Canadian canola sector could suffer ‘billion dollars’ in losses amid China probe, report says
As Canada canola producers Prepare for potential impact Since New anti-dumping investigation in China in Canadian canola imports, a new report from an international credit rating agency suggests the move could result in a “billion-dollar hit” to the country and its supply chain.
Morningstar DBRS said in a report published Thursday that the investigation into China’s canola seed imports could result in tariffs being imposed on the crop, which would have a “significant impact on global canola trade flows” and on Canadian grain handlers.
The investigation announcement Tuesday comes after Ottawa decided to impose tariffs on Chinese electric vehicles, following the lead of the United States and the European Union. The 100 per cent tariff was imposed on imports of Chinese electric vehicles, as well as a 25 per cent tariff on steel and aluminium imported from China.
The federal government says the tariffs are meant to protect Canadian jobs, but the agriculture sector has said it could pay a price. Farmer John McKee told Global News earlier this week that the market price of canola in southern Alberta dropped nearly a dollar after the announcement.
Ian Boxall, president of the Saskatchewan Agricultural Producers, told Global News that farmers will be hit hardest.
“It’s the one that farmers grow and that brings in the most money, it’s sought after all over the world, the demand is high,” he said.
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“Even though the price of canola has gone down, consumers are not going to see a reduction in margarine in the grocery stores… only farmers are going to suffer… China, for the third or fourth time, has gone after canola because they know it’s a close call with their interests.”
In 2023, the report notes that Canada exported nearly $5 billion worth of canola products to China, citing Chinese customs data showing that more than 90 per cent of the country’s canola product imports last year came from Canada.
The rating agency said in its report that it is not yet clear whether the tariffs would be imposed or how long they might last, but the impact on the economy could be similar to a trade action taken by China in 2019 that saw shipments of canola seed blocked by two major Canadian companies.
The dispute follows Canada’s detention of Huawei CEO Meng Wanzhou at the request of the United States, and the subsequent detention of Michael Kovrig and Michael Spavor.
The Canola Council of Canada estimates the dispute cost the industry between $1.54 billion and $2.35 billion between March 2019 and August 2020 through lost sales and lower prices.
Canada launched a challenge at the World Trade Organization in 2020, but the review was suspended two years later, three months after China restored shipments.
China’s current investigation into Canadian canola imports echoes its recent probe into European Union brandy, launched in the wake of EU tariffs on Chinese electric vehicles.
In this case, China announced last week that it would not impose provisional tariffs on the product, but Morningstar notes that similar investigations into dairy and pork have yet to be concluded. The agency adds that the current geopolitical context, including the upcoming U.S. presidential election, means that “a wide range of outcomes is possible regarding the current investigation into Canadian canola seed.”
However, despite the concerns, the report offers potential solutions, noting that during the 2019 standoff, the quantities of canola that should have gone to China were actually absorbed by other parts of the world – with Europe being a major importer, receiving 1.3 million and 2.5 million tonnes in 2019 and 2020 respectively, compared to 0.4 million tonnes in the previous five years.
While the investigation is being launched by China, industry officials said they would support it if necessary but would not speculate on its outcome.
Agriculture Minister Lawrence MacAulay wrote on social media Tuesday that China’s decision was “deeply concerning” and that he was working with colleagues in government and industry to “closely monitor the evolving situation.”
— with files from Reuters
© 2024 Global News, a division of Corus Entertainment Inc.
