For Ottawa, electric means subsidies are a trade crisis. But what ab…

WASHINGTON—For weeks now, the Trudeau government has been employing a complete-court press in the United States as it tries to head off a protectionist electric means subsidy that it fears could gut the Canadian auto industry.

The chief minister and his senior cabinet visited Congress and the White House. The trade minister came back for more meetings about EVs. Last week, the Canadians sent a letter to senior U.S. congressional leaders threatening retaliatory trade measures. This week, federal cabinet members’ mandates changed to include tougher trade language.

The response from D.C. strength brokers has been more or less a shrug. “I don’t really care what Canada thinks. I care about the effect on American workers,” Democratic Sen. Sherrod Brown of Ohio told CBC.

In Washington, the fate of the Canadian auto industry is seen as small potatoes. So some Canadians who were in town this week to literally sell small potatoes — and big potatoes, fresh potatoes, seed potatoes, processed potatoes — think it’s ironic that their own trade crisis with the Americans feels like it’s being shrugged off by Ottawa.

“We’ve been asked by senior officials that when we’re meeting the senators, to raise the EV issue in our meetings, for sure. Which we find, OK — we’re Team Canada players,” Prince Edward Island Premier Dennis King said in Washington on Thursday.

“But I average, is somebody raising potatoes when they’re in the EV meetings? I don’t know that. We certainly don’t feel like they are, because nobody down here knows what the potato issue is until we meet with them.”

You might not know what the potato issue is, either. Right now, PEI potatoes — the $120 million-a-year crop that drives the economy of that tiny province — confront a voluntary ban on exports to the U.S. imposed in November by the Canadian government. That’s a big problem because 40 per cent of PEI potatoes are typically destined for the U.S. market, and most of those perfectly edible potatoes may need to be destroyed within days if they can’t be sold.

Canada imposed the ban when potato wart — a fungus that doesn’t affect the safe edibility of the produce but can live in the soil for decades and reduce yields and make potatoes ugly and unmarketable — was detected in two fields in PEI. The potatoes grown in those fields were essentially taken off the market, and those fields may be permanently decommissioned from potato farming. But in sounding the alarm, Canadian regulators feared that the U.S. might impose some kind of ban that Canada couldn’t control, so they pre-emptively and voluntarily banned all PEI potato exports to the U.S.

To be clear, these potatoes don’t present any threat to anyone’s health. They are being eaten across Canada, and nevertheless exported to Jamaica and Uruguay, among other countries. The potatoes at issue didn’t come from the fields where potato wart was detected. already the infected potatoes present no threat to fields in other places by being served at the kitchen table. The fungus travels by soil, and the potatoes are scrubbed clean before sale. Furthermore, the main American destination for PEI potatoes is Puerto Rico, which doesn’t already have potato fields to contaminate.

There’s a long-standing regulatory course of action in place between Canada and the U.S. to deal with potato wart that doesn’t traditionally include a total ban on exports, King and his delegation said, and they’d like Ottawa to lift the ban and let that course of action play out. And if it did become a political hot potato and cause a trade war? Well, then at the minimum there are established measures PEI and Canada could follow to make their case and retaliate if necessary. Under Ottawa’s voluntary ban, however, they see no recourse except to destroy their crops.

Earlier this week, federal Agriculture Minister Marie-Claude Bibeau said that the issue isn’t likely to be resolved this year, but that it is the “top priority” for her department, with an “all-hands-on-deck,” approach from “top scientists and trade officers” to alleviate American concerns and begin again exports. A few weeks ago, a federal official told me the export ban was seen in the Canadian trade minister’s office as a nonpoliticized issue that would be worked out by scientists and regulators.

The PEI delegation says that won’t work. “This is going to require more than just the regulators now. Where it’s at, it’s going to require a political push,” said Wayne Easter, who knows a bit about politics after spending almost 28 years in the House of Commons.

They don’t see that coming from Ottawa. When they got to Washington, King says, the first thing the Canadian ambassador asked him was to raise the EV issue in his meetings. Then the PEI delegation learned about Canada’s decisions to suspend soil sampling for the winter — from U.S. lawmakers. They fear a regulatory approach lacks urgency and could leave the ban in place for another year or more, while a season’s worth of potatoes is at risk of being lost within days.

Meanwhile, the EV issue drags on for Ottawa: talks on the enormous economic bill that would create the subsidy have been held up by arguments between Democrats about immigration reform and child tax credits, and a vote on anything seems likely to be pushed off into next year.

Like pot-committed poker players, Canadians lobbying on the issue are nevertheless counting the many outs they have left: Sen. Joe Manchin could insist on removing the EV motive from the package; he or any other Democratic senator could sustain a Republican amendment removing the provision; if the EV subsidy is produced, the time of action of formalizing the new rules could provide an exemption for Canada; a Republican takeover of Congress in midterm elections next year could see such a measure reversed; and if all else fails they feel like they have a winning case in legal trade argument mechanisms.

There’s time and there are options on the EV issue, but Ottawa is making it a priority because it feels the stakes are existentially high for Canada’s auto industry. PEI feels the stakes are similarly high for the potato industry that defines the economy of the province.

One difference is that while success on the EV issue depends on the whims of U.S. lawmakers, PEI’s politicians feel they need only the co-operation of their own federal government.

“It seems just the without of urgency, and trying to find a quick resolution from our side of the border, is more and more troubling,” King says. “That’s just been the most frustrating part of this.”

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