The trade deficit in May met expectations at C$5.9 billion, down from a downwardly revised C$7.6 billion in the prior month, Statistics Canada said. Exports increased by 1.1 per cent on a monthly basis after an 11 per cent slump in April.

This was the first increase in exports in four months, StatCan said, and was driven by record exports to the rest of the world, excluding the U.S.

“The biggest takeaway I see from the data is just diversification,” said Prince Owusu, senior economist with Export Development Canada.

“While we continue to bleed in the U.S., we are basically diverting trade to other markets,” he said.

Trade with U.S. at lowest levels since 2020

The share of the exports and imports with the U.S. dropped to their lowest levels in May, barring the pandemic year of 2020.

Exports to the U.S., Canada’s biggest trading partner, fell for the fourth month in a row with May registering a drop of 0.9 per cent.

In volume terms total exports were up 0.7 per cent in May.

President Donald Trump has imposed 25 per cent tariffs on imports of Canada-made automobiles and 50 per cent tariffs on imports of steel and aluminum. Canada has also imposed retaliatory tariffs.

This trade skirmish between the two countries whose bilateral trade surpassed a trillion Canadian dollars last year has depleted Canada’s exports and has hit the job market.

Canada’s Prime Minister Mark Carney and Trump are aiming to reach some form of a trade deal by July 21.

Canada’s total exports for May were C$60.81 billion, up from C$60.12 billion in April, StatCan said.

This category increased by 15.1 per cent, driven mainly by exports of unwrought gold that were up 30.1 per cent to reach a record $5.9 billion.

“Most of the rise was attributable to higher physical shipments of gold to the United Kingdom,” the statistics agency said. Excluding metal and non-metallic mineral products, total exports were down 1.2 per cent, it added.

Canada looking for trade diversification

As trade with the U.S. has dropped, Canadian companies have been scouting for opportunities to increase trade with rest of the world.

Exports to countries other than the United States rose 5.7 per cent in May to reach a record high, StatCan said, but it was not enough to fully mitigate the impact of lost exports to the U.S., as well as China due to a drop in canola and crude oil shipments.

Total imports dropped by 1.6 per cent to C$66.66 billion, with imports from the U.S. falling by 1.2 per cent in May.

The Canadian dollar slightly weakened after the trade data and was trading down 0.23 per cent to 1.3615 to the U.S. dollar. Yields on the two-year government bonds were up 3.7 basis points to 2.706 per cent.

The deficit in May, albeit narrower than the prior month, is still among the highest seen historically and economists said that two months of decline will pull down the second quarter GDP.

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The two parties are seeking to update their trade accord from 2000, which covers only industrial goods, by adding services, government procurement, investment and farm produce.

EU proponents say the bloc urgently needs new partners to reduce its reliance on China, particularly for critical raw materials, and to insulate it from Trump tariffs. Last month, It struck a deal with South America’s Mercosur bloc.

“The modernized deal offers a renewed platform for coordination on future challenges – especially important given that the EU and Mexico are both in the crossfire of Trump’s tariff threats,” said Borja Gimenez Larraz, the European lawmaker overseeing the planned free trade agreement.

EU and Mexican negotiators reached an initial deal in 2018, and agreed in 2020 to grant reciprocal market access to each other’s tenders for public contracts.

However, a final agreement was delayed due to Mexico’s energy sector reform to give constitutional preference to state power generator CFE, which the Congress approved last year.

This removed potential benefits for EU energy companies and so revisions were agreed – reducing EU quotas for Mexican exports of beef, poultry and ethanol and adjusting local content rules to make it easier for the EU to export electric vehicles and batteries to Mexico than the other way around.

Practically all trade in goods will be duty-free, including for farm products such as Mexican chicken and asparagus and European milk powder, cheese and pork, albeit with some quotas.

The EU currently exports about 2 billion euros (C$2.97 billion) of agrifood products by year to Mexico, its second largest trading partner in Latin America. The EU is Mexico’s third-largest trading partner overall.

The agreement will allow Mexican companies to bid for government contracts in Europe and EU companies for those in Mexico, including at state level.

Mexico, which wants to reduce its reliance on the United States, has said the deal would grant it better access for products including orange juice, tuna, asparagus, honey, egg white albumin, as well as “equitable access” for meat products.

It is also set to recognize “geographical indications” for certain food and drink, a key EU demand, such as specifying that only cheese from Greece can be called Feta.

—Additional reporting by Kylie Madry in Mexico City

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The Chinese government announced that it was launching an investigation into alleged canola dumping by Canada. This came about week after the Canadian government said it was hiking tariffs on imports of Chinese electric vehicles by 100 per cent and increasing levies on steel and aluminum from China by 25 per cent.

“I thought there were going to be some pricing opportunities in canola until China knocked the pieces off of the board,” Jubinville commented, noting there had been a scenario unfolding that could have seen a tightening of canola supplies.

That included Canada’s canola harvest for this year coming in below the 19.5 million tonnes forecast by Statistics Canada on Aug. 28. Jubinville added the crop reports from the Prairie Provinces have said yields are coming in lighter than expected. In fact, he went as far as to project the harvest amounting to less than 19 million tonnes.

Jubinville said there had been some estimates that projected canola exports to China for 2024/25 at five million tonnes. That would be up a little from the 4.9 million this year, according to the latest Canadian Grain Commission data.

Any loss in sales to China, he suggested, could be redirected towards Japan and Mexico – Canada’s next two largest canola customers. As well as to the European Union, which is facing reduced rapeseed production due to unfavourable weather earlier this growing season.

The August world oilseed report from the United States Department of Agriculture estimated the EU’s rapeseed output for 2024/25 at 18.9 million tonnes, down from 20 million the previous year. Also, the USDA cut China’s rapeseed production to 15.6 million tonnes for this year from 16.3 million last year.

One element to this sudden canola conundrum in Canada Jubinville pointed out has been the reaction by the federal government. In particular, the feds paying lip service to canola growers, but no indication so far of any kind of financial support for them.

“You have sideswiped the ag industry. You’re protecting the auto industry at the expense of canola,” said Jubinville.

He explained that when Australia and China had a trade dispute over the former’s barley that it took about 18 months to resolve, with tariffs levied on any Australian barley imports.

“Ultimately I think this [canola] tariff is coming and it will take years to resolve,” Jubinville stated.

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Canada has followed the lead of the United States and European Union, and announced last week a 100 per cent tariff on imports of Chinese electric vehicles and a 25 per cent tariff on imported steel and aluminium from China.

“China strongly deplores and firmly opposes the discriminatory unilateral restrictive measures taken by Canada against its imports from China despite the opposition and dissuasion of many parties,” a commerce ministry spokesperson said in a statement.

The ministry said China will also initiate an anti-dumping investigation into some Canadian chemical products.

More than half of canola produced in Canada makes its way to China, the world’s biggest oilseed importer. Canola, also called rapeseed for certain variants, is used as a cooking oil and in a wide range of products including renewable fuels.

China’s rapeseed meal futures on the Zhengzhou Commodity Exchange CRSMcv1 jumped 6 per cent to 2,375 yuan ($333.56) per metric ton following the announcement, hitting its highest since Aug. 6.

• RELATED: ICE canola drops as China announces anti-dumping investigation

The ICE canola contract for November delivery RSX4 dropped to its daily limit of $45, or 7 per cent, to $569.7 per metric ton.

“Canada’s canola exports to China have increased significantly and are suspected of dumping, reaching US$3.47 billion in 2023, with a 170 per cent year-on-year increase in volume and a continuous decline in prices,” the ministry said.

“Affected by the unfair competition of the Canadian side, China’s domestic rapeseed-related industries continued to suffer losses,” it said.

China’s rapeseed meal prices have plunged 22 per cent so far this year amid abundant oilseed supply and rising domestic production.

“The current (edible oil) domestic consumption is not strong, and there is an abundant supply of domestic stocks,” said Ma Wenfeng, senior analyst at Beijing-based agriculture consultancy Beijing Orient Agribusiness Consultancy.

China imports its canola predominantly from Canada, followed by Russia and Mongolia.

“Arrivals from Canada have been growing at a fast rate,” Ma said.

The world’s second largest economy imported 5.5 million tons of canola in 2023, valued at $3.72 billion. Imports from Canada accounted for 94 per cent of the total.

Comparatively, the bulk of China’s electric vehicle exports to Canada is from Tesla’s Shanghai factory and local Chinese firms have no big exposure to that export market yet.

Canadian imports of automobiles from China to its largest port, Vancouver, jumped 460 per cent year over year to 44,356 in 2023, when Tesla started shipping Shanghai-made EVs to Canada.

The Chinese spokesperson said it intends to resort to the World Trade Organization dispute settlement mechanism for Canada’s relevant practices.

The Canadian embassy in Beijing did not immediately respond to a request for comment.

China has also initiated trade investigations on imports of pork, brandy and dairy from the European Union in response to curbs on its electric vehicle exports.

Alternative supplies

China had targeted Canadian canola in previous trade tensions. In 2019, it suspended two Canadian canola exporters before removing the restrictions three years later.

Analysts said China could turn to Australia and Ukraine for alternative supplies, especially as Australia’s canola production is ample.

Canola production in Europe has been hit by poor weather while China’s agriculture trade with Ukraine is limited.

“We expect China to buy larger volumes from Australia if restrictions on Australian canola are eased,” said Ole Houe, director of advisory services at IKON Commodities in Sydney.

“As of now Australia’s canola exports to China are negligible, just about 500 tons since the beginning of 2024,” Houe said.

China’s imports of Australian canola have been restricted due to concerns about blackleg disease.

($1 = 7.1201 Chinese yuan renminbi)

– Reporting by Mei Mei Chu, Naveen Thukral and the Beijing newsroom.

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Canada has followed the lead of the United States and European Union, and announced last week a 100 per cent tariff on imports of Chinese electric vehicles and a 25 per cent tariff on imported steel and aluminium from China.

“China strongly deplores and firmly opposes the discriminatory unilateral restrictive measures taken by Canada against its imports from China despite the opposition and dissuasion of many parties,” a commerce ministry spokesperson said in a statement.

The ministry said China will also initiate an anti-dumping investigation into some Canadian chemical products.

More than half of canola produced in Canada makes its way to China, the world’s biggest oilseed importer. Canola, also called rapeseed for certain variants, is used as a cooking oil and in a wide range of products including renewable fuels.

China’s rapeseed meal futures on the Zhengzhou Commodity Exchange CRSMcv1 jumped 6 per cent to 2,375 yuan ($333.56) per metric ton following the announcement, hitting its highest since Aug. 6.

• RELATED: ICE canola drops as China announces anti-dumping investigation

The ICE canola contract for November delivery RSX4 dropped to its daily limit of $45, or 7 per cent, to $569.7 per metric ton.

“Canada’s canola exports to China have increased significantly and are suspected of dumping, reaching US$3.47 billion in 2023, with a 170 per cent year-on-year increase in volume and a continuous decline in prices,” the ministry said.

“Affected by the unfair competition of the Canadian side, China’s domestic rapeseed-related industries continued to suffer losses,” it said.

China’s rapeseed meal prices have plunged 22 per cent so far this year amid abundant oilseed supply and rising domestic production.

“The current (edible oil) domestic consumption is not strong, and there is an abundant supply of domestic stocks,” said Ma Wenfeng, senior analyst at Beijing-based agriculture consultancy Beijing Orient Agribusiness Consultancy.

China imports its canola predominantly from Canada, followed by Russia and Mongolia.

“Arrivals from Canada have been growing at a fast rate,” Ma said.

The world’s second largest economy imported 5.5 million tons of canola in 2023, valued at $3.72 billion. Imports from Canada accounted for 94 per cent of the total.

Comparatively, the bulk of China’s electric vehicle exports to Canada is from Tesla’s Shanghai factory and local Chinese firms have no big exposure to that export market yet.

Canadian imports of automobiles from China to its largest port, Vancouver, jumped 460 per cent year over year to 44,356 in 2023, when Tesla started shipping Shanghai-made EVs to Canada.

The Chinese spokesperson said it intends to resort to the World Trade Organization dispute settlement mechanism for Canada’s relevant practices.

The Canadian embassy in Beijing did not immediately respond to a request for comment.

China has also initiated trade investigations on imports of pork, brandy and dairy from the European Union in response to curbs on its electric vehicle exports.

Alternative supplies

China had targeted Canadian canola in previous trade tensions. In 2019, it suspended two Canadian canola exporters before removing the restrictions three years later.

Analysts said China could turn to Australia and Ukraine for alternative supplies, especially as Australia’s canola production is ample.

Canola production in Europe has been hit by poor weather while China’s agriculture trade with Ukraine is limited.

“We expect China to buy larger volumes from Australia if restrictions on Australian canola are eased,” said Ole Houe, director of advisory services at IKON Commodities in Sydney.

“As of now Australia’s canola exports to China are negligible, just about 500 tons since the beginning of 2024,” Houe said.

China’s imports of Australian canola have been restricted due to concerns about blackleg disease.

($1 = 7.1201 Chinese yuan renminbi)

– Reporting by Mei Mei Chu, Naveen Thukral and the Beijing newsroom.

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Chinese firms have asked for an anti-dumping probe into pork imports from the European Union, state-backed Chinese media reported on Friday, escalating tensions after the bloc imposed anti-subsidy duties on Chinese-made electric vehicles.

China imported $6 billion worth of pork, including offal, in 2023 and more than half came from the EU, Chinese customs data showed. Ending those orders would result in a huge loss of business for Europe’s meat industry.

“The full suspension of EU pork exports to China would be a potential nightmare scenario for the pork supply chain, with implications across the EU,” said Justin Sherrard, global strategist animal protein at Rabobank.

Sherrard added that the disruption would be felt across pork supply chains in Europe, resulting in lower prices and profit margins on unwanted stock produced by the region’s farmers.

China buys pig meat including ears, noses and feet, for which there is little demand from European customers. The ability to export those parts of the animal helps generate a higher value for the whole carcass, analysts say.

“It would take time, but may be possible for EU exporters to find alternative markets for the pork muscle meat cuts that are currently shipped to China,” Sherrard said. “However, I doubt alternative markets could be found for EU pork ‘variety meat’ exports that are currently shipped to China.

‘Painful’

Germany’s pork industry has already suffered an import ban by China since 2020 after the disease swine fever was found in Germany.

Its largest meat processor Toennies expects pork prices to fall if exporters such as Spain seek new markets for lost Chinese sales resulting in a “painful loss of income”.

“If EU exporters, particularly Spain, cannot sell pork to China, some sales would have to be made within Europe and downward pressure on EU pork prices can be expected,” said Toennies spokesperson Thomas Dosch.

After finding themselves unable to sell pork to China following the swine fever ban, Germany’s pork producers sought alternative uses for unwanted pig parts including as ingredients in sausages, pet food and industrial fats.

“While alternative uses can be found, they are not as profitable as selling directly to China,” said Dosch.

South America could benefit if China seeks alternative supplies, experts say.

“This would especially be expected to involve extra sales from Brazil to China, which has been expanding its export capability in past years,” said Tim Koch, meat analyst at German market consultancy AMI.

Top pork exporters to China (graphic)

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Canada has exported 1.286 million tonnes of lentils during the crop year-to-date, running about 25 per cent behind the pace at the same time a year ago, according to the latest Statistics Canada trade data through the end of April. Of that total, green lentils accounted for 337,500 tonnes and red lentils at 690,000 tonnes.

Lentil exports during the month of 93,200 tonnes were down from 121,000 tonnes the previous month.

India has been the top destination for Canadian lentils during the marketing year, at 447,500 tonnes through nine months. Turkey had been the largest buyer at the same point a year ago, but their purchases have fallen off sharply in 2023/24, taking only 119,600 tonnes so far.

Canadian pea exports in April came in at only 60,060 tonnes, roughly half of what moved the previous month. However, year-to-date movement through nine months of the marketing year of 2.212 million tonnes were slightly ahead of the 2.178 million tonnes at the same point in 2022/23. Yellow peas account for just over three-quarters of the pea exports.

China holds the top spot for Canadian pea exports through April, at 973,100 tonnes, with India in second place at 730,000 tonnes. India was nonexistent as a pea buyer in 2022/23, with cuts to their import tariffs accounting for the increased movement this year.

Canadian chickpea exports in April came in at 10,800 tonnes, which was down from about 17,900 the previous month. Year-to-date shipments of 165,700 tonnes are running about one per cent behind the year ago pace.

Large green lentils are currently trading in the 72 to 78 cents per pound range in Western Canada, according to Prairie Ag Hotwire data, with new crop bids around 52 to 55 cents. Old crop red lentils top out at 36 cents per pound, with the new crop only slightly lower at 33 cents.

Green peas delivered to the elevator are trading at roughly C$15.00 to C$18.50 per bushel, with yellow peas in the C$11.40 to C$13.00 per bushel area. New crop pricing for the two crops can be found as high as C$14.50 and C$12.35 per bushel respectively.

Large calibre Kabuli chickpeas are currently trading at around 43 to 45 cents per pound according to Prairie Ag Hotwire, with new crop bids topping out at 42 cents per pound.

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They can now rest easy because the U.S. is no longer negotiating those types of pacts, much to the chagrin of U.S. farm groups.

Virginia Houston, director of government affairs with the American Soybean Association, says president Joe Biden’s administration feels FTAs pit U.S. domestic industries against one another.

That was one of the messages U.S. Trade Representative Katherine Tai delivered to Congress when she testified in front of the House and Senate this April.

“One thing she said multiple times is that while farmers and agriculture benefit from traditional FTAs, workers do not,” said Houston.

“They feel that the traditional FTAs tend to disadvantage domestic manufacturing.”

However, U.S. farm groups are lamenting the loss of FTAs. The last one was the U.S.-Colombia Trade Promotion Agreement that took effect May 15, 2012.

“U.S. agriculture wants more traditional free trade agreements because FTAs include tariff reduction measures and they also include codified market access,” she said.

“Without those, it’s hard to gain footholds into new markets.”

That is why 33 U.S. farm groups recently sent a letter to Tai urging her to recommit to an aggressive trade agenda that includes FTAs.

“Export markets are essential for our survival, and comprehensive trade agreements and elimination of tariff and non-tariff barriers help ensure that U.S. agriculture can compete on an even playing field in our export markets,” stated the letter.

Tai also received another letter from 21 U.S. senators making the same point.

“While the Biden administration continually refuses to pursue traditional free trade agreements, China, Canada, the European Union, the United Kingdom and others continue to ink trade pacts that diminish American export opportunities and global economic influence,” stated that letter.

Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance, is pleased Canada continues to negotiate FTAs while the U.S. has stopped.

“It can be an advantage for us if we work on these agreements where there is solid market access,” he said.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a good case in point.

The U.S. bowed out of that pact, which gives Canadian exporters a leg up in some key markets as long as signatories to the agreement work hard to ensure market access provisions in the deal are upheld and enforced.

Canada is also negotiating agreements with Indonesia and ASEAN nations that could prove advantageous.

Harvey said the anti-FTA stance of the U.S. dates back before Biden taking office.

“We’ve definitely seen that the last three American administrations have not been interested in market access the way administrations used to be,” he said.

The Democratic Party has always been skeptical about international trade due to its strong ties to trade unions.

“But the Republicans have moved in a more nationalist direction too and are a lot more skeptical than they used to be,” said Harvey.

Both parties are fed up with China’s notorious trade practices, which is influencing their trade policies.

People are also blaming trade agreements for reduced employment in the manufacturing sector rather than pinning the blame on the real culprit, which is technological advancements, said Harvey.

He believes the Canadian government needs to take the offensive to ensure the same anti-trade sentiments don’t creep across the border. Ottawa needs to remind Canadians of the economic benefits of trade.

“People are forgetting how much trade is contributing to our standard of living,” said Harvey.

That is why he is pleased Canada recently opened its Indo-Pacific Agriculture and Agri-Food Office in Manila, Philippines, to encourage trade in that important region.

In the meantime, U.S. farm groups are hopeful their government recommits to negotiating and signing FTAs because the current tactics are not cutting it.

Houston is encouraged that many members of Congress are onboard with their lobbying effort.

“We do know our voice is being heard,” she said.

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Corn, also known as maize, is a staple of the Mexican diet and is central to Mexican culture and agriculture, history and national identity. It is integral to Indigenous cultures and spiritual practices.

The groups are calling upon Canada to respect the seed sovereignty of Indigenous and peasant farmers in Mexico and their pursuit of food sovereignty.

On Feb. 13, 2023, a presidential decree in Mexico disallowed the use of GM corn for making traditional foods, such as tortillas, that rely on minimally processed white corn flour. The decree also stated the intention to eventually replace GM corn ingredients in processed foods with non-GM corn.

These measures are the result of decades of struggle by farmers and grassroots communities in Mexico who are asserting their right to seed and food sovereignty.

National Farmers Union president Jenn Pfenning has said that, “the NFU asked Trade Minister (Mary) Ng not to bring Canada into this dispute. Canada has signed both the United Nations Declaration on the Rights of Indigenous Peoples and the UN Convention on Biodiversity. Our commitments to these values should instead see Canada supporting Mexico’s efforts to protect its genetic and cultural heritage.

“Since these measures are strictly focused on corn, and Canada does not export corn to Mexico, Canada’s exports to Mexico are not affected.”

Mexico is the global centre of origin for corn. Indigenous and peasant farmers in Mexico have been stewarding life-giving corn biodiversity for thousands of years, building agroecological practices like the milpa to safeguard locally adapted landraces and ensure a resilient food supply for families and communities.

The decree says that Mexico is restricting the use of GM corn in order to uphold food sovereignty, including the Indigenous milpa; to protect native corn from GM contamination; to preserve Mexico’s biocultural heritage and to take precautionary measures to protect human health.

Today’s statement of solidarity with Mexico is one way people in Canada can show how we can work together to build a food system where family and co-operative farmers and food workers live in dignity, feeding everyone high quality, healthy, safe food using practices that protect our soil, water, biodiversity and other natural resources.

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“Why are you so concerned about upsetting people?” asked CropLife International President Emily Rees at the Canadian Crops Convention.

Canada could benefit from being “a little less sorry and not having the same fear of upsetting trade partners and being a bit more assertive in defending the interests of Canada.”

That suggestion arose from a question posed to Rees about where Canada could find a partner to push the trading cart back onto the path.

“Why do you need a partner?”

Rees is British and her organization is based in the European Union capital of Brussels, so she has a broad view of international trading realities. Her organization, representing the biggest global players in crop products, has a vested interest in protecting and preserving the world’s rules-based and science-based trading system.

That system has been under attack for most of a decade, which is challenging for trade in agricultural products. It’s also making it hard for farmers in all countries that rely upon global markets. They are loath to invest in the production of export commodities when they are repeatedly blocked by trade barriers that reduce profitability.

Canada has a vested interest in rejuvenating the world trading order. For Western Canada, the need is critical. Most of what is produced there must find markets outside Canadian borders.

The country has done a great job of stoking the remaining embers of pro-trade sentiment, most recently with formation of the Ottawa Group, which unites many of the advanced and exporting nations of the world. The Europeans and British are members, as are Australia and Brazil. Japan and South Korea are also part of the gang.

That’s a good foundation upon which to build.

But Rees’s point is that being a convenor of coalitions may no longer be enough. Getting free-flowing trade back on the rails might require less conciliation and consensus building, and might also bring awkward moments when spades are called spades.

Should Canada do that?

With both the European Union and U.K., we have shared support for the principle of rules-based trade, but we have trade conflicts with both. The U.K.-Canada trade talks have broken down over beef and cheese, while there are numerous disputes with the EU over non-compliance with the Canada-EU free trade deal and WTO rules.

Confronting our trade partners about their trade hypocrisies, and hearing their complaints about ours (supply management, anybody?) would be awkward even if Canada was willing to have more honest and forthright relations with trading partners.

Is Canada up for that?

It’s hard to see it happening any time soon. The Canadian government has been operating with minority governments for most of the past two decades. Neither of our dominant political parties wants to risk upsetting farmers in the run-up to the next federal election.

As veteran Canadian agricultural trade negotiator Steve Verheul observed, “I get the sense they’re overwhelmed by day-to-day issues.”

Canada might serve an invaluable role in championing rules-based trade, but until our next election is over and some government feels confident that it will have a few years to take on a daunting agenda, it’s hard to see Canada rising to the challenge.

Still, it’s nice to think of a Canada that could act more self-assured and willing to stand its ground. We might do better than we fear.

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