Mexico’s top official for North American affairs says his country shares Canada’s concern over an American proposal to offer tax credits to people who buy electric vehicles that are assembled in the United States.
The Canadian government warned in a letter to U.S. Congressional leaders last week that the proposed tax credits could damage the future of EV production in Canada.
Roberto Velasco Alvarez, who became head of the Mexican Foreign Ministry’s North American unit last year, was in Ottawa this week for meetings with officials at the Department of Global Affairs. He replaced Jesus Seade, who handled the renegotiation of the North American Free Trade Agreement and has since been appointed Mexico’s ambassador to China.
Mr. Velasco said in an interview that Mexico has big ambitions for its EV industry. He pointed out that the revised trilateral trade agreement, now called the U.S.-Mexico-Canada Agreement (USMCA), is supposed to guarantee an equal playing field for all three countries.
“The rules in the USMCA are clear,” he said. “There are rules about discriminatory treatment.”
In its letter to Democrat and Republican leaders in the U.S. Senate and House, the Canadian government argued provisions in two proposed pieces of American legislation could shift EV production to the U.S. Canadian International Trade Minister Mary Ng wrote that providing thousands of dollars in tax credits exclusively for vehicles assembled in the U.S. would cause “serious and irreparable harm to the Canadian automotive sector.”
A U.S. House panel in September approved legislation that would boost existing EV tax credits. The new credits would include US$4,500 for each union-made vehicle produced in the U.S., and US$500 for each American-made vehicle battery. In total, each vehicle would be eligible for up to US$12,500 in credits.
Canada’s concerns appear not to have been heeded. An updated version of U.S. President Joe Biden’s “Build Back Better” spending plan, which was released Thursday, still included the US$12,500 EV credit.
This represents a threat to the future of Mexico’s auto sector as well. “We are concerned and we will be looking at the issue very closely and following what the U.S. is doing and what Canada is doing,” Mr. Velasco said.
“Mexico is a very big producer of automotive and different vehicles, and naturally we want to have a transition to electric vehicle adoption in the next few years.”
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Canada, said the proposed credits make no sense because they would also harm U.S. companies, which make one million cars in Canada each year using 50-per-cent American parts and 60-per-cent American raw materials. “They are out over their skis on this one,” he said.
Mr. Velasco said Mexico is talking to Canada and the U.S. about reviving the annual North American Leaders’ Summit – also called the Three Amigos Summit – which ended when Donald Trump was elected U.S. president.
“North America is a good idea. We want to build a common vision, and eventually getting our leaders together would be a great way of advancing on that direction.”
The Mexican official defended changes that President Andres Manuel Lopez Obrador’s leftist government is making to the country’s energy market. Mr. Lopez Obrador has submitted a bill to give preference to state-owned power plants that burn coal and fuel oil. Critics say the move reverses liberalization by previous administrations.
Canada said earlier this year that it is worried the changes will damage Canadian investment in Mexico’s renewable energy sector.
Mr. Velasco said Mexico is talking to Canada and other countries about the changes to “see what possible areas of co-operation and solutions exist.” He said that, despite a population of 127 million people, Mexico “is the country in North America that produces the least emissions of carbon dioxide and other pollutants.”
He said Mexico would like to work with Canada and the U.S. on ways to reduce North America’s vulnerability to pandemics, including by attracting more vaccine production facilities to Mexico and Canada. “The pandemic is not going to end in North America unless it ends in the three countries in North America: Canada, the U.S. and Mexico.”
Mexico has been seeking information from Canada on the experience of legalizing marijuana, he said. Canada became the first G20 country to legalize cannabis in October, 2018. Mexico has already decriminalized cannabis use, and in June the country’s Supreme Court said its Congress should legalize the substance for recreational purposes.
Canadian trade and investment with Mexico have grown over the past decade, reaching more than $36-billion in two-way merchandise trade in 2020. Mexico is Canada’s third largest single-country merchandise trading partner, after the U.S. and China. Canadian direct investment in Mexico was $28.8-billion in 2020. The country is Canada’s ninth-largest direct investment destination.
Mr. Velasco said Mexico City feels there is a chance now to reinvigorate the bilateral relationship, considering the fact the Obrador government has three years left in its mandate and the Canadian Liberal government has a similarly firm hold on power after winning a minority in the recent federal election.
“The moment right now is ripe to do a reboot and to think very ambitiously [about] what we can achieve together in the next few years between the Lopez Obrador government and the Trudeau government,” Mr. Velasco said.
With reports from Reuters and Associated Press