Canada Urged to File WTO Case Against China Over Canola Feud

(Bloomberg) -- Canada is being urged to launch a World Trade Organization challenge against China over an escalating canola feud between the two countries.

China has halted imports of canola -- a crop used in cooking and livestock feed -- from some Canadian firms. While the Asian country is citing pest and quarantine concerns, the move is widely seen in Canada as a likely retaliation over the arrest of a senior Huawei Technologies Co. executive, Meng Wanzhou, in Vancouver late last year.

Some observers, including former Canadian ambassadors to China, are pushing Canada to file a complaint at the World Trade Organization as a way to signal Canada’s displeasure, using one of the few options available to Prime Minister Justin Trudeau, though they acknowledge it won’t be a short-term fix. In an interview Thursday, Trade Minister Jim Carr said he’ll consider anything, but his first priority is trying to get any evidence from China of violations.

“All options are on the table. We’re wanting to deal with this issue at the evidence level first,” Carr, who will meet with representatives from the industry Friday, said. Canada is considering sending a delegation to China to examine the science of any complaint. “If there’s no evidence, then we’d move along” to other measures, he said.

Top Market

China is the top export market for Canadian canola, totaling C$4.4 billion ($3.3 billion) last year. But it restricted imports this month from a pair of Canadian firms -- Glencore Plc-owned Viterra Inc. and Winnipeg-based Richardson International Ltd. -- citing concerns over pests. Carr said no other firms have yet had their export license suspended. He said Canadian officials have tested shipments, both before and since the Chinese complaints, and found no violations.

Trudeau’s government is also said to be weighing an aid package for farmers.

A WTO complaint would take years to resolve, giving farmers no certainty for the upcoming planting season, but proponents of such a move said it would nonetheless be a signal of Canada’s view on the matter.

“Canada needs to send a very clear message to the Chinese that this is not how rules-based countries behave -- one thing that is part of that is that Canada should immediately launch a WTO case,” said Meredith Lilly, the Simon Reisman Chair in International Affairs at Carleton University in Ottawa, and one-time trade adviser to former Prime Minister Stephen Harper. “It’s important that Canada uses the legal tools it has available, and one of those things is the WTO case.”

Former Canadian ambassadors to China have also backed the notion of a WTO challenge. “What’s nice about it is that it provides a high-profile medium, one that’s important to China, for delivering the message that we don’t think this is legitimate,” David Mulroney, now a distinguished fellow at the University of Toronto’s Munk School of Global Affairs and Public Policy, said in an email.

Symbolic Move

Guy Saint-Jacques, another former envoy, said a challenge should be launched if the Canadian delegation to China fails to produce a breakthrough, as he expects is likely. “We won’t make any progress, and in that case we have to be ready for a plan B -- and in my view this should include going to the WTO to formally lodge a complaint against China,” he told BNN Bloomberg television this week.

Any WTO challenge would be almost entirely symbolic in the short-term, as cases take years to fight, and the WTO is already under siege as the U.S. chokes off appointment of new officials.

“The WTO is an option but the problem is it takes years and years and years,” said Adam Taylor, a principal at Export Action Global, a trade consultancy. He’s also a former trade adviser in Harper’s government. By the time the appeals process is exhausted, “the damage will already be done to farmers.”

The canola feud is a political issue that will only be resolved at the highest levels of government, Taylor said.

However, the only thing China likely wants is the release of Huawei’s Meng, which Trudeau has no power to do at this stage of her extradition process, which could also take years.

“Our top representatives of the Canadian government need to recognize this is a huge issue and take steps to engage directly with the Chinese and find a way forward,” Taylor said. “The problem is I think the Chinese will come back with that outrageous demand, which is obviously something the Canadian government can’t consider, so they’re in a tough place.”

The government of Saskatchewan, Canada’s largest canola-producing province, encouraged the federal government in a written statement Thursday to “elevate their engagement to a diplomatic level to rectify this situation as soon as possible,” and to send a delegation to China. “Saskatchewan remains very confident in the high quality of our canola products,” the statement said.

--With assistance from Ashley Robinson.

To contact the reporter on this story: Josh Wingrove in Ottawa at jwingrove4@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Theophilos Argitis, Stephen Wicary

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