Canadian delegates head to Washington to fight made-in-U.S. vehicle credits, softwood duties

GMC Hummer EVs stack up an assembly line at the General Motors Factory ZERO electric vehicle assembly plant in Detroit, Michigan on Nov. 17, part of the World Trade Organization or USMCA.ALMOND NGAN / AFP / Getty Images

International Trade Secretary Mary Ng flew to Washington on Wednesday to try to fend off a range of protectionist American measures, including looming tax credits on US-made electric vehicles that could devastate auto assembly in Canada, as well as an announced doubling of tariffs on softwood last month .

Canadian consuls general from some of that country’s diplomatic missions in the United States will also be in Washington to discuss the case, said Ng’s spokesperson Alice Hansen, who described the visit as a “Team Canada” approach.

The opposition minister from the Conservative Party and the NDP, who accompanied her on the three-day trip, said it was time for Canada to negotiate a new softwood agreement with the US. The last one expired in 2015.

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The trip will include meetings with U.S. Senators where Ms. Ng will attempt to convince them of the pitfalls of tax credits for consumers purchasing electric vehicles or electric vehicles assembled in the United States. Sessions come ahead of an expected Senate vote in December on President Joe Biden’s $ 1.75 trillion Build Back Better bill, passed in the House of Representatives last month, which includes vehicle incentives.

The Canadian and Mexican governments fear that the proposed US tax credit could disrupt the future of electric vehicle production in their countries as auto companies could relocate production to the United States.

“It’s a press in court,” said Flavio Volpe, president of the Association of Auto Parts Manufacturers, which is also due to meet with US Senators this week. “Last-minute peace talks are always better than starting a war that no one can afford.”

The Minister and Mr. Volpe both argue that the tax credits are not only a violation of the renegotiated NAFTA agreement, which has been renamed the US-Mexico-Canada Accord, but that they will end up damaging American jobs because of US auto – Parts suppliers will lose business from exporting to Canadian auto assembly plants. Michigan auto parts suppliers ship $ 9 billion annually.

As part of the USMCA deal, automakers must source 75 percent of their parts from Canada, the United States, or Mexico. But if US fitters start building to meet the EV incentive, 50 percent of the content has to come from the United States, but the rest can come from anywhere, including offshore countries like China and Malaysia.

If it passes the Senate, the bill will eventually be submitted to a committee on which Mr. Volpe hopes lawmakers could insert a “Canada Carveout Under a Different Name” at that point.

If Canada fails to stop US-made EV credit, it has the option to appeal the US measure with the World Trade Organization or under the USMCA.

The electric car tax credits are backed by Mr. Biden, many Democrats in Congress, and the United Auto Workers union, and would disproportionately benefit Detroit’s big three automakers who assemble their US-made vehicles at unionized plants.

Vehicles would need to be made in the U.S. starting in 2027 to qualify for $ 12,500 credit, which also includes $ 500 credit on a U.S.-made battery.

The electric vehicle subsidy is one of the latest in a series of controversial US measures, which include increasing fines on Canadian softwood and a Michigan campaign to shut down Line 5 from Enbridge. Canada also stopped exporting potatoes from Prince Edward Island to the US on Nov. 2 after warnings that they would be blocked because of a fungus, although there was no evidence that the parasite was on the market 20 years after it was discovered has appeared.

Conservative traffic critic Melissa Lantsman accused Prime Minister Justin Trudeau of abandoning Canadians despite visiting Mr Biden two weeks ago. “He lost the battle for wood. He lost the fight against the peasants. He is about to lose the fight [for] Auto workers and he didn’t even bother to fight for the workers in the energy sector, ”she said during Question Time. “The Americans are ignoring this prime minister.”

Mr Trudeau denied their allegations, saying he was campaigning for Canadian industry just as he was for Canadian steel and aluminum producers. In 2018 Canada imposed tariffs on US aluminum and steel imports after the United States penalized Canadian deliveries of the same goods.

Last week the US Department of Commerce announced a new tariff of 17.9 percent for most Canadian softwood producers. Most Canadian manufacturers currently pay a duty rate of 8.99 percent for shipments south of the border.

“I always hope that we can find a permanent solution to this ongoing trade dispute,” said Susan Yurkovich, president of the BC Lumber Trade Council, in an interview on Wednesday. “The US is unable to supply its own market.”

The long-running trade war over softwood dates back to 1982. This latest confrontation marks the fifth round of the cross-border struggle. The US Department of Commerce began levying tariffs on Canadian lumber in April 2017, with tariffs for countervailing and anti-dumping duties have fluctuated since then.

“It’s not about politics, it’s about protectionism,” said Yurkovich. “The point is that US industry is trying to use its trade laws to keep its competitors out of the market and artificially drive prices up.”

Randy Hoback, the conservative international trade critic who accompanies Ms. Ng, said Canada is seeking allies for softwood in the US, such as American home builders worried about the impact of double tariffs on inflation.

He said Canada should sign a new softwood agreement to control bilateral timber trade in order to bring peace to the matter.

“You have a USA that only thinks of the USA,” he said, saying, “That goes back to Donald Trump” or even earlier.

NDP MP Daniel Blaikie, who was also on the trade trip, said Canada should try to reach a new softwood deal. “I think we should try to come up with a deal.” However, he noted that Canada has a strong legal basis for not subsidizing softwood, as the United States claims. The NDP’s terms are that it be fair and transparent, which benefits Canadian workers and the Canadian softwood industry.

He said he also wants Canada to develop a new national automotive strategy to stimulate the industry, rather than an “ad hoc” approach.

British Columbia is the province with the highest wood production in Canada, accounting for 40 percent of the country’s production last year.

The tariffs have made wood more expensive for consumers and builders. Also, wood prices have risen after the floods in BC in mid-November clogged supply chains and reduced the amount of wood available.

“Prices rose due to continued rainfall, flooding and mudslides in British Columbia,” said CIBC World Markets Inc. analyst Hamir Patel in a research note.

The US timber lobby argues that provincial governments are giving Canadian producers unfair subsidies, claiming that softwood in the United States is being dumped below market value. Ottawa and provincial governments counter that in the past they had repeatedly won cross-border trade arguments through various appeal procedures in the timber battle.

With a report from Reuters

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