Veteran observers of both the North American auto sector and the Canada-U.S. relationship say the tax-credit scheme President Joe Biden is proposing to encourage American consumers to buy more electric vehicles has a potential may never be implemented.
However, if that is the case, then tax incentives of up to $12,500 for cars and trucks assembled outside of unionized states could mean that Canada’s auto industry has already fallen into disrepair. end.
“We’re at a really confusing moment,” said Dimitry Anastakis, a Canadian professor of business history at the University of Toronto’s Rotman School of Management.
See what if the $83 billion U.S. auto market, which is rapidly abandoning the internal combustion engine, suddenly faces the opportunity to save up to nearly 25% on a $55,000 EV USD, as long as it is assembled on US soil by union workers.
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It would equate to what the federal government in Ottawa calls a 34% tax on vehicles made in Canada. The imbalance would hit foreign-made car brands with a scarlet letter and send car and parts manufacturers and some 125,000 of their jobs scrambling across the border.
It was a worst-case scenario triggered by what Anastakis called the “disintegration” of more than half a century of tripartite car production, with companies abruptly pulling out shares and canceling plans they had planned. made to spend billions of dollars on their Canada and Mexico operations.
“You will see the removal and cancellation of all notices that have been made for investments, and possibly no future investments in passenger vehicles,” he said. , “that will obviously be the end of the industry as we know it. ”
But Anastakis and the others were convinced that things would not turn out like this.
It makes no economic sense to anyone – not consumers, not producers, whether foreign or domestic, and not even the government that proposed it in the first place.
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“Established manufacturers have invested a lot of money in Canada and Mexico, and they have a lot of benefits from an integrated industry,” said Anastakis.
“There are all sorts of benefits to doing what they’ve been doing for the last 50 or 60 years – they make money doing this. There’s a reason the Big Three have made their production decisions the way they have, because they’re trying to maximize (profit). ”
It has long been a core principle of Canada-U.S. relations that the only way to effect change in DC is to frame Canadian priorities in terms of American self-interest. In other words: hurt us hurt you.
Deputy Prime Minister Chrystia Freeland and Commerce Secretary Mary Ng wrote last week to key members of the US Senate: “Given the extensive integration of our respective auto industries, the proposal will had significant consequences in the United States, affecting U.S. manufacturing and jobs.
That letter made it clear that Canada would roll out a series of targeted, retaliatory tariffs and suspend key parts of a new North American trade deal if the provision, deep within Biden’s 2,135-page Build Back Better bill, won approval from Capitol Hill. .
But we are not there yet.
“There are solutions to this; This is not a dilemma, a dilemma,” Prime Minister Justin Trudeau said Thursday in an interview with The Canadian Press, although he would not speculate on what possible solutions are on the table.
“Canada’s supply chain and Canada’s interconnectedness with the United States is such that it can become extremely uncomfortable for American workers, for American politicians, for the American economy, when it comes to this kind of disagreement, this discord, with Canada. ”
Canada offers a highly skilled, world-class manufacturing workforce with half a century’s worth of institutional knowledge in car and truck building, not to mention the cost benefits of a country with 80 cents dollars and public health care. Union leaders like Bob White, the founding president of Canadian Auto Workers after the organization split from its American counterpart, exploited those advantages wherever they went.
“Bob White used to say that for every Canadian car that rolls around, you can also put $1,500 in cash on the hood, because that’s just the difference in healthcare costs,” Anastakis said.
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“I can’t imagine that things would turn out like this, because it would be disruptive to the industry.”
So why did it happen in the first place? Politics.
Biden is a long-standing Democrat who remembers the glory days of the American auto industry, not to mention his party’s traditional base: hardworking middle-class voters.
“He has this age-old type of appeal that has always been part of his political personality,” said Christopher Sands, director of the Canada Institute at the Wilson Center in Washington, DC.
“You get the feeling from his campaign in 2020 that he thinks blue-collar voters have basically been stolen from the Democrats by Trump with a lot of nationalist language. And while he disagrees with Trump on many things, he is trying to appeal to that same group and rally votes for the Democratic Party to get those voters back. “
Like so much of what the Biden administration has done to boost public support, it doesn’t seem to work.
The president’s approval rating has added new depth in recent months, despite the seemingly strong economy – despite COVID-19 – and two notable legislative victories in Congress: $1.9 trillion pandemic relief legislation and $1.2 trillion infrastructure package.
The passage of the $1.75 trillion Rebuild Better bill, which now seems unlikely before the new year, would complete a remarkable trilogy for a president, who although governed by an equally divided Senate, has repeatedly demonstrated the consensus-building skills he honed during his more than 40 years as a US legislator.
Even so, most political observers in the US predict a Republican midterm race next year. That could ultimately work in Canada’s favor by forcing the president to focus more on center stage.
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“If you can buy time, maybe the political calculus will change,” says Sands. “Canada doesn’t want to burn its bridge to the future and doesn’t want to get too involved in this particular war because it might not actually materialize.”
Even if the Senate passes the bill, he added, a lot could change along the way, as various federal agencies sit down to design rules that will govern how the bills are implemented. different provisions of the law. That could mean expanding the definition of “assembled in the United States” to include North America, for example, if the law as written does not provide consumers with enough choice.
Duncan Wood, senior adviser with the Wilson Institute of Central Mexico, said he doubted the bill would eventually pass with some form of tax credit package still intact.
“And then I thought? Wood said. “But I think it’s going to be a long process.”
© 2021 Canadian Press
https://globalnews.ca/news/8458620/bidens-ev-tax-credits/ Industry experts say Biden’s EV tax credits would look different if implemented.