By Michael Lee, Editor, CTVNews.ca

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TORONTO, Ontario (CTV Network) – For months, Canada has spoken out against the US bill that would offer tax incentives on US-made electric vehicles (EVs).

US President Joe Biden’s Build Back Better Act contains a provision that, if passed, would offer incentives worth several thousand dollars on certain electric vehicles.

Canada opposes this, fearing that it will have a negative impact on its own auto sector, which is closely integrated with that of the United States.

It came to a head on Friday as Canada threatened to impose retaliatory tariffs on the United States if the bill passed in its current form. WHAT DOES THE BILL OFFER?

Biden’s Build Back Better bill includes up to US $ 12,500 in incentives for certain electric vehicles built in the US and made with unionized workers.

This includes US $ 4,500 for union-made vehicles and US $ 500 for US-made batteries. The vehicles are expected to be assembled in the United States by 2027 in order to qualify for the total amount of US $ 12,500.

The White House has touted the tax credit as something that will lower the cost of U.S.-made electric vehicles for middle-class families, while the bill itself will help the United States achieve their goals. climate goals and create millions of jobs.

The bill has passed the US House of Representatives and is awaiting approval from the US Senate, which is currently divided between 48 Democrats, 50 Republicans and two Independents, both in caucus with the Democrats. US Vice President Kamala Harris also holds a decisive vote in the Senate. WHY IS CANADA OPPOSED?

The federal government opposed the so-called Buy America provision, arguing that it would do away with Canadian-made vehicles and parts and, in turn, harm the North American auto industry, including American workers. .

Canada also argues that the tax credit violates the renegotiated NAFTA or the United States-Mexico-Canada Agreement (USMCA).

In a letter sent to U.S. Senate leaders and committee heads on Friday, Deputy Prime Minister Chrystia Freeland and International Trade Minister Mary Ng said about half of the contents of Canadian-made vehicles come from the United States. , Canadian manufacturers by importing more than $ 22 billion. value of American auto parts each year.

They say US tax incentives are a 34 percent tariff on electric vehicles made in Canada. The two ministers also proposed that, as a potential solution, vehicles and batteries made in Canada be eligible for the same tax relief.

However, their letter also threatened retaliatory tariffs and a reversal of some dairy-related trade concessions if Congress approved the incentives.

The move dates back to when Canada retaliated against the United States after former President Donald Trump imposed tariffs on imports of Canadian steel and aluminum.

Ng told CTV’s Power Play on Friday that while Canada does not want to impose tariffs, it is ready to defend the country’s national interests in the event of an unsatisfactory resolution.

“This problem is evolving rapidly,” Ng said. “It’s really important that we communicate very clearly to the United States how much this is having an impact on Canada. “

There is also the question of where the US auto industry will source the minerals and rare earth elements it needs to make batteries for electric vehicles.

In an October letter to U.S. lawmakers and the White House, Ng said Canada was the only country in the Western Hemisphere to have all of the essential minerals needed to make batteries for electric vehicles.

White House press secretary Jen Psaki previously said she didn’t think the tax credit violated the USMCA, but would instead help consumers and encourage the purchase of electric vehicles. .

“The electric vehicle component of the package is something that the President personally throws at him because he believes it is an industry of the future, an industry that can help create well-paying union jobs,” she said. . WHAT DID INDUSTRY AND LABOR SAY?

Speaking on BNN Bloomberg’s The Open on Nov. 18, Maryscott Greenwood, CEO of the Canadian American Business Council, said she believed “there was a lot of room” for some deals to be worked out, suggesting the option a North American tax created by unions. credits.

Others, like Flavio Volpe, president of the Auto Parts Manufacturers’ Association of Canada, called the proposed incentives “greater threat than anything Donald Trump has pointed out to us.”

Unifor National President Jerry Dias, who heads the nation’s largest private sector union and whose membership includes people employed in the auto industry, wrote a column last month in which he said Biden had ” wrong ”to believe that Americans were buying electric batteries made in the United States. vehicles will create jobs.

“These vehicles are built with parts made in Canada and contain essential components such as Canadian nickel and cobalt,” he said.

“The point is that the destinies of Canada and the United States are intertwined when it comes to the automobile. “

Earlier this month, the president of Unifor Local 444, which represents union workers at the Stellantis Windsor assembly plant, and NDP Windsor West MP Brian Masse called the federal government to increase its incentive for zero-emission vehicles to match that proposed in the United States.

On November 17, during an announcement in Guelph, Ont on domestic production of electric vehicles and batteries, Ontario Premier Doug Ford also said the proposed tax credit violated the rules commercial.

“We will do whatever it takes to be excluded from this ‘Buy America’,” said Ford. “It’s going to hurt on both sides of the border if he keeps doing this.”

With files from The Canadian Press, Reuters and CTV News Windsor

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