(Bloomberg) -- Canada is looking at banning Chinese-made software in vehicles after the US took steps toward doing so, Finance Minister Chrystia Freeland said Tuesday.
“The short answer is absolutely,” she told reporters when asked whether Canada was considering following the US move. “Our government has made very clear that we take really seriously intentional Chinese overcapacity and we take very seriously the security threat from China.”
Prime Minister Justin Trudeau’s government has already announced a 100% tariff on Chinese EVs, along with 25% tariffs on aluminum and steel. Last month Freeland also launched a consultation on other Chinese goods that could get hit with steep duties, including battery parts and critical minerals.
Freeland has justified those tariffs on the basis that China is engaging in unfair trade practices by overproducing goods using massive state subsidies to undercut industries in other countries.
But it is unclear whether the tariffs will survive a legal challenge through the World Trade Organization. China recently announced it would challenge the levies under WTO provisions that both countries have signed onto.
Banning Chinese-made car software would likely be a more permanent measure to keep the country’s electric vehicles from entering the Canadian marketplace, according to government officials who spoke on condition they weren’t named. But Canada is also weighing the security and privacy aspects of the software in deciding how to proceed.
The US has said Chinese vehicle software is a national security threat, given the amount of data the connected cars can collect and transmit. For its part, China has said it respects data privacy and the security of its foreign customers and the principles of fair competition.
If Canada chooses to ban the software on security grounds, it is possible new legislation would be needed first, one government official said. That would complicate the introduction of a ban given an election could be triggered any time within the next year — an election that could result in a change of government, given Trudeau is trailing badly in the polls.
Trudeau’s government has previously banned Huawei Technologies Co. from its wireless networks due to security concerns around the firm’s connections to the Chinese government. However, that ban addressed Huawei equipment installed into the wireless network itself, not individual Huawei phones, making it an imperfect example to apply to electric vehicles.
Alternatively, Canada could use privacy law to put restrictions on Chinese-made software. It has not been decided yet which approach Canada will take on the matter, or how quickly, the official said.
There would be widespread political and industry support in Canada for banning the Chinese software. Ontario Premier Doug Ford, whose province holds the lion’s share of Canada’s auto manufacturing, has already called on Trudeau to “stay in lock-step with our American allies” and ban the software.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, urged lawmakers in Canada’s Parliament on Monday to ensure there is “no daylight” between American and Canadian measures when it comes to Chinese autos.
Currently there are few Chinese-made electric vehicles in Canada, aside from Tesla vehicles made in a Shanghai factory. But at least one major Chinese auto producer, BYD Co., has hired lobbyists to look at entering the Canadian market.
©2024 Bloomberg L.P.
