Canada-China Trade: Q3 2020 Trade Update

This report outlines Canada-China trade up to and including the third quarter of 2020. It notes topics and trends in global trade in order to contextualize the Canadian trade picture. China’s economy has largely recovered and returned to growth, with a notable impact on global trade flows. 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. 

Canada-China Trade: 2020 YTD
Source: Trade Data Online (Statistics Canada – Customs Data)

Canadian trade with China experienced a slight uptick in the third quarter of 2020, continuing an upward trend towards recovery to pre-pandemic levels. Canadian exports are up 4.22% and imports are down by just 4.25% year-on-year, January to September. For comparison, over the first half of 2020, the same numbers for exports and imports were -0.63% and -10.4%, respectively.

The months of July (+25%), August (+7%), and September (+14%) saw strong gains in exports to China when compared with the same time period in 2019. Non-agglomerated iron ore ($1.9 billion, up 97% YTD vs. 2019) continued as the largest export category in terms of dollar value. On a 2020 YTD basis, this was followed by chemical wood pulp (down 25% to $1.3 billion), canola seed (up 52% to $976 million) swine/pork (up 165% to $865 million), and copper ores and concentrates (down 1.3% to $763 million)

Canadian imports from China also saw modest increases in July (+8%) and August (+9%) before falling slightly in September (-0.4%). Laptops also continued as the top import product category, with a cumulative $4.3 billion in value over the first nine months of 2020 (up 17.6% when compared with the same period in 2019). Cellphones (down 24% to $3 billion), made up articles of textile materials, a category including face-masks (up 1,486% to $2.3 billion), switching machines (down 9.7% to $1.5 billion) and toys (down 20% to $789 million) rounded out the top five product categories over the first nine months of 2020.

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

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

Trends and Topics in Canada/Global Trade

Canadian-China Agricultural Trade Optimism

Despite ongoing diplomatic tensions and a global pandemic, China is continuing to purchase Canadian agricultural goods at a solid pace. In fact, the two major product categories that faced export restrictions from Beijing in 2019 have rebounded in 2020.

The value of Canadian pork exports to China is rising rapidly and even exceeding levels prior to the four-month 2019 export ban – which was lifted in early November 2019. Pork exports to China are up 157.77% on a year-to-date basis (January to September) when compared with 2019, for a cumulative value of $1.27 billion (making it the top export destination when ranked by value – ahead of Japan and the United States). These numbers fall in line with 2020 projections from Canadian pork exporters, who entered the year with a rosy outlook for the Chinese market due to the devastating impacts of African Swine Fever (ASF) – which wiped out much of China’s domestic pork inventory. China now represents a billion-dollar market for Canadian pork products – a milestone that may continue for as long as China deals with the lingering impacts of ASF.

While Canadian canola seed exports continue to face targeted trade restrictions from Beijing, 2020 has been marked by relative gains in both export value and tonnage. The cumulative value of canola seed exports to China has risen by 52% on a year-to-date basis (January to September) from 2019. Canada has also exported 1.52 million metric tonnes of canola seed to export so far this year – which is just behind the cumulative value for the entire year in 2019 (1.54 million metric tonnes). Meal & oil exports – unimpacted by the ban - are relatively stable when examined by weight. While there does not appear to be any end in sight for the export license bans on Richardson and Viterra – a reality that precludes any return to pre-ban export levels – the market still presents opportunities for Canadian growers.

COVID-19 Pandemic Goods: A Global Effort

COVID-19 has highlighted global interdependencies in the production and trade of essential medical products. A May 2020 OECD report noted that “[n]o single country produces efficiently all the goods it needs to fight COVID-19. Indeed, while the United States and Germany tend to specialise in the production of medical devices, China and Malaysia are most specialised in producing protective garments.” This reality led to a global mobilization of resources to ramp up production in order to meet skyrocketing demand.

China, already a top exporter of many essential medical goods prior to the pandemic, has sharply stepped up production and exports. China produced around 5 billion masks – or half the global total - in 2019 according to the government. With Chinese companies ranging from Foxconn (the Apple-contracted tech manufacturer) to Sinopec (one of China’s largest oil and gas procurers) entering the manufacturing fray, the country reportedly stepped up production capacity by 450% and exported 70.6 billion masks between March 1 and May 31, 2020.

The Canadian government, as was the case for countries around the world, scrambled to procure sufficient supplies of personal protective equipment (PPE) for hospitals and healthcare workers after it was revealed that existing stockpiles were insufficient to meet demand. Federal authorities launched a coordinated, whole-of-government approach to combat COVID-19, including efforts to “[ramp] up domestic manufacturing capacity, through the Plan to Mobilize Industry to fight COVID-19, being led by Innovation, Science and Economic Development Canada.”

Statistics Canada import data shows just how quickly Canadian demand for COVID-19-related goods increased in early 2020. It should be noted that certain aggregation issues arise when examining customs trade data, as the data “often only cover more aggregate products (i.e. at the HS 6-digit level) than those directly relevant to COVID-19.” For example, HS 630790 – the product category including textile face masks – includes other goods made of textile materials (such as shoelaces). As a result, while the numbers do not reflect the exact import value of COVID-19-realated goods, the massive year-on-year increase within each product category is a direct result of COVID-19 demand.

RCEP Agreement Brings Forth New Global Reality

On November 15, 2020, fifteen nations (the ten members of ASEAN, plus China, Japan, Australia, and New Zealand) signed the Regional Comprehensive Economic Partnership (RCEP). Once ratified, RCEP will become the world’s largest free trade agreement. According to a joint summary statement released by the signatories, RCEP participating countries “account for about 30% of the global GDP and 30% of the world population.” The agreement will “[deliver] a single set of rules covering all 15 markets, making trade simpler and reducing compliance costs for exporters” and “[address] non-tariff barriers to trade in goods.”

Manfred Weber, the group leader of the European People’s Party – the largest in the European Parliament, stated to the South China Morning Post that he views RCEP as a wakeup call for the EU and US. It is clear that the nexus of global trade and future growth is shifting (and in some ways, has already shifted) to Asia - with China as the central power-broker. If RCEP does indeed spur trade flows and economic integration among Asian countries, non-party Western economies – including Canada –  may find themselves increasingly on the outside of an emerging growth area.  

Tom Alton Policy Research Assistant
Tom Alton is a Policy Research Assistant at the China Institute at the University of Alberta and a BCom graduate from the Alberta School of Business.