The administration of President Joe Biden intends to provide subsidies to middle-class American families for the purchase of electric cars, on the condition that they are assembled in the United States with a minimum percentage of American components and unionized labor, which could displace the product assembled in Mexico and Canada
The United States would violate the rules of the World Trade Organization (WTO) and the Agreement between Mexico, the United States and Canada (T-MEC) if it approves an initiative of tax credits for the purchase of electric vehicles presented by the administration of President Joe Biden .
That is the opinion of Luis de la Calle, general director of the consulting firm De la Calle, Madrazo, Mancera (CMM), and he emphasized it in his participation in the XXVII Congress of Mexican Foreign Trade.
If the initiative is successful, it would affect Mexico, Canada and other countries that supply automotive parts and vehicles to the United States market, as well as southern states of the United States.
Under the initiative, included in President Joe Biden’s Build Back Better plan, 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. .
The budget bill published at the end of October by President Biden includes tax credits for electric vehicles “made in the United States with American materials and union labor.”
Last October, the Ministry of Economy published a letter signed by its owner, Tatiana Clouthier, in which it warns that said provisions “are contrary to the regional content value rules agreed in the T-MEC, for which I respectfully request that they consider including incentives for all North American regional content and ensemble in a manner compatible with the Treaty ”.
For its part, Canada, in the same vein, pointed out that the legislators’ proposals to create new tax credits and support for electric cars made in North America would harm the automotive industry, in addition to violating trade agreements in the region.
Clouthier argues that “the existence of new national content requirements in legislative initiatives of the US Congress would undermine the positive development of a strengthened North American alliance.”
De la Calle said that these incentives could not be granted in Texas, Tennessee, Alabama and other states that apply what is called “the right to work,” with plants where having a union is not mandatory.
“These incentives are clearly in violation of the T-MEC, in violation of the WTO, and it is very important that the United States adhere to that,” said De la Calle.
He immediately argued that you cannot have a closed car policy in the United States, or even closed in Mexico, the United States, and Canada, because the electronic cars of the future need global sourcing and design.
“The progress that is made in the manufacture of cars and trucks is going to apply to the entire white line with the Internet of Things and it will depend on the creativity of the software development and the conjunction between software and hardware. If we make it closed and the Europeans and Asians make it open, the cars of the future will not be developed in North America, ”he said.
From his point of view, North America has all the necessary characteristics, the capacity to attract talent, the most competitive energy in the world and a very important vertical integration in the automotive sector, as to have a wrong protectionist vision.
At the juncture, he highlighted two cases. Amazon’s electric car production company has not sold a car and is worth as much on Wall Street as Ford, and Foxconn, which has extensive electronics operations in Mexico, has already announced that it will produce cars.
“If we had a promoter government, we would be queuing in Taiwan to tell them your plant to produce automobiles in North America we want it to be in Mexico,” he said.
In another parallel case, the government of Mexico determined that it will initiate a dispute settlement panel against the United States for differences in the criteria to determine the rules of origin of the automotive sector within the framework of the T-MEC.
Reference-www.eleconomista.com.mx