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Minister of Export Promotion, International Trade and Economic Development appearance before the Standing Committee on International Trade (CIIT) on the 2024 CIIT Study: Study on the Protection of Canada’s Manufacturing Sector from Chinese Imports, Including Electric Vehicles

October 21, 2024
Published: February 18, 2025

Table of Contents

Tab A - Overview material  

Tab B – Measures on Imports of Electric Vehicles and Other Goods from China 

Tab C – Other Related Issues

Tab D – Supplementary Material

  1. News Release (August 26): Canada Implementing Measures to Protect Canadian Workers and Key Economic Sectors from Unfair Chinese Trade Practices
  2. Notice of Intent to Impose Surtaxes on Chinese Steel and Aluminum in Response to Unfair Chinese Trade Practices

Meeting Scenario

Committee Context

First Round

Second Round

Committee Interests

In 2023-2024, the committee has focussed on the following:

Committee members' questions during previous committee meetings have focused on the following issues:

Annex – Full Text Of August 21, 2024, Motion

On Wednesday, August 21, 2024, it was agreed, “That given the risk of heavily subsidized Chinese made electric vehicles posed to over 600, 000 Canadian workers in the steel, aluminum, mining and auto manufacturing industries as well as risk to the $52.4 billion of taxpayers’ money, the Federal Government has announced corporate subsidies for the electric vehicle industry in Canada, the Committee begin a study of at least 5 meetings into the impact of tariffs on local industry and use of trade remedies to protect against Chinese electric vehicles, with the 5 meetings to commence immediately upon resumption of the Committee in September, 2024 and that the meetings consists of:

That the Committee request copies in both official languages of all submissions to the Federal Government’s public consultation which ran from July 2 to August 1, 2024, subject to necessary redactions due to commercial confidentiality and national security considerations, on protecting Canadian workers and electric vehicle supply chains from unfair Chinese trade practices, that the copies be sent to the Clerk for distribution to Committee members prior to the commencement of the study, that the Committee report its finding to the House.”

CIIT Study on the Protection of Canada’s Manufacturing Sector from Chinese Imports, Including Electric Vehicles - MINT Opening Remarks

Introduction

Merci madame la présidente, and good afternoon to you, the vice-chairs, and all the other members of the committee.

It’s a pleasure to be with you today to assist the committee in its important work, and an honour to speak to Canadians once again.

Ensuring a level playing field for Canada’s manufacturing sector and its workers, including our emerging electric vehicles (EV) sector and related supply chains, is a priority for me and for our government.

EV supply chains are at the centre of the global shift towards a zero-emission economy – this is a strategic sector and one that is critical to Canada and to Canadian workers.

Unfortunately, Canada’s EV sector and its workers face acute threats from unfair competition from China. The government had little option but to address this threat head on.

Global Shift Towards a Zero-Emission Economy

As you know, the Government of Canada is taking strong action to fight climate change while accelerating our path to a net-zero future.

Since 2015, we have invested over $120 billion in climate action and clean growth. By focusing on innovation and green jobs, and by working with like-minded countries, Canada will build a more resilient, sustainable, and competitive economy.

Canada has the raw materials, expertise and energy required to pursue these goals, and to help lead the global transition to a net-zero economy.

Government of Canda Investments in the EV sector

In support of this shift towards a zero-emission economy, the Government of Canada is working hard to attract investment in EV manufacturing and its related supply chains.

These efforts have already provided real returns, with major investments announced by sector leaders such as Stellantis, GM, Honda, Volkswagen, NextStar and Northvolt.

In fact, since 2020, manufacturers of EVs and goods in the EV supply chain have announced $44 billion worth of investments to expand Canada’s EV production capacity all along the supply chain, from critical mineral refinement to battery production to final vehicle assembly, which will play an important role in building Canada’s clean economy and securing long-term opportunities for workers in the sector.

The Government of Canada is also investing in this sector through incentives for people who buy EVs, including through the Incentives for Zero Emission Vehicles program and other programs.

These investments will provide generational opportunities for Canadian workers by promoting growth, anchoring supply chains, maintaining Canada’s key role in the integrated North American auto sector, and supporting the shift to a net-zero economy.

Chinese Actions Regarding the EV Sector

However, Canada’s competitiveness in EV supply chains is at serious risk of being undermined due to unfair competition from China.

Chinese manufacturers benefit from non-market policies and practices that have heavily tilted the playing field in China’s favour and led to significant overcapacity in its EV production.

China’s policies include pervasive subsidization, insufficient labour and environmental standards, and other measures that artificially lower production costs.

As a result, China’s global EV exports have grown exponentially from $4.7 billion in 2020 to $58.6 billion in 2023 – a 1,147% increase.

This rapid export growth has allowed China to gain a significant advantage in markets around the world, distorting global trade and preventing fair competition.

This is despite multilateral rules that are intended to constrain unfair non-market practices.

The multilateral trading system is feeling the pressure of increasingly unfair trading practices. These practices undermine fair competition, disrupt supply chains, and hurt not only our workers and our economies, but global trade and security more broadly.

This is a matter of concern across a range of economic sectors and affects all of us.    

The WTO’s current rules were not designed for challenges of this nature.

Recent Moves by Allies (including the U.S. and EU) in Response to Chinese Actions

Canada is not alone in responding to China’s non-market policies and practices.

Several other trading partners have taken measures to protect their industries from Chinese overcapacity. 

On September 27, the United States increased Section 301 tariffs on several goods imported from China, including tariffs of 100% on EVs, 25% on steel, aluminum, EV batteries, and critical minerals, and 50% on solar products.

On July 4, the European Union started to apply provisional duties ranging from 17.4% to 37.6% on Chinese EVs as a result of its countervailing duty investigation. On October 4, EU Member States voted to impose these duties on a definitive basis, with updated rates to be announced on October 30.

Canada must not become a destination to dump Chinese exports diverted from other markets.

Canada’s August 26 Announcement of Measures on Imports from China

During consultations in July, Canadian industry and workers confirmed that exceptional measures are required to address this extraordinary threat and defend our economic security.

That is why Canada announced on August 26 a series of exceptional measures on imports from China to protect its emerging EV sector and related supply chains.

These measures include:

  1. Implementing a 100% surtax on Chinese-made EVs effective October 1;
  2. Implementing a surtax of 25% on Chinese steel and aluminum effective October 22;
  3. Concluding on October 10 a 30-day consultation on potential surtaxes on imports of Chinese batteries and battery parts, semiconductors, solar products, and critical minerals; and,
  4. Ensuring that Chinese EVs and EV chargers are not eligible for Canada’s incentive programs.

With that said, Canada fully supports the rules-based multilateral system with the World Trade Organization (WTO) at its core. 

We firmly believe that strong multilateral rules are the best long-term approach to effectively address trade-distortive measures, and that the WTO has an essential role to play in ensuring a level playing field. 

Canada’s goal is to have even stronger international rules that better address policies and practices that are at odds with fair, open, market-based trade.

We will continue to work collectively through the WTO – and with like-minded partners through various groups including the Ottawa Group and Canada’s 2025 G7 Presidency, to explore ways to support fair competition, a level playing field for our businesses, and more open, sustainable and inclusive trade.

At the same time, Canada cannot ignore the harm caused and threat posed by China’s pervasive use of non-market policies and practices to the future viability of Canada’s critical sectors.

The Government of Canada is committed to levelling the playing field for Canadian workers, businesses and key sectors currently facing unfair competition during this period of significant transformation. We will always stand up for Canadian businesses and workers, and defend them from the harmful effects of unfair trade policies.

Standing Committee on International Trade (CIIT)

Mandate (www.ourcommons.ca/Committees/en/CIIT/About).

Standing Committee on International Trade – Membership

Liberal Party of Canada

Hon. Judy A. Sgro
Chair
Riding: Humber River-Black Creek, ON

Hon. Judy A. Sgro

Election to the house of commons

First Elected: 1999

Re-Elected: 2000, 2004, 2006, 2008, 2011, 2015, 2019, and 2021

Professional background

Municipal Politics: North York City Council (1987 – 1994); Toronto City Council (1994 – 1999); At the municipal level, Sgro focused on poverty and crime reduction.

Political and parliamentary roles

Committee membership

Points of interest to GAC

Ukraine: 

Taiwan:

Chandra Arya
Riding : Nepean, ON

Chandra Arya

Election To The House Of Commons

First Elected: 2015

Re-Elected: 2019 and 2021

Professional Background

Studies: Bachelor’s degree in engineering and a master’s in business administration.

Technology: Was an executive in the high-technology sector before entering politics.

Business: Served on the board of Invest Ottawa and as Chair of the Indo-Canada Ottawa Business Chamber.

Non-Profit: Served on the Unity Non-Profit Housing Corporation Ottawa Board and as Vice President of the Ottawa Community Immigrants Services Organization.

Political and parliamentary roles

Committee membership

Points of interest to GAC

Tariffs on Chinese Imports:

Canada-Ecuador FTA:

Mona Fortier
Riding: Ottawa-Vanier, ON

Mona Fortier

Election To The House Of Commons

First Elected: 2017

Re-Elected: 2019 and 2021

Professional Background

Studies: Bachelor's degree in Sociology and a master’s degree in business administration

Management/Business: Senior Director, Communications and Market Development at College La Cité (2011 - 2015); Senior Director, Strategic Marketing at College La Cité (2008 – 2011); Executive Director at Equinox Inc. (2005 - 2008)

Public Affairs: Vice-President at Solugik Public Affairs (2002 - 2005); Project Manager NBA Communications (1993 - 2002)

Political And Parliamentary Roles

Committee Membership

Points Of Interest To GAC

Wilson Miao
Riding : Richmond Centre, BC

Wilson Miao

Election to the House Of Commons

First Elected: 2021

Professional Background

Studies: Bachelor’s degree in business administration and international business

Business: Closing Sales Coordinator at Polygon Homes Ltd. (2014 – 2016); Director of Communications & Marketing at Richmond Sentinel (2018 – 2021); Investment Advisor Hoovest Financial Inc. (2021 – Present)

Health: Opulence Global Partner Lifestyle Advisor at Opulence Global (2011 – Present)

Committee Membership

Points Of Interest To GAC

Trade diversification:

Small and Medium Businesses:

Terry Sheehan
Riding: Sault Ste. Marie, ON

Terry Sheehan

Election To The House Of Commons

First elected: 2015

Re-elected: 2019 and 2021

Professional Background

Private & Public Sectors: Prior to entering politics, MP Sheehan had a career in the private and public sectors in business, community, and economic development.

Consultant: His last position prior to being elected as a Member of Parliament was as an employment and training consultant for the Ontario Ministry of Training, Colleges, and Universities

Political And Parliamentary Roles

Committee Membership

Points Of Interest To Gac

Critical Minerals:

Steel Industry:

Electric Vehicles:

Maninder Sidhu
Riding:  Brampton East, ON

Maninder Sidhu

Parliamentary Secretary to The Minister of International Trade, Export Promotion, Small Business And Economic Development

Election to the House Of Commons

First elected: 2019

Re-elected: 2021

Professional Background

International Trade: International Trade Specialist, Independent (2007 - 2019)

Political And Parliamentary Roles

Committee Membership

Points Of Interest to GAC

Protecting Canada’s EV Market:

Foreign Direct Investments:

Conservative Party of Canada

Ryan Williams
Riding: Bay Of Quinte, ON
Critic For International Trade, Pan-Canadian Trade and Competition

Ryan Williams

Election To The House Of Commons

First Elected: 2021

Professional Background

Studies: Bachelors in Commerce (Hotel and Food Administration, Hotel, Commerce, Business).

Municipal Politics: Elected City Councilor for the City of Belleville in 2018.

Tourism: Prior to being elected to the House of Commons, MP Williams was President and Former Board Member of Bay of Quinte Tourist Council for 10 years, and founded Bay of Quinte Living and QuinteVation.

Commerce: 6 years as the Director of the Belleville Chamber of Commerce.

Hotelier: Vice-President of Williams Hotel since 2004.

Political And Parliamentary Roles

Committee Membership

Points Of Interest To GAC

Tariffs on Chinese EVs :

Carbon Tax Provisions:

Critical Minerals and EVs:

Tony Baldinelli
Riding: Niagara Falls, ON 
Critic For Tourism

Tony Baldinelli

Election To The House Of Commons

First Elected: 2019

Re-Elected: 2021

Professional Background

Consultant: Senior Consultant at Hill & Knowlton (1997 – 2001)

Communication: Communications Manager at The Niagara Parks Commission (2001 – 2019)

Political And Parliamentary Roles

Committee Membership

Points Of Interest to GAC:

Tariffs on Chinese Imports (Steel Aluminum, and EVs):

Critical Minerals:

Matt Jeneroux
Riding: Cypress Hills-Grassands, SK  
Critic For Supply Chain Issues

Matt Jeneroux

Election To The House Of Commons

First Elected: 2015

Re-Elected: 2019 and 2021

Professional Background

Studies: Bachelor of Arts from the University of Alberta

Provincial Politics: MP of the Progressive Conservative Party at the Legislative Assembly of Alberta (2012 – 2015)

Public Service: Advisor, Strategic Policy and Planning at Health Canada (2008 – 2012)

Mental Health: Founder of the Hi Dad Foundation to raise awareness for the importance of men’s mental health for families (2022 – Present)

Political And Parliamentary Roles

Committee Membership

Points Of Interest to GAC

Supply chains: 

Asia-Pacific Region: Humanitarian Projects

Richard Martel
Riding : Chicoutimi-Le Fjord, QC  
Critic For Sport; Economic Development Agency Of Canada For the Regions Of Quebec

Richard Martel

Election To The House Of Commons

First Elected: 2018

Re-Elected: 2019 And 2021

Professional Background

Hockey: Served as head coach in the Quebec Major Junior Hockey League (QMJHL) (1993 – 2017)

Political And Parliamentary Roles

Committee Membership

Points Of Interest to GAC

Canada – U.S. and Mexico trade relations:

Dairy Industry:

Aluminum:

Bloc Québécois

Simon-Pierre Savard-Tremblay
Riding: Saint-Hyacinthe-Bagot, QC
Critic For International Trade, Aerospace And Cars

Simon-Pierre Savard-Tremblay

Trade

Election To The House Of Commons

First Elected: 2019

Re-Elected: 2021

Professional Background

Studies: Bachelor’s degree in political sciences, a master’s degree in Sociology, and a PhD in Sociology and development

Columnist: Columnist at Radio VM (2015 – 2019); Columnist at Le Mag (2017 – 2019); Columnist at Cogéco 106,9 Fm Mauricie (2016 – 2019); Columnist at La Vie Agricole (2017 – 2019)

Blogger: Blogger at Le Journal de Montréal (2016 – 2019)

Political And Parliamentary Roles

Committee Membership

Points Of Interest To GAC

Softwood Lumber:

CPTPP: Taiwan 

Investor-State Dispute Settlement (ISDS):

New Democratic Party of Canada

Richard Cannings
Riding: South Okanagan-West Kootenay, BC
Critic For Emergency Preparedness (Climate Change Resilience); Small Business and Tourism; International Trade
Deputy Critic: Innovation, Science, And Industry; Natural Resources

Richard Cannings

Critic for International Trade

Election To the House Of Commons

First Elected: 2015

Re-Elected: 2019 and 2021

Professional Background

Studies: Master`s degree in zoology from Memorial University of Newfoundland

Biologist: 17 years as a professor at the University of British Columbia, consulting biologist including work for the non-profit Bird Studies Canada, 8 years as co-chair on the Committee on the Status of Endangered Wildlife in Canada as, 11 years on B.C. Environmental Appeal Board and five on the B.C. Forest Appeals Commission, from 2006 to 2015 he was a board member of the Nature Conservancy of Canada, and authored or contribute to numerous books.

Political And Parliamentary Roles

Committee Membership

Points Of Interest to GAC
China’s Leadership in EV Manufacturing:

Canada-US Relations:

Investor-State Dispute Resolution (ISDS):

August 26 Announced Measures on Imports from China

Supplementary messages

Regarding China’s announced retaliation:

Background

On August 26, 2024, the Government of Canada publicly announced: (1) a 100% surtax on Chinese EVs effective October 1, 2024; (2) a 25% surtax on steel and aluminum imports from China, effective on October 15, 2024 (subsequently postponed to October 22), with public consultations until September 20 on the specific product coverage; (3) public consultations on future actions concerning other critical sectors, including batteries and battery parts, semiconductors, solar products and critical minerals, which concluded on October 10; and (4) the intention to remove Chinese EVs and EV chargers from eligibility for Canada’s  incentive programs, effective on October 1.

The announcement follows public consultations which ran from July 2 to August 1, 2024 on potential measures to protect Canada’s growing EV sector and related supply chains from unfair Chinese trade practices. Stakeholders in the automotive industry and its supply chain were highly supportive of a surtax, and highlighted the importance of aligning with the U.S. Some stakeholders requested expanding the scope to cover other goods related to the EV supply chain, including steel and aluminum. Others raised concerns over potential negative economic impacts, including impacts on prices and on Canadian business operations, as well as potential impacts on the pace of Canada’s adoption of EVs.

Canada’s measures are closely aligned with those of the United States. On September 13, the United States confirmed increases to Section 301 tariffs on several goods imported from China, including tariffs of 100% on EVs, 25% on steel, aluminum, batteries, battery parts, and critical minerals, and 50% on solar products and semiconductors. The U.S.’s tariff increases on EVs, steel and aluminum, EV batteries, battery parts, solar products, and certain critical minerals came into effect on September 27. Following Canada’s announcement, Minister Ng met with USTR Ambassador Tai to discuss Canada’s measures which the U.S. applauded. Ambassador Tai noted that the U.S. shares Canada’s concerns and looks forward to future cooperation to promote North American jobs, investment and prosperity, and to defend its workers from unfair, non-market actions.

China has expressed its disapproval of Canada’s announced measures with officials and publicly. On September 3, China announced a series of retaliatory measures in response to Canada’s August 26 announcement. On September 6, China requested WTO dispute settlement consultations on Canada’s announced surtaxes on EVs, steel and aluminium. On September 9, China initiated an anti-dumping investigation on Canadian exports of canola seed, and on September 14, China initiated an anti-dumping investigation on Canadian exports of halogenated butyl rubber. On September 26, China announced the start an "anti-discrimination investigation" under its Foreign Trade Law against Canada’s measures.

Electric Vehicles (EVs)

Supplementary Messages

If asked about the scope of vehicles subject to the EV surtax

If asked whether Canada will publish a report on the findings of the EV consultation and its internal analysis, similar to the U.S. and EU.

If asked how long the surtax would be in force/when will it be reviewed

If asked about concerns with Chinese EV Investment in Mexico

Supporting Facts And Figures

Background

Driven in large part by state intervention including pervasive subsidization, Chinese automakers have significantly expanded production, leading to growing overcapacity and causing Chinese EV producers to aggressively pursue export markets. Additionally, Chinese EV producers, notably BYD, have recently announced plans to establish assembly plants abroad, including in Mexico.

The U.S. has adopted measures to restrict imports of Chinese EVs, including Section 301 tariffs on vehicles imported from China in place since 2018, and restrictions on eligibility for the US$7,500 Clean Vehicle Credit (CVC), a tax credit to consumers who purchase an eligible vehicle. China has retaliated on the Section 301 tariffs and has initiated WTO disputes against the U.S. on both the Section 301 tariffs and the CVC. On September 13, 2024, the U.S. confirmed increases to Section 301 tariffs on US$18 billion worth of imports from China in “strategic sectors”, including 100% for EVs, which entered into force on September 27.

On July 4, the European Union started to apply provisional duties ranging from 17.4% to 37.6% on Chinese EVs as a result of its countervailing duty investigation. On October 4, EU Member States voted to impose these duties on a definitive basis, with updated rates to be announced on October 30. (See EU Measures on Chinese EVs brief.)

Canada’s EV consultations (July 2 to August 1), sought perspectives on potential policy responses to China’s unfair trade practices in EVs, including a surtax under section 53 of the Customs Tariff, adjustments to Canada’s EV-related incentive programs, and possible investment measures. It also sought comments on cyber and data security issues in connected vehicles.

Stakeholders representing Canada’s automotive industry have expressed concerns about the potential future influx of Chinese EVs, Chinese automotive investment in Mexico, and potential trade diversion resulting from recent actions taken by the U.S. and EU. Both the Automotive Parts Manufacturers’ Association (APMA) and the Canadian Vehicle Manufacturers’ Association (CVMA) called for Canada to align its policies with the U.S., including its Section 301 tariff of 100% on Chinese EVs.

On August 26, Canada announced its intent to apply a 100% surtax on Chinese EVs, effective on October 1, 2024. The surtax applies to electric and hybrid passenger automobiles, trucks, buses, and delivery vans, and is in addition to Canada’s existing 6.1% MFN tariff on Chinese vehicles.

Neither U.S. Section 301 tariffs nor Canada’s surtaxes apply to EVs assembled by Chinese producers in other countries, including Mexico. Major Chinese EV producers (e.g. BYD, MG Motor and Chery) are considering potential investments in new production facilities in Mexico.

On May 23, 2024, at the fourth CUSMA FTC meeting in Phoenix, Canada, the U.S. and Mexico agreed to “jointly expand their collaboration on issues related to non-market policies and practices of other countries, which undermine the Agreement and harm U.S., Canadian, and Mexican workers, including in the automotive and other sectors.”

Steel and Aluminum

Supplementary Messages 

*** Should only include information which can be released to the public***

Supporting Facts And Figures 

Background 

On August 26, Canada announced an intent to apply a 25% surtax on steel and aluminum products from China, effective October 15. Consultations are ongoing until September 20 on the scope of the final measure. The final list of goods subject to the surtaxes will be announced by October 1, 2024. The surtaxes will not apply to Chinese goods that are in transit to Canada on the day on which these surtaxes come into force. 

Despite softening global demand, China has increased its steelmaking capacity by 18.6 million metric tonnes (more than Canada’s total production capacity) since 2018, making it the world’s largest steelmaker with over 1 billion metric tonnes produced in 2023, and similarly, China’s primary aluminum capacity has grown from 11% of global production share to 59% over the last two decades, with the government investing up to $70 billion between 2013-2017 alone, according to the OECD.

Consultation on Batteries, Battery Parts, Semiconductors, Solar Products, and Critical Minerals

Supplementary Messages

Responsive - If asked for details about measures considered or next steps:

Background

The Government is committed to a net-zero future and to building the necessary industries to make this transition, with announced investments of C$160 billion in critical sectors that are essential to making this transition. These investments and Canada’s net-zero transition are at risk of being undermined by China’s use of a broad range of non-market policies and practices that result in overcapacity and artificially lower production costs. Since 2023, China has imposed export controls on critical minerals in which it dominates production that are essential to the net-zero transition including graphite, germanium, gallium and antimony, and is expected to launch public consultations to impose similar restrictions on tungsten.

As part of recent public consultations on potential policy responses to unfair Chinese trade practices in the electric vehicles (EV) sector, stakeholders shared concerns about unfair competition from China, including but not limited to, pervasive subsidization, lax and unenforced labour and environmental standards, and other measures in sectors essential to the net-zero transition. As the threats posed by these Chinese policies and practices require the consideration of exceptional measures, on September 10, the government launched a 30-day consultation period on potential surtaxes under section 53 of the Customs Tariff to defend Canada’s workers and investments in critical sectors from China’s unfair trade policies and practices, and to prevent trade diversion resulting from recent actions taken by Canadian trading partners. The consultation closed on October 10. Officials are currently assessing next steps in light of comments received.

Supporting Facts And Figures

In 2023, Canada imported from China:

Incentives for Zero-Emission Vehicles (ZEVs) and ZEV Infrastructure

Supplementary Messages

Background

ZEV Programs

The Government of Canada is taking a comprehensive approach to support the transition to zero-emission vehicles (ZEVs), in support of its ambitious ZEV sales targets, through programs for purchase incentives for EVs and to support investment in charging stations.

The Incentives for Zero-Emission Vehicles (iZEV) program provides purchase incentives of up to $5,000 for eligible light-duty zero-emission vehicles, and is funded until March 31, 2025, or until the allocated $1.7 billion in funding is exhausted.

The Incentives for Medium and Heavy Duty Zero Emission Vehicles (iMHZEV) program includes $547.5 million in funding to provide purchase incentives of up to $200,000 for eligible vehicles, to encourage Canadian businesses and organizations to adopt medium- and heavy-duty zero-emission vehicles, and is funded until March 31, 2026.

The Zero Emission Vehicle Infrastructure Program (ZEVIP) program provides funding to support Canada’s goal of installing a network of 84,500 ZEV charging stations by 2029, with total funding of $630 million managed by Natural Resources Canada.

Comparison to U.S. Clean Vehicle Credit (CVC)

As part of the Inflation Reduction Act (IRA), the U.S. CVC provides a tax credit of up to US$7,500 to taxpayers who purchase an eligible vehicle. Only EVs assembled in North America and meeting sourcing requirements pertaining to critical minerals and battery components are eligible for the CVC.

Unlike the U.S. CVC, Canada’s ZEV programs previously did not condition eligibility on the basis of country of assembly. ZEVs of any country were eligible for Canada’s programs. This concerned Canadian automotive stakeholders, because it provided taxpayer-funded benefits to vehicles made in jurisdictions that use non-market practices and policies which distort markets and undermine Canadian economic security, including pervasive subsidization and lack of rigorous environmental and labour standards. The recent changes help to address these concerns.

Canadian Policy Responses

On August 26, Canada announced measures to protect Canadian workers and key economic sectors from unfair Chinese trade practices. These measures included changes to the iZEV, iMHZEV and ZEVIP programs, effective October 1, 2024, to limit eligibility to products made in Canada, or in countries which have free trade agreements with Canada. The changes to the iZEV and iMHZEV programs only impact current imports from China, and they ensure that the benefits they provide do not undermine the effects of Canada’s announced EV surtax. Impacts of the changes to the ZEVIP program will be limited, as most EV charger imports into Canada are from FTA partner countries.

U.S.  Section 301 Tariffs on Imports from China

Supplementary Messages

If asked about the impact of U.S. Section 301 tariffs on Canada

If asked about the risk of diversion of Chinese goods 

Background

On September 13, the U.S. government confirmed that it would increase its existing Section 301 tariffs on a range of products from China in strategic sectors, which account for US$18 billion worth of imports from China”. The tariff increases came into effect on September 27 (unless otherwise noted below) on the following products:  

On September 19, the U.S. proposed to increase Section 301 tariffs to 25% on certain tungsten products and to 50% on wafers and polysilicon.

The U.S. decision to increase tariffs on these products followed the completion of a four-year statutory review of the Section 301 tariffs first imposed by former President Trump in 2018, which concluded that China had not eliminated many of its unfair technology-transfer related practices that triggered the original measures. The review also concluded the U.S. would maintain its current Section 301 tariffs, which apply to US$300 billion worth of imports from China.

The immediate impact of the new tariffs on U.S. imports from China is expected to be minimal in most sectors, as the U.S. does not import large volumes from China for most goods, in part because of the existing Section 301 tariffs. 

Impact on Canada

As with the current U.S. Section 301 tariffs on Chinese goods, the new U.S. Section 301 tariffs apply only to goods produced in China. The tariffs do not directly affect goods that have been substantially transformed in Canada or third countries.

Higher U.S. tariffs increase the risk of the diversion of Chinese goods into other markets including Canada and could lead to U.S. concerns about the potential for transshipment via third countries. Canada has taken measures that will help prevent transhipment, including Section 53 tariffs on similar goods, legislative and regulatory amendments to modernize and enhance the effectiveness of anti-circumvention measures and the trade remedy system, as well as increased funding to bolster trade investigations and enforcement.

EU Trade Remedies Investigation on Chinese Electric Vehicles (EVs) 

Supplementary Messages 

If asked why Canada did not initiate a trade remedies investigation, similar to the EU approach

Background 

In response to a surge in EV imports from China, in October 2023 the EU Commission self-initiated a countervailing duty (CVD) investigation into imports of EVs from China. The goal of the investigation was to determine the extent to which EVs imported from China benefit from subsidies and cause, or threaten to cause, economic injury to EU producers.

On July 4, 2024, the EU made a preliminary determination that imports of EVs from China were both unfairly subsidized and injurious to the EU’s domestic industry. The EU imposed provisional countervailing duties of 17.0% on imports from BYD Group, 19.9% on Geely Group, 37.6% SAIC Group, 20.8% on other cooperating producers, and 37.6% on all other producers, starting on the date of the preliminary determination. On August 20, 2024, the EU made slight adjustments to the duty rates (less than 1%) and announced that imports from Tesla’s Chinese production facility would be subject to a 9% provisional countervailing duty.

While China has sought to engage the EU in discussions to address the issue, a resolution is unlikely. The EU is expected to make a final determination on October 30, 2024. While China has requested WTO dispute settlement consultations in respect of the preliminary EU determination, it is more likely that China would seek to advance a dispute following the final determination.

Canada’s Role in The Multilateral Trading System

Top Line Messages

Supporting Facts And Figures

Background

Canada remains firmly committed to the position that multilateral rules grounded in a well-functioning multilateral institution are the ideal way to address trade-related challenges. Canada has been contributing to the development of multilateral trade rules since the 1940s – and we will continue to do so.

The World Trade Organization (WTO) has helped support the global economy, including Canada’s prosperity, by establishing a transparent and predictable global trading environment based on strong, enforceable and transparent rules.

However, many WTO members, including Canada recognize that some of the existing rules were not designed for the challenges of the current economic environment. In particular, the system has felt the pressure of increasingly unfair trading practices, as well as broader challenges posed by increasing subsidization of industrial sectors by many members and challenges for developing members seeking to industrialize.

In the face of these challenges, Canada is convinced that strong multilateral rules are the best long-term approach to effectively address trade-distortive measures, and the WTO has an essential role to play in ensuring a level playing field in the long term.

Canada continues to play an active role in the WTO reform agenda with a focus on safeguarding fundamental aspects of the system, implementing negotiated outcomes, and creating the space for responding to contemporary issues. For example, through its leadership of the Ottawa Group, Canada and a group of 13 likeminded WTO members are working to advance discussions on how to strengthen, modernize, and reform the WTO. Canada also plays an active role in WTO dispute settlement reform, recognizing the importance of a functioning mechanism to enforce existing and any new rules.

With regard to the core issues of concern, Canada is intensifying its efforts to promote discussions at the WTO on trade and industrial policy, with a view to developing a better understanding of the challenges and where the rules may not be adequate.

Canada will also leverage various mechanisms and relationships, including Canada’s 2025 G7 Presidency, to deepen our understanding, identify gaps, exchange information and consider pragmatic and creative ideas that can contribute to future rule-making.

Bilateral Relations With China

Supplementary Messages

Foreign interference

Ukraine

South China Sea

Human rights

Canada-China Commercial Relations

Supplementary Messages 

Supporting Facts And Figures 

Background 

Market access issues, Beef and Pet Food: China’s continued ban on Canadian beef and heat-treated pet food containing poultry ingredients are major concerns for our industry.

Canada has raised these issues as Specific Trade Concerns at recent meetings of the WTO Committee on Sanitary and Phytosanitary Measures and will continue to do so.

In late March, Canadian officials traveled to Beijing for in-person technical meetings between the Canadian Food Inspection Agency and the General Administration of China Customs, however no further progress was made. Canadian officials also held a virtual meeting of the Canada-China Economic Partnership Working Group at which it continued to press China to restore trade of its beef and pet food containing poultry products.

The Joint Economic and Trade Commission (JETC): The JETC is an annual Deputy Minister level consultation mechanism for the promotion of trade and investment between Canada and China. By focussing on trade policy and the promotion of priority sectors, it allows senior officials on both sides to review the commercial relationship and seek opportunities to advance two-way trade. The last JETC was hosted in 2017, in Beijing.

Canada-China FIPA: Effective October 1, 2014, the Canada-China Promotion and Reciprocal Protection of Investments Agreement (FIPA) outlines a 31-year legal commitment to promote and protect foreign direct investment in each respective country.

WTO: China is one of the three “major economies” at the WTO, together with the U.S. and European Union. China and Canada enjoy a positive working relationship at the WTO, and China’s mission to the WTO enjoys a margin of autonomy from Beijing on certain issues that permits constructive engagement. In Fall 2023, President Xi and other high-level CCP officials engaged in their first study session on WTO reform. China’s WTO priorities include progress on dispute settlement, and outcomes on development, including food insecurity and climate change, environment, and the Investment Facilitation for Development Agreement (where it has shown considerable leadership).

Forced Labour

Supplementary messages

Update

At the August 21, 2024, CIIT meeting, where members discussed a request to undertake a study on the Protection of Canada’s Manufacturing Sector from Chinese Imports, Including Electric Vehicles (EVs), the issue of forced labour was raised briefly by a member of the Conservative Party of Canada (CPC), Mr. Garnett Genuis.

Supporting Facts and Figures

15. Canadian EV Supply Chains  

Supplementary Messages 

Update 

N/A

Supporting Facts And Figures 

Background 

U.S. Investigation into Connected Vehicles

Top Line Messages

Supporting Facts and Figures

Background

In March 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) released an advanced notice of proposed rulemaking on connected vehicles (CVs) given the U.S.’ concerns over information and communications technology and services that submit data to or are designed by countries of concern.

In July 2024, the White House and State Department convened officials from Australia, Canada, European Union, Germany, India, Japan, Republic of Korea, Spain, the United Kingdom, and other partner nations to discuss CVs with the aim of coordinating approaches. Participating delegations highlighted the work that they are doing in their jurisdictions to develop cyber policies, strategies and regulations to address the risks associated with CVs. Canada was represented by GAC, ISED, Public Safety, and Transport Canada.

On September 23, 2024, BIS published its notice of proposed rulemaking (NPRM) which would prohibit the sale or import of CVs integrating specific pieces of hardware and software, or those components sold separately, made by entities in, or controlled by, the People’s Republic of China or Russia. This includes vehicles that incorporate vehicle connectivity system hardware or software and automated driving system software, even if the vehicle was made in the United States. The prohibitions for software would take effect for Model Year 2027 and the prohibitions on hardware would take effect for Model Year 2030, or January 1, 2029, for units without a model year. There is a 30 day public comment period.

U.S. restrictions on the use of Chinese or Russian software and hardware could have impacts on our integrated supply chains, given that failure to comply could bar vehicles made in Canada from being sold in the U.S. Given that the majority of vehicles built in Canada are exported to the U.S., it is expected that all vehicles built in Canada will comply with the U.S. rules. Canada would therefore need to decide whether it would consider similar measures for vehicles produced outside of Canada and then imported into the country.

Atip Protected Background

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Consultations on Measures Related to Economic Security 

Supplementary Messages

Supporting Facts And Figures

Background

Canada depends on a system of rules and institutions that provide certainty and stability for international trade and investment. The Government is seeking stakeholder views on potentially strengthening measures to advance and defend Canada’s economic security and supply chain resilience. This comes at a time when Canada and likeminded partners are increasingly focussed on advancing their industrial competitiveness while protecting against economic threats, in the context of rising geostrategic competition, critical supply chain vulnerabilities, and the increasing prevalence of protectionism and unfair trading practices.

Canada already has a range of tools in place that serve to respond to foreign trade actions, policies, and programs that support the strengthening of our supply chains, and measures to defend national security. These tools include trade remedies, the Investment Canada Act, Export and Import Permit Act, provisions within the Customs Tariff Act.

Canada has worked to modernize its existing mechanisms in these key areas. This consultation sought views on whether further enhancements to Canada’s current toolkit are needed to effectively respond to harmful economic practices in the evolving economic and geopolitical environment. Additionally, Canada sought the views of stakeholders on the potential benefits and risks of additional potential measures such as: suspension of benefits (non-surtax), trade remedies, investigative powers, strengthening supply chains, expanding Canadian incentives and tax credits, trade controls, export duties, and investing in critical minerals supply chain resilience.

CUSMA implementation

Supplementary Messages 

Update 

On August 30, 2024, the United States requested consultations under CUSMA Chapter 31 (Dispute Settlement) regarding Canada’s Digital Services Tax and the first round was held in Ottawa on October 16 and 17.

Supporting Facts

Background 

Since CUSMA entered into force on July 1, 2020, the Parties have focused on the implementation of the Agreement. Canada is on track to meet all of its commitments in the agreed-upon timelines and, along with the United States, continues to encourage Mexico to do the same, particularly on the new obligations it has taken with regards to labour. There have been seven state-to-state dispute settlement cases initiated under the CUSMA, four of which remain in progress: the United States’ interpretation of the rules of origin for core parts in the automotive sector (panel decisions adopted but has yet to be implemented by the United States); Mexico’s measures concerning genetically engineered products; Mexico’s measures in the electricity sector; and Canada’s Digital Services Tax. The closed cases are on solar products and dairy tariff rate quotas (2 cases). In addition, Canada is advancing various softwood lumber related cases through the binational panel process under both CUSMA Chapter 10 (Trade Remedies) and NAFTA Chapter 19 (Review and Dispute Settlement in Antidumping/Countervailing Duty Matters). The CUSMA Free Trade Commission is the main Ministerial body responsible for overseeing the implementation and overall operation of the Agreement, including the 25 trilateral subsidiary bodies.

CUSMA 2026 Joint Review 

Supplementary Messages 

Responsive – U.S. position

Responsive – Mechanics of the CUSMA joint review process

Responsive – U.S. requesting consultations on DST Act

Update 

On August 30, 2024, the United States requested consultations under CUSMA Chapter 31 (Dispute Settlement) regarding Canada’s Digital Services Tax, and the first round was held in Ottawa on October 16 and 17.

Supporting Facts and Figures 

Background 

Article 34.7 (Review and Term Extension) is designed to ensure that the CUSMA Parties have an opportunity, starting in 2026, to review the operation of the Agreement, review recommendations submitted by a Party, and trilaterally decide on any appropriate actions. Parties are also given the opportunity to confirm whether they wish to extend the term of the Agreement for a new 16-year period.

While the obligation is to review – and not necessarily renegotiate – the Agreement, Canada should not assume that either the United States or Mexico will agree to extend CUSMA in 2026 and is closely watching discussions on CUSMA during the ongoing 2024 election campaign in the United States.

USTR officials have, in recent public statements, set out a broad perspective on the joint review – noting that it could cover issues such as the challenges posed by China, including related to autos and electric vehicles, as well as their concerns with the dispute settlement functions of the CUSMA. 

Mexico’s starting position regarding the joint review appears to be well aligned with Canada’s in terms of seeking to keep the review as narrow and targeted as possible, although they have expressed an openness to taking on new issues, such as rules for zero-emission vehicles, that were not prominent when the CUSMA was first negotiated.

Canada’s preferred scenario would be to extend the term of the Agreement as soon as possible in order to demonstrate the Parties’ commitment and provide greater certainty and predictability to businesses and the investment community. Canada will also seek to use the review to advance our shared interests in furthering North American economic integration and security.

Canadian officials are preparing for a range of potential scenarios for the 2026 joint review. As part of these preparatory efforts, officials are informally consulting domestic partners (e.g. provincial and territorial trade representatives) and targeted stakeholders (e.g. businesses and business associations). In addition, public consultations were launched via a Canada Gazette notice on August 17 and will close on October 31, 2024. These CUSMA consultations will help inform Canada’s preparations for the joint review in 2026 and other efforts to ensure the effective operation of the Agreement, including under Canada’s chairing of the CUSMA Free Trade Commission in 2025.

Canada implementing measures to protect Canadian workers and key economic sectors from unfair Chinese trade practices

The August 26 news release can be found on the Canada implementing measures to protect Canadian workers and key economic sectors from unfair Chinese trade practices page.

Notice of intent to impose surtaxes on Chinese steel and aluminum in response to unfair Chinese trade practices

Background

The government recently held consultations on potential policy responses to unfair Chinese trade practices in the electric vehicles (EVs) sector.

During this process, stakeholders shared concerns about unfair competition from China, including pervasive subsidization, and lack of rigorous labour and environmental standards in other sectors essential to the net-zero transition, including steel and aluminum. They indicated that Chinese producers that benefit from unfair, non-market acts, policies and practices are jeopardizing investments for producers around the world, including in Canada, thereby threatening workers and businesses in those sectors, and undermining Canada's long term economic security.

In the steel and aluminum sectors, Canada, likeminded trading partners, and the Organisation for Economic Cooperation and Development (OECD) have long noted concerns with Chinese structural overcapacity and impacts on global trade. China is the world's largest steelmaker, producing over 1 billion metric tonnes in 2023 (54 per cent of global production). Despite softening global demand, China has increased its capacity by 18.6 million metric tonnes (more than Canada's total production capacity) since 2018.

Similarly, China's primary aluminum capacity has grown from 11 per cent of global production share to 59 per cent over the last two decades, with the Chinese government investing up to $70 billion between 2013-2017 alone, according to the OECD. The significant subsidization and other non- market policies and practices by the Chinese government in these sectors, often utilizing higher-carbon production technology, have contributed to persistent, non-market structural overcapacity, affecting the long-term economic viability of market-oriented Canadian firms.

Key likeminded trading partners such as the United States and Mexico have identified similar concerns with Chinese policies and practices and overcapacity in the steel and aluminum sectors. Most notably, on May 14, 2024, the United States announced an increase in its Section 301 tariffs on a range of products imported from China, including steel and aluminum.

Scope of Surtaxes

In response to the exceptional threats posed by Chinese practices, the federal government intends to impose a 25 per cent surtax on imports of steel and aluminum products from China under section 53 of the Customs Tariff to protect Canada's workers and investments in these sectors from China's unfair trade policies and to prevent trade diversion resulting from recent actions taken by Canadian trading partners.

The initial list of goods subject to surtaxes is in Annex 1 below. These surtaxes will apply to goods originating from China, which shall be considered as those goods eligible to be marked as a good of China in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (Non-CUSMA Countries) Regulations.

The final list of goods subject to the surtaxes will be announced by October 1, 2024, with the surtaxes taking effect on October 15, 2024. The surtaxes will not apply to Chinese goods that are in transit to Canada on the day on which these surtaxes come into force.

It is the government's intention that the surtaxes will be reviewed within a period of one year from implementation and could be extended for a further period of time and supplemented by additional measures, as appropriate.

Contact Us

Written comments should be provided no later than September 20, 2024. Submissions, at a minimum, should include the following information:

  1. Company/organization name, address, telephone number, and contact
  2. The relevant eight-digit tariff item(s) and description of the goods of particular interest.
  3. Reasons for the expressed support for, or concern with, the proposed surtaxes, including detailed information substantiating any expected beneficial or adverse impact.
  4. Indication of whether any information provided is commercially

Email your comments and feedback to tariff-tarif@fin.gc.ca, including "Steel and aluminum surtaxes" in the subject line.

Comments and feedback may also be sent by mail to: International Trade Policy Division (Steel and Aluminum Surtaxes)

Department of Finance
90 Elgin Street, 14th Floor
Ottawa, Ontario
K1A 0G5

Privacy

In order to respect privacy and confidentiality, when providing your submission please advise whether you:

Information received throughout this submission process is subject to the Access to Information Act and the Privacy Act. Should you express an intention that your submission, or any portions thereof, be considered confidential, the Department of Finance Canada will make all reasonable efforts to protect this information.

Annex  1

Annex 1 can be found on the Final list of steel and aluminum products from China that will be subject to a 25 per cent surtax page.

If asked how the government’s recent imposition of surtaxes on electric vehicles from China will impact the government’s zero emission vehicles sales targets

Background

The government has set ambitious zero-emission vehicle (ZEV) sales targets of at least 20 per cent of new light-duty vehicles sales by 2026, 60 per cent by 2030, and 100 per cent by 2035, as well as medium- and heavy-duty ZEV sales target of 35 per cent by 2030 and 100 per cent by 2040.

U.S. duties on Quebec’s softwood lumber exports

Talking Points:

Background:

In 2023, Quebec accounted for 25.8% of Canada’s softwood lumber production and for 20.4% of Canada’s softwood lumber exports to the United States (by volume). The value of Quebec’s softwood lumber exports to the United States in 2023 was $1.38 billion. Since 2017, exports of softwood lumber from Quebec (and most other provinces) have been subject to U.S. countervailing and anti-dumping duties. The current combined duty rate on Quebec’s softwood lumber exports is 14.4%. The impact of the U.S. duties as well as other challenges facing the Canadian forestry sector (e.g. fires, fibre shortages, low lumber prices) have led some Quebec producers to curtail softwood lumber production in recent months.

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