SIM REPORT: North America, Issue 4

CANADA & CHINA: Beef producers eye new trade rules following US-China deal

The so-called ‘Phase One’ US-China trade deal, signed in Washington, DC on 15 January and featuring a commitment from Beijing to buy up to USD50 billion of agricultural products from the US in the next two years, has raised hopes among Canadian farmers that they will also benefit. In particular, under the bilateral US-China deal, Beijing has committed to remove a raft of restrictions related to trade in meat, which may likely apply to Canadian beef products. Examples of Beijing’s actions include agreeing to accept beef imports containing internationally accepted levels of growth hormones, and removing age restrictions imposed to minimise the risk of a spread of BSE, or mad cow disease. China has also agreed to recognise the US’s animal identification system, designed to identify and halt the spread of diseases, and will end its requirement that US production facilities are audited by Chinese inspectors.

Although China’s actions were announced in the framework of the US-China deal, under the World Trade Organization’s (WTO) ‘most favoured nation’ rules, Beijing must treat all trading partners with which it does not have a free trade agreement (FTA) equally. As the US-China deal is limited in scope and economic sector, it is not considered an FTA and Beijing must therefore apply its provisions to other trading partners with which it does not have an FTA, such as Canada. Farmers in Canada are hoping that the high level of integration between the US and Canada’s agriculture sectors will boost their export opportunities, while Beijing seeks to diversify its meat imports amid an outbreak of African Swine Fever (ASF) which is expected to kill almost half of the country’s pig heard.

Canadian farmers’ desire to increase their exports to China, however, is likely to be strongly influenced by the two country’s fraught political relations. In particular, Ottawa’s detention of the chief financial officer of Chinese telecommunications giant Huawei, Meng Wanzhou, in December 2018 on a US extradition warrant, has led to a rapid worsening of bilateral relations. In apparent retaliation for Meng’s arrest, China promptly arrested two Canadian citizens in China, diplomat Michael Kovrig and entrepreneur Michael Spavor, and also imposed restrictions on the import of Canadian products, including rapeseed, pork, and beef. Although Beijing subsequently lifted its ban on Canadian meat products after four months, bilateral relations are likely to remain heavily strained until there is a resolution to Meng’s case.

While the US-China trade agreement is a positive development for Canadian farmers, Beijing retains significant influence over its trade policy and political tensions may push Chinese importers away from the Canadian market. The agreement, however, which addresses a significant hurdle in bilateral US-China relations, may prompt a swifter resolution to Meng’s case, particularly if the US decides to withdraw its arrest warrant, which would pave the way for a major improvement in Canada-China ties.

WANT TO READ MORE ANALYSIS IN THIS LATEST SIM EDITION...

UNITED STATES: New Orleans cyberattacks highlight potential impact on businesses

UNITED STATES: Virginia rally highlights disputes over states’ gun control proposals