Ottawa expelled Chinese diplomat Zhao Wei on Monday over allegations related to foreign interference, and hours later, China asked a Canadian diplomat in Shanghai to leave by Saturday in response to what it called Ottawa’s “unreasonable actions.”

“We understand there is retaliation, but we will not be intimidated, we will continue to do everything necessary to keep Canadians protected from foreign interference,” Trudeau told reporters in Ottawa.

A row has simmered since the detention of Huawei Technologies executive Meng Wanzhou in 2018 and Beijing’s subsequent arrest of two Canadians on spying charges. All three were freed in 2021.

Some fear the latest flare-up could have economic repercussions for Canada. Chinese imports of Canadian goods rose 16 per cent last year to a record of $100 billion, and China is Canada’s second-biggest trading partner after the U.S.

Last year, Beijing lifted a three-year ban on imports of canola, Canada’s largest crop, from trading companies Richardson International and Viterra. China is also a major importer of Canadian potash and wheat.

“With China, there’s always a risk” of retaliation, said Tyler McCann, managing director of the Canadian Agri-Food Policy Institute. “(But) it seems the Chinese government is more sensitive about food security than they were years ago and that might mitigate the risk.”

Global supplies of wheat and vegetable oil are in tighter supply due to the Ukraine war, which may make it difficult for China to limit its imports of Canadian wheat and canola.

China “took a very measured response,” Guy Saint-Jacques, a former Canadian ambassador to China, said in an interview on CBC. He said the Chinese could have responded by expelling a more senior official or multiple officials.

Saint-Jacques also said he does not expect China to resort to economic sanctions because Beijing is trying to reassure foreign companies that they can work there after draconian COVID-19 restrictions were dropped.

Beijing has this year rolled out the red carpet for Western leaders including French President Emmanuel Macron, and China’s Premier Li Qiang has reached out to corporate leaders to ensure them the country is now open for business.

Beijing is conducting a “charm offensive (to) convince foreign enterprises to come back to China to invest,” Saint-Jacques added. “So putting sanctions on Canada at this stage would have sent a very bad message to foreign companies.”

— Reporting for Reuters by Ismail Shakil and Steve Scherer in Ottawa, additional reporting by Rod Nickel in Winnipeg.

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Meng, whose father Ren Zhengfei founded Huawei and is the telecommunications company’s chief executive, entered an agreement with U.S. prosecutors last year for the case to be dismissed four years after her December 2018 arrest.

Prosecutors accused Meng of bank fraud and other crimes for misleading HSBC and other banks about Huawei’s relationship with a company that operated in Iran.

They said Meng’s actions put banks at risk of penalties for processing transactions that violated U.S. sanctions.

Huawei has pleaded not guilty to related U.S. criminal charges.

U.S. District Judge Ann Donnelly in Brooklyn dismissed Meng’s indictment with prejudice, meaning it cannot be brought again.

A lawyer for Meng and a spokeswoman for Huawei did not immediately respond to requests for comment.

Meng spent nearly three years under house arrest in Canada following her arrest at a Vancouver airport.

She entered a deferred prosecution agreement with U.S. prosecutors in September 2021 in which she acknowledged having made false statements about Huawei’s Iran business.

On the day Donnelly approved that agreement, Meng flew home to Shenzhen.

Shortly afterward, China released two Canadians it had been holding, and two American siblings who had been prevented from leaving the country were allowed to fly home.

Chinese restrictions on imports of Canadian canola from two major Prairie grain firms — imposed several weeks after Meng’s arrest — were lifted about eight months after her departure from Canada.

In suspending the licenses for the two companies in March 2019, China said it had found quarantine pests in canola seed deliveries. The Canola Council of Canada noted at the time that no other export customers had made similar complaints.

Meng, 50, now serves as Huawei’s rotating chairwoman and deputy chairwoman, as well as CFO.

The United States still views Huawei as a national security threat.

On Nov. 25, the Biden administration banned approvals of new telecommunications equipment from Huawei and China’s ZTE Corp. because they posed an “unacceptable risk” to national security.

— Reporting for Reuters by Karen Freifeld and Jonathan Stempel in New York.

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Meng struck a deal with the prosecutors last year for the charges against her to be dismissed on Dec. 1, 2022, four years from the date of her arrest in Canada on a U.S. warrant, as Reuters reported first.

With no information Meng violated the deal, “the government respectfully moves to dismiss the third superseding indictment in this case as to defendant Wanzhou Meng,” Brooklyn U.S. Attorney Carolyn Pokorny wrote in a Dec. 1 letter to U.S. District Judge Ann Donnelly.

Huawei, a telecommunications equipment maker the U.S. views as a national security threat, is still charged in the case, which is pending in U.S. District Court in Brooklyn, New York. No trial date has yet been set, and a status conference is scheduled for Feb. 7.

While Thursday’s move was expected, it closes a chapter on a particularly fraught phase of U.S.-China relations that also thrust Canada into the middle of a broader clash between the two superpowers.

Meng had been accused of bank fraud and other crimes for misleading global bank HSBC about the company’s business in Iran to obtain banking services in violation of U.S. sanctions.

As part of her deal — a deferred prosecution agreement — she acknowledged that she had made false statements about the company’s Iran business in a 2013 meeting with a bank executive.

Meng’s untrue statements were in a statement of facts that she agreed was accurate and voluntary and would not contradict.

The charges against Huawei include everything from bank fraud to sanctions busting to conspiracy to steal trade secrets from U.S. technology companies and obstructing justice. It has pleaded not guilty.

In the wake of its alleged activities, Huawei was added to a U.S. trade blacklist, restricting U.S. suppliers from doing business with the company.

The U.S. also waged a global campaign against Huawei, warning that the Chinese government could use the company’s equipment to spy. Just this week, the U.S. Federal Communications Commission adopted final rules banning new telecommunications equipment from Huawei.

Meng, the daughter of Huawei founder and CEO Ren Zhengfei, now serves as the company’s rotating chairwoman and deputy chairwoman as well as its chief financial officer.

She flew to China from Vancouver on Sept. 24, 2021, the day she struck the deal. Two Canadians arrested in China shortly after she was detained were then released, and two U.S. siblings who had been prevented from leaving China were allowed to fly home.

Chinese restrictions on imports of Canadian canola from two major Prairie grain firms — imposed some weeks after Meng’s arrest — were lifted about eight months after her departure from Canada.

A lawyer for Meng declined comment and a spokesperson for Huawei did not immediately respond to a request for comment.

— Karen Freifeld reports on U.S. law enforcement and courts for Reuters from New York. Includes files from Glacier FarmMedia Network staff.

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The WTO Dispute Settlement Body (DSB) panel suspended its work as of Tuesday, the complaint said.

Work can be suspended at any time at the request of the complaining party for a period of up to 12 months, said the complaint. If work is suspended for longer than that, the authority for establishing the panel lapses, it added.

China blocked imports of canola seed from two major Canadian exporters starting in March 2019, alleging pest contamination. However, the ban was widely believed to be a retaliation for Canada’s arrest of a Chinese tech executive the previous December on a U.S. warrant alleging bank and wire fraud.

Canada began the trade challenge process in September 2019, seeking bilateral consultations with China at the WTO.

The arrested executive, Huawei’s Meng Wanzhou, was released from house arrest in September last year and returned to China after reaching a deal with U.S. prosecutors.

A DSB panel had been requested last June and organized last November last year to hear Canada’s canola case, but China lifted its ban on the two affected companies’ canola in May this year before a DSB hearing could be arranged.

— Writing for Reuters by Miranda Murray; includes files from Glacier FarmMedia Network staff.

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“We intend to exclude Huawei and ZTE from our 5G networks,” Industry Minister Francois-Philippe Champagne told reporters in Ottawa. “Providers who already have this equipment installed will be required to cease its use and remove it under the plans we’re announcing today.”

Champagne added that companies will be required to remove their 5G gear by June, 2024, and would not be reimbursed. Companies using their 4G equipment must be removed by the end of 2027.

The decision — widely expected — had been delayed amid diplomatic tensions with China. The rest of the Five Eyes network — which consists of Canada, the U.S., Britain, Australia and New Zealand — has already banned the equipment.

In September 2018, Canada first announced it would review the possible threats to national security in adopting Huawei equipment.

Then in December of the same year, Huawei chief financial officer Meng Wanzhou was arrested in Canada on a U.S. warrant, creating a long-running dispute with China that finally ended last September with Meng’s release.

After Meng’s arrest, two Canadians were arrested by Beijing and accused of espionage. The two men were released the same day as Meng.

Now diplomatic tensions between China and Canada have eased somewhat. On Wednesday, China removed a three-year restriction on imports of Canadian canola seed, reversing what was considered a retaliatory move for Meng’s arrest.

Winnipeg grain trader Ken Ball of PI Financial said Thursday he’s unsure whether the lifting of canola restrictions will result in increased business, as the suspension had only affected two companies — Viterra and Richardson International — and Canada “was still capable of exporting lots of canola to China if they wanted it through other companies.”

China, he said, is “not doing it because they’re nice guys, they’re doing it for a reason and the reason is they’re anticipating they might need to buy more canola in the upcoming season, with the vegoil situation being what it is.”

Thursday’s decision on Huawei comes after telecom companies in Canada already opted to use other companies’ 5G hardware. ZTE did not immediately responded to requests for comment.

Alykhan Velshi, vice-president of corporate affairs for Huawei in Canada, told CBC the company is still waiting to hear “what sort of national security threats they think Huawei poses.”

Velshi said Huawei still has 1,500 employees in Canada, mostly in research and development, and sold products such as mobile phones, and would continue to do so.

In 2020, Bell Canada and rival Telus — two of the biggest wireless providers — teamed up with Sweden’s Ericsson and Finland’s Nokia to build fifth-generation (5G) telecoms networks, ditching Huawei for the project despite using Huawei 4G gear.

In addition to the ban, Public Safety Minister Marco Mendicino said Canada would draft new legislation to protect critical financial, telecommunications, energy and transport infrastructure from cyber threats.

— Reporting for Reuters by David Ljunggren in Ottawa, additional reporting by Ismail Shakil; writing by Steve Scherer. Includes files from Adam Peleshaty of Glacier MarketsFarm.

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Canada’s Trade Minister Mary Ng and Agriculture Minister Marie-Claude Bibeau, in a joint statement Wednesday, confirmed the decision by Chinese customs officials allowing Richardson International and Viterra to resume canola sales to China.

“We welcome this decision to remove the restrictions and immediately reinstate the two companies to allow them to export Canadian canola seeds,” the ministers said, adding they would “continue to work” with the canola sector to “defend their interests and support their success at home and in markets abroad, including China.”

“This is a positive step forward, restoring full trade in canola with China and ensuring that all Canadian exporters are treated equally by the Chinese administration,” Jim Everson, president of the Canola Council of Canada, said in a separate statement.

“We will continue efforts to nurture and maintain a predictable, rules-based trade environment,” he added, thanking Ng and Bibeau and officials with their departments for their support on the matter.

China in March 2019 had suspended the licenses for Winnipeg-based Richardson and Regina-based Viterra to export canola to China, saying it had found quarantine pests in canola seed deliveries.

The Canola Council noted at the time that no other export customers had made similar complaints. The dispute was widely believed by observers to be a retaliation against Canada for carrying out a U.S. arrest warrant in Vancouver in late 2018 on Chinese telecom executive Meng Wanzhou, over charges of bank and wire fraud.

Wanzhou, the chief financial officer for Huawei, remained in Vancouver under house arrest pending extradition proceedings, up until last September when she reached a deal with U.S. prosecutors allowing her to leave Canada and return to China.

Two Canadians, businessman Michael Spavor and former diplomat Michael Kovrig, who were arrested and detained in China shortly after Meng’s arrest, were released by Chinese officials right after Meng’s return.

While the bans didn’t affect other Canadian companies’ seed exports, nor did they affect exports of Canadian canola oil or meal, the Canola Council noted the value of exports of Canadian canola seed to China dropped from $2.8 billion in 2018 down to $800 million in 2019, then rose to $1.4 billion in 2020 and $1.8 billion in 2021.

The council has cited estimates putting the cost to the canola industry between $1.54 billion and $2.35 billion from lost sales and lower prices between March 2019 and August 2020 alone.

Canadian trade officials took the issue to the World Trade Organization later in 2019. After bilateral consultations with China at the WTO, however, the global trade body established a panel of its Dispute Settlement Body in July 2021 to resolve the matter.

A DSB panel was formally composed on Nov. 12 last year. Countries including the U.S., European Union, Russia, Australia and Brazil have reserved third-party rights to the dispute, which has yet to be heard by the panel. — Glacier FarmMedia Network

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Dominic Barton’s departure, which will take effect Dec. 31, leaves a crucial diplomatic post open at a time when the Liberal government of Prime Minister Justin Trudeau is rethinking its policy toward a more assertive China.

Barton said in a statement that working to free the two men had been “the honour of a lifetime.”

Michael Kovrig and Michael Spavor spent almost three years in detention before being freed in September. The two were jailed shortly after Canadian police picked up a top Huawei Technologies executive on a U.S. warrant.

Trudeau, under pressure from the official opposition Conservatives to take a tougher line with China over human rights, said Canada was “better positioned to manage this important relationship and achieve our diplomatic objectives.”

Conservative leader Erin O’Toole said Trudeau had mishandled the relationship with China, which he said was currently a disaster. Canada should consider a diplomatic boycott of the Winter Olympics, he told reporters, a step U.S. President Joe Biden is set to announce this week.

Despite the release of the two men, bilateral relations remain chilly. A Chinese ban on imports of canola from two major companies imposed in 2019 remains in place and Canada is yet to decide whether to bar Huawei equipment from 5G telecommunications networks.

Two senior diplomatic sources said Canada was putting together a new strategy for the Indo-Pacific region, in part to deal with China. Canadian officials say Ottawa, which has limited diplomatic influence, must work with others.

In February, Canada launched a 58-nation initiative to stop countries from detaining foreign citizens for diplomatic leverage, a practice that Ottawa says China is using.

Charles Burton, a China expert and senior fellow at the Macdonald-Laurier Institute think tank, said one replacement for Barton could be long-time diplomat Julia Bentley, who served in China from 2011-2014 and recently ended an assignment as head of mission in Malaysia.

Another possibility is Sarah Taylor, a fluent Mandarin speaker, who is ambassador to Thailand.

The office of Foreign Minister Melanie Joly did not immediately respond to questions about when a replacement might be named or whether Canada might consider a diplomatic boycott.

— Reporting for Reuters by David Ljunggren in Ottawa; additional reporting by Susan Heavey in Washington.

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Soybean futures climbed as China booked several U.S. cargos of the oilseed but wheat futures ended narrowly mixed.

Chicago Board of Trade December corn settled up 12-3/4 cents at $5.39-1/2 per bushel after reaching $5.40, the contract’s highest since Aug. 31 (all figures US$).

CBOT November soybeans ended up 2-1/2 cents at $12.87-1/2 a bushel. CBOT December wheat fell 1-1/2 cents to settle at $7.22-1/4 a bushel.

Corn rallied despite clear weather in the U.S. Midwest that should promote harvesting. After the CBOT close, the U.S. Department of Agriculture said the U.S. harvest was 18 per cent complete for corn and 16 per cent for soybeans, both slightly ahead of the five-year averages of 15 and 13 per cent, respectively.

Yet with harvest still in the early stages, cash markets remain relatively firm as processors scramble to meet their immediate needs.

“There hasn’t been enough grain in the pipeline to supply the end-user. We are trying to push the market up high enough to attract the farmer,” said Don Roose, president of Iowa-based U.S. Commodities.

Corn drew additional support as crude oil futures advanced. Goldman Sachs raised its forecast for year-end Brent crude oil prices to $90 per barrel, from $80 previously. Corn sometimes follows trends in the energy market due to its role as the primary U.S. feedstock for ethanol.

Some traders also cited optimism that China might buy more U.S. grains after an agreement between the U.S. and China led to Canada releasing Huawei executive Meng Wanzhou last week.

USDA on Monday confirmed private sales of 334,000 tonnes of U.S. soybeans to China, the world’s largest oilseed buyer, a factor that supported soybean futures.

Meanwhile, U.S. soybean export inspections jumped to a six-month peak last week while corn shipments were the highest in a month as Louisiana Gulf Coast terminals steadily ramped up operations disrupted by Hurricane Ida nearly a month ago, preliminary data showed.

The export pace, however, was still well below normal for this time of year as several terminals remain shuttered or running at reduced capacity.

Traders are looking ahead to USDA’s Sept. 30 quarterly stocks report. Analysts surveyed by Reuters on average expect the government to report U.S. Sept. 1 corn stocks at 1.155 billion bushels, below the 1.187 billion bushels USDA projected in its last monthly supply/demand report on Sept. 10.

— Reporting for Reuters by Julie Ingwersen in Chicago; additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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On Friday, Huawei chief financial officer Meng Wanzhou flew home to China from Canada after reaching an agreement with U.S. prosecutors to end the bank fraud case against her, a point of tension between China and the United States.

Within hours of the news of the deal, the two Canadians who were arrested shortly after Meng was taken into custody were released from Chinese jails and were on their way back to Canada. Beijing had denied that their arrests were linked.

When asked if the White House was involved in brokering a “prisoner swap,” White House press secretary Jen Psaki rejected the premise.

The deferred prosecution agreement with Meng was “an action by the Department of Justice, which is an independent Department of Justice. This is a law enforcement matter,” she said, adding, “There is no link.”

But Psaki also confirmed that in a call on Sept. 9, two weeks before the announcements, Chinese President Xi Jinping brought up Meng’s case and U.S. President Joe Biden pressed for the release of the two Canadians, businessman Michael Spavor and former diplomat Michael Kovrig, who had been held in China for more than 1,000 days.

“It should not come as a surprise that President Xi raised the Huawei official, but…there was no negotiation on this call. These two leaders raised the cases of these individuals but there was no negotiation about it,” Psaki said.

When asked, Psaki said she had no information on whether Biden knew about the status of the negotiations between Meng’s lawyers and the Justice Department.

Meng had been arrested at Vancouver International Airport on a U.S. warrant, and was indicted on bank and wire fraud charges for allegedly misleading HSBC in 2013 about the telecommunications equipment giant’s business dealings in Iran.

The years-long extradition drama had been a central source of discord in increasingly rocky ties between Beijing and Washington, with Chinese officials signaling that the case needed to be dropped to help end a diplomatic stalemate.

Psaki emphasized the deal announced on Friday did not indicate a softening of U.S. concerns about Chinese behaviour.

“Our policy has not changed, our policy toward China,” Psaki said. “We are not seeking conflict. It is a relationship of competition and we are going to continue to hold the PRC to account for its unfair economic practices, its coercive actions around the world and its human rights abuses,” she said, using the acronym for the People’s Republic of China.

— Reporting for Reuters by Alexandra Alper and Steve Holland.

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Michael Kovrig and Michael Spavor were picked up in December 2018, shortly after Vancouver police arrested Huawei Technologies chief financial officer Meng Wanzhou on a U.S. warrant.

Shortly before Trudeau spoke, Canadian media reported that Meng flew back to China after reaching a deal with U.S. authorities.

“Twelve minutes ago Michael Kovrig and Michael Spavor left Chinese airspace on their way back home,” Trudeau told reporters in brief remarks.

“These two men have been through an unbelievably difficult situation, but it is inspiring and it is good news for all of us that they are on their way home to their families.”

Although Beijing insisted throughout that the two cases were not linked, Trudeau’s Liberal government accused China of engaging in hostage diplomacy. Trudeau was not asked whether the two countries had struck a bilateral deal.

“I want to thank our allies and partners around the world in the international community who have stood steadfast in solidarity with Canada and with these two Canadians,” he said.

— Reporting for Reuters by David Ljunggren.

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