As Canada’s canola farmers brace for potential impact from China’s new anti-dumping investigation into Canadian canola imports, a new report from an international credit rating agency suggests the move could lead to a “billion-dollar hit” for the country and its supply chain.
Morningstar DBRS said in a report released Thursday that the investigation into canola seed imports by China could result in levies being imposed on the crop, which would have a “meaningful impact on global canola trade flows” and Canada’s grain handlers.
The announcement of the investigation Tuesday came after Ottawa moved to impose tariffs on Chinese electric vehicles (EVs), following the lead of both the U.S. and the European Union. That 100 per cent tariff was put on Chinese EV imports, along with a 25 per cent tariff on imported steel and aluminum from China.
The federal government says the tariffs are aimed at protecting Canadian jobs, but the agricultural sector has said it may pay the price. Farmer John McKee told Global News earlier this week that the market price for canola in southern Alberta dropped by nearly a dollar following the announcement.
Ian Boxall, president of the Agricultural Producers of Saskatchewan, told Global News it’s the farmers who will be hit the most.
“It’s been the one that farmers have grown that makes the most money, it’s wanted around the world, the demand for it is high,” he said.
Get daily National news
“Even though the price of canola’s down, consumers at the grocery store are not going to see a reduction in margarine… it’s only the farmer that’s going to feel the hit…. So China, again for the third or fourth time, has attacked canola because they know it hits close to home.”
In 2023, the report notes Canada exported close to $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 were from Canada.
The credit rating agency said in its report that it’s not yet known if tariffs would be levied or how long they could last, but the impact on the economy could be similar to that of a trade action taken by China in 2019 that saw shipments of canola seed blocked from two major Canadian companies.
That dispute came following the Canadian detention of Huawei executive Meng Wanzhou at the request of the U.S., 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 from lost sales and lower prices.
Canada launched a World Trade Organization challenge in 2020, but the review was suspended two years later, three months after China reinstated shipments.
China’s current investigation into Canada’s canola imports has echoes of its recent probe into brandy from the European Union, which it launched following tariffs imposed by the EU on Chinese EVs.
In that case, China announced last week that it would not impose provisional tariffs on the product, but Morningstar notes that similar probes into dairy and pork products have yet to come to a conclusion. It adds the current geopolitical landscape, including the upcoming U.S. presidential election, means “a wide range of outcomes is possible regarding the current probe into Canadian canola seeds.”
However, despite the concerns, the report does pose potential solutions, noting that during the 2019 standoff, the amounts of canola that would’ve gone to China were in fact taken in by other parts of the world — Europe being a big importer, receiving 1.3 million and 2.5 million tonnes in 2019 and 2020, respectively, compared with the 0.4 million tonnes seen in the prior five years.
As the investigation begins by China, industry officials said they would support it, as appropriate, but would not speculate on the outcome.
Agriculture Minister Lawrence MacAulay wrote on social media on Tuesday that China’s move was “deeply concerning” and he was working with government and industry colleagues to “monitor developments closely.”
— with files from Reuters
Comments