Background information: Public consultations on potential new measures to advance and defend Canada’s economic security interests

The Government of Canada is seeking stakeholder views on protecting and promoting Canada’s economic security.

Current situation in Canada

Trade is an integral part of the Canadian economy. It represents two-thirds of Canada’s GDP, while exports alone support nearly 3.3 million – or 1 in 6 – Canadian jobs.  As a trading nation, Canada depends on, and benefits from, a system of rules and institutions that provide certainty and stability for Canadian business in international trade and investment.

In the world today, supply chain disruptions, rising global protectionism and unfair trade practices threaten to undermine Canada’s access to open markets and the reliability of our supply chains, as well as our national security.  Left unaddressed, these challenges can impair Canada’s competitiveness, cost us jobs and damage our future economic prosperity.

Canada has an existing range of tools to protect and promote our economic security and prosperity, which include measures built into our existing trade and investment laws and frameworks, as well as policies that promote trade diversification, investment attraction, and support the competitiveness of our industries. The Government has identified in this consultation a range of areas where we could potentially build upon this toolkit.

The Government is also seeking stakeholder views on risks and threats to Canada’s economic security, potential gaps in Canada’s ability to protect against these risks and threats, and the likely impact of potential new approaches for Canadian importers, exporters, industry, and the public.

This consultation encompasses Canada’s whole economic security toolkit, as it may apply to a range of partners and sectors, to ensure Canada is ready to face a broad array of economic-related challenges. This consultation is separate from the consultation on potential policy responses to unfair Chinese trade practices in electric vehicles which concluded on August 1, 2024.

Canada’s economic security toolkit

Canada has many important and flexible tools and measures that can be used to defend its economic interests, such as:

• The Special Import Measures Act provides for anti-dumping or countervailing duties to be imposed after arm’s length investigations by the Canada Border Services Agency and Canadian International Trade Tribunal (CITT), generally in response to formal industry complaints. Duties may be imposed when imports are found to be (1) unfairly dumped (i.e., goods sold to importers at a price lower than in the country of export, or when goods are sold at unprofitable prices) or unfairly subsidized by a foreign government and are (2) causing injury or retardation or threatening to cause injury to the Canadian industry.
• The Export and Import Permits Act allows the government to include certain goods on the Import Control List (ICL) or the Export Control List (ECL) for various purposes, including for national security purposes, to assist with the implementation of other legislation (e.g., the Customs Tariff), or for trade monitoring purposes. Once a good is added to the ECL or ICL, a permit from the Minister of Foreign Affairs is necessary in order to export or import that good from or into Canada.
• Section 55 of the Customs Tariff provides for global safeguards to be applied to imports from all sources following an investigation by the CITT, when a surge of imports causes serious injury or threat thereof to the Canadian industry. In critical circumstances, provisional measures (e.g. surtax or tariff rate quota) can be imposed by the Government on the basis of a report by the Minister of Finance and must be followed by a CITT investigation to determine whether longer-term safeguards are warranted.
• Section 53 of the Customs Tariff provides authority for the Government to apply measures to enforce Canada’s rights under a trade agreement or respond to “acts, policies or practices […] that adversely affect, or lead directly or indirectly to adverse effects on, trade in goods or services of Canada.” Measures could also include imposing a surtax, a tariff rate quota or non-surtax responses, including the suspension of some or all rights under a trade agreement.
• The Canadian International Trade Tribunal Act (CITT Act) establishes the CITT and its various mandates as an arms-length, quasi-judicial tribunal operating in Canada’s trade system.  Aside from the CITT’s role in trade remedy and global safeguard inquiries noted above, Sections 18 and 19 of the CITT Act also allows the Government to direct the CITT to undertake inquiries and make recommendations on economic, trade, or tariff matters.
• The Investment Canada Act (ICA) allows the Government to review foreign investments of any size to ensure they are not harmful to Canada's national security.  The ICA also allows the federal government to review the most significant investments into Canada by non-Canadians to ensure they benefit Canada’s economy. A number of policy statements have also been released providing details on how the ICA may be applied to certain foreign investments.
• The Special Economic Measures Act allows the government to impose sanctions. Sanctions place restrictions on the activities permissible between Canadians and foreign states, individuals, or entities. They can encompass a wide variety of measures, including, but not limited to, financial restrictions, travel restrictions, arms embargos, export/import restrictions, shipping bans, and the suspension of technical assistance to a country. These may be imposed when an international organization of which Canada is a member calls on its members to take economic measures against a foreign state; a grave breach of international peace and security has occurred, gross and systematic human rights violations have been committed, or foreign public officials or their associates are involved in acts of significant corruption.
• The Security of Information Act establishes offenses in respect of the theft of trade secrets by persons operating at the direction of, for the benefit of or in association with a foreign economic entity.
• The National Security Guidelines for Research Partnerships integrate national security considerations into the development, evaluation, and funding of research partnerships. They are intended to better position researchers and federal granting agencies to identify and mitigate national security risks to research, including through a mandatory risk assessment process in the context of certain federal granting programmes.
• The Policy on Sensitive Technology Research and Affiliations of Concern prevents funding by the federal government of research in sensitive technology areas if there are affiliations with organizations connected to state security entities that could pose a risk to Canada’s national security.

Canada has also been working to modernize its existing tools in key areas:

• According to the Policy Statement on Ensuring Reciprocal Treatment for Canadian Businesses Abroad (2023), Canada will consider reciprocity as a key design element for new policies going forward, in order to ensure that our trading partners grant Canadian businesses the same access that their companies benefit from in Canada. This approach will be applied to a range of new measures, including but not limited to, government procurement, investment tax incentives, grants and contributions, technical barriers to trade, sanitary and phytosanitary measures, investment restrictions, and intellectual property requirements.
• Bill C-34 to modernize the national security review provisions of the Investment Canada Act received Royal Assent in March 2024 and certain new provisions will come into force on September 3, 2024. The amendments include, among other things, new authorities for the Minister of Innovation, Science and Industry to take certain actions (e.g., extend review, accept undertakings) that were previously under the purview of the Governor in Council. New notification requirements in sensitive sectors and new penalties will be set out as part of a regulation making process.
• In 2024, Canada introduced a system to collect and publish data on the countries in which steel imports are initially melted and poured to increase transparency in the steel supply chain and enable industry to track possible trends in real time. In addition, Canada completed public consultations in June 2024, to seek input regarding the potential collection and publication of country of smelt and cast information for select aluminum imports. 
• Since 2018, Canada has introduced a series of measures to strengthen its trade remedy system, including providing new tools to address unfairly traded goods where markets are distorted, strengthening enforcement and the ability to address circumvention, and allowing greater consideration of worker interests. Most recently, Budget 2024 announced that the government is taking steps to create a dedicated unit within the CBSA to monitor and update trade remedy measures annually, to ensure that duties applied reflect the market conditions, and better protect Canadian businesses from unfair trade practices.
• In July 2020, further to its commitment in the Canada-United States-Mexico Agreement (CUSMA) Labour Chapter, Canada became the second country in the world, after the U.S., to ban the importation of goods produced by forced labour, regardless of country origin. Since then, Budgets 2023 and 2024 have reiterated the federal government’s intention to introduce legislation in 2024 to help eradicate forced labour from Canadian supply chains and to strengthen the import ban on goods produced using forced labour.

Canada has also undertaken to cooperate with key partners on economic security and supply chain resilience:

• Canada endorsed the Joint Declaration Against Trade-Related Economic Coercion and Non-Market Policies and Practices with the U.S., UK, New Zealand, Japan and Australia in June 2023.
• Canada was a key player in the development of the standalone G7 Leaders’ Statement on Economic Resilience and Economic Security released in 2023 under Japan’s G7 presidency, and continued under Italy’s presidency.
• Canada joined with the U.S. in the Energy Transformation Task Force to accelerate cooperation on critical clean energy opportunities and to strengthen integrated Canada-U.S. supply chains.
• Canada signed a new agreement in May 2023 with South Korea for cooperation on critical mineral supply chains, clean energy transition, and energy security and launched a high-level economic security dialogue with South Korea in May 2023.

Enhancing Canada’s toolkit

Canada is exploring whether potential enhancements to this toolkit are needed to effectively respond to harmful economic practices in the evolving economic and geopolitical environment. In this context, Canada is seeking the views of stakeholders on the potential benefits and risks of the following potential measures:

• Suspension of benefits (non surtax): Explore options such as suspending non-tariff-related benefits under a free trade agreement in response to trade actions that harm Canada.
• Trade remedies: Consider enhanced trade remedies authorities (e.g., anti-circumvention and enforcement) that could further protect against unfairly dumped or subsidized imports that harm Canadian industry.
• Investigative Powers: Consider whether new forms of administrative or quasi-judicial investigations or reviews may be needed to achieve economic resilience objectives.
• Strengthening supply chains: Exploring potential policy measures (e.g. restricting eligibility to incentives or other trade and investment benefits) to strengthen Canada’s supply chains in relation to certain products, for instance in critical or strategic sectors, to limit the sourcing of these products from entities that pose risks related to Canada’s essential security interests.
• Expanding Canadian incentives and tax credits: Consider expanding incentives for targeted sectors to improve competitive standing (e.g. Canadian critical minerals projects).
• Trade controls: Ensure the export controls regime under the Export and Import Permits Act (R.S.C., 1985, c. E-19) continues to address risks to national security posed by exports of advanced dual-use technologies. Consider additional critical or strategic items to be added to the Export Control List or Import Control List, including where enhanced monitoring may be required.
• Export duties: Consider amended or additional authorities to impose export duties or restrictions on specified products in critical or strategic sectors in response to the trade actions of other countries or for Canada’s economic security (e.g. through amendments to the Special Economic Measures Act or the Export Act) or through the creation of new, targeted legislation to cover specific sectors such as critical minerals. Consider specific criteria related to when export duties may be required, or products to focus on to protect Canada’s economic security.
• Investing in critical minerals supply chain resilience: Consideration of financing options or measures to address price volatility and to support diversification of critical minerals supply chains, including through financing from federal Crown Corporations (e.g., Export Development Canada and the Business Development Bank of Canada), or through other mechanisms to support targeted Canadian direct investment domestically and abroad in strategic projects. Consideration of public-private strategic holdings of specific critical minerals and/or associated materials to bolster Canada’s economic and national security and prevent material shortages.