China has responded to the tariffs imposed on its electric vehicles by requesting the World Trade Organization (WTO) to investigate the export pricing of Canadian canola.
What is Canola? Canola is a product derived from the rapeseed plant, which has been selectively bred by Canadian producers to create a highly popular oil known globally as canola. Major production occurs in the Canadian provinces of Saskatchewan (53%), Manitoba (29%), and Alberta (17%), with Canada producing 20 million tonnes of canola annually, making it the world’s largest producer. This output is primarily exported to foreign markets, with China being a significant buyer.
Why Target Canola? Canola ranks among Canada’s top export products, alongside oil and wheat. This isn’t the first time China has targeted canola to exert pressure on Canada. In 2019, Beijing reduced its canola imports following the arrest of a Huawei executive in Canada and the subsequent detention of two Canadian citizens in China. Pork, a major export from Quebec, was also targeted during that time.
The current issue arose after Canada imposed a 100% tariff on Chinese-made electric vehicles, prompting China to request a WTO investigation into Canadian canola producers. China accuses them of selling canola at lower prices in export markets than in the domestic market, a practice known as dumping, which is prohibited under international trade rules.
China frequently uses its significant agricultural imports as leverage in trade disputes. It has also requested the WTO to investigate European exports of meat and alcohol, following the imposition of tariffs on Chinese electric vehicles by European countries.
What Will Be the Impact of China’s Decision? Following China’s request to the WTO, canola prices on commodity markets dropped. A WTO investigation can be lengthy. During the last canola dispute, China resumed imports before the WTO ruled on Canada’s complaint. The financial impact of this latest Chinese response to Canada’s tariffs on Chinese electric vehicles remains uncertain. However, during the previous reduction in canola imports from March 2019 to August 2020, Canadian producers estimate they lost over $2 billion.
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