Improving Supply Chain Security: Kicking Forced Labour Out

Following the COVID-19 pandemic, policymakers quickly realized that Canada and the West severely lacked the capacity to produce critical (and sometimes less critical) products. From facemasks to automobiles, an urgency to rectify our supply change deficiencies has been a top priority in Western capitals, particularly Washington, D.C. The United States has put into action a renewed, whole of government focus on supply chain resiliency and supply chain security. As part of the effort to reduce American reliance on China, the U.S. has sought to reshore and nearshore many critical supply chains for essential goods. Under former President Trump, this was primarily accomplished through the use of tariffs and continued by President Biden. To complement these tariffs, President Biden also implemented a 'carrot-based approach' through the Inflation Reduction Act, designed to further encourage investment in the United States.

Compared to the U.S., Canada's approach to China and our supply chain security has been considerably more tepid. As the American consensus on global trade shifts to greater regionalization and a renewed focus on security, it is time that Canada acknowledges this fact. As we prepare for the renegotiation of the Canada-United States-Mexico Agreement (CUSMA) in 2026, we need to develop our own position on the threat China poses to our national interests.

With the consensus on international trade shifting, including the normalization of tariffs, it is critical that Canada consider an appropriate approach that reassures the Americans of our care for continental security while not unduly harming Canadian exporters and producers in other markets. To that end, embracing the 'all-in-on tariffs' approach that former President Trump proposed – and looks set to continue – may not be the wisest for our country. Quoting a recent report by CIBC Capital Markets, 'U.S. Elections and Trade Policy: What's at stake for the U.S. and Canada?', "tariffs alone might not shut the door to Chinese goods in the U.S., or at least those produced by Chinese-owned firms, nor will it necessarily weaken China's global trade share. Instead, in the reglobalization trend, China is redirecting its exports, and its foreign investment, to countries like Mexico, Vietnam, India and South Korea that are gaining share in the U.S. market." This 'redirection' poses a significant threat to Canada, as goods imported through Mexico are subject to duties outlined in CUSMA and are therefore exempt from the new duties applied to Chinese goods. For goods imported from the four countries listed, Canada does not know where those products originated from. To that end, we need to enhance our supply chain visibility, and this must be done in cooperation with the United States.

A novel approach to this challenge would be to amend the Customs Act by requiring importers to report the origin of their goods (and the products that make up those goods) to the Government of Canada. A change to Section 12 of the Customs Act that required importers to present a detailed bill of materials for the products they import with the corresponding country of origin would be in Canada's best interest as it would increase transparency, remove forced labour from the supply chain, and improve national security. Should this new measure fail, we could also include an escalator that would increase the depth of investigation if the good is suspected of coming from a region of the world that has been designated as a 'known violator of human rights,' such as the Xinjiang Uyghur Autonomous Region in China. Investments in artificial intelligence and modernizing CBSA's procedures will help ensure a well-ordered system works nationwide. In addition, when constructing the new system, small and medium-sized enterprises (SMEs) must be engaged in its development, as they will be the primary users of this new system. By placing the onus on the importer, Canada can work to reduce our reliance on bad-faith market actors by removing forced labour and reducing the circumvention of tariffs.

As part of this new change to the reporting requirements for importers, Canada should also develop a federal database that is accessible to provincial authorities, airports, ports, and rail companies. Gone are the days in which ignorance of goods moving into and out of the country was allowed. We have a moral and a legal obligation to put an end to products that are made with forced labour.

Additionally, there is the added benefit that having this information makes good business sense. By allowing provincial authorities and critical nodes within our infrastructure apparatus to have this knowledge, we can effectively plan for growth in capacity in needed areas. Critical data leads to informed decisions.

Implementing this change to the Customs Act would align Canada with the United States and help secure our North American border. As we reshore and nearshore products critical to our national interest, it is essential that we prevent dumping from our strategic adversaries while nascent North American markets develop.

An effective, modern, and robust reporting mechanism that places the onus on importers will reduce circumvention and support Canadian jobs. Tariffs are not the only option for protecting our economy and securing our supply chains. We have the mechanisms to affect change. It is time we use them.