Many commodity groups are apprehensively observing the deterioration of relations between Canada and China, with concerns they may get entangled in the same way other segments of the agricultural sector did when China previously used trade as a means of punishing Canada.
In December 2018, Canadian authorities arrested Huawei's chief financial officer, Meng Wanzhou, to be extradited to the United States. China responded by detaining two Canadians and by changing a drug smuggling sentence against a third Canadian to the death penalty. As a result, trade between China and Canada slowed significantly. Canadian exporters had to find other routes to get to China. This time, who knows?
Some experts suggest that was the moment Cold War II started. Canada needs to be ready for this. Unlike Cold War I, agri-food trades can be weaponized since we now have massive economic involvement between nations. Knowing more about your enemy is much easier now. Our economies have provided open access to people and data. This is not at all reassuring.
According to Farm Credit Canada, after canola and wheat, crustaceans such as lobster, crab and shrimp were Canada's third-largest agricultural export to China last year, with a value of more than $1 billion. Canada's agriculture and agri-food products worth more than $8 billion were consumed by China, which happens to be the second-largest export market for Canada. In contrast to numerous other trading partners, exports to China have been on a continuous rise and were not affected by the global economic crisis. This relationship also comes with some significant diplomatic baggage. Canada essentially feeds China, and has done so for a few decades now. But, China has also grown and increased its capacity to feed itself. Food insecurity is less of an issue in China today than it was a few years ago.
Despite having less than 10% of the world's arable land available for cultivation, China manages to produce one-fourth of the world's grain supply. China's agricultural output is the largest globally, yet only 10% of its total land area can be used for farming. And the country is only getting more efficient. It is currently building hog farms, which can produce one million pigs a year. China has more options than before.
Some may argue that China is not worthy of our democracy and no such relationship is warranted. It’s hard to argue with that. Still, making a statement now will always come with a response, and China is in a powerful position to hurt many nations through trade sanctions.
Global food geopolitics aren’t what they used to be. During the first cold war, you picked a side and Canada picked the winning side. With Cold War II, it’s China on the rise against a weakening United States, along with Europe, South America, the Middle East and everything else in between, including Canada.
Picking the side of the United States this time will come with great risks. Canada’s relationship and proximity with the U.S. is a growing problem for our country, no matter who’s in power. Many agri-food trade groups like the Lobster Council of Canada, the Canadian Meat Council, and the Canola Council are fully aware the writing is on the wall, and have already made efforts to open new markets in the Asian-Pacific region. Ottawa just opened an office in the region for that exact purpose. India is certainly an underdeveloped market for Canada. Increased export market diversity, beyond the United States and China, is more critical than ever. Canada exports more than $85 billion of agri-food products a year, supporting our economy. That can’t be underscored enough.
The days of Prime Minister Pierre Elliott Trudeau’s love affair with China are over. The world has changed. China's President Xi Jinping's tenure is set to outlast many U.S. presidents and prime ministers. The "America buys while China sells" paradigm is ending. With significant holdings of America's debt and control over many parts of Africa, a new world order is well underway.