Canada has begun evaluating the impact of China’s alleged unfair trade practices on its electric vehicle (EV) market, leaving China unhappy and perturbed. This decision follows actions by the US and the European Commission, Canada’s international partners, which have recently responded to unfair competition in their EV industries. The purpose of the consultation, which will continue until August 1, is to assess the risk of Canada’s EV market being inundated with cheaper Chinese plug-ins.
Experts have not ruled out the possibility of retaliation from China. If Canada imposes tariffs on Chinese electric vehicles, two trade experts predict that the world’s second-largest economy will forcefully retaliate. Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said that a response from China’s government would be virtually inevitable, and imports of Canadian agricultural products would be an easy target. According to the University of Alberta, Canada’s exports to China amounted to $30.5 billion last year, led by canola, coal, and iron.
“The other thing China might do is restrict Canada or its allies from access to some of its critical minerals, like graphite, and other battery parts,” Ziemba noted. Mark Warner, a Canadian and American trade and investment lawyer, agreed, stating, “It’s pretty obvious this is going to invite retaliation. The Chinese have shown a willingness to retaliate against smaller trade-dependent countries and make examples of them. They know there is a discrete group of industries that would be hurt.”
Meanwhile, Chinese analysts have taken serious note of Canada’s move. According to the Global Times, analysts have appealed to the Canadian government to refrain from stirring up trade tensions with China over electric vehicles. Criticizing the document as being full of unsubstantiated claims and false statements, and essentially being a copybook of US policies, Chinese analysts warned Ottawa not to disrupt trade ties with China, which may undermine the prospects of bilateral trade and economic cooperation and lead to a lose-lose situation.
“China and Canada have no disagreement in jointly tackling climate change with the latest technologies and new means of transportation, and it is in the interests of the two countries to actively engage in cooperation wherever possible and seek win-win results,” Lü Xiang, a research fellow from the Chinese Academy of Social Sciences, told the Global Times on Wednesday. However, if the Canadian government, under the influence of the US, obstinately chooses to complicate matters and stir up a trade dispute, it risks resulting in a lose-lose situation, Lü added, noting that the suggested curbs on Chinese investment are of a discriminatory nature. Irritated by Canada’s consultation process, Chinese analysts warned Ottawa not to disrupt trade ties with China, which may undermine bilateral trade and economic cooperation.
Observers noted that Canada should value the recovery in bilateral trade and economic cooperation, which has been strained since the detention of Huawei executive Meng Wanzhou by Canadian authorities more than five years ago. Earlier, the Canadian government in an official release justified its stance by stating that Canadian auto workers and the auto sector currently face unfair competition from China’s intentional, state-directed policy of overcapacity and lack of rigorous labor and environmental standards. Chinese producers are generating a global oversupply that will erode the profit incentives of EV producers around the world, including in Canada.
The purpose of launching the month-long consultation was to ascertain potential policy responses to protect Canada’s auto workers and its growing EV industry from unfair trade practices and prevent trade diversion resulting from recent actions taken by Canadian trading partners. In mid-May, the United States announced plans to increase Section 301 tariffs on Chinese EVs and certain hybrids to 100 percent from August 1. In mid-June, the European Commission announced it would apply provisional countervailing (anti-subsidy) duties on Chinese-made EVs from July 4, following a preliminary trade remedy investigation, with final duties expected to be finalized in the fall.
Besides the government, environmentalists have expressed serious concern. According to CBC News, critics of China’s EV industry point to its large environmental footprint and low labor standards. “[There’s] no justification to trade away high-paying, high-skilled jobs for cheap and high-intensive carbon vehicles built under deplorable conditions,” said Lana Payne, president of Canada’s largest private-sector union, Unifor.
Unifor national president Lana Payne was not available for an interview but released a statement calling China “the most pressing threat” to the North American auto sector. “China has taken a low-road approach to its green industrial development, fueled by dirty energy, deplorable labor standards, and overproduction for export markets,” Payne said. In her statement, she said Unifor “welcomes any federal action to guard against unfair Chinese EV imports.” Last week, Payne stood shoulder to shoulder with Chrystia Freeland, who announced the 30-day consultation at a plant in Vaughan, Ontario, where Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, also appeared. Volpe has been as vocal as anyone about Canada needing protectionist barriers, such as tariffs on Chinese-made EVs.