Liberal EV tariff is stupid policy
“Ford Motor Company announced plans to shift production at its Oakville, Ontario factory in Canada from electric sports vehicles to gas-powered pickup trucks.” — September 2nd, 2024.
Exactly seven days earlier, the CBC reported that Trudeau had effectively banned made-in-China affordable EVs with a 100 per cent tariff on imports. There’s nothing that explicitly links the two announcements, but let’s establish some context: As Canadian forests and towns are consumed by wildfires under a worsening climate scenario, and Canada is failing to meet it’s own climate targets, the decision was made to keep EVs out of the market; As Canadians grapple with the cost of living amidst outrageous housing costs, food price inflation, and increased energy costs, the Canadian government opted to keep affordable EVs out of the hands of Canadian consumers.
The CBC story, please read it, is enlightening as hell. Trudeau is quoted as saying, “Actors like China have chosen to give themselves an unfair advantage in the global marketplace, compromising the security of our critical industries and displacing dedicated Canadian auto and metal workers. So, we’re taking action to address that.”
Essentially, Trudeau made three arguments:
- China is exploiting an “unfair advantage” in the marketplace.
- EVs from China compromise “the security of our critical industries”.
- Automotive Jobs are at risk if Canadians are able to buy cheap EVs made in China.
Unfair Advantage
Trudeau doesn’t say how “Actors like China” give themselves unfair advantage. But the main accusation appears to be “dumping an over capacity of production” into foreign markets.
Global capitalism is defined by over production and dumping. It’s called economies of scale. It works like this: A ship with x crew using y fuel costs z dollars even if they catch only one fish. So the cost of per unit production falls with every additional fish caught. Catch all the fish and your per unit cost tapers off along a declining line. The problem then becomes the over capacity of all the fish being caught. That problem is solved by marketing and discounting.
Consumers are persuaded they want/need to eat more fish and they discount the price because the production costs, per unit, are low. That’s why tinned fish is sold so cheaply at the dollar store while wild fish are declining along a line to zero. Nevertheless, dumping is considered to be an unfair trade practice.
Here is how the World Trade Organization (WTO) defines “dumping”:
“If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product.”
China currently sells few products on the Canadian market. In fact, “While Canada’s actions were reportedly aimed at Chinese EV makers, the volume of Chinese EV exports to Canada were relatively small until Tesla started to ship its Shanghai-made EVs to Canada in 2023. The value of Chinese EV exports to Canada rose to C$2.2 billion ($1.6 billion) in 2023, compared to C$100 million in 2022, according to media reports.”
So the made in China vehicle sold in Canada is a Tesla with roughly five per cent of the market? Is Canada saying Elon is dumping? In fact, there is no evidence of dumping in Canada. So certainly, then, another nation, perhaps Europe or the US, have decisions proving China is dumping EVs, right? Nope.
As far as I can find, there is no evidence of China being convicted of dumping EVs. What’s more, and this has also been echoed by deputy PM, Chrystia Freeland, Canada’s tariffs are in part to protect Canada’s own subsidies and the industry from competition: “Obviously, we need to protect our billions of dollars of investment in battery manufacturing and electric vehicles,” (said) David Adams, president of the Global Automakers of Canada, as reported in the Financial Post.
Those subsidies have been substantial: “The federal Parliamentary Budget Officer calculated the EV sector is slated to receive $52.5 billion in federal and provincial support,” reported The Toronto Star.
The Security Of Our Critical Industries
One might ask how “electric and certain hybrid passenger automobiles, trucks, buses and delivery vans” could put at risk “our critical industries”. What are our “critical industries”? The government helpfully tells us and right at the top?
“energy and utilities”
Certainly an affordable EV is an existential risk to the retail sector of the oil and gas industry. However, the argument that seems to get the most play is that auto companies from China may collect information about Western consumers that could then be used by the state for nefarious purposes. “As China tries to position itself as a global leader in EVs, cybersecurity experts have warned Beijing could use these vehicles to collect huge amounts of sensitive data on North American drivers,” we are warned by Global News in a report headlined “Rolling Spy Vans”.
I’m still not clear on the risk to “critical industries”. How often someone visits Tim Hortons puts at risk the free world? And if China buys the same info from Meta or Google, that’s different? More importantly, if someone is willing to pay the price, they may still buy a Chinese made EV. Do they become less risky to Canada’s critical infrastructure as they become more expensive? Just wondering.
If the issue is the software, the Canadian government could mandate that any auto maker who wants to sell on the Canadian market must open source and publish their software so that it may be reviewed by the entire world. That could go a long way to protecting not only critical industries but consumers, drivers and passengers, and everyone who shares the roads.
Jobs, jobs, jobs
In the 1980s, in the name of jobs, the Conservative Prime Minister Brian Mulroney ushered in the era of globalization and neoliberalism to Canada with chants of “Jobs! Jobs! Jobs!” and Canadians witnessed the factories fall like dominoes, and union jobs evaporate like a summer rain. Statistics Canada lays it out fairly starkly:
In the 1980s, globalization and neoliberalism meant the onset of agreements, both multilateral and bilateral, that sought to protect not people and planet, not human rights, and not to end poverty or to do anything noble of any sort at all, much less shower Canadians with jobs. Those agreements sought to protect a class of person, who may not be human, called “investors” who would derive the vast share of benefits and carry the least share of responsibility, except to their shareholders.
I’m not persuaded the government cares that much about Canadian jobs. But if they did, why not leverage that to get North American auto makers to step up? That’s the crux of the matter. Much of this magnificent BS is to protect a lazy North American auto industry that only knows how to build big, thirsty, and gassy. The top three selling vehicles in North America are the Ford F-Series, GM Sierra, and Dodge RAM. The 2024 Ford F-150 starts at $47,730. Contrast that with under $15,000 for a made-in-China EV.
BYD, a Chinese car manufacturing giant, debuted its Seagull EV last year at a starting price of about $14,600 Cdn for a 305-kilometre-range version. — CBC
Did you know China’s BYD already has an assembly plant in Ontario? It’s located in Newmarket where its building electric buses, including for the TTC, according to Newmarket’s The Era. Could the plant become a casualty of the tariffs?According to the Financial Post, Canada’s auto industry lobby considers the BYD bus assembly plant in Newmarket, Ont. to be different. But it’s not:
The EV-related tarrif will apply to a range of vehicles, including electric and certain hybrid passenger vehicles, trucks, buses and delivery vans. ElectricAutonomy.
Canada doesn’t really have a domestic auto industry. We have auto jobs because we have negotiated access to our markets with American, European and Asian governments. Why wouldn’t we prefer jobs and affordable, clean vehicles when they’re made in China?
That’s not all of it. Canada didn’t make affordable EVs unaffordable just to appease the auto industry. The government is also appeasing the USA.
The Americans have been sparring with China over trade for decades. It wasn’t until Trump, however, that it broke out into a trade war. The Biden admin has only intensified that policy. The problem for the Americans is that China is gradually eclipsing American trade and economic power and the US is determined to stop that, if at all possible, by using trade policy to hinder Chinese growth.
How do we know Canada is marching to the US drum? The CBC told us in that article I linked near the top.
“Trudeau and his cabinet heard from Jake Sullivan, Biden’s national security adviser, late Sunday during a surprise stopover before his trip to China.
Sullivan told reporters that the U.S. would like its partners to adopt a co-ordinated approach to Chinese EVs.”
Of course, “… a senior government official said Canada is not enacting these tariffs because of U.S. pressure”. Sullivan just happened to show up on his way to China, had a chat with the PM, who then made the totally unrelated, out-of-the-blue announcement like the good lad that he is, and that was that. There’s nothing else to it. Off you go. Nothing to see here.
The government of Canada’s policy says that “To help decarbonize the transportation sector, we need to accelerate the adoption of ZEVs. That is why the Government of Canada committed to achieve 100% zero-emission vehicle sales by 2035 for all new light -duty vehicles, including interim targets of at least 20% by 2026 and at least 60% by 2030.”
We’re pretty close to 2026 and “While not exactly a tipping point for electric-vehicle adoption in Canada, new ZEV sales crested 10 per cent of overall vehicle sales for the first time ever in 2023,” according to this article. So we’re about half way there?
Despite dips, the trend remains upward, which is good, but affordable vehicles made in China fits with Canada’s climate policy “to accelerate the adoption of ZEVs”. The consequence of the tariff is to actually remove EVs from the Canadian market place. Not only Chinese EVs. As noted at the start of this piece, Ford has announced it will shift part of their EV production at the Oakville plant to ICE pickup trucks.
BMWBLOG reports, “BMW doesn’t walk away completely unscathed, though. Chinese-produced EVs like the MINI Aceman and Cooper would be subject to the new tariffs. It’s possible the new tariffs will impact BMW’s decision whether or not to bring the motoring icon to Canadian shores. Most likely, both will be delayed until BMW can get production in Oxford optimized. Right now, the plant is focusing only on gas-powered variants.”
A Swedish battery plant to be built in Quebec is now on hold, according to the CBC. “The construction of a $7-billion electric vehicle battery plant on Montreal’s South Shore could take up to a year and a half longer than originally planned, according to the Quebec government.”
Who buys more EV batteries than the Chinese who currently supply half the automobiles sold globally?
From my personal perspective, I am not a big fan of EVs. I think the emphasis on EVs over more effective and quickly implemented climate and transportation solutions is about saving the auto industry, not the planet. Auto dependency sustains the land use that is every bit as destructive as the mode. Still, the current trajectory is such that we must take urgent measures and EVs are a better option the status quo.
Cheap EVs, no matter their national origin, should be welcomed on the Canadian market to both propel the drive to electrification and to give Canadians a break from the unreasonable cost of living.
Good policy should advance the objectives the government has set for itself around climate, transportation, and affordability, and all are undermined by an effective ban of cheap, clean vehicles.
