Volkswagen announced it plans to build a major plant for electric vehicle batteries in Canada because the federal government offered them large subsidies. Ottawa won’t say how much money they are putting into the plant.Jens Meyer/The Associated Press
Volkswagen has just chosen to build an electric vehicle battery plant in St. Thomas, Ont., because the federal government offered them large subsidies. How much money? Ottawa isn’t saying.
That is a big deal because we are no longer talking about a billion here or there. The Financial Times reported last week that Volkswagen was putting plans for a European battery plant on hold because it could get €10-billion in subsidies – $15-billion – to build a plant in North America.
Is that how much Ottawa is paying?
If the federal government has really chipped in that much, it is now subsidizing on a scale never seen in this country. But apparently, we won’t know the sum until more such commitments are made.
Ottawa won’t say how much money they are putting into the new Volkswagen plant yet because they are trying to lure other carmakers to build battery plants in Canada, and they don’t want to reveal just how much they are willing to offer.
When asked about the lack of disclosure at a news conference in Bridgewater, N.S., on Tuesday, Prime Minister Justin Trudeau told reporters that Volkswagen will make a full announcement in the future and he suggested “all that information will be there.” Yet an aide to Innovation Minister François-Philippe Champagne said the amount of the subsidy is “commercially sensitive” and will be kept confidential until talks with other companies are complete.
From a deal-making perspective, that makes sense. For accountability, it’s appalling.
Ottawa is seeking to compete with massive U.S. subsidies for green industry like electric-vehicle batteries. But that doesn’t mean the federal government should pay any sum for EV batteries, no matter how astronomical.
Perhaps Canada can spend on incentives in other industries or in technologies. But how can anyone tell if we have no idea how much we’re spending?
Sometimes enormous sums can feel meaningless, so let’s put it another way. If Ottawa really is paying $15-billion for a single battery plant, and hopes to do the same thing two more times, that would mean $45-billion over a decade. That’s roughly as much additional new money as the federal government put into health care in a recent agreement with the provinces.
Is that what Ottawa will do? Will it commit that kind of money to another battery plant? Should it? There hasn’t been much debate about it among politicians.
That’s not to say that there is no need for an industrial policy in Canada. We are no longer in a world of stable trade rules out. Geopolitics are shaping trade policies and economic decisions.
President Joe Biden has passed bills establishing hefty incentives to bring industrial investments to the U.S., to “reshore” advanced manufacturing from China, and to build a high-tech and cleantech industrial base for the future.
On Tuesday, Mr. Trudeau portrayed this as a moment of change when Canada can see economic opportunities, saying we are in “a time of anxiety around climate change, around shifting supply chains, around authoritarian governments using their resources political levers – but that makes it also a time of incredible opportunities for Canadians.”
That sounds ambitious. But the U.S. hammered out its industrial incentives in several pieces of legislation that passed through the Congress. Canada is negotiating battery-plant subsidies one by one, confidentially, as part of a larger industrial strategy that has not yet been announced.
Surely someone should do the math and show it to the public before the money is gone.
The hope behind the subsidies is that battery plants such as Volkswagen’s and another previously announced by Stellantis will anchor an electric-vehicle auto industry in Southwest Ontario, encouraging carmakers to assemble electric vehicles there, and in turn providing business for Canadian auto-parts manufacturers.
But surely it matters how many billions the federal government spends to subsidize an auto sector that contributes about $19-billion to Canada’s gross domestic product each year. Should it be 1 per cent, 10 per cent or 20 per cent?
Let’s go back to the moment that Mr. Trudeau says we are in: A window of opportunity to build Canada’s industry of the future. If that’s so, Canadians should assess the plan before the decisions have all been made – and without numbers, that’s impossible.