Trudeau: EV tax credits could hamper US-Canada trade relationship

By Riley Beggin

WASHINGTON — Canadian Prime Minister Justin Trudeau has a message for President Joe Biden: Electric vehicle tax credits favoring union- and American-made vehicles would have "a real negative impact" on trade relations between the two countries.

"We are a little bit concerned about the zero-emission vehicle rebates brought forward by the current proposal in Congress," Trudeau said at a Woodrow Wilson Center event Wednesday. "That's part of the conversation that we're going to have today, to make sure that doing this together is good for all of us."

The remarks came ahead of a bilateral meeting Thursday between Trudeau and Biden as part of a summit with Mexican President Andrés Manuel López Obrador, and as the U.S. House prepares to vote on the Build Back Better bill.

The bill includes provisions authored by Rep. Dan Kildee, D-Mich., and Sen. Debbie Stabenow, D-Mich., that would give consumers up to $12,500 off electric vehicles — including a $4,500 credit for EVs assembled in U.S. factories under a collective bargaining agreement and a $500 credit for EVs containing at least 50% U.S.-made parts and powered by U.S.-made batteries.

Trudeau also met with congressional leaders and members who represent states bordering Canada on Wednesday. Rep. Bill Huizenga, R-Mich., was in the meeting and said Trudeau dubbed the EV tax credits "the most significant issue that we are dealing with as far as trade."

Huizenga, who is co-chair of the Canada-United States Inter-Parliamentary Group, said Trudeau talked "very passionately" about the importance of a 1965 pact between the U.S. and Canada that removed tariffs for auto sales and the new United States-Mexico-Canada Agreement, which he argued may be violated if the U.S. approves the new EV credits.

"He was putting up a warning flag that this is a significant issue in the U.S.-Canada relationship," Huizenga said. He added there are several auto parts suppliers in his district who are confused about what would qualify as American-made under the proposed policy because the supply chains are so deeply integrated.

"It just seemed evident to me that there has not been a lot of thought on the U.S. side about the implications of this."

It's not the first time Canada has raised alarms about the proposal. Canadian Trade Minister Mary Ng sent a letter to congressional leadership in late October arguing that the provisions would "cause serious and irreparable harm" to both the U.S. and Canadian auto sectors. Automotive trade between the two countries averages over $100 billion annually, she wrote.

Foreign automakers and Tesla Inc. — which have significant U.S.-based auto manufacturing presences but which do not have unionized workforces — also have vehemently opposed the credits.

Jennifer Safavian, CEO of Autos Drive America, an advocacy group representing foreign automakers producing vehicles in the U.S., said in a statement Thursday that Biden should "oppose policies that strain relationships with our allies" and support policies that "will benefit the climate, provide a level playing field that leads to expanded competition and consumer choice with electric vehicles" and be consistent with USMCA.

Congressional Republicans and centrist Democrat Sen. Joe Manchin of West Virginia have also raised objections to the credits.

General Motors Co., Ford Motor Co. and Stellantis NV are the only automakers with U.S. workers organized by the United Auto Workers. The UAW and the Detroit Three have praised the legislation, as have leading environmental organizations in the United States.

The White House, however, seemed unmoved Thursday by their ally's concern. White House Press Secretary Jen Psaki told reporters that the credits are an opportunity to help consumers, incentivize a move toward clean energy, help businesses and create union jobs with high wages and benefits.

"The electric vehicles component of the package is something that the president is personally very excited about," she said. "All diplomatic relationships have areas where there might be tough topics to discuss, where people have concerns, that's the purpose of these in-person meetings."

Asked briefly in front of Trudeau about whether he would make changes to the provision to accommodate Canada, Biden said "there's a lot of complicating factors" and noted the bill has yet to pass through the House or Senate.

"We're going to talk at length about it, I'm sure," he said in the Oval Office ahead of his meeting with the prime minister.

The debate over electric vehicle tax credits comes at a time when the auto industry globally is spending billions to pivot toward zero-emission vehicles, pushed by changing regulatory environments and increasing concerns over climate change.

GM said in January that it aspires to sell only zero-emissions vehicles by 2035; Ford has said it expects to electrify 40% of its global lineup by 2030 and make its European passenger-vehicle lineup all-electric by 2030; and Stellantis has said it will have fully electric options across all its nameplates by 2030.

The shift poses new challenges for autoworkers. While Democrats in Congress and in the White House argue the transition to green technology will create new jobs, electric vehicles have fewer parts and require fewer people to assemble and maintain them. The non-partisan Congressional Research Service estimates a quarter of all auto parts manufacturing jobs could be upset by electrification.

That's put UAW leaders on high alert — even as they support the transition to electric vehicles, they've consistently warned that it must be accompanied by policies that protect workers and create new jobs in the U.S.

That's what the EV tax credit proposal aims to accomplish, according to sponsors Kildee and Stabenow. Both have defended the provision as a way to improve the climate while protecting union jobs.

"Let me be clear: Yes, we want that rebate to be used for vehicles made in America. Yes, we want you to receive a bonus if it's made by the workers who built the middle class of our country, the UAW," Stabenow said during a visit Wednesday to GM's new Factory Zero plant alongside Biden.

She described what she said was the hypocrisy of foreign automakers opposing the tax credits despite benefiting from similar incentives and supporting union workforces in their home countries.

"It takes a lot of nerve for them to fight our effort to have a consumer bonus for buying vehicles made by the United Auto Workers," she said. "So I call this just leveling the playing field. And I'm committed to supporting the home team and leading this efforts in the Senate."

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