Opinions
2024.10.03 21:17 GMT+8

Canada's EV tariffs: Who benefits?

Updated 2024.10.03 21:17 GMT+8
Radhika Desai

New energy vehicles being charged at a charging station in Gujiao Township of Bouyei-Miao Autonomous Prefecture of Qiannan, southwest China's Guizhou Province, October 17, 2023. /Xinhua

Editor's note: Radhika Desai, a special commentator on current affairs for CGTN, is a professor of political studies at the University of Manitoba in Canada. The article reflects the author's opinions and not necessarily the views of CGTN.

Canada's 100 percent tariffs on Chinese electric vehicles (EV) have just gone into effect and 25 percent tariffs on steel and aluminum will soon follow. China's Ministry of Commerce has asked the World Trade Organization (WTO) to rule on the legality of the moves and conduct investigation. However, the Trudeau government's moves also raise important issues for Canadians.

The first is excessive U.S. influence on Canada's policies, in particular its all-important policies toward the world's manufacturing giant, China. In recent years, Canada seemed to be taking advantage of China's rise to diversify its trade links, which had traditionally been U.S.-centric. But, since the Trump administration tore up the North American Free Trade Agreement and replaced it with more U.S.-favored United States-Mexico-Canada Agreement, Canada has been following the U.S. policies closely – some might say slavishly. This is evident in its decision to arrest Huawei's Chief Financial Officer Meng Wanzhou when most other countries through which she had traveled over the previous months refused to do so. And now, Canada is imposing these copy-cat tariffs.

Admittedly, Canada's historically deep economic relations with its neighbor to the south cannot be wished away overnight, but the alacrity with which Canada complied when U.S. National Security Advisor Jake Sullivan asked Ottawa to join Washington in these tariffs is clearly not the way to retain any bargaining position with any country, least of all one whose increasingly bullying behavior makes the case of diversifying economic ties more urgent. There is also the separate issue of following the U.S. lead in securitizing economic policy, a practice that enhances neither economic prosperity nor national security.

Canada justified the tariffs as necessary to protect Canadian manufacturers from "unfair" Chinese competition. However, Canadian auto industry experts point out that these tariffs are so excessive that they will inevitably be met with China's countermeasures. By following the U.S.'s sledgehammer approach, Canada's much smaller and much less diversified economy will become more vulnerable.

Moreover, since no special provisions have been made for Tesla, whose China-manufactured cars were a hit in Canadian markets last year, the company stands to lose the most. In contrast, BYD, China's leading EV producer has barely begun its exports to Canada. In applying these identikit tariffs, Canada may side with the Biden administration against Donald Trump in an especially volatile election year given Tesla owner Elon Musk's support for Trump. This decision could cost Canada dearly if Trump wins, which currently has a 50-50 chance.

The possibility of fostering a Canadian EV industry is, moreover, remote. Since the Second World War, leading industrialized countries, of which China is now an outstanding member, have opted not to replicate each industry within each country. Instead, they benefit from economies of scale and specialization, with individual nations focusing on the production of certain high-tech goods. Moreover, despite recent talk about industrial policy, these countries are no longer geared to conjure up entire sectors of production from scratch.

A GEM e4 small electric vehicle is on display during the Everything Electric Canada Show in Vancouver, British Columbia, Canada, September 6, 2024. /Xinhua

Furthermore, China has developed its advantage in EVs through a long, patient and strategic effort which simply cannot be replicated by other countries. It is best to leave this Chinese competitive advantage well alone and focus on developing Canada's competitive advantage in some other equally sophisticated and attractive product.

If the government is really concerned about Canada's industrial sector, it must bear in mind that the further tariffs the Trudeau government is considering placing on products like solar cells, computer chips and lithium ion batteries, which are used by so many Canadian manufacturers, will certainly gum up their supply chains, raising costs, likely costing jobs and contributing further to, rather than stalling and reversing, the industrial decline of the country.

As for climate change, according to environmental advocates, the EV tariffs, by preventing Canadians from replacing their internal combustion engine cars with affordable EVs, will set back the achievement of climate goals. 

Finally, we come to labor and environmental standards. Canada's Deputy Prime Minister Chrystia Freeland has called them "abysmal" in China. Well, if that's the case, why does Canada import so much from China – imports that keep Canadian living standards high and inflation low? This hypocrisy is even more galling considering that neoliberal governments of Freedland's sort have witnessed a historic weakening of both labor and environmental standards thanks to their pious devotion to U.S. interests. Conversely, the Chinese government has facilitated a significant improvement in workers' living standards and in environmental sustainability within China and is contributing to achieving similar goals globally.

Whatever else they will achieve, these tariffs do not bode well for Canada, its sovereignty, its workers or its industrial economy, let alone the prospects for addressing climate change. 

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