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Canadian minister in Washington: We need to decouple from China

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Canada’s industry minister was in Washington making a pitch for projects north of the border to access U.S. federal funding for critical minerals.

François-Philippe Champagne’s trip came after the U.S. passed several bills offering large sums of money for green energy and other high-tech projects.

They include hundreds of millions for President Joe Biden to steer to certain projects under the U.S. Defense Production Act.

As a legal member of the U.S. industrial base, and home to several of the critical minerals that power electric batteries, Canada is hoping some cross-border projects might qualify.

“Yes there are sums in these acts which Canadian companies can tap into,” Champagne, the innovation, science and industry minister, told reporters Friday at the Canadian embassy in Washington. 

“That’s what we’re going to be working (on) with Canadian industry. To be embedded in these very important initiatives.” 

He was speaking at the tail end of a trip where he met his U.S. counterpart, Commerce Secretary Gina Raimondo, the head of NASA, Bill Nelson, and spoke to a business audience.

What’s the context

The context is the rivalry with China and Russia. Washington is increasingly unnerved about being dependent on its greatest geopolitical foe, China, for minerals that power the economy: phones, computers, clean technology and electric vehicles.

China dominates the market and once cut off Japan’s access to those vital industrial inputs. Just as Russia has now cut off Europe from exports of home-heating gas. 

The U.S. is now working to decouple its high-tech economy from China’s and just restricted exports of advanced computer chips to that country; the U.S. has set out broad strategies for breaking its dependence on Chinese goods.

Champagne said countries that share similar values should be leaning on each other more and leaning less on rivals including China.

“What we want is certainly a decoupling: certainly from China, and I would say other regimes in the world which don’t share the same values,” he told a panel hosted by the Canadian American Business Council.

“People want to trade with people who, really, share the same values.”

Canadian Deputy Minister Chrystia Freeland this month gave a speech in Washington on a similar theme, arguing for so-called friend-shoring: she said democracies should tighten their economic, and military, bonds and rely on each other more for trade.   

Champagne called this a once-in-a-generation chance to rewrite supply chains, as the world shifts toward electric vehicles and toward trading more with reliable allies.

He cited examples of how Canada fits in.

For example, he said he envisions a future where New York State and Quebec form a semiconductor corridor, similar to the auto-production corridor in Windsor and Detroit: as Detroit’s Big Three move parts between their plants on either side, he said, an IBM could move computer components to plants back and forth.

He also noted Canadian spending on a critical mineral plant in Quebec: Champagne said the titanium produced there will benefit the U.S. military.

During his trip, Champagne also received blowback for two bills currently in Parliament, his government’s bills C-18 and C-11.

They would require big Internet platforms to compensate Canadian news organizations for content they run, and give the CRTC new power over online content.

A director at a large U.S. business lobby group, Abel Torres at the U.S. Chamber of Commerce, told Champagne the bills discriminate against U.S. websites; violate trade commitments; contradict the principles of an open internet; and give companies little guidance about how Canadian regulators intend to use their new powers.

“We feel these measures are a step in the wrong direction,” he told Champagne during the business panel Friday.

What’s next

Canada has increasingly secured a spot in the new supply chains for zero-emission vehicles: companies have announced new plants and the just-passed U.S. omnibus bill defined cars in Canada as eligible for a domestic tax credit for electric vehicles.

But the fine print on that so-called Inflation Reduction Act has yet to be released. Also lacking: specifics on which projects will get access to funds under the Defense Production Act.

Car companies have complained that so few models will qualify for the electric-vehicle tax credit as to render it meaningless: companies say there just aren’t enough minerals and batteries produced in friendly countries to be eligible for the credits as designed.

We should have more clarity in the coming months about how the tax credits will work.

The U.S. is still drafting rules for how to implement the law and the U.S. government announced this month that people will have until Nov. 4 to submit public comments as part of that process.

Source : CBC



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