Canada could net $1 trillion in additional exports by 2030 by capitalizing on the Biden administration’s plans to reengineer North American supply chains and invest $400 billion in cleantech, according to RBC Economics

Canada could reestablish its export sector as a key driver of growth by positioning itself as a leader in electric vehicle and battery manufacturing, along with other areas in cleantech, according to a new report by RBC Economics.

The report, called “Trading Places,” argues that Canada could reverse a worrisome two-decade decline in its export competitiveness by capitalizing on rapidly increasing international interest in green industry — with EVs and batteries key items on that list.

“A new era in Canadian trade is beginning, and it’s not just about dairy or lumber or steel tariffs. It’s about climate change, labour rights and who will control the technologies of the future,” the report states.

“It’s crucial to capture as much of that EV supply chain as we can”

Josh Nye, Senior Economist, RBC Economics

U.S. moves the main catalyst

The primary catalyst for this renewed opportunity is the Biden administration’s move to reengineer critical supply chains and “re-shore” manufacturing. While the U.S. is still the destination for 75 per cent of Canada’s goods exports (about the same as 30 years ago), Canada has fallen from first to third among the top sources of imports to the U.S., behind China and Mexico.

But the new administration’s massive emphasis on the green economy — it plans to invest US$400 billion over 10 years in this area — provides an opportunity for “a new continental trade strategy,” the report states. It foresees a potential opportunity for Canada to rack up an additional $1 trillion in exports to the U.S. by 2030.

Rebooting our industrial policy to bolster manufacturing in cleantech could “revitalize traditional sectors like autos, energy and metals that have long been the core of Canada’s export strength,” the report says. “As these sectors are disrupted by global shifts to greener technologies, a Canadian foothold in new U.S. supply chains could enable them to pivot to higher-growth opportunities.”

A new auto industry

While Canada has slipped as a traditional automotive manufacturing power, there is some significant movement underway towards retooling its industrial capabilities to allow for large-scale production of EVs. General Motors, for instance, is investing $1 billion to turn the CAMI assembly plant in Ingersoll, Ont., into Canada’s first large-scale EV manufacturing plant, at which its new EV600 electric delivery van will be manufactured. And Ford and Selantis (formerly Fiat-Chrysler) have made significant commitments to manufacture electric vehicles in Canada.

Given the numerous differences between electric and combustion vehicles and their respective manufacturing processes, however, such transformations are only part of the equation.

“There’s only so much overlap between production of electric vehicles and internal combustion vehicles,” says RBC senior economist and report co-author Josh Nye, in an interview with Electric Autonomy Canada. “It’s crucial to capture as much of that EV supply chain as we can… if we aren’t able to capture some of these EV-specific parts, particularly batteries, which make up so much of the value of an electric vehicle, that’s a vulnerability.”

As the report points out, however, Canada is uniquely poised to do just that.

Battery minerals

For one, the country currently produces or has reserves of every critical mineral and raw material used in the development of EV batteries. To capitalize there, one of the report’s main recommendations is that Canada establish itself as “the principal, secure supplier of critical minerals to the U.S.”

The recently finalized Canada-U.S. Joint Action Plan on Critical Minerals Collaboration is a key tool there. As is the 75 per cent North American content requirement for EV batteries under the Canada-United States-Mexico Agreement (CUSMA).

Canada could take the latter a step further, the report states, by advancing a potential North American requirement under CUSMA that all raw materials used in the manufacture of batteries, EVs and other vehicles by ethically sourced.

Technology and ESG

Technology hubs like Toronto also give Canadian industry access to an abundance of the sort of skilled talent that is crucial to advancing EV technology.

“If we look at the opposite end of the supply chain and some of the software and the research and development that is so critical to electric vehicles, we think we have some capabilities there in terms of our AI research, and battery technology research as well,” says Nye.

Canada is not the only country in the world with the potential to become a major player in EV battery manufacturing exports. However, Nye says, qualities such as Canada’s leadership in ESG (environmental, social and corporate governance) go a long way to making it uniquely attractive as a trade partner.

“We need to work with our allies and really sell ourselves as a secure, sustainable supplier of these metals and minerals, and one that produces with strong environmental and labour and human rights regulations,” says Nye.

“Government…commitments in terms of EV purchase incentives and charging infrastructure that help support demand is something that will also attract supply here to Canada.”

Josh Nye, Senior Economist, RBC Economics

“Demand makes the case for supply”

In order to prepare Canada’s industrial leaders for what the report argues is a necessary transition, it recommends the creation of a “private/public body… with the goal of developing coherent trade, competitiveness, and industrial strategies to position Canada in the green, digitally enabled economy.”

Ultimately, Nye points out, Canada’s ability to take advantage of the rapidly growing green automotive economy will rely in part on the speed at which widespread electrification of passenger and industrial vehicles occurs throughout Canada.

“We have to recognize that demand makes the case for supply,” Nye says. “Demand for electric vehicles in Canada has improved, but the government continuing with their commitments in terms of EV purchase incentives and charging infrastructure that help support demand is something that will also attract supply here to Canada.”