Mexico readies retaliation for US auto subsidies

The Mexican government has warned that it is preparing to retaliate if the US Congress votes on December 13 on an initiative presented by the administration of President Joe Biden that includes tax credits for electric vehicles.

From the perspective of the Mexican government, these credits would violate the international commitments of the United States by conditioning them on purchases of vehicles assembled in the United States and a certain degree of American content in the auto parts.

“To defend our auto industry and regional commitment we would retaliate commercially; We would do that because it is not valid that we are playing to be partners when it suits me and when not, I apply you through the dark way, and I say dark because it does not show, because we are talking that this measure would come into force in 2017, “he said Tatiana clouthier, Secretary of the Economy, in a virtual press conference.

According to the initiative, included in the plan Build Back Better From President Biden, the electric vehicle tax credit will reduce the cost of an electric vehicle made in America with American materials and union labor by $ 12,500 for a middle-class family.

Clouthier said the incentives include an additional $ 500 for batteries.

“We are evaluating all kinds of retaliation, it is not the first time,” said the official at the conference, in which she was accompanied by secretaries of economic development from several states. “We have to propose something important and strategic, for those products and places where it hurts, to give precision shots,” he added shortly after.

In parallel, the government of Mexico prepares dispute resolution cases both within the framework of the Treaty between Mexico, the United States, and Canada (T-MEC) and the World Trade Organization (OMC).

Right there, Luz Maria de la Mora, Undersecretary of Foreign Trade of the Ministry of EconomyHe indicated that in the case of the WTO, also members such as Canada, Japan, South Korea, Germany and the European Union are interested in addressing the matter, if it prospers as proposed in the US Congress.

“(The measure) could be singled out (in the WTO) as a performance requirement, which is prohibited. The type of tax credit that is being proposed conditions the final assembly of the electronic vehicle (sic) in facilities in the United States that operate under a unionized collective bargaining agreement and is also considering that the components and parts of the vehicle contain at least 50% of domestic content and battery cells that have been manufactured in the United States, ”said De la Mora.

The Undersecretary stated that these conditions on production in order to receive this tax incentive are clearly prohibited in the WTO and, therefore, Mexico will be working with its partners in that forum.

Mexico’s automotive sector represents around 4% of the country’s Gross Domestic Product (GDP), approximately 1 million direct jobs and a figure that is around 25% of its total exports.

Clouthier also stressed that the measure goes against the agreements in the framework of the Economic Dialogue of High level between Mexico and the United Statess (DEAN), the integration of North America, the “historical position” that the United States has promoted in free trade and what is best for the region with respect to migratory flows.

“We should be seeing what routes we follow to have an impact and mobilize voters, even so that they make the call to their senators and see the repercussions that this can have. And I say again: there cannot be an anti-migrant strategy, when on the other hand I am doing the opposite, “said Clouthier, referring to the US government.

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