Canadian farmers are used to risk, but those who export their goods are facing additional strain this year. Market risks have increased with trade embargoes while the World Trade Organization’s (WTO) ability to settle disputes appears to be compromised. Countries including the U.S. and China are in disputes with each other, and each is also challenging the WTO’s authority in managing the rules that support international trade stability.
And the biggest challenge? Trade is currently dominated by politics.
The Canada-China dispute can be traced back to diplomatic tensions between Canada and China that were escalating following the arrest of Huawei executive Meng Wanzhou last December on a U.S. warrant. Since then, the events blocking our trade include the charges in June of unacceptable Canadian meat and in March of contaminated Canadian canola destined to China.
Chinese authorities said the feed additive “ractopamine” that is banned in China was found in Canadian pork shipments and that veterinary certificates for the animals were fraudulent. The Canadian Department of Agriculture and Agri-Food confirmed in a statement that “inauthentic certificates” had been identified, and referred to it as a “technical issue,” saying that information had been forwarded to law enforcement and that the agency was investigating.
The good news is that the Chinese government recently announced that it will now open up trade to some degree with Canada again. This about-face certainly came as a relief to Canadian farmers who export pork to China. But the message is clear: China is capable of major disruption.
A new normal?
Unfortunately, the Canadian canola imports that have been blocked since March are still blocked. The Canola Council of Canada says intensive talks are underway, but China maintains they have quality concerns with Canadian canola seed related to specified quarantine pests that include weed seeds and plant diseases.
The Canadian Food Inspection Agency disagrees with the assessment of China’s customs agency but technical discussions about these pests are not going well. WTO consultations between Canada and China took place on October 28 in Geneva but China had still not provided the required scientific evidence according to the rules of the WTO’s Sanitary and Phytosanitary (SPS) agreement.
While we may continue to look to the WTO to intervene and prevent trade disruptions there are many who question whether some countries will just choose to use their political and economic might to write their own trade rules and ignore WTO decisions.
As a country that both benefits by exporting but lacks the power to influence world trade, we are vulnerable if “trade by politics,” uncontrolled by the World Trade Organization (WTO), is the new normal.
Individual Canadian farmers who are now bearing the costs of disrupted global trade conditions did not cause the fights; and as a relatively small player on the world scale, but with a sizeable agri-food trade surplus, Canada needs the arbitration and enforcement powers of a strong WTO.
The big question facing farmers now concerns strategy. They are considering further diversifying their markets and questioning whether we need more processing here at home before exporting. But the reality is that farmers will be needing help weathering the current and potential threats to world trade disruption. How can individual farmers can successfully endure worldwide trade war challenges on their own?
According to Al Mussell and Douglas Hedley, Canadian trade experts on agriculture, farmers should look beyond their own resources for solutions: “The global agri-food market situation stands to create greatly increased volatility in the immediate future, independent of the risks of change in the global trade environment. The prospect of additional risks from the erosion in rules-based trade, or even the collapse of the WTO, greatly escalate the risk. The Canadian agri-food policy dialogue should reflect this source of risk, acknowledge Canada’s vulnerability to it, and begin the process of developing a contingent strategy to mitigate its potential effects.”
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