Canada-China Trade: 2021 Q1

Canadian trade with China rebounded sharply in early 2021 after the COVID-19 pandemic suppressed trade in the same period one year earlier. This continues an ongoing trend of expanding Canada-China trade, spurred on by China’s rapid economic recovery in 2020 and into 2021.

The following data is gathered from Statistics Canada for goods (merchandise) trade with China, presented on an unadjusted customs basis in Canadian dollars. The relevant HS 6-digit identification code is used to identify individual products.

Q1 Data: Canada-China Trade
Source: Trade Data Online (Statistics Canada – Customs Data)

Canadian exports to China rose 37.8% over the first three months of 2021, when compared with the same period in 2020. The first quarter of 2020 was hit, of course, by an unprecedented pandemic-related economic slowdown in China, which led to Canadian exports to China fall by 15% compared to Q1 2019. This nearly 40% rise in Q1 2021 vs. Q1 2020 demonstrates that exports have stabilized, and goods are flowing to China above pre-pandemic levels.

Coal (+199.3% to $519 million), iron ore (+96.5% to $516 million), chemical wood pulp (+2.8% to $441 million), canola seeds (+30.4% to $405 million), and canola Oil (+57.3% to $390 million) are the top five export categories by dollar value.

Canadian imports from China also rose considerably in the first three months of 2021, up 32.3% from last year, when imports fell by 20% compared to 2019. This includes a 59% jump in March 2021 alone.

Computers (+48.3% to $1.5 billion), cell phones (+54.9% to $1.07 billion), switching machines (+37.2% to $565 million), toys (+24.7% to $269 million), and made-up articles of textile materials (a category including facemasks, +370% to $242 million) are the top five import categories by dollar value.

Canada-China Trade, Last 24 Months (April 2019 – March 2021)
Source: Trade Data Online (Statistics Canada – Customs Data)

Q1 Canada-China Trade: By Province/Territory
Source: Trade Data Online (Statistics Canada – Customs Data)

Trends & Topics in Canada/China Trade

Canadian Canola: 2 Years of Trade Disruption

March 2021 officially marked a second full year of Chinese market access restrictions for Richardson and Viterra, two major stakeholders in the Canadian canola industry. The Canola Council of Canada (“the Council”) announced a new “market access plan” to “prevent and resolve challenges in the future.” One element of this strategy includes calling on the Government of Canada to “diversify markets and create trade predictability in Asia” by creating an Asia-based industry “diversification” office.

The canola industry in Canada has good reason to pursue market diversification. The Council notes that China-related disruption to canola seed exports “cost the industry between $1.54 and $2.35 billion from lost sales and lower prices between March 2019 and August 2020.” Pakistan (for seed exports) South Korea (for oil exports), and Bangladesh (for seed exports) are three markets that the Council is “keeping a close eye on.”

The Chinese market will continue to be an important destination for Canadian canola, despite ongoing challenges. The most beneficial outcome for Canadian canola producers would be the continued revitalization of China as an export destination combined with a measured expansion to alternative markets in Asia and elsewhere.

Imports from Xinjiang Province: Controversy & Consideration

The Government of Canada announced measures in January 2021 aimed at addressing the ill treatment of the Uyghur population in China’s Xinjiang Province, pledging to “address the risk of goods produced from forced labour in any country from entering Canadian and global supply chains and to protect Canadian businesses from becoming unknowingly complicit.” This move was made in coordination with the United Kingdom, who jointly condemned the “evidence of gross human rights violations including extra-judicial detention and forced labour” in the region. The measures were broadly aimed at increasing guidance and accountability for companies with business interests in Xinjiang during a time of heightened international scrutiny.

There is evidence to suggest, however, that the measures are not working to their full desired effect. A joint report from the Toronto Star/Guelph Mercury Tribune, published in March 2021, notes that, while separate measures to prevent the importation of goods made with forced labour were implemented in July 2020 under the new Canada-United States-Mexico Trade Agreement, no shipments from manufacturers with alleged links to forced labour have been turned away. The National Post reports that “critics say the measures did not go far enough, particularly because private companies do not have access to the information required to determine whether supply chains depend on forced labour.” It appears that this issue will continue to garner media attention as the Canadian government grapples with the most effective way to implement the new measures.

China’s Ban on Australian Coal

China’s ban on Australian coal in December 2020 created a shift in global trade flows. Australian coal was exported to nations like India instead, while China imported more Mongolian and Russian coal. The amount of Canadian coal flowing to Chinese importers has also increased. Canada’s top merchandise export category in the first quarter of 2021 was bituminous coal, which increased by 199.3% when compared with Q1 2020 to a cumulative export value of $519 million. This is already 70% of the total export value recorded in 2020, and 60% of the 2019 value.

Teck Resources, the Canadian mining giant, had previously noted in late 2020 that it would be pursuing China as an export destination after the Australian ban was announced. While President Xi Jinping stated in an April 2021 speech that China would begin to phase down coal consumption from 2026 onwards, the Chinese market is still extremely lucrative for the time being. As the world’s largest consumer, importer, and producer of coal, any sort of winding down process will take considerable time.