Consultations on potential policy responses to unfair Chinese trade practices in electric vehicles

Introduction

Auto manufacturing directly supports over 125,000 good-paying Canadian jobs. 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.

That is why, on June 24, 2024, the federal government announced it is 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 China’s unfair trade policies and practices, and prevent trade diversion resulting from recent action taken by Canadian trading partners.

The Government of Canada invites any interested stakeholder to provide input, including from:

Issue

EVs, and their associated supply chains, represent a strategic sector in support of Canada’s clean future. Over the past four years, vehicle manufacturers and supply-chain partners have announced $46 billion of investments to expand Canada’s EV production capacity all along the supply chain from critical mineral refinement to battery production to final vehicle assembly, which will play an important role in building Canada’s clean economy and securing long-term opportunities for Canada's auto supply chain workers.

This growth is at risk of being undermined by the significant recent increase in exports of Chinese EVs to the Canadian and global markets, enabled by unfair support through China’s use of a broad range of non-market policies and practices. These include, but are not limited to, pervasive subsidization, including of the supply chains of necessary components, problematic or non-existent labour and environmental standards, and other measures to artificially lower production costs, which is leading to significant overcapacity in Chinese EV production.

There is a risk that China’s unfair support for the EV sector, if left unchecked, could lead to an exponential surge of imports that will adversely affect planned EV investments and the transformation of Canada’s automotive sector. There has already been an initial influx of imports of EVs made in China into the Canadian market, totalling almost $2.3 billion in imports in 2023 (see Annex 1).

Some of our likeminded trading partners, including the United States and the European Union, have identified similar concerns with supports in the Chinese EV sector and are taking steps to protect their markets. On May 14, 2024, the United States announced an increase in Section 301 tariffs applicable to EVs imported from China from 25 to 100 per cent, among a range of other strategic sectors. Further, on June 12, 2024, the European Commission announced a provisional finding that China’s EV battery supply chain benefits from unfair subsidization which is threatening to cause injury to European producers. Provisional duties ranging from 17.4 per cent to 38.1 per cent may be imposed on imports of Chinese-produced EVs starting July 4, 2024.  

Distinct from the risks to the development of Canada’s EV industry, connected vehiclesFootnote 1 with technology from China could pose cyber and data security risks, along with associated privacy considerations. On February 29, 2024, the United States issued a notice seeking public comment to inform the potential development of regulations to secure and safeguard the information and communications technology and services supply chain for connected vehicles.

Chinese Policies and Practices

As part of this exercise, the government is welcoming additional information from stakeholders on Chinese policies causing overcapacity and accelerating exports of EVs from China. This includes information on subsidies, including to key production inputs such as critical minerals, steel, and aluminum as well as problematic environmental or labour practices or any other non-market policies and practices.

In providing input, please include detailed information detailing the policy or practice in question, benefits to China’s EV production, as well as negative impacts on Canadian workers and businesses.

Canada’s Potential Policy Response

Canada’s potential response measures to this extraordinary challenge would be intended to level the field and support the conditions for our EV industry to grow and compete in the domestic and global auto markets, as well as to safeguard Canada’s national security interests. The response measures would also ensure that Canada is not a potential destination for a surge of unfair imports from China resulting from the diversion of Chinese EVs from other markets that have recently announced trade protective measures.

The government welcomes comments on the following potential response measures:

Any measure that restricts imports could potentially have an impact on the price and/or selection of EVs available in Canada, and the government would welcome perspectives in that regard.

Finally, it is the government’s intention that any measures applied following this consultation process be reviewed within a period of one year from implementation and could be extended for a further period of time and supplemented by additional measures, as appropriate.

Contact Us

Submissions for this consultation will open from July 2, 2024, to August 1, 2024.

Email your comments and feedback to tariff-tarif@fin.gc.ca, including “EV consultation” in the subject line.

Comments and feedback may also be sent by mail to:

International Trade Policy Division (EV Consultations)
Department of Finance
90 Elgin Street, 14th Floor
Ottawa, Ontario K1A 0G5

Please include the following information with your submission:

Privacy

In order to respect privacy and confidentiality, when providing your submission please advise whether you:

Information received throughout this submission process is subject to the Access to Information Act and the Privacy Act. Should you express an intention that your submission, or any portions thereof, be considered confidential, the Department of Finance Canada will make all reasonable efforts to protect this information.

What’s Next

Following the conclusion of the consultation period, the government will use feedback from stakeholders to help inform decisions about which potential policy responses should move forward, and what the appropriate policy details, such as tariff rates, of those policies will be.

Annex 1 – Canada’s Imports of EVs, Top 10 Countries, 2018-2023*

Table 1
Canada’s Imports of EVs, Top 10 Countries, 2018-2023
*imports by value in Canadian dollars

2023
Rank
Country 2018 2019 2020 2021 2022 2023
1 U.S. 1,051,365,585 1,190,187,758 1,512,191,826 2,057,810,060 5,172,840,547 3,646,432,256
2 China 790,692 2,415,039 17,581,730 32,421,366 84,435,516 2,205,458,430
3 S. Korea 110,827,433 302,295,758 508,195,781 342,365,406 540,591,583 1,217,957,932
4 Germany 41,885,878 64,761,759 163,041,576 188,812,056 503,189,521 817,365,885
5 Mexico 608,495 1,026,266 2,820,366 296,653,172 424,961,899 642,221,944
6 Japan 315,156 283,576 32,526 636,791 81,490,871 557,862,261
7 Belgium 0 65,098,212 27,706,347 86,192,598 158,553,194 320,958,178
8 Vietnam 0 0 0 0 0 82,385,250
9 U.K. 407,500 1,139,949 8,724,083 13,813,600 25,319,183 32,663,302
10 Austria 7,400,267 23,185,312 1,829,210 6,634,374 2,467,092 15,106,033
Total Global Imports 1,222,246,355 1,653,493,528 2,242,528,321 3,025,524,455 6,994,322,743 9,538,915,457

Source: Statistics Canada

Annex 2

Descriptions are included for illustrative purposes, with the scope established by the tariff item in column 1. For precise descriptions, please refer to the Schedule to Canada’s Customs Tariff.

Table 2

Tariff Item

Indicative Description

8702.20.10

Hybrid buses, for the transport of 16 or more persons, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion

8702.20.20

Hybrid buses, for the transport of 10-15 persons, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion

8702.30.10

Hybrid buses, for the transport of 16 or more persons, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion

8702.30.20

Hybrid buses, for the transport of 10-15 persons, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion

8702.40.10

Electric buses, for the transport of 16 or more persons, with only electric motor for propulsion

8702.40.20

Electric buses, for the transport of 10-15 persons, with only electric motor for propulsion

8702.90.10

Other buses (e.g., powered by fuel cells), for the transport of 16 or more persons

8702.90.20

Buses powered by fuel cells, for the transport of 10-15 persons

8703.40.10

Non-plug-in hybrid passenger autos, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion, of a cylinder capacity not exceeding 1,000 cc

8703.40.90

Non-plug-in hybrid passenger autos, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion, with a cylinder capacity of 1,000 cc or more

8703.50.00

Non-plug-in hybrid passenger autos, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion

8703.60.10

Plug-in hybrid passenger autos, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion, of a cylinder capacity not exceeding 1,000 cc

8703.60.90

Plug-in hybrid passenger autos, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion, with a cylinder capacity of 1,000 cc or more

8703.70.00

Plug-in hybrid passenger autos, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion

8703.80.00

Electric passenger autos, with only electric motor for propulsion

8703.90.00

Passenger autos powered by fuel cells

8704.41.90

Hybrid trucks (e.g., pick-up trucks), with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion, g.v.w not exceeding 5 tonnes

8704.42.00

Hybrid trucks (e.g., pick-up trucks, cube vans), with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion, g.v.w. exceeding 5 tonnes but not exceeding 20 tonnes

8704.43.00

Hybrid transport trucks, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion, g.v.w. exceeding 20 tonnes

8704.51.00

Hybrid pick-up trucks, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion, g.v.w. not exceeding 5 tonnes

8704.52.00

Hybrid transport trucks, with both spark-ignition internal combustion piston engine and electric motor as motors for propulsion, g.v.w. exceeding 5 tonnes

8704.60.00

Electric trucks, with only electric motor for propulsion (any g.v.w.)

8704.90.00

Trucks powered by fuel cells

Page details

Date modified: