Evidence of meeting #32 for Science and Research in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was china.
A recording is available from Parliament.
Liberal
Aslam Rana Liberal Hamilton Centre, ON
Dr. Burton, China's own industrial priorities around EVs have been shifting recently. How should Canada be factoring that into how it thinks about this arrangement going forward?
Senior Fellow, Sinopsis, As an Individual
I'm concerned about Chinese EVs coming into Canada under any conditions. They are grossly subsidized by the Chinese government. I think the estimate for the past 10 years is something on the order of 300 billion dollars' worth of Chinese subsidies, which makes them very competitive.
There are concerns about the labour and environmental practices of lithium extraction in the Tibetan regions, as the executive director of the Canada Tibet Committee, Sherap Therchin, testified to the House of Commons international trade committee. I think there are also concerns about the use of forced labour in bauxite extraction in the Uyghur regions.
These things are quite serious barriers in terms of other aspects of Canadian law. Can we accept products of forced labour or products of environmental and labour practices that are unacceptable under international practice and Canadian law? This is a matter that I think is a barrier to fulfilling our commitment to the Chinese government to allow the 49,000 EVs to enter Canada in the initial phase, followed by more in subsequent years.
Liberal
Aslam Rana Liberal Hamilton Centre, ON
Thank you.
Mr. Kingston, the government has put forward several measures to support the automotive sector alongside this arrangement. From your members' perspective, what are the most pressing needs the sector has right now?
President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association
The biggest challenge facing the automotive sector and auto manufacturers in Canada remains access to the U.S. market. As I noted at the outset, the industry that exists has grown because we have free trade with the United States. As long as those tariffs remain in place, there will be significant costs driven to auto manufacturers.
At a time when the industry is under such pressure, introducing new market entrants from China, who do not compete on a level playing field, adds a whole new risk to the sector. We're looking for government to level the playing field and make sure that if manufacturers are going to compete with new market entrants, there's a set of rules that everybody abides by. China does not play by those rules. Therefore, that's a huge risk to the sector.
Liberal
Aslam Rana Liberal Hamilton Centre, ON
Where do you see Canadian vehicle manufacturers being most competitive in the EV transition, and what role does this arrangement play in that?
President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association
Manufacturers have already invested billions of dollars in the EV supply chain in Canada. As I noted, Ford and GM are the EV sales leaders in Canada. Stellantis is the only manufacturer currently building EVs here and, of course, has recently finalized major construction of Canada's first large-scale EV battery plant. We have the ground being laid for an emerging EV sector.
The challenge we're facing right now is a lack of demand from consumers, but we still believe that the future is electric and you'll see more and more manufacturers shifting into that space. We have to work with government to try to make the supports available to help consumers switch. Charging infrastructure, the recently announced incentive and the EVAP will help, and we'll see higher adoption levels over time.
Liberal
Aslam Rana Liberal Hamilton Centre, ON
Thank you very much.
Mr. Adams, the automakers you represent are making long-term investment decisions right now. What are the factors weighing most heavily on where they choose to locate EV production?
President & Chief Executive Officer, Global Automakers of Canada
I would look at it and reframe it as electrified production. One of the keys, as Mr. Kingston mentioned, is obviously having unfettered access to the United States market.
The other reality is the fact that we do share the same integrated auto environment, but the U.S. administration is basically undermining all of its environmental and EV-related goals and objectives with respect to battery production, investments, and so on and so forth. When we're trying to sell vehicles or build vehicles in Canada with 80% or more of those going to the United States, we need to be building vehicles that Americans want to buy.
That's why our members Honda and Toyota have taken that approach. American consumers are quite interested in hybrids, but they haven't developed the building of fully electric vehicles yet. They need the market.
Liberal
The Chair Liberal Salma Zahid
We will now proceed to MP Blanchette-Joncas for six minutes.
Please go ahead.
Bloc
Maxime Blanchette-Joncas Bloc Rimouski—La Matapédia, QC
Thank you, Madam Chair.
I’d like to welcome the witnesses who are with us today.
My first questions are for Mr. Burton.
In your opinion, is Canada making a strategic mistake by treating this arrangement as a mere trade agreement?
Senior Fellow, Sinopsis, As an Individual
Yes, I think it is a strategic error to agree to this. On the terms, it seems the idea was that we would accept the 49,000 EVs and more in subsequent years in exchange for relief on the canola seed tariffs that China had imposed. The canola seed tariff relief only runs from March 1 until the end of the year, so we've made a permanent commitment to allowing in the Chinese EVs in exchange for a highly temporary one.
The canola producers do not necessarily support our making this kind of deal. For them, as I've spoken to some of the officials involved in the canola industry, they'd really prefer not to be dependent on the Chinese market and to make as much as 75% of the canola seeds into biofuel so that they're not subject to these vagaries over and over.
They had it when we held Huawei CFO Meng Wanzhou on a U.S. extradition request, and then they had it again when we imposed 100% tariffs on EVs. They have enough trouble looking after the climate and the soil conditions without having to deal with arbitrary and punitive actions as China weaponizes trade to serve China's geostrategic interests.
Bloc
Maxime Blanchette-Joncas Bloc Rimouski—La Matapédia, QC
Thank you, Mr. Burton.
Given that Chinese companies are subject to Chinese national security laws, can we really rule out the risk of the Chinese government accessing or exploiting the data?
Senior Fellow, Sinopsis, As an Individual
No, I do not think we can. More and more of the Chinese algorithms are very specific, so the concerns that were just raised in the question with regard to the military would be highly valid. I do think that the concern is over software updates and putting backdoor routines into these vehicles. When you're looking at millions and millions of lines of code, it would be very difficult for the Communications Security Establishment to keep on top of whether these EVs are presenting a security threat.
I just despair about this. China is an integrated regime where businesses are expected to respond to the Chinese Communist Party, which has a state military-business integrated approach with an overall geostrategic plan to become the dominant power on the planet by the year 2050 under Xi Jinping's community of common destiny for mankind. I cannot think that its strong desire to have EVs running in Canada is not part of its overall foreign policy and defence agenda.
Bloc
Maxime Blanchette-Joncas Bloc Rimouski—La Matapédia, QC
Thank you, Mr. Burton.
We know that electric vehicles collect sensitive data, such as location and travel habits.
Should we consider these vehicles as potential vectors for collecting strategic information?
Senior Fellow, Sinopsis, As an Individual
The EVs would be able to pick up the licence plates of EVs and vehicles round about. In other words, they know where you've been going and what you've been parking next to. They also can gather information about infrastructure. China doesn't allow Teslas, for example, to enter into military and government spaces for the same reason. They provide extensive information about the driver. We have concerns about whether they can be used for listening in on communications through the Bluetooth applications in those EVs.
I think there are any number of reasons to be concerned about them. They are like cellphones or spy machines on wheels. There's no question about this. The idea that the Chinese state would not fully exploit the possibility of that advantage strikes me as extremely unlikely.
Whether we're able to solve it through installing, let's say, BlackBerry software into the cars, I don't have the technical expertise to speculate on that. However, I really feel that this is a mistake from a security point of view, and it could have very serious consequences for Canada's security in years ahead.
Bloc
Maxime Blanchette-Joncas Bloc Rimouski—La Matapédia, QC
Mr. Burton, we cannot guarantee data security. Nor, of course, can we guarantee the absence of forced labour in the supply chain.
In your opinion, is there a major strategic risk for Canada?
Senior Fellow, Sinopsis, As an Individual
Yes, I think we are. The Chinese government—I think just last week—initiated legislation that makes it illegal to transfer information abroad about supply chains. Also, they have legislation that punishes companies that are withdrawing from China under foreign pressure because of supply chain concerns. For example, they're not allowing the executives of the companies to exit China until the legal issues are resolved with regard to whether they are doing it for foreign reasons.
I don't think there is a good solution to this. The best solution is to ban Chinese EVs from entering the Canadian market for security reasons. I agree fully with what the other witnesses have said about these other significant factors. It's unfortunate that the Carney government has made this decision.
It appears that we are giving up on our previous concerns about security, foreign influence, transnational repression and defence of Canadian diaspora communities with a view that we can gain significant trade advantages. Let's face it. Our total external commodity trade to China is 4%. Even if we are able to raise it to 6% by 2030, as the government proposes, it will not make a significant difference in the concerns we have about what the U.S. may do to our economy.
Liberal
The Chair Liberal Salma Zahid
Thank you.
We will start our second round with MP Ho for five minutes.
Please go ahead.
Conservative
Vincent Ho Conservative Richmond Hill South, ON
Thank you, Madam Chair.
My first set of questions is for Mr. Kingston.
Just last week, the Prime Minister said that our historically close U.S. ties have now become “weaknesses” and suggested that Canada should look elsewhere. From the standpoint of Canadian auto jobs and supply chains, is importing Chinese-made EVs a credible substitute for the North American auto market?
President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association
No, absolutely not. I'm an economist by training. Our trade relationship is always going to be with the largest economy that is geographically closest to us. We happen to sit beside the largest, wealthiest, most dynamic economy in the world, which is in the United States. Our relationship with the United States will never be a weakness. It is our biggest strength.
There's no doubt that we're going through a difficult time right now, as we deal with this administration, but to suggest that we could somehow diversify away from the biggest economy that we sit right beside...? That is not economically feasible. China will absolutely not be a replacement for our auto industry or for the access we have to the U.S.
Conservative
Vincent Ho Conservative Richmond Hill South, ON
It's great to hear from an economist.
Previously, it was said that Canada should be the best destination in the world for auto investment. Does the Liberal government's decision to import more Chinese-made EVs make Canada a better place to build or an easier place to dump product at the expense of Canadian auto jobs and supply chains?
President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association
It makes Canada a worse market for automotive investment. We are very fortunate to have five companies that have invested in this country and employ hundreds of thousands of Canadians throughout their supply chains and dealer networks.
By allowing Chinese companies that have no footprint, no investment and don't play by the rules into the market, it undermines the manufacturers that have invested in this country. This agreement makes it far worse. It threatens our access to the U.S., so there could be very little justification for any new investment in Canada if you can't guarantee that you can get your product into the U.S. market.
Conservative
Vincent Ho Conservative Richmond Hill South, ON
Thank you.
My next set of questions is for Mr. Burton.
Mr. Burton, last week the Prime Minister said that Canada's “close ties to [the United States] have become weaknesses...that we must correct.” In your view, is replacing dependence on the U.S. with deeper exposure to Beijing-linked EV technology actually a correction or just swapping one vulnerability for another vulnerability, one which this government is not adequately prepared to address?