Representatives of Mexican and Canadian consulates in the Midwest say electric vehicle tax credit provisions in the Build Back Better Act conflict with the USMCA.
“Of course we’re all in favor of clean cars, but by bringing in these kinds of subsidies, we’re undermining free trade,” Consul General Julian Adem of Mexico said yesterday during a virtual discussion hosted by WisPolitics.com, WisBusiness.com and the Wisconsin Technology Council. “That’s not the way to go. Personally, I don’t think the bill can be passed in its current form.”
One provision of the Build Back Better Act that’s pending in the U.S. Senate would provide a $4,500 tax credit for electric vehicles assembled in the United States with union labor. Adem, who represents the Mexican consulate in Milwaukee, said Mexico “would do all that is within our scope” to avoid this going into effect, including seeking resolution through official dispute channels.
Aaron Annable, representing the Canadian consulate in Chicago, called the electric vehicle tax credit provision “the biggest bilateral issue for us right now,” arguing it would represent a step backward from the progress made in the United States-Mexico-Canada Agreement. The agreement replaced NAFTA and went into effect July 1, 2020.
“We share the vehicle electrification objectives of the U.S. but don’t see this as the way to achieve them,” Annable said. “What it will amount to for us is essentially a 34 percent surcharge on vehicles coming to Canada, which will have dramatic impacts.”
Panelists also touched on the role of the USMCA in facilitating the flow of dairy products through North American markets. Annable noted Canada made some “important concessions” to the United States in crafting the agreement. But he acknowledged tensions remain as some critics have complained about lax enforcement.
He said Canada agreed to provide new market access to U.S. producers through tariff rate quotes for dairy, poultry and ag products, as well as eliminating tariffs on whey powder and margarine. The agreement also establishes a mechanism to monitor exports of skim milk powder, milk protein concentrate and infant formula above an agreed upon threshold.
“There was a lot of work in that area with dairy between Canada and the U.S., but I think from our perspective we did make some important concessions that will provide new opportunities for U.S. producers,” Annable said.
Stanley Pfrang, a senior market development director for the Wisconsin Economic Development Corp., said Canada represents both a “strong competitor” for U.S. dairy and a major export destination for Wisconsin-based companies.
Meanwhile, Tech Council President Tom Still highlighted labor trends in Mexico and Canada that could play a role in how the United States addresses workforce challenges. He noted Canada has enacted immigration changes to “open up” its tech-based workforce to skilled workers from other countries, while demographic trends have resulted in a relatively young population in Mexico. Adem described an ongoing effort since 2013 to improve English skills among Mexican university students through scholarships.
“If they can go back to Mexico and work when they finish their degrees in a tech-based field, can go back to Mexico and work in transnational companies, possibly based out of Canada and the United States,” Adem said. “The challenge is to continue this parallel activity in cooperation in the educational sector with the support of private funds.”
Annable said Canada’s digital economy is “operating at nowhere near the potential it could be,” pointing to a shortage of workers with STEM skills.
“Even though we do have a highly educated and skilled workforce in Canada, we do need to look abroad,” Annable said, adding that labor mobility provisions were preserved in the USMCA. “Could we have gone further? Perhaps, but at least we’ve preserved what was there.”
Adem discussed aspects of the USMCA aimed at modernizing the trade agreement, related to digital trade, intellectual property and more, that are helping small businesses in North America thrive. He said 94 percent of all companies in Mexico are small businesses, adding “those will now be able to be inserted better into the USMCA” thanks to these changes.
“They have more guarantees to trade, and so will your counterparts in the United States now have more opportunity, either through digital, through protection of intellectual property, etcetera,” he said.
Yesterday’s discussion also hit on the pandemic’s impact in North America, including global logistics issues putting a strain on supply chains around the world. Since NAFTA was created in the 1990s, supply chains between the United States, Canada and Mexico have grown increasingly integrated over time, Annable said.
“The modernized USMCA provides exactly the kind of tools that we need in our toolboxes to move our countries forward, while we still continue to face challenges from the pandemic and these ongoing supply chain challenges,” he said.
–By Alex Moe