U.S. President Joe Biden was unwilling to offer concessions to Prime Minister Justin Trudeau and Andres Manuel Lopez Obrador of Mexico on proposed Buy American provisions, including tax incentives for U.S.-made electric vehicles that could cause future production of the vehicles to move away from Canada.
Mr. Biden met his two North American partners one-on-one in the Oval Office, and later in a trilateral meeting to discuss climate change, immigration issues on the U.S.-Mexican border and major irritants to continental trade.
Despite Canada’s warnings that the proposed incentives for U.S.-made electric vehicles would violate the United States-Mexico-Canada free trade agreement, Mr. Biden was non-committal about whether his administration would acquiesce to Mr. Trudeau’s requests that America allow the tax credits to apply to Canadian-made vehicles too. The credits are a component of Mr. Biden’s U.S.$1.75-trillion Build Back Better program, which has yet to receive congressional approval.
Mr. Biden told reporters that he would not start negotiating a deal until after the incentives, which would offer American consumers up to US$12,500 each in tax credits for buying U.S.-made electric cars, are approved by Congress.
“There’s a lot of complicating factors,” he said in the Oval Office before his meeting with Mr. Trudeau.
Asked if there was room for compromise, the President said: “The answer is: I don’t know, and I don’t know what we’re going to be dealing with, quite frankly, when it comes out of the legislation, so we’ll talk about it then.”
The Prime Minister told a late news conference that he made the point to the President that the U.S. will not benefit in the long run from the electric-vehicle incentives.
“We have been highlighting our concern about the proposed credit for electric vehicles uniquely made in the United States and the impact it would have on Canadian jobs and the Canadian auto industry at a time when we are investing significantly in the kinds of zero emissions vehicles that the world is going to need in the coming years,” he said. “Canada has highlighted real concerns about the impact it would have, not just on Canada, but the integrated industry and workers on both sides of the border.”
The current wording of the legislation is vague on how exactly the Buy American provisions of the tax credits would work, leaving it up to the White House to make more specific regulations later on. A refusal by Mr. Biden or congressional leaders to rewrite the legislation to allow Canada-made vehicles to qualify for the credits would set up a potentially years-long effort after the bill’s passage to get the White House to write a Canadian exemption into the regulations.
Offering the tax credits only for U.S.-made vehicles could cut Canada and Mexico out of the production of electric vehicles by encouraging auto companies to put their plants in the U.S. It could also hurt the auto industry and drive up costs for consumers by disrupting supply chains, which currently stretch across all three countries.
Later, White House Press secretary Jen Psaki took strong exception to Canada’s claims that the tax incentives would violate the United States-Mexico-Canada Agreement.
“In our view the electric vehicle tax credits is an opportunity to help consumers in this country,” she told a White House news conference. “It’s not the first time that there have been incentives and tax credits to help consumers.”
She said the tax credits will help Americans move toward a cleaner environment by switching to electric vehicles. And she made clear how personally committed the President is to the measure.
“The electric vehicle component of the package is something the President is very personally excited about because he believes it is an industry of the future,” she said.
Deputy Prime Minister Chrystia Freeland, who negotiated USMCA, has said Canada intends to aggressively lobby Democratic and Republican legislators to revamp the electric vehicle provisions in the Build Back Better legislation. Canada is not opposed to tax incentives for electric vehicles, only the plan to apply these credits solely to U.S.-made vehicles.
Mr. Trudeau and Mr. Biden met alone for 20 minutes, which Mr. Trudeau opened by pressing Mr. Biden on electric vehicles, said a Canadian government official briefed on the sit-down. They then met for an additional 40 minutes, together with members of their cabinets and staff. The meeting went longer than originally planned. The official said that the pair also discussed securing critical minerals and cross-border supply chains, and how to deal with the rise of authoritarianism.
The Globe and Mail is not naming the official because they were not authorized to speak publicly.
The Trudeau government, which faced former president Donald Trump’s repeated threats to tear up continental free trade, was caught off guard when the friendlier Mr. Biden also proved to have a strong protectionist streak.
The signature infrastructure package he signed into law earlier this week contains Buy American provisions meant to direct most of the US$1.2-trillion in spending to U.S. firms. Canada is exempted from most federal Buy American rules because of a World Trade Organization agreement, but infrastructure spending routed through local governments is not subject to the WTO deal. This could cut Canadian contractors out of major projects under Mr. Biden’s plan.
Despite these serious squabbles, Mr. Biden boasted about Canada-U.S. collaboration on climate change and social justice. “This is one of the easiest relationships you have as an American president, and one of the best,” he said.
Mr. Trudeau said the two countries are “hugely aligned on climate and COVID.”
Speaking on background to reporters, senior U.S. officials said the President wants to hammer out compromises on issues that have troubled Canada and Mexico since Mr. Biden replaced Mr. Trump as president.
One official said the three leaders will start a North American supply chain working group that will aim to minimize future disruptions to essential industries in areas like critical minerals.
The three leaders committed to expanding manufacturing production and supply chains for pandemic preparedness. And Canada and Mexico will repay millions of COVID-19 vaccinations provided by the U.S. at the height of the pandemic by sending supplies to hard-hit Latin America.
Mr. Trudeau and Mr. Lopez Obrador also embraced a call from President Biden to confront racial inequality in the workplace.
In his bilateral meeting with Mr. Biden, Mr. Trudeau objected to Michigan’s attempt to shut down Line 5, a Canadian Enbridge oil and gas pipeline that crosses the state. Canada is backing Enbridge under the terms of a 1977 pipeline treaty.
Enbridge has been locked in a long-running dispute over Line 5, which ships 540,000 barrels per day of crude and refined products. Michigan ordered the pipeline shut down in May over fears an underwater section could leak into the Great Lakes.
Canadian Chamber of Commerce President Perrin Beatty expressed disappointment that Mr. Trudeau was unable to make any progress with the President on U.S. protectionism and attempts by Michigan to shut down Line 5.
“While Canadians hope that the change in administrations in Washington will help revive the historic special relationship between our two countries, that relationship remains largely transactional, with domestic U.S. politics driving key decisions that are critical for Canada,” Mr. Beatty said.
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