Joe Biden will meet with leaders from Mexico and Canada this week as his plans to encourage Americans to buy US-made electric cars met with furious opposition from two of the United States’ biggest trading partners.
The so-called Three Amigos Summit, to be held at the White House, will take place for the first time since 2016 and comes as senior officials in Mexico City and Ottawa have complained that Biden’s plans to start manufacturing electric vehicles in the United States are crashing internationally. trade rules.
The opposition of some of the United States’ closest allies to a flagship climate policy poses a political and diplomatic dilemma for Biden. The president is committed to both reducing tensions with trading partners following Donald Trump’s tumultuous tenure and using industrial policy to boost green industries like electric car manufacturing.
While yet to be passed, Biden’s broader $ 1.75 billion legislative package contains proposals to offer a $ 7,500 tax credit for electric vehicles made only in the United States. United from 2026. Another tax credit of $ 4,500 is available for the purchase of electric cars made with unions.
On Friday, Mélanie Joly, Canada’s Foreign Minister, said she raised the issue during a meeting with Antony Blinken, US Secretary of State.
Mary Ng, Canada’s Minister of Commerce, has previously written to Democratic and Republican leaders and to Katherine Tai, US Trade Representative, and Gina Raimondo, US Secretary of Commerce, to voice Ottawa’s “very serious concerns” about electric vehicle credits.
Ng’s office said the measures proposed by Washington were “inconsistent” with both its obligations under the USMCA, the updated North American trade agreement between the three countries under Donald Trump, and with the rules of the World Trade Organization.
Tatiana Clouthier, Mexico’s Economy Minister, has sent her own letters to U.S. lawmakers asking that the proposals be amended to bring them into compliance with the USMCA.
“It’s contradictory,” said Clouthier. “They would leave more [migration] with this kind of measurement.
Tai declined to question this week whether the US proposals violate the USMCA trade deal she helped negotiate as the Democrats’ chief trade adviser in the House of Representatives.
“I am aware of the concerns that our trading partners have raised, and we care about those concerns,” she said.
Edward Alden, senior researcher at the Council on Foreign Relations, said the growing dispute between the three nations was “a big problem.”
“Everyone is rushing towards electric vehicles, and automakers are now deciding where to locate their electric vehicle factories,” Alden said.
“This tax credit is a pretty strong incentive to locate final assembly in the United States. So it’s no surprise that Canadians and Mexicans are deeply concerned about this.”
Currently, the North American auto industry supply chain is dispersed across all three countries. According to a recent Congressional Research Service report, some auto parts cross the US, Mexico and Canada borders “seven or eight times” before being assembled into the final vehicle.
The United States imports $ 29.4 billion in auto parts from Mexico and exports $ 5.9 billion in parts to Canada, while exporting $ 11.7 billion in finished vehicles to Canada and $ 67.5 billion in Mexico. CRS reports that vehicle parts exported to Canada and Mexico often return to the United States for incorporation into finished vehicles.
“It’s important to remember that the auto industry is the most quintessential North American, USMCA or Nafta industry,” said Tony Wayne, former US Ambassador to Mexico, referring to the trade deal. USMCA precedent. “It’s more integrated than any other industry.
Canada has hinted that US threats to break auto industry integration at this point could backfire on the United States.
Ng’s letter reminded U.S. officials that Canada was “the only country” in the Western Hemisphere to have reserves of all the essential minerals needed to build an electric vehicle battery, and therefore Canada was ” necessary for the United States to realize their electric vehicle. goals in the future ”.
Mexico’s low labor costs have long attracted automakers, but industry executives already fear it may not be able to attract another investment boom in the switch to electric vehicles.
The plans have also aroused some national political opposition. Joe Manchin, the moderate Democratic senator from West Virginia, opposed part of the proposal to offer an additional $ 4,500 in tax credits for cars made at a US factory where workers are unionized.
Manchin, who holds a deciding vote in a Senate split 50-50 between Democrats and Republicans, said during a visit to an unorganized Toyota plant in Buffalo, West Virginia, that the additional credits were “incorrect” and “not who we are”.
Biden is expected to visit a General Motors electric vehicle factory in Detroit, Michigan later this week to sell workers how his infrastructure bill will help expand electric vehicle supply chains and create “jobs. well-paid unions across the country ”.