China agrees to maintain Canada's access to $2.6B canola market through 2020

Two of Canada's biggest agricultural trade irritants with China have gone away.

A deal reached in Ottawa today means Canadian canola exports willcontinue through 2020 while both sides conduct research to resolve a shipment quality dispute, while exportsof bone-in beef from Canadian cattle under 30 months of age will resume following a BSE-related ban.

The canolacompromise cameat the last minute during talks betweenChinese Premier Li KeqiangandPrime Minister Justin Trudeauon Parliament Hill Thursday.

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Li, who is on a four-day official visit to Canada following the United Nations General Assembly meeting in New York, arrived late Wednesday.Intense negotiations went onovernight between Canadian officials andZhiShuping, the Chinese minister responsible for thecanolafile who's also in Ottawa for thevisit.

Fearing a disease outbreak,the Chinese have been questioningthe quality of Canada's canola shipmentsand threatening to impose restrictions orcutaccess to a market that was worth roughly $2.6 billion for Canadian canola producers in 2015.

In this compromise, both sides agreed to conduct additional scientific research to find a "science-based and stable solution," the prime minister said.

"This is great news," Trudeau said. "Our progress on this file goes to show how two countries can collaborate, can solve difficult challenges together."

Trudeau outlines new Canada-China trade deals

8 years ago

Duration 2:46

Prime Minister Justin Trudeau outlines the results of trade discussions with Chinese Premier Li Keqiang which include a new deal on canola.

Aworldwide surplus of the cropallowsChina to putpressure on its international suppliers.

The size and growth of the largest Asianmarket, where cooking oil like thatderived fromcanolais in high demand, maderesolving this dispute essential.

Canada is the world's largestcanolaexporter.Over 40 per cent is exported to China.

The dispute was a priority for International Trade MinisterChrystiaFreelandduringTrudeau'strip to China last month.

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Talks continued over the past three weeks on a near daily basis. Agriculture Minister LawrenceMacAulayis planning a trip to China in November.

Under the agreement, trade will continue under current terms while additional research is conducted to determine whether there's a legitimate link between the level of dockage stems, leaves or chaff that might be found in a grain shipment and the risk of disease transmission.

Changing the level of allowable dockage in shipmentswould have added a significant cost for the industry withoutmeaningfully loweringdisease risk, the Canadians argued. The two sides have been grappling over this since 2009.

China is the world's largest banquet, and we want Canada to be the caterer.- Brian Innes, Canadian Agri-Food Trade Alliance

"If we hadn't been able to come to an agreement, other exporters would have gotten into that market and we would have lost significant share,but it wouldn't have been easy for China to replace what we send to them," said Patti Miller, president of theCanolaCouncil of Canada.

Until the prime minister and ministers intervened,"we really were at a stalemate over the last couple of years," she said."We were stuck. I think their engagement in the negotiations, in raising the profile of it, really helped move things along."

Final major BSE holdout

The beef deal to resume trade in bone-in beef cuts from cattle under 30 months of age wasamong severalbilateral agreements signed Thursday on a range of issues.

China isamongthe final few countries that haven't completely reopened their marketsfollowing Canada's 2003outbreak ofbovine spongiform encephalopathy (BSE).

Trade in the lowest-risk products boneless beef from young cattle resumed in 2010. Thursday's deal adds bone-in beef, worthpotentially$10 million in new exports,to start.

China's large market will remain closed, however, to Canadian beef from cattle over 30 months of age. This restriction is considered less commercially meaningful, because goodmarkets nowexist for this in North America.

In a dispute unrelated to BSE, Canada has also not seen eye-to-eye with China on importing fresh (chilled) beef, not just frozen. Now that Air China has added a flight to Edmonton that could carry cargo, Canada wants to start shipping fresh beef cuts too.

Asian markets holdvaluable potential for Canadian beef exportsnot just because of their size and growing middle class: consumersthere purchasedifferent cuts from the steaks and hamburgers favoured by North Americans orEuropeans.

Taiwan, another significant market, reopened to Canadian beef exports in July, mere days after the visit of Mexico's president to Ottawa yielded a deal to reopen that valuable North American marketas ofOct. 1.

Indonesia continues to place restrictions on beef byproducts likebone meal, but mostother countries who closed their borders over the issue have now reopened.

A few, like Australia, haverestrictions not for scientific reasons but as a means of protecting domestic business a symbolicbanwithlittlecommercial impact on Canada.

New markets drive optimism

After a long stretch of bad news bad prices, bad weather and currency fluctuations"we're really coming to the light at the end of the tunnel," said John Masswhol of the Canadian Cattlemen's Association.

"Our herd sizes haven't grown," he said. "Ultimately what we need is for producers to be confident that if they're going to expand their herds, that they want to know that the return on the investment is going to be there for them in the years ahead."

Export-oriented agricultural sectorsneed newAsian markets in order to expand.

Both sectorsvoiced support for Thursday's announcement of exploratory talks with China towards a free-trade agreement.Beef, for example, enters China at a 25 per cent tariff.

"China is the world's largest banquet, and we want Canada to be the caterer," said BrianInnesin a statement on behalf of the CanadianAgri-FoodTrade Alliance.

And withthe ratification of the Trans-Pacific Partnership on the ropes, Canada needs alternative strategies in Asia.

Australians already havea free-trade deal with Japan and "eat our lunch," Masswohlsaid.