BYD electric vehicles at the port of Lianyungang, in Jiangsu province, China, on April 25.China Daily CDIC/Reuters
Guy Saint-Jacques served as Canada’s ambassador to China from 2012 to 2016.
The decision by the Canadian government to impose 100-per-cent tariffs on Chinese electric vehicles was to be expected. Because of its deep economic integration with the United States (and the possibility that Donald Trump will be the next U.S. president), Ottawa had no choice on Monday but to align with the American position by imposing such tariffs.
But we must recognize that this is an issue bigger than EVs. That’s why Ottawa also announced 25-per-cent tariffs on Chinese aluminum and steel. We have already seen how China has created a near-monopoly on solar power components, to name only one sector, and destroyed foreign competition.
For the past 40 years, and especially since it joined the WTO in 2001, China’s economic success has been based on exports supported when necessary by subsidies of various kinds. In 2015, President Xi Jinping enunciated the Made-in-China 2025 policy to not only reduce Chinese dependency on imports in 10 technological sectors, but also to become a net exporter of these technologies, EVs being one of them. The Chinese economic model encourages overcapacity as its provinces and local officials compete among themselves to create jobs and boost economic growth, with Beijing unable to fully co-ordinate economic development. And China still encourages the acquisition of foreign technology by all means, including theft.
China got a free ride for a long time by occasionally giving piecemeal concessions to foreigners and timely contracts to detract criticism. But China needs to recognize it would pay a price for not playing by the rules – such as giving large subsidies to manufacturers and very slowly removing barriers to allow foreign companies into the Chinese market, despite promises to open it after joining the WTO.
Beijing needs to learn it faces wide-ranging consequences; there have been few consequences so far as foreign governments have been reluctant to take China to the WTO when it did not follow the rules. (There are a number of cases that Canada should have pursued when restrictions were imposed on Canadian products after the arrest of Meng Wanzhou in 2018). As Mr. Xi is more preoccupied by national security, that is preserving the survival of the Communist Party, we should not expect rapid progress in adherence to the rules even if foreign investment in China has been dropping significantly in recent years.
In many ways, we are dealing with a government in Beijing that is immature and does not know how to act responsibly as a major power. Its fallback position has been to act as a bully and use coercive measures against countries that dare to confront it. The Canadian government knows it is not in a comfortable position: the United States remains by far our No. 1 export destination, despite the goals of the Indo-Pacific Strategy; the search for new markets in Asia is moving slowly, while our exports to China keep growing; and China remains an important part of the supply chain of many of our companies.
Foreign Minister Mélanie Joly is trying to rebuild some bridges with China and she should be commended for that, but progress will be limited as the chemistry between Prime Minister Justin Trudeau and Mr. Xi is very bad. Restoring a minimum of dialogue is important for our interests while continuing to press China to improve its human-rights record. We need to explain to them that not doing so and not playing by the rules will prevent China from becoming a great power.
So a goal for Canada (we could call it the level-playing-field policy) should be to work with other countries to force China to play by the rules and, in exchange, we would welcome their products more openly. This would also require an effort to revitalize the WTO so it can play its role more effectively.
In the meantime, it is too bad Canadian consumers cannot benefit from Chinese EVs that are well made and very affordable. As the transportation sector represents a large part of GHG emissions in Canada, getting more EVs on the market should be a priority. Let’s hope we can return to a situation where people can enjoy the benefits of (clean) globalization.