I've been avoiding commenting on - even thinking about - Canada's new 100% tariff sucharge on imported Chinese electric vehicles (EVs), as well as a 25% tariff on Chinese steel and aluminum. That's because it's complicated, and I'm still not sure how I feel about it on balance.
Given that we are following the Americans' identical move (and a lesser tariff increase by the European Union), we ought to be on pretty firm ground, but I still feel like we're not. The main stated goal of the move is to protect Canada's home-grown EV industry and its high-paying, high-skilled jobs, but it brings with it a bunch of other not-so-desirable baggage.
First off, let's get one thing out of the way: is it even legal under the World Trade Organization (WTO) rules? Surely, we can't just go around slapping tariffs on specific countries willy nilly, can we? China will certainly argue that we can't, and the WTO will definitely be one of their first ports of call.
Well, legal scholars think that Canada can maybe justify itself to the WTO, although it's not a particularly straightforward argument. Section 53 of Canada's own Custom Tariff Act, while rarely used, should cover our internal laws on the matter, but what about international law?
The argument would be that China is itself breaking WTO rules by subsidizing its exports rhrough its system of "state capitalism". It is argued that Canada is justified in acting unilaterally over this, even in the absence of a WTO panel adjudication, because the WTO's broken dispute settlement system would take years to come to a decision.
Furthermore, the WTO Agreement allows member states to depart from binding obligations if their "essential security interests" are threatened because of war or "other emergency in international relations". Apparently, it can be argued that China's massively subsidized exports and its aggressive policy of exporting excess capacity in order to make itself into the dominant global supplier would qualify as an "emergency in international relations", or at least that's the theory.
Both arguments seem a bit tenuous to me, but "the experts" seem convinced.
That aside, are Canada's actions worth the pain that China will certainly inflict in retaliation? There is little doubt that it will retaliate - it has still to retaliate against the USA, which instituted its tariff change earlier, but little Canada is much more vulnerable than the USA. The most likely form of retaliation is for China to pick a sector like Canada's agricultural exports and block market access, much as they are doing with the EU. Exactly how that could play out remains to be seen, but China could make life quite uncomfortable for Canadians.
And then there is the issue of how this affects Canada's climate change commitments. Environmentalists warn that, if Canada is to stand any chance of achieving its ambitious climate change goals, then one plank of that has to be making EVs more affordable and more mainstream, not just expensive luxury items that only wealthy households can afford. Doubling the price of affordable Chinese EVs is not the way to do that, and the new tariffs will effectively slow down Canada's transition to electric vehicles.
Environmental groups like Clean Energy Canada and Environmental Defense have come out strongly against the tariff, despite the admitted benefits to the Canadian sustainable vehicle industry. And I can appreciate where they are coming from.
Even government officials admit that Canadian-made EVs will be substantially more expensive than Chinese imports - even Chinese imports with a 100% import tariff - if only because Canadian workers get paid a reasonable wage, vehicle safety rules are much more stringent, and we have to follow local labour and environmental regulations.
Because that is another charge laid against Chinese EVs: China's power grid is still very carbon-intensive compared to Canada's (and increasing, despite China's huge investments in renewable energy), so we should not be encouraging products manufactured with a large carbon footprint. True, but even EVs produced in a coal-powered environment are still greener than gas-powered cars over the vehicle's lifetime. And it is kind of hard to knowingly start down the slippery slope of protectionism...
Like I said, it gets complicated; you can twist yourself into knots over this stuff.
No comments:
Post a Comment