Biden’s EV tax credit could cause ‘serious trade battle’: Fedeli

President Joe Biden could be steering Canada and the U.S. toward a “very serious trade battle” by reviving a signature bill that threatens Ontario’s auto industry, the province’s Trade and Job Creation minister says.

Before breaking for Christmas, Biden’s omnibus Build Back Better legislation hit a sudden snag when Democratic Sen. Joe Manchin declared he would not support it.

The bill sought to fulfill many of Biden’s domestic promises by spending trillions of dollars on new climate and social policies, including by creating a new electric vehicle (EV) tax credit. It would incentivize Americans to buy EVs by increasing the rebate they’re entitled to by $5,000 if the car and its battery are union- and U.S.-made.

But in the narrowly divided U.S. Senate, Manchin’s opposition effectively sunk the bill. It was too sweeping and its price tag too high, he said.

The legislation’s failure was a victory for Canada’s auto-manufacturing industry, which is concentrated in Ontario. The Canadian, American and Mexican industries are all closely intertwined and rely on each other’s labour and parts.

But last week Biden suggested the win may be short-lived. The president said Democrats would revive the package, and try to pass parts of the bill after they “break it up.”

“I think it’s clear that we would be able to get support for the $500-plus billion for energy and the environmental issues that are there,” Biden said.

While the U.S. poses trade challenges to other industries — such as the agriculture, softwood lumber, and steel industries — the threat to Ontario’s EV-manufacturing sector is back atop provincial Economic Development, Job Creation and Trade Minister Vic Fedeli’s list of concerns of American protectionist measures.

“The Build Back Better proposal runs absolutely counter to any principle whatsoever of an integrated auto sector,” Fedeli said in an interview on Monday.

Passing the EV tax credit would equate to “ripping up a section” of the Canada-United States-Mexico Agreement (CUSMA), which “could degenerate into a very serious trade battle,” Fedeli added.

In December, Mary Ng, the federal minister of International Trade, Export Promotion, Small Business and Economic Development, and Chrystia Freeland, the federal Finance minister, said if Biden’s EV tax credit becomes law that they’ll challenge its legitimacy under CUSMA, and retaliate against the U.S. Ontario’s Progressive Conservative (PC) government supports these moves, Fedeli said.

Those threats came after the governments of Ontario and Canada spent months trying to win allies south of the border. Efforts by the two levels of government included writing to and meeting with Biden administration staff and U.S. lawmakers, advocating through consuls general, ambassadors and to governors, and lobbying through trade specialists. Opposition MPs who were a part of one trade delegation cast doubt on how productive Canadian tactics had been when speaking to iPolitics.

Ontario’s government announced the latest reinforcements to its cause on Monday: 10 new appointees to Premier Doug Ford’s Council on U.S. Trade and Industry Competitiveness.

The government first announced the creation of the council, and the appointment of its chair, Unifor national president Jerry Dias, on Dec. 9. Its newly announced members include business and labour advocates. The council’s members won’t be paid, but will be reimbursed for “reasonable” expenses, like those they incur when traveling to the U.S.

“We obviously need to counter those (U.S.) trade actions, and this group will highlight basically the essential role that Ontario has in our North American trade and look to be a counterweight to this protectionism we’re seeing coming out of the U.S.,” Fedeli said.

Other provincial trade officials, located in cities including Washington, Chicago, Dallas and San Francisco, will continue appealing for support against Biden’s EV tax credit proposal, Fedeli said.

Ontario hasn’t filled its top U.S.-based trade job — the post of its official representative in Washington — since Ian Todd left the position in October. Fedeli wouldn’t say when the government hopes to hire a replacement when asked on Monday.

If Biden’s EV tax credit is passed into law, Fedeli said the PC government will continue incentivizing companies to invest in EV production in Ontario.

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