Prime Minister Justin Trudeau says Canada is “a little bit concerned” about U.S. President Joe Biden’s proposed electric vehicle tax credits for American-built vehicles, and that he plans to have a conversation with Biden on the issue “today.”
Trudeau made the comment Wednesday just ahead of a meeting with Biden and Mexican President Andres Manuel Lopez Obrador — the first so-called “Three Amigos” since 2016.
“We are a little bit concerned about the zero-emission vehicle mandates or rebates brought forward in the current proposal in Congress right now,” Trudeau said, speaking during a Q&A session hosted by The Wilson Center in Washington.
“But that’s part of the conversations we’re going to have today to make sure that people understand that doing this together is good for all of us, good for the jobs, good for the future as we fight climate change, as we build prosperity in North America.”
The proposal, which has yet to pass into law, looks to establish a US$4,500 incentive for union-made vehicles, and US$500 for U.S.-made batteries, for an additional US$5,000 in available rebates.
Vehicles would have to be made in the United States starting in 2027 to qualify for the electric vehicle tax credit, which Biden’s proposal would boost from US$7,500 to US$12,500.
This kind of protectionist policy is “nothing new,” according to Maryscott Greenwood, CEO of the Canadian American Business Council, who spoke to Global News from the location of the “Three Amigos” summit.
“What’s important about this dialog this week with the three leaders is that they have a real conversation about how economically integrated we are and how our economies can maximize the benefits of our trade agreement,” Greenwood said.
“That’s going to be a very active discussion.”
The North American auto manufacturing industry is extremely integrated. Auto parts and components can cross Mexican, U.S. and Canadian borders “as many as eight times” before finally being assembled in one of the partner countries, according to the Canadian Vehicle Manufacturers’ Association (CVMA).
“The truth is jobs in the United States and jobs in Canada are dependent on each other. That’s why any of these dislocations, as the economists call it, are serious,” said Greenwood.
“We don’t want policies that will disadvantage people in Canada or in the United States, so we have to look carefully at all of this.”
The vast majority of vehicles made in Canada are also sold in the United States, meaning any jump in protectionist sentiment from our neighbors to the south can be a serious threat to Canada’s auto industry.
Vehicles are the second-largest Canadian export by value, according to the CVMA, at $42.9 billion in 2020 — and a whopping 93 per cent of those vehicles are exported to the U.S.
Cara Clairman is the president and CEO of Plug’n Drive, a non-profit that works to accelerate the deployment of electric vehicles. While she welcomes any policy that incentivizes the purchase of electric vehicles, she said she’s heard concern from the industry over the proposed rebate.
“I’ve definitely heard it as a concern, but I think people are still hopeful that it will not come to pass worded exactly how it is now,” she said.
Clairman said that rather than taking a “buy American” approach, manufacturers would instead like to see Biden’s administration make a “buy North American” push.
“I’m hopeful that the language will be inclusive (and) just say ‘North American vehicles’ as opposed to ‘American vehicles,’ because that auto manufacturing is extremely integrated across the border,” she said.
Still, the details of the tax credit aren’t finalized, so the true impact of the rebate remains to be seen, according to Greenwood.
“We’re going to have to really look and see, not just at what’s been sort of announced from a podium, but what’s really in the letter of the regulations,” she said.
“And hopefully it will be consistent with our obligations.”
There’s a chance the details of the regulation could violate trade agreements Canada has in place with the United States, Greenwood warned.
“If it’s not consistent with our trade obligations, then we’re going to have some litigation,” she said.
Canada hasn’t ruled out the possibility of taking those steps.
In a letter dated Oct. 22, Canadian Trade Minister Mary Ng told U.S. lawmakers and the Biden administration that the credits, if approved, “would have a major adverse impact on the future of EV and automotive production in Canada.”
Ng added that the proposed rebates were inconsistent with U.S. obligations under the USMCA and the World Trade Organization.
Innovation Minister Francois-Philippe Champagne has also warned U.S. officials that Canada would respond “appropriately” if the tax credit were approved.
“They understand that legislation like that would generate a response on the Canadian side,” he said.
— With files from Reuters