Cars, Canola, and the Country Canada Chooses to Be

Standing beside Xi Jinping in Beijing, Prime Minister Mark Carney presented Canada’s new trade deal with China as a win for diversification and affordability. In exchange for restoring access to the Chinese canola market, Ottawa will lower tariffs on Chinese electric vehicles, with promised investment and joint ventures to follow. That exchange is already economically lopsided.

But the deeper problem is not the deal itself; it is what it reveals about Canada’s economic strategy. By treating electric vehicles and canola as roughly equivalent trade-offs, Ottawa is confusing industrial platforms with bulk exports. That is not a technical oversight. It is a choice about what kind of country Canada intends to be.

Since Confederation, Canadian economic policy has revolved around an unresolved question: Should Canada accept a role as a resource exporter based on comparative advantage, or use access to large markets to build domestic industrial and technological capacity? At different moments, Ottawa has gestured toward both without fully committing to either.

In the postwar period, Canada leaned toward industrialization, using tariffs and production requirements, most notably through the 1965 Auto Pact, to require firms seeking access to the Canadian market to build domestically. That approach had real flaws. It produced branch plants and weak domestic innovation, patterns that continue to shape Canadian industry today. But the problem was not that firms were foreign-owned, rather, that innovation activity was not embedded in Canada.

Trade liberalization under the North American Free Trade Agreement (NAFTA) reopened the question without resolving it. Market access expanded dramatically, but Canada never decided whether that access would be used to build domestic industrial and technological capacity, or simply to accelerate exports of oil, lumber, minerals, and crops while higher-value production stayed elsewhere. That ambiguity has driven policy ever since.

The EV-for-canola deal suggests the government is resolving this by reverting to a familiar role: Canada as a supplier of bulk resources to the largest economy of the day, rather than a country intent on building its own industrial depth. In different eras, that role has meant feeding the British Empire, the U.S. market, and now the Chinese economy. Left unchecked, that pattern hardens into permanence. Once industrial platforms are traded away, countries do not diversify out of resource dependence; they lock it in.

But this is not an inevitable fate thrust upon Canada by its geography. It is a deliberate strategic posture. Countries like Sweden, Finland, and even the United States moved beyond resource dependence by insisting that market access serve industrial development, not replace it. Others took the easier route, leaning into bulk exports, exposure to global price swings, and the gradual erosion of manufacturing.

That choice is no longer abstract. It is operationalized in this agreement.

The agreement lowers barriers for Chinese electric vehicles in exchange for agricultural relief, treating the two as roughly equivalent concessions. They are not. Automotive manufacturing is an industrial platform. A battery plant does not just assemble cells; it pulls in thermal management systems, precision tooling, quality-control software, and workforce training that compound across the economy. Agricultural commodities, however valuable, are globally interchangeable.

China does not care where it buys canola. Canada should care where vehicles are made, because manufacturing location determines where capital is sunk, suppliers cluster, and innovation occurs.

Current conditions make the deal especially risky. Canada’s auto sector is in the middle of a transition, with plants being retooled, suppliers deciding whether to commit capital, and EV production economics still unsettled. Signals pointing toward sustained competitive pressure from low-cost imports push firms toward caution. Investment pauses, suppliers hesitate, and industrial ecosystems thin out, like bees disappearing from a field. By the time closures become visible, the system is already hollowed out.

Chinese EV producers intensify this dynamic. Many operate under state-backed overcapacity and financing systems designed to move volume rather than earn commercial returns. Under those conditions, Canada is not an attractive site for long-term investment. It is a convenient outlet for surplus production.

Policy sequencing determines whether that behaviour can be altered. Market access remains one of the few tools governments possess to influence how firms serve a market. When access is tied to investment, firms adjust. The United States followed this model in the 1980s, using tariffs and export restraints to force Japanese and European automakers to choose between constrained exports or building locally. Companies responded by constructing plants, integrating domestic suppliers, and investing in workforces across the country. Capacity came first. Access followed.

Investment becomes optional once access is guaranteed. Firms rarely choose costly commitments when cheaper alternatives remain available, and once pressure is removed, incentives to build largely vanish.

None of this implies autarky or economic isolation. Canada does not need to build everything alone, and allied firms can play a central role in domestic production. The danger lies elsewhere: treating industrial capacity as expendable in exchange for access to commodities.

Some will argue that recent rhetoric from President Trump makes Canada’s auto sector untenable anyway, and that trading EV access for agricultural relief is simply adaptation to reality. But that logic confuses adjustment with surrender. When external pressure rises, industrial capacity becomes more valuable, not less, because it preserves options, leverage, and bargaining power. Giving it up early does not insulate Canada from risk; it concentrates it.

At the end of the day, this is not a marginal decision. Using industrial platforms as bargaining chips for commodity access risks locking Canada into a permanently resource-heavy economic structure, where lost manufacturing capacity cannot be easily rebuilt and its absence reshapes the economy for decades.

The risk in this deal is not engagement with China. It is the quiet surrender of industrial ambition, justified in the language of diversification. Canada can sell canola to many markets. Manufacturing capacity, once weakened, does not return so easily.

Treating cars like canola is not strategy. It is a choice about what kind of country Canada intends to be.