Ottawa launches consultations on China’s ‘unfair trade practices’

The Federal Ministry of Finance officially sent an information document to various groups in the electric transport sector this week, on the basis of which they will then be consulted on the advisability and amount of taxation of electric vehicles imported from China.

The federal government is launching a 30-day consultation process, which will end on March 1^uh Canada’s Minister of Industry, Industry and Energy, discussed in August what “strategic actions” Canada could take to “protect its workers” in the auto and electric vehicle sectors. This consultation comes in response to the decisions of the United States and the European Union to impose 100% and 38% tariffs on Chinese-made electric vehicles, respectively.

Work, environment, cybersecurity

The federal document, entitled Consultations on possible responses to China’s unfair trade practices regarding electric vehiclesThe government is letting the cat out of the bag a bit. The question seems to be less whether Canada should tax electric vehicles imported from China than at what level it should do so.

It’s a position that has been welcomed by leading representatives of the Canadian auto industry. “Canadian global automakers (support) the government’s announcement today of upcoming consultations before the Canadian International Trade Tribunal on possible responses to unfair trade practices in the electric vehicle market,” CMAC, which represents some 20 auto brands, from Acura to Volvo to Honda and Hyundai, was quick to declare.

Ottawa says it wants to protect the country’s 125,000 auto sector jobs from what it sees as unfair competition, knowing that Beijing has been generously helping its automakers for years and that they are now better positioned to sell their vehicles abroad at a knockdown price. The Canadian government is also concerned about Chinese companies’ compliance with labour and environmental standards.

Cybersecurity is also at the heart of the debate. Under Chinese law, Chinese companies could be forced to hand over to Beijing, without notice, data they hold on their foreign customers.

“The Canadian auto manufacturing sector and the people who work in it face unfair competition from China,” the Finance Department document says. “China is pursuing a policy of intentional state-led overcapacity and is failing to meet rigorous labour and environmental standards. Chinese producers are flooding the global market, which will reduce the financial incentive for other electric vehicle manufacturers around the world, including in Canada.”

China on the rise

In addition to a surtax on products from China, the government is considering at least two other measures to resolve the situation: removing vehicles made in China from purchase assistance programs and encouraging Chinese manufacturers to assemble their vehicles on Canadian soil, or at least on North American soil.

Canada finds itself in a delicate situation in this matter. It obviously does not want to upset its Western partners, first and foremost the United States, but it does not seem very keen on the idea of ​​damaging its growing trade relations with China.

In the auto sector, the value of Chinese imports to our United States has jumped by a few tens of millions of dollars per year since 2019, reaching more than $2.2 billion last year. Only Korean imports have seen a comparable increase over the same period, from less than half a billion per year to $1.2 billion in 2023.

At the same time, U.S. auto imports fell from more than $1 billion a year before the pandemic to $5.2 billion, before falling to $3.7 billion last year.

Canada stuck

This decline in American exports is not unique to Canada. It explains Washington’s sudden reaction to China’s emergence as a leader in electrification. The result is that Canada must take a position between the pressure of its American neighbour and that of its Asian partner, notes Daniel Breton, president and CEO of Electric Mobility Canada.

“Canada, at the moment, is stuck between China and the United States because of this geopolitical situation,” explains Mr. Breton, whose organization represents nearly a hundred companies in the electric transportation sector.

The latter says he is not in a position to respond to the Canadian government’s position, given that the members of his organization themselves are likely to be very divided on the issue. Because, already, brands like Tesla, Volvo and Polestar import vehicles made in China into Canada.

In fact, even General Motors sells Chinese-made vehicles in Canada, but these have gasoline engines and do not seem to be a problem.

This has led many in the industry to argue that the problem is not so much Chinese competition as the inability of American automakers to produce affordable electric vehicles, something that Chinese, and even Korean, brands are apparently capable of doing.

In short, the only thing that seems to be understood at this point is that electric vehicles sold in the country are likely to continue to be expensive, so as not to harm a North American electric transportation industry that is lagging behind its international competition.

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