Once Canada poured tens of billions of dollars into electric-vehicle subsidies, it was inevitable that, one day, this country would build a tariff wall to keep out China’s EVs.
The Liberal government decided more than a year ago that Canada had to create its own version of the United States’ global trade policy, which means economic competition with China, especially in green technologies such as EVs.
So when Deputy Prime Minister Chrystia Freeland told reporters on Monday that Canada is still a defender of the rules-based global order, and that this country’s EV subsidies are nothing like China’s, there was a fair bit of illusion.
The truth is that geopolitics is now leading global economics and trade. It is true that Beijing has used trade rules to undercut free-trading principles, but no one can pretend Canada isn’t playing a part in a subsidy war.
Now, after obligatory consultations, Canada will follow the U.S. in imposing tariffs on Chinese EVs. Federal and provincial governments have committed up to $52.5-billion to EV subsidies, according to the Parliamentary Budget Officer, so it’s no wonder those governments don’t want those industries to lose out to Chinese competition.
That’s Canada’s economic policy now. But in theory, there’s another economic philosophy on offer in Ottawa. At least there is supposed to be.
Conservative Leader Pierre Poilievre has a double-digit lead in the polls, promising he’ll transform Canada’s economy if and when he gets into the prime minister’s chair. But Mr. Poilievre hasn’t said much about what he would do in this new era of global trade and economics.
Mr. Poilievre is by credo a free-market follower of Milton Friedman, the Chicago School economist who argued for governments to unilaterally drop tariffs and industrial subsidies.
How would Mr. Poilievre fit the economic principles that are at the core of his politics into the world of geopolitical subsidy wars?
We don’t really know.
On Monday, the Conservatives appeared to support tariffs and embraced Ms. Freeland’s argument that China is dumping cheap EVs onto the Canadian market.
“Our priority is to protect the jobs of Canadian workers. Canada should not allow the dumping of cheap Chinese products into our country that threaten Canadian manufacturing jobs,” said Kyle Seeback, the Conservative shadow trade minister, in a statement.
Of course, when there is a straight-up political question of Canadian jobs versus Beijing’s economic perfidy, it’s easy to support tariffs on Chinese goods.
But Mr. Poilievre’s Tories are not worried their base will scream about a spike in Tesla prices. It’s the Liberals who mandated that new cars must be electric by 2035 and who have to explain why they are keeping out cheaper EVs that would lower greenhouse-gas emissions. Opposition leaders don’t have to worry that Beijing will impose retaliatory tariffs.
But for the most part, on the topic of industrial subsidies and trade wars, Mr. Poilievre has been deliberately silent.
He has never said if he is for or against the massive EV subsidies. The Tories have complained about foreign workers setting up the plants, and sometimes used language that suggests that perhaps they don’t much like subsidizing corporations.
But when asked directly, Mr. Poilievre has declined to say.
The Conservative Leader’s own inclinations don’t seem too hard to guess. He has cited Mr. Friedman’s Capitalism and Freedom as a seminal influence, and the Nobel Prize-winning economist was particularly irritated by the tendency of politicians to interfere in markets with subsidies and tariffs to protect business and interests.
But there isn’t a world of rules-based trade out there to work with.
U.S. President Joe Biden put forward massive subsidies for green technologies and semiconductors to compete with China – which forced Canada to decide to copy the strategy or risk losing industry. And if Donald Trump wins the presidency again, U.S. policy will be more unpredictable, but no more committed to global free trade.
The Liberal government has more or less retooled its trade philosophy around the U.S. approach to the new world, though they don’t admit it. Ms. Freeland still cites a commitment to a global rules-based order but also her power to levy tariffs to protect a massive government-subsidized industrial strategy.
Perhaps Mr. Poilievre would stick to free-trading principles and ignore the threat that Canada will get clobbered in these trade wars. His silence so far suggests he wouldn’t be immune to the pressure to protect jobs and pour money into an industrial strategy.
Either way, it’s no small question anymore.