The Chinese government announced that it has found pests in logs imported from Canada and will be treating Canadian lumber with relevant precautions. Though China has not announced any lumber-related export restrictions thus far, Canadian forestry companies are concerned that this announcement precedes an official sanction on this key Canadian export. Sources: Globe & Mail, Financial Post
Top of mind are previous Chinese sanctions on Canadian agricultural products, including canola, which despite having been eased, severely affected prairie farmers.
China has recently placed sanctions on Australian beef and barley imports, in retaliation for Australia’s calls to investigate Beijing’s handling of the coronavirus pandemic.
Since the arrest of Huawei executive Meng Wenzhou in December ,2018, Canada has been caught in the middle of a power struggle between China and the United States, that resulted in trade sanctions and the retaliatory arrests in China of Canadians Michael Kovrig and Michael Spavor.
So now there may be a new front in the lingering trade tensions between Canada and China: logs.
Canadian officials are investigating after China said it discovered pests in shipments of hardwood and softwood. The move comes three weeks after a judge ruled that extradition proceedings may continue against Huawei’s chief financial officer Meng Wanzhou and is raising concerns the pest issue may be politically motivated.
“This looks like it could be a ‘tit for tat’ move around the extradition of Huawei’s CFO,” Mark Wilde, an analyst at BMO Capital Markets in New York, said in an email.
The Canadian government received 16 notifications of non-compliance from China related to the discovery of pests in shipments of hardwood and softwood logs on 9 June, said Ryan Nearing, a spokesman for Canada’s minister for trade.
Trade in forestry products continues between the two nations despite the notices and Canada is looking into the matter, he said.
China tends to fumigate logs that arrive at its ports, so the pest issue is likely more of a “political football,” said Kevin Mason, managing director of Vancouver-based ERA Forest Products Research.
Last year China suspended the licenses of two major canola shippers. It cited pest and quarantine concerns, although the move was widely seen as retaliation over Meng’s arrest in late 2018.
China was the second-largest buyer of fir and spruce logs from Canada in 2019 next to the US, according to federal government data.
While lumber exports are kiln-dried, which kills any pests, logs are not, so it’s very difficult to remove any pests, said RBC Capital Markets analyst Paul Quinn. That said, most logs coming into China are treated at the ports upon entry, he said.
“I’m not sure if this is just China flexing its muscles,” Quinn said in an email.
