In September of 2019, Canada requested WTO consultations with China in relation to Chinese measures restricting imports of canola seeds from Canada. Consultations were held in October of that year but failed to resolve the dispute. In June of 2021, Canada revived the dispute by requesting a panel. China blocked the first request for a panel at the DSB meeting of June 28, but the panel was established on July 26 at the second meeting where it was on the agenda. This post briefly reviews some of the factual, political, and legal aspects of the dispute.

Import Restrictions Led to a Drop in Imports

China imports canola seeds in part so as to turn them into vegetable oil and meal to feed pigs and fish. In early March 2019, Canadian canola seeds began to face additional inspections and tests in Chinese ports. First, China revoked the license of one Canadian exporter, Richardson, on quality grounds. A second Canadian exporter, Viterra, had its license cancelled a few weeks later when Chinese authorities said they had found pests in its shipments. These developments led some Chinese importers to cancel canola seed orders from Canada. According to the Canola Council of Canada, Canola seed exports to China "were down approximately 70 per cent in 2019 due to trade disruptions, resulting in an estimated $1 billion in lost revenue from canola." Based on this Council's data, the decline in Canadian exports to China through 2020 was as follows:

Canadian Canola Seed Exports to China

Year

2020

2019

2018

2017

2016

Quantity

2,576,168

1,544,608

4,866,647

4,511,090

3,542,468

Metric tonnes; source: Canola Council of Canada (https://www.canolacouncil.org/markets-stats/exports/)

Data from UN Comtrade shows a similar decline in Chinese imports of Canadian canola seeds:

Year

2020

2019

2018

2017

2016

Quantity

2,315,560

2,357,604

4,443,301

4,513,309

3,438,299

Thousands of kilograms; source: UN Comtrade; HS Code 1205

This had a significant impact on the industry, as China had been "a major market for Canadian canola, accounting for approximately 40% of all canola seed, oil and meal exports." (For more details, see Case Study - Impacts of the Chinese Trade Restrictions on the Canadian Canola Industry.)

The Political Background: Canada-China Tensions

In terms of the politics behind this dispute, although there is no direct evidence, there is a widespread belief that the Chinese restrictions were adopted in response to the Canadian detention of Huawei executive Meng Wanzhou and other diplomatic difficulties. Several news articles from February and March 2019 made this connection. A CBC News article quoted an industry executive as saying the import restrictions are "direction retaliation" to various Canadian actions. Along the same lines, a Washington Post article refers to a University of Toronto political science professor saying that the canola seed restrictions and Meng's detention are “definitely” linked. And a Reuters article has a Chinese company explaining that "China is likely carrying out the heightened checks to 'pressure Canada' amid the current diplomatic tensions." When asked about this issue in March of 2019, China's foreign ministry spokesperson stated that "[t]he Canadian side should take some concrete measures to correct its previous mistakes." (See Annex 1 for the full exchange).

The WTO Complaint

Prior to a formal WTO complaint being filed, Canada raised the issue at the WTO in a General Council meeting. At the meeting of May 7-8, 2019, Canada focused on the lack of a scientific basis for the measures:

Canada has been working hard to resolve this issue with China, using every available channel on the ground both in China and in Canada. We have been, and remain, open to working constructively with Chinese counterparts to address their stated concerns.

To do so, however, we need to fully understand the problem. The Canadian Food Inspection Agency tested - and then retested - the shipments from the two Canadian establishments suspended by China and found that they met China' s Import requirements.

Canada has repeatedly asked China for the scientific evidence that supports its findings and the measures taken - but China has not been forthcoming in providing this information.

To fully understand China's findings, Canada maintains that we need further technical information: pest risk assessments; sampling and testing methodologies; and access to the specimens detected.

In response, China insisted that the scientific basis had been communicated:

Recently, quite a number of cans of harmful pests from Canadian products had been intercepted by China's customs. The relevant information including photos had been provided to Canada. Consultations between both sides had been held and China would like to keep communication with Canada in the SPS Committee framework in the WTO.

Canada's consultations request was filed in September of 2019, with consultations held the next month. No further formal steps were taken until June of 2021, when Canada filed a panel request.

The panel request refers to two measures:

1) China's suspension of canola seed imports from two Canadian companies; and

2) China's application of enhanced inspections to canola seed imports from other Canadian companies.

The Canadian request also notes that "China cites detection of quarantine pests in canola seed shipments as the reason for its measures affecting the importation of Canadian canola seed." In response, Canada reiterated that: "Canada has repeatedly attempted to obtain information from China regarding the scientific basis for its measures and on the process to restore full market access for Canadian canola seed. Canada has employed numerous and varied formal and informal mechanisms at its disposal to solicit this information. To date, these efforts have failed to produce satisfactory results." Canada then cites a wide range of WTO provisions as having been violated, under the SPS Agreement, the GATT, and the Trade Facilitation Agreement. These sorts of cases tend to emphasize the SPS Agreement claims, but it can be hard to say at this early stage where the parties and the panel will focus.

Next Steps

With the panel now established, the next stage is for Canada and China to work with the WTO Secretariat to find three panelists to hear the dispute. We will report further on the dispute as the litigation proceeds and any submissions of the parties or third parties become available.

Relevant readings:

Cardwell, Ryan and Derek G. Brewin, "Blackleg or Blackmail? Economics of the Canada-China Canola Trade Dispute," Canadian Journal of Agricultural Economics. 67(3): 251-260, 2019

Amanda Coletta, "China has put Canadian canola oil in the middle of a wider geopolitical dispute," Washington Post, March 27, 2019

Pete Evans, "China halts canola shipments from major Canadian supplier," CBC News, Mar 05, 2019

Rod Nickel, Dominique Patton, Hallie Gu, "Canadian canola runs into Chinese delays after Huawei arrest," Reuters, February 5, 2019

Zhiduo Wang, "Canola Disputes in Canada-China Agricultural Trade: A Chinese Policy Perspective," 2019.

Annex 1:

Foreign Ministry Spokesperson Geng Shuang's Regular Press Conference on March 27, 2019

Q: Yesterday, Chinese customs announced that they've suspended canola imports from a second Canadian company. Is this part of a wider trade dispute and will it have any effect on the broader China-Canada relations which have already strained after Meng Wanzhou's arrest and continued detention of two Canadian citizens in China?

A: China's General Administration of Customs has issued a notice on halting imports of canola seeds from the Canadian company you mentioned. I want to stress that the Chinese side has taken these precautionary quarantine measures to ensure safety. These measures are scientifically-sound and reasonable that comply with the relevant Chinese laws and regulations and international practices. The competent department in China has notified the Canadian side of the issue regarding Canada's canola seeds exports to China and remains in communication with the Canadian side on technical matters.

As for China-Canada relations, we hope that the Canadian side could work with us to promote the sound and steady development of bilateral relations. The Canadian side should take some concrete measures to correct its previous mistakes.

Follow-up: Do you have any updates on Richardson International, the first one that got suspended earlier this month?

A: China has suspended importing canola seeds from this company. That is all I know.