Why does Biden’s proposal to subsidize electric cars cause sparks in the T-MEC?

Each of the three friends has a difficult issue to defend with their business partners. For AMLO it is the electrical counter-reform. In Justin Trudeau’s case, protecting his dairy industry. With Joe Biden is his proposal to subsidize the purchase of electric vehicles made in the United States.

For Biden, this is a central proposition in his plan to put the United States at the forefront of global competition in the production of electric cars. In a two-way carom, the proposal throws a cable at America’s auto unions. The government will grant up to $ 12,500 in tax credits for anyone who buys an electric car made in the United States, produced by unionized workers. As it stands, the only car that now qualifies for the maximum allowance is the Chevrolet Bolt EV and Bolt EUV. They are left out, for example, Tesla cars, because unionized workers are not fully allowed in their factories. The Mustang Mach E is out, because it is made in Mexico.

The Mexican Ministry of Economy was the first to shout Foul, regarding the United States’ tax incentives proposal. It is against the spirit of the agreement in the T-MEC, expressed Tatiana Clouthier Carrillo. There would be no level floor. It is a case of protectionism that contradicts a free trade agreement because it discriminates against production made in a partner country. Between the lines, we can read that Clouthier is concerned that this is not an isolated action. Since the Trump administration, there have been several attempts to bring back to the United States a part of the automotive production that is now in Mexico. There were flirtations and threats, but things stayed more or less the same.

With the arrival of Biden and his team to the White House, a new style and other tactics appeared. Washington wants a very rigid new criteria to be used to account for how much of each vehicle is made in each country and in the North America region. This new criterion is rejected by Mexico and Canada because it would make their industries less competitive compared to the United States. The Mexican government will decide in December whether to take the controversy over the new US criteria to a panel.

Let’s go back to the electric car subsidy and look at Canada’s position. In a meeting with students in Washington DC, Prime Minister Trudeau said he was concerned about the negative impact this proposal could have. His Deputy Prime Minister, Christya Freeman elaborated on the issue, saying: “This incentive has the potential to become the dominant issue in our bilateral relationship.” Canada is key to the competitiveness of the North America region in the production of electric vehicles. It is a very rich source of critical minerals in EVs, for example lithium, nickel, cobalt and graphite.

The White House has dismissed criticism / complaints from its business partners. Prior to the three friends summit, spokesman Chris Meagher said “there is a long history of using tax credits to incentivize consumer choices.”

The truth is that Biden’s initiative touched a vital nerve in the body of the T-MEC, largely because the automotive industry is the best example of successful integration of production chains in North America. The parts of a car, made in Mexico, come and go more than 10 times between North American countries, in the vehicle manufacturing process.

For Mexico, they represent more than 110,000 million dollars of annual exports, including vehicles and auto parts. In addition to around 900,000 direct jobs. Canada has been overtaken by Mexico in recent years in automotive and auto parts, but its numbers are very close to those of Mexico in production, exports and jobs. Can this degree of integration and collaboration be sustained in the age of electric vehicles?

González

[email protected]

Editorial Director General of El Economista

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Degree in Economics from the University of Guadalajara. He studied the Master of Journalism in El País, at the Autonomous University of Madrid in 1994, and a specialization in economic journalism at Columbia University in New York. He has been a reporter, business editor and editorial director of the PÚBLICO de Guadalajara newspaper, and has worked for the newspapers Siglo 21 and Milenio.

He has specialized in economic journalism and investigative journalism, and has made professional stays at Cinco Días in Madrid and San Antonio Express News, in San Antonio, Texas.