LILLEY: Biden’s budget puts Canada’s auto industry in jeopardy

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Joe Biden’s promise to support whatever is done in America could end up costing thousands of Canadian jobs in the auto industry. Budget legislation moving through Congress contains tax breaks for electric cars that could rule out future investments by car manufacturers in Canada and cost tens of thousands of jobs.

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The legislation would increase the incentive to buy an electric vehicle to $ 12,500, but only if the vehicle and the battery that is in the vehicle are made in the United States.

That could rule out battery plants being considered for Ontario.

Flavio Volpe, president of the Automotive Parts Manufacturers Association, said Monday that the impact of this budget proposal should not be underestimated.

“The protective damage from this action could exceed any damage that Donald Trump has thrown at us,” Volpe said.

Toyota announced plans for a US-based battery plant on Monday. Ford has previously announced power plants in Tennessee and Kentucky, but so far, despite aggressive sales efforts, there is still nothing for Ontario.

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Stellantis, formerly Fiat-Chrysler, announced Monday that they have formed a partnership with LG Energy to make batteries for electric vehicles in North America. The company’s CEO, Carlos Tavares, has said the company is considering two plants, one of which could be in Canada.

This budget proposal could alter those plans.

It is not clear what the federal government is doing to reject these latest protectionist measures. In the past, prime ministers called on the incumbent president to reject protectionist proposals coming from Congress, but these measures have the support of the White House and several Buy American provisions have originated there.

Deputy Prime Minister Chrystia Freeland was asked about the many Buy American provisions, specifically the auto provisions, when she visited Washington last week.

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“I’m aware of that,” Freeland said when asked about the auto incentives in the budget bill.

Being aware of the problem and being able to change the policy are two very different things. It’s not clear from its track record so far that the Trudeau administration has enough clout in Washington to get the president to change this part of the budget or get an exception for Canadian products.

“Our government is very committed to the auto industry,” Freeland said, noting that the industry generates a lot of high-paying union jobs. What he didn’t say was what was being done to fix what could be a major problem for Canada’s auto industry in the future.

Ontario Prime Minister Doug Ford has been a leading advocate for the installation of electric vehicle manufacturing plants in his province and has been especially optimistic about making sure a battery plant is part of the mix. On Monday, while visiting the automobile hub that is Windsor, Ford extolled the benefits of making batteries for electric vehicles in Canada.

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“We have all the natural resources and we have the lithium, we have the nickel, we have the cobalt,” Ford said.

It’s part of a sales pitch you’ve made in the past that could work if there were a level playing field between Canada and the United States. However, for the CEO of Stellantis, he has to see if he can sell the vehicles his company makes and with the US market ten times the size of Canada, incentives will be a major factor.

Volpe said he hopes the ongoing diplomacy can get a waiver for Canada – other than that, he says the proposal should be challenged under the USMCA trade agreement and at the World Trade Organization.

“We have to be clear and very loud from Queen’s Park, to Ottawa and Washington,” Volpe said.

The future of one of the nation’s largest industries depends on Canada winning. A legal challenge could very well be successful, but by the time it is heard, investment decisions may have already been made.

This needs to be addressed at the political level and soon.