Canada takes steps to strengthen tariff regime on Chinese electric vehicles by announcing consultation

The federal government took a step Monday to make Chinese electric vehicle imports more expensive in Canada by announcing a 30-day consultation period to review Beijing’s business practices in the electric vehicle sector.

Deputy Prime Minister and Minister of Finance Chrystia Freeland made the announcement in Vaughan, Ontario. She said the consultations, which will begin on July 2, will help the government develop its response to Beijing.

“Canadian auto workers and the automotive sector… face unfair competition from China’s intentional, state-directed overcapacity policy, which is undermining the ability of the Canadian electric vehicle sector to be competitive in domestic and global markets,” Freeland said.

Freeland said China’s oversupply of electric vehicles cannot be absorbed by the Chinese market and is shipped overseas, where it “undermines electric vehicle producers around the world.”

“We currently live in a world where China is taking advantage of the global economic system,” Freeland said. “We know we have to defend our national interests and we will.”

Freeland did not hint at Canada’s response, saying only that she would wait until the end of the consultation period to announce possible trade measures against China.

“Nothing is excluded and all possible tools are on the table,” she said. “This includes the use of section 53… It gives very strong and very broad powers to the Minister of Finance to act.”

Currently, the only Chinese-made electric vehicles imported into Canada are Teslas made at the American tech giant’s Shanghai factory. Vehicles built in China are currently subject to customs duties, but under Article 53 of the Customs tariff law, Freeland could impose a surcharge on top of the customs tariffs.

The consultation will also focus on adjusting federal incentives for zero-emission vehicles, such as rebates of up to $5,000 offered to Canadians who buy or lease an electric vehicle.

Environmental and labor standards.

Freeland said China’s electric vehicle overcapacity is created by “very problematic labor standards (and) very problematic environmental standards.”

“In our trading relationship, Canada places very high importance on high labor standards, high human rights standards and high environmental standards, and that will be a set of issues that we will look at carefully,” she said.

Freeland also said the consultations would examine possible threats to cybersecurity and data security and examine possible restrictions on foreign investment.

Conservative trade critic Kyle Seeback said the Liberal government has so far “failed to protect Canadian auto workers” and has increased the cost of manufacturing by imposing a price on carbon.

“We should work with our close trading partners like the United States, so we can protect Canadian jobs and defend our country’s workers,” Seeback said in a media statement.

NDP industry critic Brian Masse welcomed the news.

“It’s a relief to see this government finally step up and start working on developing a plan to protect Canadian auto workers from unfair trade practices,” he said.

Although China is not the largest supplier of cars to the Canadian market, it is a significant player in Canada in batteries and electric vehicle battery components – sectors in which Canada has invested heavily over the past few years. of the last four years.

In 2021, almost 80% of all lithium-ion batteries for electric vehicles worldwide came from China and the International Energy Agency says that almost 60% of global electric vehicle sales are now manufactured in China.

Claims that China boosted its own electric vehicle industry through unfair subsidies led Europe and the United States to fight back this spring.

Many Chinese electric vehicles are cheaper than European models

US President Joe Biden announced in mid-May that he would increase tariffs on Chinese electric vehicles from 25% to 100% this year, although there is currently only one Chinese electric vehicle available to the United States. -United.

Biden also announced increased tariffs on lithium-ion batteries and some other clean energy products, including solar cells.

The European Commission is still completing its anti-subsidy investigation, but announced two weeks ago that it would impose provisional customs duties of between 17 and 38% on electric vehicles made in China from July 4.

This plan could change; Europe and China agreed to negotiate on the issue this weekend.

Electric vehicles made in China now account for 8% of the European market, up from 1% in 2019. Europe says its preliminary findings confirmed that Chinese electric vehicles benefit from an “unfair subsidy”.

Many Chinese electric vehicles are significantly cheaper than similar models made in Europe.

Details of the Canadian plan currently being developed

Canada’s decision on tariffs will depend on the consultation process. A government source, speaking on condition that they not be named because they were not authorized to speak publicly, told The Canadian Press that a brief consultation period usually takes place before imposing specific tariffs .

Prime Minister Justin Trudeau has repeatedly said since the American announcement that Canada is monitoring the situation very closely.

On June 12, the day the European Commission announced its interim tariffs, International Trade Minister Mary Ng told reporters on Parliament Hill that Canada was working on its own plan.

“The status is that we are working on it, and I have been very clear about that,” she said. “This issue concerns us.”

Ng said she is already talking with Canadian industry representatives.

Typically, the process of initiating an anti-subsidy investigation begins with an industry complaint.

“We have invested deeply and heavily in the electric vehicle supply chain,” she said.

Since 2020, Canada has attracted more than $46 billion in investment for 13 electric vehicle, battery and battery component manufacturing projects. Ottawa and the provinces have jointly promised up to $53 billion in return, including tax credits, production subsidies and capital investments.