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Subsidy game could hurt Canada-US relations | US Politics In :60 | GZERO Media

Subsidy game could hurt Canada-US relations

Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, DC shares his perspective on US politics.

What is happening with US/Canada relations?

Well, I'm headed up to Toronto, Canada, just about a week after President Biden made his first trip to America's neighbor to the north, which is also the US' second largest trading partner. A very important, deeply ingrained relationship between these two North American economies. And a major source of tension right now between the US and Canada is over industrial policy. The US over the last several years has started to deeply subsidize infrastructure development, semiconductor manufacturing, and in the Inflation Reduction Act, green energy production, electric vehicles, and the components that go into this.

Now, the automobile industry is obviously a very major component of US/Canada trade and has been that way since the mid '90s when NAFTA was signed. The renegotiated USMCA has created a new set of playing rules for governing US/Canada trade, and there have been several long-standing disputes between the two countries that have not yet been worked out. And now with the introduction of the US' new subsidies, the Inflation Reduction Act is causing major concerns in Canada who are worried about losing green energy investments to the United States where there are tax preferences, loan programs, and other direct form of subsidies in order to get that manufacturing into the US.

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A view of solar panels at the green hydrogen proof-of-concept site in Vredendal, Western Cape, South Africa, in November 2022.


How to recharge Africa’s electrification dreams

Africa’s dreams of providing universal access to electricity by 2030 are in jeopardy thanks largely to a change in tune from China. The pandemic’s impact on the Chinese economy, years of debt-sustainability concerns, and plenty of bad press have zapped China’s ability and willingness to fund African power projects.

How did Africa come to rely on China? Over the past decade, some African leaders argued that conventional lenders and Western countries were not dependable partners. They urged countries to look instead to China to fill funding gaps to power the continent’s energy infrastructure goals.

As a result, China’s contribution to Africa’s power sector has been enormous: The International Energy Agency estimates that the amount of generation capacity from China’s 2010-2020 contracts in the region was around 17 gigawatts – projects mostly financed with Chinese loans and, to a lesser extent, equity, grants, and blended finance.

But today, Chinese investment in African power projects is declining sharply, leaving governments exposed to a potential shortfall in energy funding over the coming decade.

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