D.卡尔顿 罗西
D. Carlton Rossi

Free Trade



                                 
      
                                                      Hanzhou  2007
 


                           China-Canada Free Trade
 
Free-trade negotiations will begin shortly with China ceteris paribus. They are ill-conceived since it is a contradiction to have free trade in this day and age among countries of such unequal, economic size and strength. With its smaller size economy, Canada will be at a severe disadvantage. It will be like Wallonia in the European Economic Union or perhaps the autocratic, Marxian country of Freedonia. The negotiations are inconceivable in that Canada has a system of rule of law while China's system is one of rule by law. A free trade agreement with China will infringe upon and impinge on four, key, core values of Canadians; namely, free-trade mandate, judicial law, territorial sovereignty and environmental protection. 

Throughout Canada's history, elections have been won or lost on the issue of trade reciprocity with the United States. Reciprocity is a core concern of Canadians. However, in the run-up to the most recent federal election there was virtually no talk of China let alone a free trade agreement with China. The Liberal government has no idea what the opinions of Canadians are on this most important issue. It is a grievous and egregious error to begin trade negotiations with China on free trade without a mandate from Canadians. Either another federal election is required or a national referendum needs to be held immediately.

It may be necessary to remind Canadians that the reciprocity issue (free-trade) has been a key feature of several elections throughout Canada's history. In 1891, the Laurier liberals ran on a platform of removal of tariffs. It lost to the conservative protectionist party. Unsuccessful attempts by the liberals to revive free trade with a reciprocity treaty in 1911 led to a political victory by the conservatives who warned of annexation. More recently, the Progressive Conservatives won the 1988 election on almost the exclusive basis of a Canada-US Free Trade Agreement or FTA. In 1993, the pro-NAFTA conservative government majority was reduced from 154 members to 2 members.

It was disingenuous of the Liberal Party to not have campaigned on the issue of free trade with China. It was well known that the FIPA agreement with China (which was vigorously opposed by Canadians) formed the basis to negotiate a free trade agreement with China. At that time, China expressed interest in a free trade agreement with Canada. Why did the Liberal Party wait more than one year into their term to accept exploratory talks with the Chinese if not to avoid an election on the issue. They do not have a mandate to initiate free-trade talks with China because it was effectively silenced in their election platform.

A free-trade platform in an election is a core necessity for Canadians if free-trade is contemplated. It has been omitted and been replaced by behind the scenes pay-for-play strategy with the Chinese to fund the next campaign. It is opportunistic at best and at worst it is oligarchic behaviour for the Liberal government.  

Donald Trump ran on a protectionist platform to change or even scrap NAFTA. While he mainly directed his attention to Mexico it was well understood that by extension it could also apply to the other signatory of the agreement which is Canada. President Trump has a clear mandate based on the results of the electoral college to renegotiate NAFTA.  

On the other hand, the Liberal government does not have a mandate to negotiate a free-trade agreement with China. The PRC is an autocratic regime which has trampled on human rights. Are you aware the head of the Supreme People's Court has just dismissed the concept of judicial independence as an “erroneous Western ideal” and trap? In other words, China is governed by the Communist Party under one man rule rather than under the rules of a constitution. If Canada pursues accelerated free-trade with China without a clear electoral mandate then its democracy will regress from Periclean to Peisistratan tyranny.  

A second core issue for Canadians is rule of law both domestically and internationally. Canadians are protected domestically by both a Constitution and a Charter while they are protected internationally by universal rights and conventions. On the other hand, authoritarian states such as China have wonderful constitutions which are flaunted, but laws protecting citizens are flouted. China has routinely circumvented laws of international organizations such as the WTO and United Nations for its own advancement. Its core concerns are dictated by its four core leaders. Therefore, what is the guarantee that China will abide by the terms of a free-trade treaty?

A third core issue concerns territory. Canada's territory has been set with bilateral agreements with the United States to establish a virtual free border between them. Its other borders have been recognized by international agreements. On the other hand, there is no international agreement concerning China's claim to territory or free land in the South China Sea. Its claim is enforced through its navy.

In other words, Canada's definition of territory is specific while China's definition of territory is general. The Chinese definition is nebulous, turbid and indistinct. It could include practically anything. Why does this inconsistency exist after 18 years of preparation for FIPA and will the error be repeated in a China-Canada free-trade agreement?

Canada has long been criticized by the US administration for not defending freedom of the seas in the South China Sea. Perhaps this is because Canada claims sovereignty in its northern passage rather than recognizing the American position regarding freedom of the seas. However, the Canadian position is rather hypocritical since Canada depends militarily on the United States to keep the passage open. A second in command of the Canadian armed forces was removed recently for divulging confidential data concerning the shipbuilding program which was to have enforced our claims to sovereignty in the north.  

Is the government completely convinced that a general definition of territory will not come into conflict with a specific definition of territory with respect, in particular, to the Arctic. What if China were to challenge Canada's sovereignty to the Arctic by sending an icebreaker and tanker through the territorial passage recognized by international agreements as Canadian without the approval of the Canadian government? What if China wished to purchase and upgrade deep water ports at Tuktoyaktuk in the Inuvik Region or Churchill port owned by OmniTRAX? The issue of a dual type of definition for territorial sovereignty must be examined, debated and voted upon in the House of Commons before trade talks begin.

The fourth core issue concerns the environment. For clarity, the issue of coal shipments will be examined. A high percentage of coal sales to China are made by one company--Teck Resources. It is believed that China imposes a tariff of between 3 to 6% on these shipments depending on type and grade of coal. Presumably, in order to have these tariffs reduced to zero (as in the Australian case) then Canada must make some other concession to China.

In 2009, China's state-owned China Investment Corporation purchased a 17 per cent position in Teck Resources through a subsidiary called Fullbloom Investment Corporation. Really, will a 100 flowers bloom
百花运动 on Bloomsday in a coal-induced haze over Beijing? At any rate, as a result of Fullbloom's minority stake in Teck Resouces, Quan Chong was appointed as one of 14 directors on the Teck board. That, in itself is business as usual. What is unusual and perhaps unique is that Quan Chong is a Deputy in the National People's Congress of China. Dermod Travis of Integrity BC said that this issue threatens Canada's sovereignty. "We ultimately risk ceding a great deal of control over the rate our resources are mined, the use of those resources and, potentially, who will be hired to do the mining itself"
 
Neither Canada nor China can live up to their international obligations concerning reduction of greenhouse gases if Chinese tariffs are reduced on Canadian coal exports. It is unconscionable of Canadian companies to dig up these resources but leave the refining to countries like China which have environmental laws which are not enforced. It is NIMBY at its worst. The solution is for Canada to proportionately impose an export tariff of between 3 and 6 per cent if any Chinese coal tariffs are reduced. Of course, a similar argument can be applied to shipment of bitumen to China.
 

It is one thing to assume that because neither Canadian reporters nor citizens asked questions at the town halls about China-Canada free-trade, which were engineered to deflect criticism of patronage and pay-for-play, that they have no concern for basic, entrenched core values in their trade relations with China. If Canadians were interested in free trade at all it would not be to satisfy the elite, vested interests of a clique of executives, but rather it would rest on the core interests of all Canadians. The Canadian government's China policy has been neither apparent nor transparent. This can only bode ill-will for the well-being of Canadians. The government's negotiations prior to the Hanzhou conference can be considered at best amateurish and smiles don't go that many miles--not when Chinese police wear smiley face stickers when arresting human rights advocates.

Canada should not do what its trade opponent wants or should one rather say "don't do everything your trade rival wants"! It is one thing to look for common interests concerning trade between two countries such as the United States and Canada, but it is a totally different matter for one who may have no core interests to willfully or wistfully overlook the differences between Canadian core interests and the interests of a core, Chinese leader. Sonny Liston did not follow sunny ways in the boxing ring. He fought without charity to crush his opponent. Expect nothing less from your trade competitor.



D.卡尔顿 罗西

2017年1月20日 


 

                                   


                                                              FTA


A Free Trade Agreement with the People’s Republic of China is highly unlikely with the Canada-China FIPPA agreement if logic is paramount. Basically, FIPPA gives rights of lawsuit to Chinese investors while transferring obligations to Canadians. This stems from the fact that China holds major assets in Canada which are subject to rule of law—most lawsuits will be filed against Canada. It is improbable that Canada could or would try to renegotiate FIPPA. One cannot scrap it because it means loss of face and a broken contract for Canada. The logical conclusion is to forget about a Free Trade Agreement. This is likely an unintended consequence of the ratification of FIPPA since the old guard of the Conservative party and perhaps prospective directors of oil companies wish to promote oil sands development with its passage, but they may not have anticipated the offer of a Free Trade Agreement.

The FIPPA agreement lasts 31 years. That is a generation. Many things can happen in a generation. Supposedly, the length of the bilateral agreement was to correspond to the length of an oil sands project. However, thirty-one year agreements were not made between federal or provincial governments and oil sands companies to guarantee the investments of the latter. The private, integrated oil companies had to assume the risk and not Canadians. Risk was not transferred to the public and benefits did not accrue to private companies as was earlier done in the United States during the sub-prime mortgage crisis.

Currently, the NDP government in Alberta has been rather indecisive about royalties. The oil companies can either try to convince the government to change their stance or hope for a change of government. The companies cannot dictate to the provincial government about its royalty policy.

In the future, though, will the provincial right to determine royalties be hamstrung by FIPPA? Remember, too, there may be at least five different provincial parties in each province or territory and different federal parties in a thirty-one year period while in China there is only one. Will FIPPA lead to an homogenization of parties effectively removing opposition under a FTA?

How long will a Free Trade Agreement last? Logically speaking, it should match the expiry of the FIPPA agreement. This is undesirable. It is like the tail wagging the dog with respect to length of term. Isn’t it more logical to have first negotiated a FTA which is the more important and practical followed by a FIPPA? In this time sequence, a FTA could have been medium term with a six month notice of termination allowed and the length of the FIPPA’s term would have matched it. The reality is though that the offer of a FTA came after a FIPPA. The real consequence to Canadians is that a FTA under the umbrella of a FIPPA compounds risks and multiplies obligations with greater investments and increased trade while limiting benefits.



D. Carlton Rossi

July 18, 2016






                                             

                                                                   Canola


What was the Canola dispute mainly about?


1.  Dockage

One might say unscientifically that 98% of Canadians don't care what dockage is. It can be defined simply as "items like chaff from the plant, dust, wild oats, small seeds and seedpods". One might also say after high-level negotiations have concluded that 99% of Canadians don't care. That's a one percent increase.
 
Some growers consider that the grain companies are holding the farmers for ransom "when they get deducted for dockage on their delivery tickets and pay for cleaning while grain companies top up the dockage before sending the canola overseas". Furthermore, "buyers pay grain companies for dockage, while the farmer is penalized for it--especially when growers are paying through basis levels to have their canola cleaned."  The Western Producer, by Sean Pratt,  Sept. 08, 2016.

 It is evident that Canadian farmers are not treated with r.e.s.p.e.c.t.


2.  Transportation costs

Canadian agribusinesses were asked by their Chinese customers to reduce dockage. The customers were told it couldn't be done, but the agribusinesses were shown up by a couple of early sales which proved otherwise. How times have changed.  It used to be the customer was always right and now it has morphed into the customer is always wrong.

As a matter of fact, they had a chance to reduce dockage for several years. The last time was around April 1, 2016 until it was postponed by the Chinese until September 1, 2016. One may conclude that both sides could have known in advance the full significance of that date with respect to the meeting of world leaders in Hangzhou. Never imagine that the players would even contemplate collusion followed by collision.  


3.  Free Trade

The dockage disagreements made a mountain out of a molehill and certainly hurt chances for a free trade agreement. It also distracted negotiators from other more important issues. One might conclude though in the absence of facts that the Council may not favour a FTA to the same degree as it favours multilateral or bilateral agreements.

However, what exactly is The Canola Council of Canada's position on a Canada-China FTA? The author tried to discover it. As a matter of fact, the author's internet connection was severed on three separate occasions as he attempted to answer this concern. It seems while the Council's position that "effective market access means being free to sell Canola without tariff or non-tariff trade barriers" that "free" might not extend to knowledge of what the hell is going on.
 
 
4. Scientific Method

Surely, the Chinese can't be serious about the issue of scientific method as applied to dockage when it was a Canadian researcher who invented Canola and Canadian researchers who improved the product. Indeed, (and not widely known), 95% of Canada's  Canola is genetically modified on some 8 million hectares. This eclipses by far corn and soybean crops. Canola is tolerant to two major herbicides.


5. Canola Prices

All grain prices are depressed. The Chinese announcement concerning Canola dockage weighed heavily on the market until typhoons hit four Chinese refineries. Why sell to Chinese (the third largest or some say second largest Canadian crop of Canola on record) to a Chinese market saturated in Canola until at least June 2017. Why not store the Canola seed and sell it later when the market recovers? 

In effect, this is what your competitor--China--is doing; after all, they already had a surplus of Canola seed. Why should they buy more seed if not to store and sell it when the price rebounds or process it later? The Chinese didn't want to cut off sales as one might conclude from all the hysterical talk. They wanted all of it until 2020! You have transferred to them control of the Canola market on a silver platter. It is not hard to imagine that blueprints are being drawn up at this very moment for the construction of more refineries to sell Canola oil from Canadian seeds to the international market.

It is no secret concerning oilseeds that Canola is at a competitive disadvantage to soybeans in the Chinese market. The reason is that a 9% tariff is placed on Canola and a 3% tariff is placed on soybeans. This is significant since Chinese crushers of oilseed are price sensitive and can switch to soybeans based on price. Most contracts to supply Canola to the Chinese market have already been signed. Who will benefit most then if tomorrow the Chinese drop the tariff on Canola to 3% until 2020? It might be supposed those who knew in advance that a tariff reduction was in the cards. However, if the Chinese are as clever as it seems they are then they will reduce the Canola tariff to 0% thus giving favour to this commodity over soybeans and cornering the Canola market to a greater extent.


6. Negotiation Tactic

It is clear that the Chinese demand for dockage reduction was a negotiation tactic to exert pressure under deadline. Curiously, though, they didn't want to talk about it, as they professed to consider it a scientific issue. On the other hand, it seemed it was the only issue the Canadians wanted to talk about and they left earlier on their trip to do more talking. In other words, Canada played the Chinese game. What is more clear is that Canada had no pressure tactic of its own!


7.  $2 billion

The loss of $2 billion of Canola contracts would have been a serious problem for Canada's export of the product. However, $2 billion means practically nothing to the Chinese. How can Canada consider a free trade agreement as a price to pay for access to Chinese buyers of Canola when the size of China's economy dwarfs Canada's and when China does not have the same views on international law as  Canada does?


8.  Hostage

Who is the next Canadian to be arrested and held hostage by the Chinese for them to use as a negotiation tactic in trade or any other issue?  How will our government effectively counter this circumstance or better, yet, preempt it. It is necessary to clearly state to China in advance what the specific consequences will be if an arrest takes place under similar circumstances and that you are prepared to take further, measured action if the situation deteriorates. It is imperative that the government explicitly states in advance what dire consequences will result if a Canadian prisoner is executed or dies in prison. 

An extradition treaty is out of the question with China as long as China has the death penalty which might be applied to a person extracted through extradition or to any member of his/her family in China. It is out of the question when just a short time ago a Canadian convicted on two charges of subversion might have been executed. Canada has long said it doesn't deal with terrorists in trying to get prisoners released. In this case, it might be said don't deal with "errorists" either.

 
9.  Trade Gap

A loss of China as a major Canola customer would have meant a widening trade gap for Canada. Can you possibly imagine the extent of the trade gap if Canada were to sign a free trade agreement with China? Don't consider the temporary solution to a dockage issue as a victory in battle, but rather as a resounding defeat. The Chinese want free trade. The majority of Canadians shout out against free trade with China. Why tout a blue sky FTA?


10.  Heavy Oil

Wasn't it implied that China will buy Canadian Canola to be refined into canola oil if the Canadian government were to expedite a pipeline for heavy oil to the west coast by downplaying environmental and climate change concerns which might be the equivalent of dockage to the Chinese?


11.  Other

Many of the above issues were involved in the Canola dispute to one degree or another. However, the question read "What was the Canola issue mainly about?" The author contends it was none of these. It was an "Other" issue. It was another issue that neither the Canadian government nor its trade negotiators were addressing or for that matter even recognized regarding Canola. 

The Chinese mind can be very subtle or elusive to a foreigner. One has to peel away the various layers to reach the core of their thinking. Our government has little understanding of how Chinese think. Its think-tanks have "thunk out". It is therefore prone to repeat similar or same errors (time and time again) in different scenarios. If the government does not understand why the Other is not named or explained in detail herein then it has not understood in depth the Chinese mind.


D. Carlton Rossi 

D.卡尔顿 罗西   D. Kǎ'ěr dùn luō xī

October 17, 2016











                     

                         Public Safety Minister Ralph Goodale




The absurdity of the Liberal Government's China Policy and Strategy as it pertains to Canola


Some critics have commented on Goodale's mission to Beijing with regard to the canola issue as being absurd. They say the real issue is the arrest of MENG Wanzhou who is an executive of Huawei. It seems the Canadian government understands all of this, too; but, nevertheless, sticks to the point of demanding scientific proof of pests. Goodale goes to Beijing (at the same time as Lighthizer and Mnuchin who are negotiating a complex trade deal of immense proportions with Vice-Premier LIU He). Goodale delivers a speech to the cameras about hammering away on the pest issue. Might he be unaware of who is the hammer and who is the nail? He might even have a dialogue with someone in the Chinese agriculture department about pests in the following vein. "We have no pests." "Yes, you have pests." This might go on as argumentum ad infinitum. He may consult with the ex-ambassador to China whose chosen Chinese name means honourable head of the family who gives wheat. All of these would be examples of the definition of the word "absurd" through exemplification. The absurdity of the Liberal government's China policy and strategy as it pertains to canola is an echo of the past which means a pattern has been established.

It may be said in criticism about the author that he is trying to use reason to understand what is really absurd. There is some degree of truth in that accusation. He is reminded of the character Don Quixote who in his moments of sanity tried to understand his own madness. The errant-knight saw brilliance in the subleties of what appear to most of us as illogical gibberish. For example, he would ponder over the significance of the following sentence. "The reason for the unreason to which my reason is subjected , so weakens my reason that I have reason to complain of your beauty". It is clear that Quixote doesn't quite have all of his mental faculties since he takes the absurd so seriously and therein lies the comedy. It is quite understandable if a critic finds the theme of this essay to be rather absurd and laughable, but perhaps the author is not so sillily insensible as he may seem.

One needs to put the present into perspective by examining the past. On June 28, 2014, SU Bin--who was a permanent resident of Canada--was arrested for cyberespionage against Amercian military contractors with the theft of hundreds of thousands of files. Kevin Garratt who is a Canadian was arrested in China on August 4, 2014 in a tit-for-tat response and later charged with espionage. There was no foundation for the charges against Garratt. One might even call them absurd. Garratt didn't report to CSIS, but rather to God. He was held as a bargaining chip.

The Chinese did not want Canada to extradite SU Bin to the United States according to the Canada-United States Extradition Treaty. However, the extradition did take place. SU Bin admitted his role in the theft, paid a fine and was offered a plea deal with regard to sentence. He was sentenced on July 13, 2016. Garratt was treated in a similar way. He was charged with "suspicion of stealing and spying to obtain state secrets". The operative word there is "suspicion". No real evidence was presented at a closed kangaroo trial. He plead guilty to the charge, paid a fine and then was deported in September 2016.

That happened to be the time that China was offering and Canada was seeking a free-trade deal. To put it another way, Canada wanted free-trade and China wanted an extradition treaty with Canada so that Chinese would not be extradited to the United States, but rather be sent to China. In other words, the Chinese wanted their claim to take precedence over the American claim with respect to extradition in serious espionage cases. Of course, they couched the issue in other terms such as fighting corruption and recovery of illegal proceeds.

The first time that canola came to the forefront was actually in 2016. It was on February 22, 2016 that China's quarantine agency said it wanted to cut dockage. Basically, dockage is anything that is not canola seed as determined by a series of three sieves in the Carter tester. The reduction was to have been from 2.5% to 1% in order to reduce chances of potential blackleg disease. One might link this new change in policy to both the prospects of a free-trade agreement and extradition treaty as well as the charges laid against Garratt on January 28, 2016. These issues became prominent in September 2016 as they were negotiated.

There was an absurdity in the Canadian position regarding dockage reduction. The reason is that many producers had actually reduced dockage to lower transportation costs by rail to the port of export. Dockage was then added at the shipping terminal to meet the 2.5% requirement. It may very well be that the Chinese knew of this circumstance.

While exploratory talks on free-trade and an extradition treaty began in 2016 they did not mature into active talks. Trudeau himself has been blamed because of the approach he has taken. At a four day trip to China around December 04, 2017, he insisted to Premier LI Keqiang that the Chinese listen to his "progressive agenda" which involved protecting women, labour laws and the environment. China's response was to tell Trudeau to take back his garbage.

While Trudeau's approach was seen by the Chinese as arrogant, it might also be interpreted to be absurd. Why was he mixing social issues with trade? The more general question though is "Why does he want free-trade and an extradition treaty with an authoritarian regime which favours SOE's and represses human rights? It is also absurd for Trudeau if he thinks he can get a free-trade deal without an extradition treaty. They go hand-in-hand.

While the finishing touches on a new NAFTA Agreement designated as USMCA were being negotiated it was announced that Article 32.10 had been inserted at the insistence of the United States. This article states that "any one of the three USMCA partners must inform the other two in advance about starting free-trade negotiations with a non-market economy and that the other partners can terminate the USMCA if those negotiations result in a free-trade agreement." Finance Minister Morneau said that this was similar to the existing situation.

Morneau's assessment is not accurate since NAFTA went from a general prohibition to a specific one under USMCA  Article 32.10 which undoubtedly refers to what might be a free-trade agreement between Canada and China which is a non-market economy. A week later, on October 11, 2018, Morneau seemed to mock the clause when he said at the Greater Vancouver Board of Trade “if your largest client is Telus, and you are about to sign a deal with Bell Canada, you might think about that and make sure they are OK with it”.

It was not long before the Liberal government sent four, high-level, negotiators to China in order to discuss canola and other agricultural products. It was announced on November 12, 2019 that the government's aim was to double agricultural exports to China by 2025. However, the door still remained closed due to both tariff and non-tariff barriers imposed by China.

When Trudeau was at the ASEAN summit in Singapore on November 14, 2018 he said that Canada and China will continue to work together towards an “eventual” free trade deal. The Canadian Press also reported that "Trudeau and LI Keqiang met at a key gathering of Asia-Pacific leaders, hoping to push ahead on talks toward a free trade agreement". One can deduce from these statements that both Canada and China were concerned with the non-market economy issue with respect to their sovereignty and were looking with renewed interest in free trade. Both countries returned to the canola agenda.

An important key to opening the Chinese door to a non-tariff barrier of canola was the approval by the Chinese of two seed traits on January 09, 2019; although, one trait has still to pass the test. All three had met Canadian requirements in 2012, but awaited Chinese approval for export. The Canada Canola Council estimates that approval of these traits will allow growers to increase productivity using the same amount of land.

The Chinese approval of canola traits was directly tied to the arrest of MENG Wanzhou on December 1, 2018. This was an incentive (carrot) for Canada to release her. However, the Chinese also brandished a stick by slowing down customs approval as canola arrived at Chinese ports. WSAU News reported that "one Chinese crusher that had a cargo which arrived at the end of December said it took more than 20 days to clear customs, about twice the usual time, as authorities carried out more thorough inspections related to GMOs."

The author was well aware that there was a high probability that China would retaliate for Ms. Meng's arrest with regard to Canada's canola exports. He proposed shortly after her arrest that Ms. Meng be traded for the five Canadians who were already in Chinese custody. He saw it as an issue of morality rather than legality. It was a doable solution because the US justice department had not yet laid formal legal charges. He did not explicitly associate probable retaliation on canola exports because he did not want to link morality with commerce in regard to the arrest of Ms Meng. It seems that this was the exact kind of error that Prime Minister Trudeau made with regard to the SNC-Lavalin affair when he linked legality with commerce and then tried to short-circuit the legal issues through interference in the judicial system.

The author continued to press the issue of a trade of prisoners based on morality as it involved family reunification at the time of the upcoming Spring Festival. The Chinese then added Kovrig and Spavor to the list of hostages and retried Schellenberg. In the first week of January the author warned that there was a high probability that canola sales would be targeted; although, he still did not link it with a moral imperative. On two different occasions, in open letters, he volunteered to meet the Chinese ambassador in Ottawa to discuss a trade of prisoners on the condition that it met the approval of the Canadian government. If he could have facilitated a trade of prisoners it is almost assured that Canada today would be on the road to doubling agricultural exports to China.

One has to go back to the initial premise. There has been an unstated and unspoken association among negotiators on both sides between canola exports and an extradition treaty since late summer 2016 if not from the earlier time when charges were laid against Garratt. It is not surprising then that the Chinese were upset with the possible extradition of Ms Meng to the US which was based on the US-Canada Extradition Treaty. It was almost inevitable from the Chinese point of view that canola exports would be hurt--especially since our Minister of Foreign Affairs has a personal interest in canola. The issue for the Chinese was no longer a hypothetical China-Canada extradition treaty, but the arrest of a top executive of Huawei who might be extradited to the US.

In conclusion, it is said that China-Canada relations are the worst they have been since the recognition of China by Pierre Elliott Trudeau in 1970. The Chinese nicknamed Justin Trudeau "small potato". Only an arrogant Trudeau could take that as a compliment because it is derisive. It is equivalent to the "small Bush" nickname given by the Chinese to George W. Bush. The Trudeau policy of talking exploratory free-trade with China while listening to extradition treaty arguments is absurd. China is not a free-market economy and is an authoritarian political regime. Furthermore, a China-Canada extradition treaty could only undermine the Charter of Rights and Freedoms which was the main achievement of Pierre Elliott Trudeau. Finally, canola was actually genetically modified in the early 1970's by public sector scientists. This period coincided with the first term of the government of Pierre Elliott Trudeau. By 2018, China accounted for 40 percent of Canada's canola seed, oil and meal exports. Today, Canada may stand to lose 2.7 billion dollars per year at the end of the first term of Justin Trudeau's government if China permanently blocks Canadian canola products. Isn't that just about as absurd as it can get?

D.卡尔顿 罗西
D. Carlton Rossi

2019年4月03日



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THE CANADIAN PRESS, CBC News, China charges Canadian with spying, stealing state secrets, January 28, 2016.

https://www.cbc.ca/news/canada/british-columbia/kevingarratt-china-charged-spying-1.3423931




THE CANADIAN PRESS, CTV News, Trudeau sits down with China's premier at Asian summit over free trade future, November 14, 2018.

https://windsor.ctvnews.ca/trudeau-sits-down-with-China-s-premier-at-asian-summit-over-free-trade-future-1.4176766




TOP CROP MANAGER, China grants regulatory approval of TruFlex canola with Roundup Ready technology, January 09, 2019.

https://www.topcropmanager.com/china-grants-regulatory-approval-of-truflex-canola-with-roundup-ready-technology-21601/




UNGKU, Fathin, Trudeau says Canada to work with China on eventual free trade deal despite NAFTA clause, Reuters, Business News, November 14, 2018.

https://www.reuters.com/article/us-asean-summit-trudeau/trudeau-says-canada-to-work-with-china-on-eventual-free-trade-deal-idUSKCN1NK0CU











                       





The Restriction of Food Imports and Exports


The main issue which Canadian farmers are now concerned with was the restriction on March 1, 2019 of "some" Chinese imports of canola amounting to billions of dollars of lost sales and what to do about spring planting. If it is recalled correctly it was on January 3rd that the author expressed the view that it was probable that canola exports to China would be restricted based on his assessment of the Huawei situation and other considerations. He continued to recommend that the Huawei issue be treated as one of morality rather than legality and the only free-trade was ironically one of prisoners whose families were waiting for them. The PMO with its sunny ways pooh poohed the Winnie the Pooh scenario citing its emphemeral optimism of win-win.

Of course, there is no scientific basis for the Chinese claim that Canadian canola is infested with emphemerae or insect pests lasting transitorily. The Chinese were indicating to Minister Freeland that officials of the PMO and others were regarded as "pests" with their insistence on an absolute interpretation of rule of law. They have linked their ban on imports of canola and the arrests of Kovrig and Spavor with the arrest of MENG Wanzhou.

A parallel situation reared its ugly head in 2016 when canola "dockage" was the excuse and Garratt was accused of espionage. The Chinese were retaliating because of the arrest of Su BIN for his admitted role in a conspiracy of hackers from the PLA's Air Force to illegally access and steal US military information. At that time, the author uniquely interpreted the dockage issue to be the Chinese dissatisfaction with the Canadian view of human rights. In his opinion, the Chinese were saying indirectly that it was impossible to eliminate all human rights abuses in any society as it was to scientifically and completely eliminate dockage. They were also saying that rule of law is what a rule by law government says it is.

The author encountered a situation about 10 years ago which reminded him of the restrictions placed on canola. He had visited Wilfred Laurier University to solicit donations of books which were to be sent to the middle school of Dawu Group. The university agreed to donate used surplus books to the school. In turn, the author would use his import/export contacts and expertise to facilitate the matter and pay for transportation costs.

He acquired wooden shipping crates provided free of charge from a Canadian tobacco company. These bulky crates had been sent to China and then had been returned to Canada from China. They were in excellent shape, looked almost new. and were properly stored. They had been treated chemically so that they would not be infested with insect pests and been imprinted accordingly. However, the Chinese shipper refused to send them as they were. The shipper said with bald face that the containers did not meet the standards for shipment because they had not been chemically treated. It appeared to the author that the company had been instructed not to accept the shipment because it would be sent to Dawu School. It had nothing to do with chemical designation, but rested soley on the particular destination. In other words, the author was regarded as a "pest" for wanting to help Dawu students who now number over 5000.

Before one proceeds one must add a cautionary note. If one is involved in the decision-making process within government then personal issues must be placed aside. One must not let potential conflict of interest or the appearance of it affect one's judgement. Chinese negotiators will take advantage of the situation as they have done in the past. Harden your shell and you will be invincible. Steel yourself and you will be victorious.

The author will not offer any more solutions to problems of dockage or pests which are ultimately politically oriented. It is though a matter of economics. Canada should not put up with this nonsense of arbitrary or non-scientific restrictions regarding agricultural exports. If a country like Saudi Arabia arbitrarily bans imports of wheat and barley from Canada because of Canada's views on human rights then Canada should reciprocate the ban by extending it to 25 years on wheat and barley exports to Saudi Arabia. Give it back to them in spades.

If a country like China--on two separate occasions-- restricts imports of all or some Canadian canola because of Canada's views on human rights and rule of law then Canada should extend the ban, based on economic considerations, to all canola exports over a 25 year period. Why must we constantly be on the defensive? If China doesn't want Canadian canola then it doesn't want Canadian canola. Give it what it wants on Canada's terms of 25 years. If China wishes to switch from canola to soy oil while it has a shortage in vegetable oil supplies of 20 million tonnes then why try to argue with their logic? Let's see how happy their state planning will make 1.2 billion Chinese who have placed an emphasis on food and family by eating mustard seed as far back as the Han Dynasty (206 BC-AD 221).

If governments of these countries wish to regard food (which is ultimately the import of water) in a political context then Canada should respond economically. Canada should not bend, scrape and ultimately make costly concessions to win back these contracts. The Party used food as a political weapon against its own people during the period of the Cultural Revolution. Forty million Chinese farmers starved to death. The Party now thinks it can apply this political standard outside China to economically hurt our farmers. No way. This Canadian refuses to be continually blackmailed by illegal exaction.

Climate change is a fact. It is happening right now. In the last summer, smoke from B.C wildfires drifted across Canada. This smoke delayed the maturation process of canola by 10 days in some areas. While our climate is getting warmer; so, too, the unpredictability of our weather is increasing with extremes being the new norm. It is uncertain how these factors will affect future crops. At the moment, Canada has surpluses of crops which we can export. These surpluses may dwindle as time passes with warmer climate and uncertain weather. Canola seed requires cold weather in a temperate climate to germinate.

Our customers depend on our agricultural exports. They rely on our high quality products. They rely on our guaranteed delivery. They rely on our supplies meeting their demand. They trust us. It is a balanced relationship.

However, Canadians cannot serve our loyal and steadfast customers if a few are playing political games. Every shopkeeper has the right to sell or not to sell product or services to whomever they want. If a shopkeeper is not satisfied with how a customer conducts business then he has the right to say to that customer--don't come back. Our obligation is to those who respect contracts and not to those who break them for political reasons. There is enough uncertainty with regard to climate and weather in terms of the economics of agriculture. We do not also need political uncertainty in the equation.

With respect to China it will be very difficult for Canada to find other customers to replace the loss of "some" substantial sales. It is highly probable that canola farmers will ask for financial compensation from the Canadian government. And they deserve it. Before any compensation is paid, though, a 25 year ban on "all" canola exports to China must be put in place. Since it is the second time we have been extorted then we double down. If you are mistreated once then you are a victim. If you are mistreated twice then you are a fool. If you are mistreated three times then you are mad. We would be fools to resume sales at any time in the next 25 years and jeopardize our reputation with our loyal customers of being a secure export supplier in the agriculture industry. If so, so long--lóng.

With climate change and with weather variability our loyal and reliable customers will appreciate a secure supply of the highest quality food. If there happens to be a food shortage in the next twenty-five years in either the Kingdom of Saudi Arabia which is without enough fresh water or the People's Republic of China which is without enough arable land and potentially fresh water then it will not be our political concern. Those governments will be accountable to their own people who do not have benefit of a vote to remove their governments.



D.卡尔顿 罗西
D. Carlton Rossi

2019年3月20日










               




            The Impact of Chinese Sorghum Tariffs


Sorghum is a cereal grain which is used primarily for livestock feed and ethanol output. In the past five years, U.S. producers have increased shipments to China in order to meet its animal feed requirements. China though has imposed 179% tariffs on its imports of U.S. sorghum as a result of an escalating trade war with the United States. However, the impact of these tariffs on the Dawu Group whose main business is animal feed seems to be positive.


Basically speaking, its animal feed business is based on corn. Dawu City is surrounded by corn which is harvested by combines in the fall. On the author's last visit to the area he helped a family harvest and process its crop by hand. It is anticipated that if a Chinese tariff is imposed on sorghum that corn prices will rise; although, the increase may be stemmed should China release supplies from its strategic inventory.


At the end of 2017 the Dawu Group established a sophisticated animal feed operation. It introduced a full set of production equipment from the Swiss company Buhler with an annual output of 100,000 tons of automatic premixed production lines. Through a strategic cooperation with China Agricultural University and co-operative research of the industry, the Jinfeng series of high-quality hens, Jinlong series of high-end pig premixes and beef cattle as well as young sheep premixes were successfully launched. While the price of corn may rise one may anticipate that prices of premixes will at least keep pace if not exceed increasing corn prices since they are higher end products.


Recently, the author has published the success of Dawu Group's wholly-owned liquor subsidiary in its defence of trademark at the level of the Supreme Court. You may recall that the case dealt with the term "five grains". There are various combinations of five grains employed in the production of clear liquor known as baijiu (白酒). Incidentally, the reader will see a mention of baijiu in the poem called "Lazarus Resurrected". If a toast to your health with baijiu doesn't prolong your life then nothing will. One of the five grains which are used to make baijiu is sorghum.


While the author is unaware of the proportions of five grains or its constitution in Dawu liquor which is a proprietary secret; nevertheless, he will make a general comment. The most popular type of baijiu in China is Strong Aroma (浓香) which may be made with one or multiple grains. On the other hand, in northern China such as Hebei Province where Dawu City is located it is Light Aroma (清香) which is most common. It is distilled using sorghum and rice husks and fermented in ceramic jars. Barley and peas are also used to produce a mild sweetness.


One might suspect that if sorghum imports are restricted then it will impact both the price and availability of Dawu baijiu. Its premier product takes four years to ferment and costs about $150 Cdn a bottle. The problem seems to lie with new production, the uncertainty regarding how long the tariffs will be imposed and if other international markets can be accessed for sorghum.


China is turning to Australia to see if it can supply sorghum. It may be guessed that it is primarily interested in sorghum to be used in distillation of baijiu rather than as livestock feed. It could encourage a switch from sorghum to corn for livestock feed because it can supply the market at higher prices from its inventory. Therefore, sorghum for distillation purposes becomes the main problem.


It is unlikely that China will try to access Canadian supplies of sorghum. The reason is that Canada is having difficulty moving grain such as canola through a rail bottleneck. As a matter of fact, a labour strike may be imminent.


It is ironic that Minister Chrystia Freeland made concessions in exploratory free-trade talks to overcome potential restrictions imposed by the Chinese on canola sales due to dockage issues. You will recall how it was the author's opinion that the Chinese equated the difficulty of reducing dockage with the problem of bettering human rights without exactly expressing the relationship explicitly or overtly. It is too bad that the one billion dollars invested with the Asian Infrastructure Investment Bank by the Canadian government was not applied to rail infrastructure in order to facilitate transportation of canola and other grains which languish in silos waiting their shipment to China.


Instead, a leading Canadian company called Aecon has been taken over by a Chinese firm. One can't blame Aecon for seeking to do business on building the Chinese dream of One Belt One Road when quality infrastructure projects such as rail or pipeline in Canada are not supported by the government. Canadians do not forget that the creation of jobs through infrastructure was a core promise of the Liberal Party with progressive characteristics. Now, the jobs will be created outside of Canada for Asians.


The author cannot say whether or not sorghum supply is an issue with Dawu Group in terms of its liquor business nor does he represent them. In the short run, Dawu Group will probably benefit by increased liquor and premix prices. However, if Australian sorghum suppliers were interested in extending their market share in China then there would be no better place to start than opening talks with Dawu Group to act as a market agent.


D. Carlton Rossi










Free-Trade 2