International Trade Committee on Sept. 18th, 2024

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

That leads into my next question.

China has signalled its intention to take this matter to the WTO. What possible legal challenges could Canada face at the WTO, and what effect might this have on future trade policies?

[Dr. Charles Burton]

It is very concerning because, like so much of China's malign activities here in Canada, including the ongoing foreign influence and their espionage operations, it's very hard for us to come up with solid evidence. In other words, we're never going to be able to produce a Huawei 5G that's actually been used for espionage. They're not doing it yet. With the EVs, as I think people like Dick Fadden have said, it's a potential. It's not actually there right away.

As to how we can defend ourselves at the WTO, I'm not familiar enough with these kinds of national security provisions that would allow us to evade action by the WTO that would rule in favour of China on this. China, of course, insists that it doesn't subsidize them and that they're simply a result of Chinese ingenuity, that China is able to produce a superior product at a lower price. From what I read, they are excellent, those Chinese subsidized EVs. Taxi drivers in Spain think they're the best thing going.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

How does the tariff decision then fit into the broader geopolitical context of Canada's foreign policy? What's next? There is an election in the United States ahead of us. You kind of alluded to where we're going. Where's your gut saying this is going to end?

[Dr. Charles Burton]

I would prefer that we simply ban Chinese EVs on the security grounds. I think the tariff could lead to more problems. You're imposing a 100% tariff. Obviously, the idea is that no Chinese EVs will come into Canada. I think that's great. I'm just not sure that the mechanism in terms of diplomatic norms and how the Chinese will take it is best going this particular route.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

I'd like to pose the same question to Mr. Simard online.

How does this tariff decision fit into the broader geopolitical context of Canada's foreign policy, and what do you anticipate is next?

[Jean Simard]

First of all, let me add that on the largely subsidized electric vehicle, you have to factor in the subsidies on the aluminum and steel that go into these vehicles. When you're talking about the geopolitics, you have to look at it in a very holistic way. Right now, China has to deal with what they are going to do with the metal that's going into the cars that will not be going into North America in the future. This probably raises the stakes for them in terms of retaliatory scenarios, and it spreads to other things.

I think they're going to have to measure the extent to which they want to commit to retaliation. If they go for agriculture products, well, they need those products. It's measuring through time the impact you're willing to submit yourself to and the effect of what you're trying to submit the other to. Canada's been pretty good, as we've seen in the past.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Simard.

Next is Mr. Sidhu for five minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thanks, Madam Chair, and thanks to our witnesses for coming today on this very important study.

Mr. Kingston, you mentioned in your opening statement the importance of Canada aligning with the U.S. in terms of their mandates in regard to the EV sector. It's very interesting. California has a very similar population to what we have here. The mandate that they passed in 2022 requires 35% of new passenger cars, trucks and SUVs sold in the golden state to be electric or hydrogen-fuelled by 2026 and 100% by 2035. Here in Canada, the mandate we have brought forward is 20% by 2026, 60% by 2030 and 100% by 2035, which is exactly what California has mandated.

Can you shed some light on this? I think we're very aligned, but you were saying in your opening statement that we're not very aligned with them.

[Brian Kingston]

Yes. Thank you.

Canada has always—and this is really going back to the auto pacts in the 1960s—aligned with the federal U.S. on the range of automotive standards, including emissions standards. The U.S. federal government is trying to reduce the emissions of the on-road vehicle fleet and encourage electrification by ratcheting up those standards and making them tighter and tighter. Canada has always followed that approach. There's been a departure under this government in going forward with an EV mandate, which dictates which vehicles Canadians can and can't buy. That's a different approach. Yes, it is aligned with California, but we don't need to align with California. It's a single state. We need to align with the U.S. federal government. It is a departure. It's a significant departure, and it is very problematic.

[Maninder Sidhu, Liberal, Brampton East, ON]

I think Mr. Wallace may want to shed some light on this as well.

Look, the California market is a very large market in the U.S., one of the largest markets, with a population of 39 million. We have roughly the same.

Mr. Wallace, go ahead.

[Nate Wallace]

I would say we will most likely be aligning with both: the federal GHG regulations, which the Biden administration published over the past summer, and the ZEV regulation, which California has, as do about 15 other U.S. states that align with the California rule. As a matter of fact, the most recent U.S. federal rule, published by the Biden administration, actually incorporates analysis of ZEV uptake increasing as a result of the California rule. It's essentially embedded in the U.S. federal rule.

I would not say that Canada's actually being able to meet its EV sales targets as a result of this regulation is aligning with the U.S. at all. I wouldn't say that statement is true.

[Maninder Sidhu, Liberal, Brampton East, ON]

Mr. Kingston, here in Canada our federal government has many incentives in place to make sure EVs are more accessible. The data shows that the provinces that also have EV rebates have a higher take-up in EVs. The investments our government is making, whether in Stellantis, Volkswagen or, as recently announced, Honda, with a record $15-billion investment in the North American automotive industry, are really making an impact by bringing EV production here to Canada.

Perhaps you can speak to the importance of having EV manufacturing here in relation to innovation and access for Canadians.

[Brian Kingston]

Sure. It's been a huge success over the past four years. We're now at about $46 billion in new investment into the automotive sector in Canada, in everything from battery manufacturing cathodes through to final vehicle assembly. This is a huge advantage for Canada. I think the biggest economic opportunity is in developing our critical minerals mining capacity. It relates to what we're talking about today. We are highly dependent on the Chinese EV battery supply chain. Canada happens to have every mineral needed for advanced batteries. If we can get that part of the supply chain right, I think we will be well positioned for decades to come in this sector as part of an integrated North American industry.

[Maninder Sidhu, Liberal, Brampton East, ON]

You're right. We're one of the only countries in the western hemisphere to have every single element required to make an EV battery. I was up in Whitehorse recently, and I learned a lot of this from the premier there.

How much time do I have left?

[The Chair, Liberal, Judy Sgro]

You have 30 seconds.

[Maninder Sidhu, Liberal, Brampton East, ON]

Okay. This is a very detailed question, so I'll just say thank you again for coming.

[The Chair, Liberal, Judy Sgro]

Mr. Savard-Tremblay, go ahead for two and a half minutes, please.

Please indicate if there's a problem with translation. Please immediately raise your hand.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you.

Mr. Burton, you ended your previous intervention by mentioning materials and goods produced from forced labour. I put a question on the Order Paper last year asking for the total value of what had been seized. The only cargo seized was under a decision that was subsequently overturned. In the end, nothing was seized over time, whereas in the U.S., the value is at several million dollars. In the U.S., the burden of proof is on the importer, but under Canadian law, it's on the customs officer, as if the use of forced labour were going to be noticed by flashlight during an inspection.

Do you see a problem with the legislation? Is there some kind of gaping hole the size of the Grand Canyon?

[Dr. Charles Burton]

I think it's the implementation of the legislation that has been problematic. In one case, some clothes that were seized, alleged to have been using Chinese cotton produced by forced labour, were eventually released. The determination was that there wasn't justification for withholding those on a forced labour basis. As you say, other countries are seizing a lot of stuff from China by identifying the forced labour and putting the responsibility and incumbency on the importer to demonstrate that there is no forced labour involved.

I feel a lot of regret that Canada is so far behind on this, but this is perhaps characteristic of Canada's being behind other nations in terms of recognizing Chinese malign activities and coming into compliance with the United States, the U.K., Australia and so on in forming legislation and regulations and practices that meet the challenge. We need to put many more resources into our intelligence and CBSA to try to realize the will of Parliament to stop these kinds of activities from occurring.

We'll face the same thing with Bill C-70. It's nice legislation, but will we be able to implement it effectively?

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Cannings, you have two and a half minutes, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'll continue with Mr. Wallace on the theme of how, if we're going to put on these 100% tariffs to exclude these cheaper EVs from the North American market, we can continue the trajectory of getting more EVs sold in Canada. When I look at where Canadians are buying EVs, it's mainly in British Columbia and Quebec. From what I understand, a lot of that has to do with the incentives there and the regulations about matching the California kind of regulations.

I'm just wondering what more we could do in those spheres. Putting aside keeping China out of the market, because that seems to be what we're doing, how can we get people to buy EVs and basically force the automakers to provide them? We need to have them available and have the infrastructure there to drive them.

[Nate Wallace]

I would say you're absolutely right. The reason Quebec and California and British Columbia all have the highest ZEV penetration rates, with the highest amounts in Canada being sold in those jurisdictions, is that they have their own version of Canada's electric vehicle availability standard, which was recently introduced for the 2026 model year. Our modelling has shown that if you look at how automakers would respond to that measure alone, it would essentially force them to bring more affordable models to the market. Our modelling, which we did with an academic at Simon Fraser University, predicts that prices would decline by about 22% below the baseline price trajectory by 2035.

Then again, I think it's important to recognize that we need additional policy measures to continue making EVs more affordable, in particular in the used vehicle market, where most people make their vehicle purchases. I think expanding the incentive to that market is one tool. If we look at things like requiring automakers to provide standardized EV battery health information, that's one way to actually help foster the used vehicle market. People don't actually know how degraded their battery is and that sort of thing, which makes it difficult for the market to price it. It's also looking at corporate car fleets and increasing the turnover of new vehicles into the used vehicle markets. There are some institutional buyers, like rental car companies, that buy a whole lot of new vehicles and sell them into the used vehicle market. They would be key drivers of used EV supply, potentially, if they could be encouraged to purchase more EVs.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Wallace.

We will move on to Mr. Baldinelli for five minutes.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

Thank you to the witnesses for being with us this afternoon.

Ms. Cobden, thank you again for appearing. On Monday we had Marty Warren here from the United Steelworkers. When he spoke to the committee, he essentially indicated that if we do not figure out how to stop Chinese dumping, then every job in our steel sector is at risk.

Would you agree?

[Catherine Cobden]

Yes, this is, again, why we think it is so crucial that section 53 be added into the mix. Unfortunately, regrettably, the trade remedy regime is not structured to deal with these unprecedented times and the surge of imports into our country.

The steel sector fights the good fight in Canada every day. As François reported in some of his French responses, we have seen a significant decline of our market share year over year. When you look at a longer period of time, that decline has been significant, so we need new tools in the tool kit. The world has changed. We must keep pace. It doesn't mean that we don't believe in free trade, but we absolutely must have a level playing field.