Prime Minister Justin Trudeau said Thursday he pressed his U.S. counterpart to drop a provision of the pending $1.9-trillion social infrastructure bill which has the potential to devastate the Canadian auto sector.
“We’re concerned,” Trudeau said in French at a news conference after the North American Leaders’ Summit. “This would be quite a problem for vehicle production in Canada. We stressed this with the Americans throughout our conversations. They’ve heard us loud and clear.”
At issue is a clause buried in the Build Back Better Act, President Joe Biden’s plan to inject hundreds of billions of dollars into social programs and climate initiatives to help juice the country’s COVID-19 recovery.
To spur the fledgling electric vehicle (EV) industry, the Democratic-controlled Congress is proposing sizeable tax credits worth up to $12,500 US to buyers of new electric vehicles — as long as those cars are manufactured by union workers in the U.S.
Experts agree the tax measure would be a major blow to the Canadian automotive sector, which is trying to attract new investment as the industry transitions away from internal combustion engines. The fear is that manufacturers would shift production from Canada to the U.S. to make cars that qualify for the generous subsidy.
The program would privilege cars made in so-called “blue” states where unionized factories prevail, to the detriment of Ontario plants like GM’s Oshawa assembly, Ford’s factory in Oakville or the sprawling Chrysler operation in Windsor. It would also hit U.S. car factories in “right-to-work” states where the United Auto Workers (UAW) union is a non-factor.
Trudeau vowed to continue the conversation with Biden and American lawmakers and to stress that U.S. EV production depends on critical minerals that Canada has in abundance, like cobalt, nickle and lithium.
Biden was non-committal when asked if his administration would exempt Canada from such a tax plan, given that the North American auto industry is so deeply intertwined.
“We’re going to talk about that. It hasn’t even passed yet through the House … and we don’t know what will happen in the Senate. There’s a lot of complicating factors,” he said. The bill was expected to pass, with the tax credit intact, late Thursday.
Michigan Republican Rep. Bill Huizenga — who says he stands with Canada on the EV tax credit — met with Trudeau Wednesday, as part of a bipartisan group of lawmakers which included U.S. House Speaker Nancy Pelosi.
He said some were “surprised” by Trudeau’s “forceful” reaction to the issue.
“This really was the thing that dominated the conversation and the prime minister really stressed the point,” Huizenga told CBC’s Power & Politics.
“I think it caught them a little flat-footed, to be honest.”
WATCH | Canada pushes back on ‘Buy American’:
David MacNaughton, Canada’s former ambassador to the U.S., says Biden and congressional leaders may not understand just how harmful this action could be to the Canadian economy. After petroleum products, cars are easily the country’s second largest export.
During a stop at a new GM plant in Detroit yesterday, Biden said he wanted cars made in America “not halfway around the world.”
“But what he’s really doing is stealing jobs from across the river,” MacNaughton said, referring to Windsor. “Part of the thing I realized when I was in Washington is that the Americans don’t think about the interrelationship of our economy and their economy, and the importance of Canada to so many states in the U.S. — we have to constantly remind them.”
WATCH | Canada says EV incentive violates trade deal:
While the threat of an EV tax credit is concerning, MacNaughton said he’s confident there will be some sort of solution.
MacNaughton said the face time between Trudeau and Biden might help Canada advance its agenda. “There’s no substitute for getting together in person to be very frank about these things,” he said.
Flavio Volpe, the president of the Automotive Parts Manufacturers’ Association, says the EV tax credit would cost both Canadian and U.S. jobs.
Volpe said the program, as currently structured, would allow automakers to source more foreign auto parts from Asia for their American-assembled cars and then pass them off as “U.S. made.”
Volpe said there are seven times more jobs — more than 700,000 people — working in the parts business compared to auto assembly.
As the bill moves to the Senate for further study and debate, Volpe said the Canadians should lobby West Virginia Democratic Sen. Joe Manchin to help strip the bill of the EV provision. Toyota has an engine and transmission factory in his state — a plant that supplies the company’s assembly operations in southwestern Ontario. A threat to one is a threat to the other, he said.
In an evenly split Senate where the Democrats and Republicans each hold half the seats, a “no” vote from Manchin would be a deal breaker.