, Hong Kong-based journalist and commentator Philip Bowring chided the Chinese government for alienating potential international allies and noted “… its reaction has again shown an underlying arrogance and ethnocentricity, which is being noticed around Asia and in the West…”
He noted the country does have a case for its claim the arrest is suspicious, arguing that almost always it is the companies, not individuals, who are targeted. Shareholders pay the price through fines and other sanctions. By way of example, he offered the fact that no Wall Street bankers saw the inside of a cell following the Global Financial Crisis.
Were China to take a more humble approach, Bowring said, its leaders would likely find themselves with common ground that would help them drive the change they want to see.
“In the Huawei case, armed with damning evidence of U.S. judicial hypocrisy, what does China do? It takes aim at a Canada that is only obeying its own laws in a transparent manner. The seizing of Canadians is simply an act of thuggery, not befitting a Confucian civilization with thousands of years of history. China could have made friends with many countries that see the Huawei case as more driven by long-term U.S. strategic interests than the law,” he wrote.
Shutting the door to canola shipments is just another expression of this newly found power — and the arrogance it appears to have brought with it.
U.S. farmers have found themselves stuck in the middle of wrangling between these two governments since July of 2018, when the Trump administration brought in US$34 billion of tariffs on Chinese products and China retaliated in kind.
The result has been about 25 million tonnes of U.S. soybeans expected to go unsold this crop year, according to Robert Johansson, USDA chief economist, in a February statement. That number represents the cumulative carry-over of this and last crop year he said, and is a direct result of the China-U.S. trade war.
Johansson went on to say the cumulative losses to U.S. farmers in the past year have been around US$7.9 billion, to say nothing of the lingering effect of South American producers displacing U.S. farmers.
It’s too early to say if canola growers could be facing a similar hit, but the stakes are high.
Already China has forecast rising soybean imports to make up the shortfall and canola futures have fallen.
As Canada works to restore imports and ensure the bans don’t spread, everyone will be watching the markets nervously.
Hopefully cooler heads will prevail and trade will normalize.