US Electric Vehicle Tax Credit Among Issues Raised at Trilateral Leaders’ Summit

The leaders of Canada, the United States, and Mexico met in Washington this week for the first time since 2016 with the intent to strengthen co-operation on the economy, security, health, and migration. 

Going into the one-day summit on Nov. 18, concerns about protectionist policies in the United States and Mexico had been raised by different stakeholders. One such concern—the Biden administration’s controversial $12,500 tax credit for American-made electric vehicles—came up a few hours before the summit during the customary fireside photo op in the Oval Office.

When asked if the proposed tax credit would be amended to spare the Canadian auto industry, President Joe Biden said, “I don’t know.”

“We’re going to talk about that to some extent,” he said. “We haven’t even passed it yet in the House—there’s a lot of complicating factors.”

The tax credit of up to US$12,500 for new EVs is part of a US$1.75-trillion spending bill that was passed by the House of Representatives on Nov. 19. The bill could face obstacles in the evenly split Senate, with possible opposition by Democrat Sen. Joe Manchin.

Canada says the tax credit would bring severe economic harm, with tens of thousands of jobs lost in one of its largest manufacturing sectors. U.S. workers would also be impacted.

On the evening of the summit, Prime Minister Justin Trudeau told a news conference that he had stressed Canada’s concerns about the tax credit with the Biden administration and highlighting the impact it would have on Canadian jobs and its auto industry.

“We’re going to continue to do the work necessary to not just highlight our position but find a solution,” he said.

In late October, Canadian Trade Minister Mary Ng sent a letter to U.S. officials warning about the impacts of such a program and that it would be inconsistent with terms of the USMCA free trade deal between the countries, Reuters reported.

Mexico’s Energy Reform

Speaking on background the day before the summit, U.S officials said Biden would address the issue of energy with Mexican President Andrés Manuel López Obrador.  Mexico’s planned energy reform has sparked concerns in the private sector in the three countries.

The reform seeks in part to give the state increased control over the electricity market, wresting it away from private companies. Business groups in all three countries have expressed concerns that the move would reduce their access or cut them out of the market.

Before making the journey to Washington, López Obrador told Mexican media he was prepared to defend the plan in front of Biden and Trudeau if it came to it, but he expected receptivity from “people of integrity.”

“It is very simple, we don’t want the price of electricity to increase. And the abuses of private companies, especially foreign companies, and especially Spanish companies, they need to stop seeing us as a land of conquest; it’s over, they can go steal elsewhere,” he said.

Business groups in all three countries view the planned reform unfavourably and singled out the issue in a letter written to the countries’ leaders before the trilateral summit.

“Attempts to favour state-owned enterprises at the expense of renewable and other private energy providers only undermine investment certainty,” the Canadian Chamber of Commerce, the U.S. Chamber of Commerce, and the Consejo Coordinanor Empresarial, a business association in Mexico, wrote in the letter.

The groups also took more general stances against protectionism and other free trade-restricting practises, saying the countries should guarantee open and transparent investment environments, align their definition of essential services, and improve border management to ensure the flow of goods is maintained.

China Concerns

López Obrador took another protectionist stance during the summit, but this time from the perspective of North America and the entire continent versus China.

“Economic integration, in full respect of our sovereignty, is the best instrument to face the competition stemmed from growth in other regions of the world, especially the productive and commercial expansion of China,” he said in his opening remarks.

The Mexican president said China’s rapid growth rate compared to North America’s more stagnant pace could pose future security dilemmas. The economic imbalance could lead to the “use of force, which would put us all in danger,” he said.

López Obrador also said reliance on Asia can be replaced by having more investment in North America.

“Why can we not produce in North America?” he asked. “Well, of course we can. It is a matter of defining a regional economic strategy.”

With files from The Canadian Press

Noé Chartier

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Noé Chartier is an Epoch Times reporter based in Montreal.

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