Encouraging electric vehicles: U.S. Buy American policies threaten Canadian auto worker jobs

U.S. President Biden’s Build Back Better Act passed the U.S. House of Representatives in November, including  incentives to encourage adoption of electric vehicles: a consumer tax credit of $7,500 for electric vehicles made in the U.S., and an additional $4,500 tax credit if the vehicle was made with union labour.  The news was welcomed by U.S. auto workers’ union UAW, but in Canada, workers and the government are alarmed. A press release from Unifor, the Canadian auto workers’ union, is titled “President Biden needs to realize he is shooting U.S. auto sector in the foot” , stating: “The fact is U.S. assembly plants couldn’t survive without the engines and other components we make here. ….. For that matter, he can’t build a sustainable BEV industry without the nickel, cobalt, manganese and other minerals coming out of Canada, either.” The business-oriented Financial Post published “Why America’s rush to EVs might kill the entire Canadian auto parts business”. As reported by CBC News, federal government officials have threatened retaliatory trade measures, arguing that the Buy American provisions amount to a 34 per cent tariff on electric vehicles assembled in Canada and violate the terms of the U.S.-Mexico-Canada Agreement (USMCA) .  An alternate solution is described in  “Canada willing to ‘align’ EV incentives with U.S. to avert tax-credit crisis: Trudeau” (Toronto Star, Dec.13).  CTV  News offers an Explainer which also summarizes reactions from government, industry, and labour. 

In Ontario, where most Canadian auto jobs are located,  the provincial government announced on December 9 the creation of the Premier’s Council on U.S. Trade and Industry Competitiveness, to be chaired by Unifor National President Jerry Dias, working with the Minister of Economic Development, Job Creation and Trade. From the press release: “This new Council, with the full support of our government, will continue to advocate for Ontario against unfair Buy American policies by highlighting the cost of protectionism to businesses on both sides of the border and promoting a Buy North American approach to our auto sector.” 

On October 17, Ontario had announced Phase 2 of its Driving Prosperity – The Future of Ontario’s Auto Sector  policies “to secure production mandates for hybrid and electric vehicles, create a domestic battery ecosystem, and strengthen Ontario’s position as a North American automotive and electric vehicle (EV) innovation hub.”   To date, the Ontario government strategy has been to incentivize manufacturers but resist the kinds of consumer incentives Biden has proposed, as described in “Doug Ford talks big on EVs but won’t reintroduce rebates”  (National Observer, Dec. 13).

NAFTA becomes USMCA – what has changed for workers and the environment?

NAFTA FREELAND

Canada’s Foreign Affairs Minister Chrystia Freeland in Mexico City,  July 25, 2018. (AP Photo/Eduardo Verdugo)

On September 30, the  governments of Canada, the United States and Mexico  agreed on a replacement of the North American Free Trade Agreement –  the United States Mexico Canada Agreement (USMCA). Legislatures in all three countries must now consider and ratify the agreement before it is final; if that happens, it will automatically be reviewed after six years, at which time it will continue for a 16-year period, if all parties agree to that.

What has changed?   The new agreement runs to over 1800 pages, including annexes and side letters – a complexity that will take a while to digest.  For WCR readers,  the major changes of interest relate to the elimination of Chapter 11,  (Investor-State Dispute Resolution) for Canada, and a change to auto tariffs, so that, as of 2020, a car will qualify for tariff-free treatment  if 75 per cent of its contents are made in North America (an increase from the current NAFTA threshold of 62.5 per cent).

General summaries and reaction:  From  CBC News “Buried behind the cows and cars: key changes in NAFTA 2.0” ; an iPolitics article on October 3  is headlined  “Canada can claim at least partial success of progressive agenda in USMCA”  . From the Council of Canadians: “The Good, the bad and the ugly from NAFTA 2.0”   with #1 in the “good news” category: “at the request of the U.S., there will be no ISDS process between U.S. and Canada”;  also on ISDS,  “Canada cheers the end of corporate NAFTA challenges in the new deal”  (Toronto Star  Oct. 2) .  From The Conversation Canada:  “Winners and Losers in the new NAFTA”   by Atif Kubursi , Professor Emeritus of Economics, McMaster University, who states “ The most significant achievement by Canadian negotiators is their success in preserving Chapter 19 from the original NAFTA” (which covers  dispute resolution re tariffs and countervailing duties).

In the bad news category:  An Opinion from Gordon Ritchie in The Globe and Mail on Oct. 1 says “NAFTA gets a new name but little else has changed” , reflecting a cynicism that the agreement was an exercise in “branding” by President Trump.   It has been noted that Article 32.1 would make it difficult for Canada or Mexico to negotiate any separate free-trade agreements with a “non-market country,” (shorthand for  China) . And from a broader view, the New York Times on October 3, “For Canada and U.S., ‘That Relationsip is Gone’ after bitter NAFTA Talks”  and “For Canada, a Sigh of relief more than a celebration in new Nafta deal”  (Oct. 1), which chronicles the difficulties of negotiation and includes some unique reactions.

The oil and gas industry lobbied and made gains, mostly in provisions relating to Mexico (which maintains the Investor State Dispute Resolution provisions for oil and gas investment) – explained in an article in Grist  , and explained in more detail in  “Trump’s USMCA delivers big wins to drugmakers, oil companies and tech firms”  in the Washington Post.  Energy Mix  echoes the same ideas from a Canadian viewpoint in  “Fossils cheer climate absent as Canada Mexico U.S. reach new trade deal”  (Oct. 3) .

On the key issue of the Environment: The National Observer article of October 1 notes that   the agreement does not appear to contain the terms “climate change” or “global warming” in any of its chapters, annexes or side letters. The article quotes the Sierra Club in the U.S. : it  “includes weak environmental terms that have historically enabled outsourcing of pollution and jobs, fails to make any mention of climate change, and includes special handouts to oil and gas corporations. …Much of the language appears designed to greenwash the deal, not to rectify NAFTA’s threats to wildlife, ecosystems, or clean air and water.”   Sierra Club’s “Environmental Audit of the new NAFTA deal” is here .  The weaknesses of USMCA on the environmental front are explored in “Trudeau says he still wants to talk climate change and trade with Trump” in the National Observer (Oct. 1).  The Canadian government Technical Summary of the Negotiated Outcomes:  Environment Chapter   states “Climate change remains a priority for Canada, and we remain committed to addressing this issue through ongoing negotiations of a parallel environmental cooperation agreement (ECA).”

Union Reaction to the USMCA:    The Canadian Labour Congress welcomes the elimination of Chapter 11 and is “pleased to see the side agreements on labour moved into the main agreement, now subject to a state-to-state dispute resolution process.” in “Along with key gains in the USMCA, Canada’s unions raise concern” (Oct. 1) .

Similarly, Canadian Union of Public Employees posted:  “CUPE applauds the elimination of Chapter 11, the ISDS (investor-state dispute settlement) mechanism from NAFTA, which CUPE has long fought to have removed, though it is regrettable that Mexico will remain subject to ISDS provisions” in “NAFTA gets worse for Canadians under USMCA”    (Oct. 1) . CUPE continues: “it is disappointing that the agreement does not meet or even come close to the progressive benchmarks that the Liberal government set for itself on NAFTA.”

The current tariffs against Canadian steel and aluminum remain unaffected by the new USMCA, prompting the United Steelworkers to issue a press release: “NAFTA Deal a Sell-Out for Canadian Steel, Aluminum Workers” .

“United States-Mexico-Canada Agreement (USMCA) should offer more protections for workers, says OFL”  in a press release (Oct. 2) .   “ The OFL calls on the government of Ontario to work alongside their federal counterparts to ensure that the immediate removal of security tariffs on Canadian steel and aluminum are a top priority.”

In a surprisingly subdued press release on September 30, auto workers union Unifor was withholding any celebrations until further study of the language of the official agreement, according to  “USMCA framework achieves auto gains: Unifor”

Official Documents related to the USMCA:  Canada’s Office of International Trade has compiled Technical summaries of the Chapters and backgrounders at its main website in English  and in French  . The government’s overview summary is in English here  ( in French here ).  Also available,  Technnical Summaries of the Negotiated Outcomes: for  Labour ; for  Trade remedies and related dispute settlement (Chapter 19) (re countervailing duties and tariffs);  for State-to-State Dispute Settlement ; Section 232 Side Letters summary re auto industry

The full text of USMCA is (so far) available only at the  Office of the U.S. Trade Representative.  Chapter 23 on Labour is here ; Chapter 24 on the Environment is here  ; Chapter 31 on Dispute Settlement is here .

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