The Trudeau government is being urged to revive a Team Canada approach to tackle the U.S. protectionist policies of the Biden administration, a non-partisan strategy that worked effectively during the 2017 North American free trade negotiations.
Canadian business and labour leaders say an all-Canada approach is urgently needed as the U.S. Senate begins negotiations on Build Back Better legislation that includes large tax breaks for Americans who buy electric vehicles built in the United States.
During the NAFTA negotiations, Deputy Prime Minister Chrystia Freeland enlisted business and union leaders, premiers and even former Conservative cabinet ministers to work the U.S. political system.
They lobbied Congress, U.S. governors and state legislators and business groups south of the border.
“There is no question this is going to take a Team Canada approach like we did in the NAFTA negotiations,” said Unifor president Jerry Dias, who represents Canadian auto workers. “We need to meet with 33 governors where Canada is their major trading partner and say: ‘Look we are not going to have our number one manufacturing industry destroyed without you feeling some pain as well.’”
Prime Minister Justin Trudeau was unsuccessful on Thursday in his direct appeal to President Joe Biden for concessions on Buy American incentives that include tax credits of US$12,500 to encourage Americans to buy electric vehicles (EVs) made in the United States.
Mr. Trudeau and senior ministers told the President and U.S. lawmakers the incentive would kneecap Canada’s auto industry and violate the North American free-trade agreement, now called the United-States-Mexico-Canada Agreement (USMCA).
Mr. Biden was unmoved, and his press secretary, Jen Psaki, later told reporters the electric vehicle tax breaks do not breach the USMCA.
“We have a different view of the USMCA commitment on the EVs,” Brian Nichols, U.S. Under Secretary for Western Hemispheric Affairs, told reporters on Friday.
The electric vehicle incentives are included in Build Back Better legislation that the Democratic-controlled House of Representatives passed on Friday. The US$1.75-trillion bill aims to bolster social programs and fight climate change.
The bill is being sent to the evenly divided Senate, and Canada will need to begin heavy lobbying to get the EV incentive removed. Centrist Democratic Senator Joe Manchin of West Virgina has expressed misgivings about the tax credit.
“We’ve got enormous work ahead of us both with the administration and Congress,” Canadian Chamber of Commerce president Perrin Beatty said. “We really need to have everybody – the private sector, the government, the provinces and others, pulling on the oars in the same direction.”
David MacNaughton, who helped negotiate the USMCA as ambassador to Washington, concurred.
“We are going to have to be constantly in that kind of Team Canada mode if we are going to be successful in continuing to have access to the U.S. market,” he said.
Mr. MacNaughton said members of the Biden administration have protectionism in their DNA, and he was not surprised Mr. Trudeau got no concessions.
“I didn’t think we would get any dramatic breakthrough Thursday, but I do think we will get some sort of accommodation on the electric vehicle thing, but it’s not going to be easy. It has to be a combination of cajoling and occasionally being tough,” he said.
Mr. MacNaughton said the Canadian government took a tough line when the United States was unwilling to send personal protective equipment during the height of COVID-19. The Americans caved when Ottawa threatened to block pulp exports, a key material for making the protective masks and gowns.
Mr. Trudeau reminded the President that Canada has a competitive advantage on critical minerals used in batteries for electric vehicles, computers, smartphones and other essential items.
“They want to develop their electric vehicle industry, but they are going to need our nickel, our cobalt, our magnesium in order to do that,” Mr. Dias said. “And ultimately we can say to them that you are the last country in the world we will export any of that to unless you pull that proposal off the table.”
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said Canada also should also partner with Europe, Japan, Korea and Italy, which say the electric vehicle tax credit would violate international trade rules.
Goldy Hyder, president of the Business Council of Canada, said the country needs a “sustained and collaborative” strategy from every sector of the economy to “protect our interests” in the face of U.S. protectionism.
“That’s how we won in the USMCA negotiations,” he said.
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