Freeland hints at broader trade action against China

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(Bloomberg) — Canada’s finance minister said she’ll hold talks next week with business and labor groups about erecting trade barriers against Chinese-made vehicles — and suggested the government may even go beyond autos.

The government last month announced a public consultation on how to respond to “unfair Chinese trade practices” of electric vehicles. But “the consultation actually could be broader than that,” Finance Minister Chrystia Freeland said in an interview on Friday with Bloomberg News.

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Canada, which relies heavily on two-way trade with the US, has been closely watching the Biden administration’s moves to impose higher tariffs against Chinese EVs, solar cells, batteries, steel and other products.

Canada has no choice but to view its trading relationships through a national security lens, said Freeland, who’s also the deputy prime minister.

“Geopolitics and geoeconomics is back. That means that Western countries— and very much the US — is putting a premium on secure supply chains and is taking a different attitude towards Chinese overcapacity,” she said. “And that means that Canada plays an even more important role for the United States.”

Freeland, who has Ukrainian heritage, pointed to this week’s statement by the North Atlantic Treaty Organization that China is a “decisive enabler” of Russia’s war against Ukraine. “What NATO said this week about China is significant,” the minister said. “I would sort of urge people to pay attention to that.”

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Prime Minister Justin Trudeau’s government is seeking to align itself with Group of Seven allies after the Biden administration unveiled plans to hike tariffs on Chinese goods and the European Union announced new levies as high as 48% on Chinese vehicles. Canada currently imposes about a 6% levy on Chinese vehicles.

Bloomberg News was first to report last month that Canada was preparing the way to potentially increase tariffs on Chinese-made electric vehicles, following the US and EU moves. The public consultation is the first stage of the process. China, which has denied allegations from Western countries that it is flooding the market with cheap goods, has also said tariffs could undermine trade and economic cooperation between Beijing and Ottawa.

The government is also facing pressures domestically. It has promised billions in subsidies to lure global automakers such as Volkswagen AG and Stellantis NV to set up electric-vehicle battery production in the province of Ontario to supply North American assembly plants. The Canadian auto industry is also pushing it to put up barriers to Chinese electric vehicles to protect local jobs and wages, arguing Chinese products are cheaper due to weaker labor standards.

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“For me, labor is a very important piece of the puzzle there and I think it is high time,” she said. “China is a centrally planned communist economy and China has an intentional, state-directed policy of overcapacity.”

Trudeau’s government has fought a number of diplomatic and trade battles with China — its second largest trading partner after the US — most notably when Canada arrested Huawei executive Meng Wanzhou on a US extradition warrant. China retaliated by detaining two Canadian citizens for nearly three years.

Freeland, however, pulled no punches when talking about China on Friday. There’s a prevailing view that China’s entry to the World Trade Organization more than two decades ago was a mistake, she said.

“I see that Leninist precept in Chinese economic policy — of dominating the commanding heights of the global economy and of acting quite intentionally to undermine and cut out Western competitors,” she said. “I think it’s high time for us to be clear-eyed about that.”

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