Finance department worried blockades would torpedo negotiations with U.S on EV tax credits

The Canadian government was worried about how the convoy protests and blockades would damage its trading relationship with the U.S. and jeopardize negotiations over electric vehicle (EV) tax credits, a senior Department of Finance official told the Emergencies Act inquiry on Thursday.

"This was a first-tier issue," said Michael Sabia, the deputy minister of finance.

The Public Order Emergency Commission is reviewing the federal government's decision to invoke the Emergencies Act on Feb. 14 to end the protests that had gridlocked parts of downtown Ottawa and some border crossings. 

At the time, the federal government was trying to convince the United States to scrap a plan that would exclude electric vehicles assembled in Canada from a proposed consumer tax credit, which would give an advantage to companies manufacturing electric cars on U.S. soil.

Sabia said the protests darkened Canada's image as a place to invest, just as the U.S. was re-evaluating its trading relationships. The deputy minister said he was hearing from U.S. officials and business stakeholders who were questioning whether Canada was a reliable trading partner.

"There was no doubt that these disruptions coming when they did in that process brought with them the risk we would not be able to get the North American treatment," he said.

The Biden administration eventually expanded the tax credit to cover electric vehicles produced throughout North America. 

"Electric vehicles are the future of the automotive industry," Sabia said. "So if we had not succeeded in doing that, then the particular consequence of that for the central Canadian based-automotive industry would have been very, very serious." 

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The Department of Finance has not produced an assessment of the economic impacts of the blockades. 

"Determining the actual scale of economic impact of the blockades is challenging given that it depends on the length of disruptions and that the shipment of goods across the border affects almost every industry at some point in their business process," said a report the department put together for the commission.

"However, given that the border closures were ultimately relatively short-lived, the department believes that the impacts were likely transitory."

Sabia told the inquiry Thursday that he looked into various ways to cut off financing to convoy protesters, but many of those options would have required legislative changes that would have taken time.

The Emergencies Act gave authorities new powers, including the ability to freeze the finances of those connected to the blockades and protests.