PM makes progress, but obstacles remain

What a difference a day makes.

Just yesterday on this page we were talking about how Canadian producers were unlikely to see much — if any — movement on the issue of Chinese tariffs on canola, peas, pork and seafood. Until now, China had been firm in stating that tariffs on these commodities would remain in place until Ottawa dropped its 100 per cent tariff on Chinese-made electric vehicles.

And in the week leading up to Prime Minister Mark Carney’s visit to China on Thursday and Friday, the federal Liberals were trying to curb expectations within the industry.

For the sake of local canola and pulse crop producers, we’re glad our expectations proved incorrect.

Carney announced on Friday morning from China that Canada had agreed to lower tariffs on some Chinese electric vehicles, in return for a major reduction on the tariffs China had imposed.

Ottawa expects Beijing to drop canola seed duties to 15 per cent from 84 per cent by March 1, according to a report from The Canadian Press.

At the same time, Canadian canola meal, lobsters, crabs and peas will no longer be subject to Chinese “anti-discrimination” tariffs from March to at least the end of the year. Not mentioned was the 100 per cent tariff on canola oil.

As part of this deal, which Carney called “enormous progress,” Canada agreed to drop its 100 per cent tariff on Chinese electric vehicles down to a 6.1 per cent tariff, and will allow up to 49,000 Chinese-made EVs into Canada each year. Further, half of those imported vehicles must cost less than $35,000 by 2030, to ensure that EVs are more affordable for the Canadian market.

Canadian Canola Growers Association president Rick White called “significant value deterioration” of the canola grown by farmers as a result of the Chinese tariffs.

“Farmers had all this production,” White told BNN Bloomberg on Friday. “It’s in their bins right now, and the values were tumbling.”

Friday’s announcement, while not a complete pull-back of the levies on canola products, will offer producers room to breathe, particularly going into the spring seeding season.

“We are very hopeful and optimistic to some degree, that the success of this will be determined by the movement of canola, the sales of canola going back into China,” White said. “The value recovery can start now.”

While this is good news for Prairie farmers, Carney’s decision to allow Chinese electric vehicles into the country marks a significant break with the United States, and may put Ontario’s auto industry in a bit of a bind.

Carney made it clearer than ever that the United States had lost favour in Ottawa, telling news media in Beijing that China had become a more “predictable” partner to deal with than the U.S., according to a report by the New York Times.

That message was strongly emphasized when the prime minister announced Friday that China and Canada were “forging a new strategic partnership” — this even as critics questioned Canada’s overtures to a country that until recently Carney had considered Canada’s biggest security risk.

There is an element of pragmatism to this decision in that, of the two superpowers, China currently seems to be the more stable. After all, China has not been openly talking about annexing Canada anytime soon, unlike the U.S. president’s “51st state” rhetoric.

But as we noted yesterday, there is an element of risk in moving away from the United States. Driving a further wedge between Canada and the United States is a definite win for the Chinese government, but we were heading in that direction anyway, with or without Chinese involvement.

We may also be putting in jeopardy upcoming trade talks with the United States and Mexico as a result. China may be the second-largest purchaser of canola, but the largest market for Canadian canola is the United States.

So, too, Ontario’s automotive sector, which operates in conjunction with plants in both Mexico and the United States.

Ontario Premier Doug Ford told CBC that he didn’t think news of the deal would go over well when it comes down to negotiating with Trump.

“This was not thought out properly, it wasn’t consulted, it was a knee-jerk reaction, and this is going to be a big, big problem,” Ford said.

To be fair, Carney has done a remarkable job in getting China to the table after nearly a decade of poor relations during the Trudeau years. Not only have the two governments agreed to co-operate more on clean and conventional energy, Carney announced on Friday that China would be making a “considerable investment into Canada’s auto sector” in the next three years. This represents an opportunity for Ontario, if it’s willing to work with the federal government.

But the problem with the Chinese tariffs is that they were designed to pit Canadian industries against each other. And this clearly has not been resolved to anyone’s satisfaction.

What we can say for certain, however, is that Carney’s direction for the country has grown far clearer with his trip to China. It remains to be seen if Canadians will follow him down that path.