Canada says EV tax credits would cause 'serious' harm to auto industry

Riley Beggin
The Detroit News

Washington — The Canadian government argued in a letter to congressional leadership Friday that "the protectionist elements" of proposed electric vehicle tax credits would damage the North American auto industry and aren't consistent with existing trade agreements.  

Canadian Trade Minister Mary Ng told lawmakers and officials in the Biden administration that the two nations' auto supply chains are deeply integrated, and the proposed credits "would cause serious and irreparable harm" to both the Canadian and U.S. auto industry. 

Canada's Prime Minister Justin Trudeau is accompanied by Mary Ng, Canada's Minister of Small Business, Export Promotion and International Trade, as they arrive for a meeting with Ethiopian women entrepreneurs, in Addis Ababa, Ethiopia Sunday, Feb. 9, 2020.

"If passed into law, these credits would have a major adverse impact on the future of EV and automotive production in Canada, resulting in the risk of severe economic harm and tens of thousands of job losses in one of Canada’s largest manufacturing sectors," Ng wrote in the letter obtained by The Detroit News. "U.S. companies and workers would not be isolated from these impacts."

The EV tax credit proposal is part of Democrats' social safety net and climate legislation currently being debated in Washington. Rep. Dan Kildee, D-Flint Township, and Sen. Debbie Stabenow, D-Lansing, spearheaded the legislation that would eliminate the automaker cap on EV credits and implement up to $12,500 in point-of-sale consumer rebates. 

Vehicles built by union workers would qualify for $4,500 worth of credits, and vehicles with batteries made in the U.S. would get an additional $500 consumer credit. Beginning in 2027, vehicles would have to be assembled in the U.S. to qualify for the full $12,500 worth of credits. 

Ng stressed the interconnected nature of the two auto economies: Every vehicle assembled in Canada contains around 50% U.S.-made parts, the two countries are the top importers of each others' auto exports, and the two countries agreed earlier this year to collaborate on sourcing critical minerals needed to make electric vehicle batteries. 

She also wrote that the proposed policies are inconsistent with trade obligations under the United States-Mexico-Canada Agreement, and that a weaker Canadian automotive sector would negatively impact the Great Lakes region in particular. 

"Canada and the United States share the common objectives of transitioning to green economies,

combating climate change, and ensuring the vehicles, components and critical minerals of the

future are produced here in North America," she wrote. 

"Canadian unions and labour standards are as robust as those in the United States. Therefore, it is imperative that Canadian assembly, including Canadian unionized assembly, is not discriminated against and is eligible for the maximum incentive available."

Canada's letter is the latest in a deepening divide over the proposed credits.

Late last month, executives at 12 major foreign automakers — including Honda Motor Co., BMW AG, Hyundai Motor Co., Nissan Motor Corp., Volkswagen AG and Toyota — signed a letter to House Speaker Nancy Pelosi, D-Calif., urging her to reject the extra credit for union-made EVs, arguing that the proposal would limit consumer choice and get in the way of reaching President Joe Biden's carbon-reduction goals.

Tesla Inc. CEO Elon Musk, who company is the largest U.S.-based EV producer and does not have unionized assembly plants, has also criticized the proposal. 

The United Auto Workers, the Detroit Three carmakers and leading environmental organizations such as the League of Conservation Voters, the Environmental Defense Action Fund and the Sierra Club have expressed support for the legislation. 

More than 100 Democratic members of Congress, including all of Michigan's Democratic representatives in the House, signed a letter to House leadership last week urging Pelosi to retain the EV tax credits. 

Stabenow and Kildee's offices did not immediately respond to a request for comment on the letter Friday, but both have said they stand by the union provisions that have been the focus of controversy. 

"I'm not going to apologize for the fact that we think labor-union supported workers should go to the front of the line," Kildee said. "They helped build the middle class, we want to keep it that way. If we invest in jobs that have good wages, good benefits, good workers protections, that benefits everybody."

Twitter: @rbeggin