Canada launches consultation to protect Canadian workers and electric vehicle supply chains from unfair Chinese trade practices

From: Department of Finance Canada

News release

30-day consultation on Chinese EVs open until August 1

July 2, 2024 – Ottawa, Ontario – Department of Finance Canada

Auto manufacturing directly supports over 125,000 good-paying Canadian jobs, many of which are unionized. Canada’s electric vehicle (EV) supply chain potential is ranked first in the world—and the federal government is seizing the growth opportunities of EVs to ensure Canadian auto workers can succeed well into the future.

Canadian auto workers and the auto sector, however, currently face unfair competition from China’s intentional, state-directed policy of overcapacity and lack of rigorous labour 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.

As first announced on June 24, 2024, Canada is today launching a 30-day consultation, from July 2, 2024, to August 1, 2024 on 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 action taken by Canadian trading partners.

The consultations seek views on potential policy responses, including a surtax under section 53 of the Customs Tariff, and possible additional measures such as adjustments to the federal Incentives for Zero-Emission Vehicles (iZEV) program and investment restrictions. The consultations also seek comments on cyber and data security related to protecting Canadians’ privacy and Canada’s national security interests. The government is also considering perspectives on policies driving China’s overcapacity and surging exports of EVs, including labour and environmental standards, and unfair and non-market practices. 

Action is necessary to level the playing field for Canadian auto workers and for Canada’s EV industry to compete in domestic, North American, and global markets. Action will also guard against unfair competition from a potential surge of Chinese imports resulting from the diversion of Chinese EVs from markets that have recently announced increased trade protections on Chinese EVs, including the United States and the European Union.

Quotes

“Canada is home to the talented workers, raw materials, clean electricity, and specialized production capabilities needed to build electric vehicles, and that has meant our EV supply chain potential is ranked first in the world. However, Canadian workers and the auto sector are facing an intentional, state-directed policy of overcapacity, undermining the Canadian EV sector’s ability to compete in domestic and global markets. This consultation will help us take action to protect our workers, level the playing field, and prevent transshipment or oversupply from China’s anti-competitive practices.”

The Honourable Chrystia Freeland,
Deputy Prime Minister and Minister of Finance

“Today’s launch of consultations underscores Canada’s unwavering commitment to safeguarding our auto sector, securing jobs, protecting rules-based trade, and promoting a competitive electric vehicle sector alongside a robust integrated supply chain. Canada is committed to protecting and promoting fair trade to ensure there is a level playing field for Canadian industries and workers. Collaborating with partners to respect our international trade commitments, we will not stand by while our workers are disadvantaged by non-market practices and a failure to abide by labour and environmental standards.”

The Honourable Mary Ng,
Minister of Export Promotion, International Trade and Economic Development

“Canada has a proud auto manufacturing history, one that has supported generations of workers, and built communities. As the world moves to reduce pollution and keep our air clean, we have attracted historic investments in building EV manufacturing capacity here in Canada. That is why our government is taking concrete action, by launching this consultation, to make sure we continue to strengthen our domestic supply chains and bolster access to critical commodities.”

The Honourable François-Philippe Champagne,
Minister of Innovation, Science and Industry

Quick facts

  • Since 2020, China has emerged as the largest manufacturer and exporter of EVs in the world, and its capacity continues to grow, as a result of policies such as extensive state subsidies and other non-market practices. In 2023, China’s annual EV exports totalled $47.2 billion, up from $0.2 billion in 2018.  

    • China’s unfair trade practices include weak standards across EV supply chains, including poor labour standards, a lack of environmental protections, and trade policies supporting oversupply.
    • Connected vehicles containing technology from China also pose significant risks to the privacy of Canadians, their data, and Canada’s national security interests. They collect information from drivers, yet lack transparency on data ownership. 

  • Canada’s international partners, including the United States and the European Union, have recently responded to unfair competition to their EV industries.

  • In Budget 2024, the federal government announced its intention to introduce the new 10 per cent EV Supply Chain investment tax credit, to attract investment across at least three supply chain segments:

    • o   EV assembly;
    • o   EV battery production;
    • o   Cathode active material production.

  • The new EV Supply Chain investment tax credit is the government’s sixth major economic investment tax credit and complements the 30 per cent Clean Technology Manufacturing investment tax credit. 

  • On June 20, 2024, four of the six major economic investment tax credits received Royal Assent, in Bill C-59 and Bill C-69, providing investors with the certainty needed to create good-paying jobs, grow the economy, and keep Canada on track to net-zero by 2050:

    • The Carbon Capture, Utilization, and Storage investment tax credit, available as of January 1, 2022;
    • The Clean Technology investment tax credit, available as of March 28, 2023;
    • The Clean Technology Manufacturing investment tax credit, available as of January 1, 2024; and,
    • The Clean Hydrogen investment tax credit, available as of March 28, 2023.

  • To ensure Canadian workers benefit, labour requirements to pay prevailing union wages and create apprenticeship opportunities, effective as of November 28, 2023, must be met to receive the maximum tax credit rate for the following investment tax credits:

    • Carbon Capture, Utilization, and Storage investment tax credit;
    • Clean Technology investment tax credit;
    • Clean Hydrogen investment tax credit; and,
    • Clean Electricity investment tax credit.

  • Canada’s automotive sector builds more than 1.5 million vehicles every year—one every 21 seconds. It supports nearly 550,000 direct and indirect jobs, contributed $18 billion in 2023 to Canada’s GDP, and is one of the country’s largest export industries. Canada’s auto sector is anchored by the presence of five manufacturers: Stellantis, Ford, General Motors, Toyota, and Honda.

Associated links

Contacts

Media may contact:

Katherine Cuplinskas
Deputy Director of Communications
Office of the Deputy Prime Minister and Minister of Finance
Katherine.Cuplinskas@fin.gc.ca

Media Relations
Department of Finance Canada
mediare@fin.gc.ca
613-369-4000

General enquiries

Phone: 1-833-712-2292
TTY: 613-369-3230
E-mail: financepublic-financepublique@fin.gc.ca

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