China likes Canada's canola, lumber

Canadian canola has grown significantly in global trade with China and it's becoming ever more important for China to buy Canada's lumber with the US' protectionism, according to Paul Ferley, assistant chief economist of the Royal Bank of Canada.

Ferley made his comments at a briefing on the outlook for the US and Canadian economies and the impact of China, last Thursday in Markham.

China is Canada's second-largest trading partner in terms of bilateral trade and is second only to the US in both imports from and exports to China.

The top Canadian exports to China are resource-based goods such as pulp, paper and paperboard, seeds and beans, wood and wood products, mineral ores, motor vehicles and seafood.

"Canadian exports to China have continued to be dominated by natural resources, lumber and agricultural products, compared to what we saw in the last decade," said Ferley. "It is interesting that the seeds and beans component - whole seeds and oil seeds - exports have jumped up dramatically."

China was the second-largest export market for canola after the United States last year, taking in 4.8 million tonnes of seed, oil and meal worth $2.7 billion; and a free trade deal with China could create 33,000 additional jobs in Canada from increased exports of canola alone, according to the Canola Council.

"Canola product in Canada has grown quite significantly in the global trade with China," Ferley said. "Agriculture in Canada used to be dominated by wheat, and all the other crops were secondary. But China's demand for canola and seed oil has created a growing market for Canada."

The other big pick up is British Columbia's lumber and wood products, the economist pointed out. "We've seen a marked trade improvement for lumber products with China."

In 2011, China became British Columbia's top market for softwood lumber exports, surpassing the US, but transpacific export has declined since then, relative to the US.

"With the US' protection under measures, one of the areas on the radar screen is softwood lumber, so it becomes even more important with the Canadian economy buying more markets outside of the US for our lumber," he said.

The trade dispute with the US over Canadian softwood lumber exports has sent British Columbia looking for new buyers in China, as US President Donald Trump announced duties of up to 24 percent on its lumber imports.

"It's important for the BC government to grow those markets in China that much more rely on an offset of a potential hit in terms of our lumber trade with the US," he said.

Ferley also discussed Chinese foreign direct investment into Canada, which has increased significantly in recent years. It remains at 2.6 percent overall.

Canada's trade deficit with China was trending higher but narrowed last year, as imports from China slowed modestly, while exports to China edged higher.

"We looked at Canada and China trade and it disappoints me," Ferley said.

renali@chinadailyusa.com