Opinion: Canada must look beyond electric vehicle tariffs and force China to play by global trade rules

Guy Saint-Jacques was Canada's ambassador to China from 2012 to 2016.

The Canadian government’s decision to impose 100% tariffs on Chinese electric vehicles was predictable. Given its deep economic integration with the United States (and the possibility that Donald Trump will be the next president of the United States), Ottawa had no choice but to align itself with the American position on Monday by imposing such tariffs.

But it must be acknowledged that this problem goes far beyond electric vehicles. That is why Ottawa has also announced 25% tariffs on Chinese aluminum and steel. We have already seen how China has created a near monopoly on solar energy components, to name just one sector, and destroyed foreign competition.

For 40 years, and especially since joining the WTO in 2001, China’s economic success has been based on exports supported, if necessary, by subsidies of all kinds. In 2015, President Xi Jinping outlined the “Made in China 2025” policy aimed not only at reducing China’s reliance on imports in ten technology sectors, but also at becoming a net exporter of those technologies, electric vehicles being one of them. China’s economic model encourages overcapacity, as provinces and local officials compete to create jobs and spur economic growth, with Beijing unable to fully coordinate economic development. And China continues to encourage the acquisition of foreign technology by any means, including theft.

China has long enjoyed preferential treatment, occasionally granting partial concessions to foreigners and concluding timely contracts to deflect criticism. But it must recognize that it will have to pay a price for not playing by the rules, including providing large subsidies to manufacturers and being very slow to remove barriers that prevent foreign companies from entering the Chinese market, despite its promises of openness after joining the WTO.

Beijing needs to understand that it faces broad consequences. So far, consequences have been rare, as foreign governments have been reluctant to take China to the WTO when it breaks the rules. (There are a number of cases that Canada should have pursued when restrictions were imposed on Canadian products after Meng Wanzhou’s arrest in 2018.) Given that Mr. Xi is more concerned with national security—that is, preserving the survival of the Communist Party—we should not expect rapid progress on compliance, even though foreign investment in China has declined significantly in recent years.

In many ways, we are dealing with a Beijing government that is immature and unsure how to act responsibly as a great power. Its fallback position is to act like a bully and use coercive measures against countries that dare to confront it. The Canadian government knows that it is not in a comfortable position: the United States remains by far our largest export destination, despite the objectives of the Indo-Pacific strategy; the search for new markets in Asia is slow to progress, while our exports to China continue to grow; and China remains an important part of the supply chain for many of our companies.

Foreign Affairs Minister Joly is trying to rebuild ties with China and she should be commended for that, but progress will be limited because the understanding between Prime Minister Justin Trudeau and Mr. Xi is very poor. It is important to restore a minimum of dialogue in our interest while continuing to put pressure on China to improve its human rights record. We must explain to them that if we do not do this and do not play by the rules, China will not become a great power.

One of Canada's goals (one might call it a level playing field policy) should therefore be to work with other countries to force China to play by the rules, and in return we would welcome its products more openly. This would also require an effort to revitalize the WTO so that it can play its role more effectively.

In the meantime, it is unfortunate that Canadian consumers cannot take advantage of Chinese electric vehicles, which are well-made and very affordable. Since the transportation sector is responsible for a large portion of GHG emissions in Canada, bringing more electric vehicles to market should be a priority. Hopefully, we can get back to a situation where people can enjoy the benefits of (clean) globalization.