China revokes Canadian canola permit as dispute escalates One of Canada's largest grain processors has been blocked from exporting canola to China in what could be retaliation for the arrest of an executive from Chinese tech giant Huawei

WINNIPEG, Manitoba -- One of Canada's largest grain processors said Tuesday that China has revoked its permit to export canola there, a move that some saw as retaliation for the Canadian government's arrest of a top executive for the Chinese tech giant Huawei.

China's action against Richardson International Ltd. following non-compliance notices alleging that some imports from Canada were contaminated with pests or bacteria. Canada disputes that claim.

"I am very concerned by what we've heard has happened to Richardson. We do not believe there's any scientific basis for this," Canadian Foreign Affairs Minister Chrystia Freeland said in Montreal. "We are working very, very hard with the Chinese government on this issue."

The loss of the shipping permit comes as Canada is proceeding with an extradition hearing for Huawei CFO Meng Wanzhou, who is the daughter of Huawei's founder. She was arrested by Canada at the request of the U.S., where she is wanted on fraud charges.

It wouldn't be the first time Beijing has retaliated against nations that offend it. China suspended its bilateral trade deal with Norway and restricted imports of Norwegian salmon after the Nobel Peace Prize was awarded to Chinese political prisoner Liu Xiaobo in 2010.

Britain and other countries were retaliated against over meetings with the Tibetan spiritual leader the Dalai Lama, considered a dangerous separatist by Beijing.

Canadian Agriculture Minister Marie-Claude Bibeau said in a statement that the government was closely monitoring the situation and any potential impact on Canada's agricultural trading relationship with China.

She said the Canadian Food Inspection Agency conducted further investigations after China issued the notices of non-compliance on canola seed imports, including nine since January, and said the agency had not identified any pests or bacteria of concern.

China is the destination for about 40 percent of Canada's canola exports, and the revocation of Richardson's permit hurts the entire value chain of industries involved in the market, the Canola Council of Canada said.

"We are aware of challenges our exporters have faced shipping to China — these are concerning as they create instability and add costs," council spokeswoman Heidi Dancho said by email.

Dancho said that while the diplomatic frictions between China and Canada are concerning, there is no clear evidence they are related to the canola dispute.

Neil Townsend, senior market analyst at FarmLink, however, said he thinks there is a definite link to the Huawei case. "There's no doubt China's mad at us," he said.

Beijing has warned of serious consequences if Meng is not released. China arrested two Canadians on Dec. 10 in what was widely seen as an attempt to pressure Canada to release Meng.

After Meng's arrest, a Chinese court also sentenced a Canadian to death in a sudden retrial, overturning a 15-year prison term handed down earlier.

China's move hits a vital crop for western Canada, and comes after canola prices have already been hit by China's retaliatory tariffs on U.S. agricultural exports. The industry should be concerned because if China cuts back on buying it would hit prices further, Townsend said.

"With China kind of saying — because they're mad about the Huawei thing — they're basically saying like, "Oh, we're not going to buy any more,'" Townsend said.

He said he suspects Richardson was targeted since it is the largest exporter that is fully Canadian-owned.