Prime Minister Justin Trudeau said Thursday that he pressured his US counterpart to remove a provision from the pending $1.9 trillion social infrastructure bill that has the potential to destroy Canada’s auto sector.
“We are concerned,” Trudeau said in French at a news conference after the North American leaders’ summit. “This would be a huge problem for car production in Canada. We confirmed this with the Americans during our conversations. They heard us loud and clear.”
At issue is a provision buried in the Building Back Better Act, President Joe Biden’s plan to pump hundreds of billions of dollars into social programs and climate initiatives to aid the country’s recovery from COVID-19.
To spur the nascent electric car (EV) industry, the Democratic-controlled Congress is proposing large tax credits of up to $12,500 for buyers of new electric vehicles — as long as those vehicles are manufactured by union workers in the United States.
Experts agree the tax measure will be a major blow to the Canadian auto sector, which is trying to attract new investment as the industry shifts away from internal combustion engines. The fear is that manufacturers may move production from Canada to the United States to make cars that qualify for the generous subsidy.
The program would franchise cars made in the so-called “blue” states where union plants predominate, at the expense of Ontario plants like General Motors’ Oshawa Group, Ford’s Oakville plant or Chrysler’s sprawling operation in Windsor. It would also hit US auto plants in “right to work” states where the United Auto Workers (UAW) is a non-operating factor.
Trudeau pledged to continue dialogue with Biden and US lawmakers and to stress that US electric vehicle production depends on important minerals Canada has in abundance, such as cobalt, nickel and lithium.
Biden was noncommittal when asked if his administration would exempt Canada from such a tax plan, given that the North American auto industry is deeply intertwined.
“We’ll talk about it,” he said. “It hasn’t gone through the House yet… We don’t know what’s going to happen in the Senate. There are a lot of complicating factors.” The bill, with the tax credit remaining unchanged, was expected to pass late Thursday.
Michigan Republican Representative Bill Huizinga – who says he stands with Canada on the electric vehicle tax credit – met with Trudeau on Wednesday, as part of a bipartisan group of House of Representatives that included US House Speaker Nancy Pelosi.
He said some were “surprised” by Trudeau’s “strong” reaction to the case.
“That was the thing that dominated the conversation and the prime minister really stressed the point,” Huizinga told CBC. power politics.
“I think it caught their attention a little bit, to be honest.”
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David McNaughton, Canada’s former ambassador to the United States, says Biden and congressional leaders may not understand how much damage this measure could do to the Canadian economy. After petroleum products, automobiles are easily the country’s second largest export.
During a layover at GM’s new 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 the other side of the river,” McNaughton said, referring to Windsor. “Part of the thing that I realized when I was in Washington is that Americans don’t think about the interrelationship between our economy and theirs, and the importance of Canada to many states in the United States — we have to constantly remind them.”
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While the threat to the electric vehicle tax credit is worrisome, McNaughton said he’s confident there will be some kind of solution.
McNaughton said spending time between Trudeau and Biden could help Canada move forward with its agenda. “There is no substitute for meeting face to face to be very frank about these things,” he said.
The electric vehicle tax credit will cost both Canadian and American jobs, says Flavio Volpi, president of the Auto Parts Manufacturers Association.
Volpi said the program, as currently regulated, would allow automakers to supply more foreign auto parts from Asia for their cars assembled in America and then pass them off as “American-made.”
Volpi said there are seven times more jobs — more than 700,000 people — working in parts than in car assembly.
As the bill moves to the Senate for further consideration and debate, Volpe said Canadians should pressure West Virginia Democratic Senator Joe Manchin to help strip the electric vehicle provision bill. Toyota has an engine and transmission plant in his state – a plant that supplies the company’s assembly operations in southwestern Ontario. He said that a threat to one is a threat to the other.
In a deeply divided Senate where Democrats and Republicans both hold half the seats, a “No” vote from Manchin would be a deal breaker.