By David Ljunggren and Rod Nickel
OTTAWA/WINNIPEG (Reuters) – Canada and China have agreed on a long-term solution to a trade dispute over C$2 billion ($1.53 billion) worth of annual canola sales, leaders of the two countries said on Thursday, setting aside their spat over the crop as they seek to broaden trade ties.
China announced plans this year to toughen its standard on foreign material, called dockage, in Canadian canola shipments, before twice backing down near its deadlines. Even so, sales from Canada, the world’s biggest exporter of the yellow-flowering crop, slowed.
The solution is “predictable, science-based and stable,” ensuring access for Canadian shipments to China, Canadian Prime Minister Justin Trudeau said in Ottawa at a joint press conference with Chinese Premier Li Keqiang.
China, which has said it was concerned about the foreign material spreading a crop disease called blackleg, had intended to change its standard on Sept. 1 before agreeing to continue negotiations with Canada leading up to meetings in Ottawa.
Li said the agreement runs until 2020, and in the meantime, the countries will study the risk dockage may pose, he said.
“For China, we have pretty sufficient amount of time to increase the quality of exports to China,” Li said through an interpreter. “That agreement is in the larger picture of Canada-China relations.”
Canadian exporters, which include Richardson International, Glencore PLC unit Viterra Inc, and Cargill Ltd, have raised concerns that the tougher standard would curb sales to China as it raises their costs. Industry analysts have said China’s stance was likely linked to high domestic stockpiles.
“This brings much-needed stability to the canola industry,” said Patti Miller, president of the Canola Council of Canada, which represents exporters and farmers, as well as other farm companies.
Few details were released, but sources with knowledge of the deal said the maximum level of dockage China accepts will continue to be 2.5% of a shipment. China had intended to lower the maximum to 1 percent.
Some Canadian exporters made sales to China based on its tougher specifications, but others balked. The agreement will now give the exporters and Chinese processors confidence to sign contracts, Miller said.
The crop, also called rapeseed, is crushed in China, Canada’s biggest canola export market, to produce vegetable oil and animal feed.
ICE Canada canola futures rose 1.5%, touching the day’s highs after news of the agreement. ($1 = 1.3058 Canadian dollars)
(Writing by Rod Nickel in Winnipeg, Manitoba; Editing by Phil Berlowitz and James Dalgleish)