French president’s visit to Washington highlights tensions at perilous trans-Atlantic moment
For Canada, it’s the old irritant that cooled off months ago. For Europe, it’s still burning hot and causing sweats in its relations with the U.S
Remember that electric-vehicle dispute with the U.S
France sure does. As does the rest of Europe, and Asia. President Emmanuel Macron’s state visit to Washington this week emphasized this big-money brouhaha remains very much alive
At issue is the unprecedented sums Washington has pumped into clean-energy production under the new Inflation Reduction Act, lavishing hundreds of billions to turbocharge the transition to zero-emissions technology
Canada and Mexico escaped one of its most worrisome provisions: A stipulation that only vehicles assembled in the U.S. qualified for certain tax credits
It caused cross-border palpitations for a few months. Policy-makers to the U.S.’s north and south contemplated the potential wipeout of next-generation manufacturing jobs
We caught a break in the final version of the bill. It granted preferential treatment to all North American vehicles
That fortuitous news came amid a hot streak for Canadian auto-manufacturing, with billions in new auto-plant investments, and Canada zooming to No. 2 in Bloomberg’s worldwide rankings (new window) for electric battery supply chains
The last 18 months have been unprecedented. There hasn’t been another stretch like that, even a 10-year stretch like that, in the history of the Canadian auto sector,
said Flavio Volpe, head of Canada’s auto-parts lobby
A year ago we were faced with the prospect of exclusion from the U.S. market – from the market that pays our bills.… It’s a real table flip
Canada and Mexico, he said, are the only two jurisdictions inside the U.S. tent
And countries outside the tent, like France, are steaming
That’s because only North American-made cars are eligible for the full $7,500 tax credit; U.S. consumers get a smaller refund for buying cars from other countries
U.S. EV TAX CREDIT CHANGES A RELIEF FOR CANADA’S AUTO SECTOR
4 months agoDuration2:06Canadian automakers breathed a sigh of relief after a U.S. climate bill that would have seen consumer tax credits for American-made electric vehicles expanded to include North American-produced EVs, batteries and critical minerals
Macron to U.S.: ‘Put yourself in my shoes’
That frustration was emphasized during Macron’s state visit, the first of Joe Biden’s presidency
In various stops during his visit, Macron called U.S. subsidies super aggressive;
he lamented that they could destroy
numerous clean-energy jobs in Europe
He repeated his complaints while meeting with the president, with U.S. lawmakers, and with French citizens in Washington
Put yourself in my shoes,
Macron said on Capitol Hill. Nobody contacted me when the [Inflation Reduction Act] was being discussed
He shared a fear with a gathering of French expats: that as America prepares for a long-term rivalry with China and frantically re-engineers its trade routes, it might forget old allies
Let’s not kid ourselves: There’s a risk here,
Macron said, speaking in French
[That], in a way, Europe, and France, become collateral damage
Europe has problems, well beyond Washington
Those worry lines are etched everywhere
From the European Union surveying (new window) car companies to find out who might be relocating operations to the U.S., to Volkswagen officials suggesting (new window) North America is a more attractive investment destination
U.S. trade policy is just one problem with Europe’s automotive sector. High energy (new window) prices in Europe are another. As are other (new window) factors, including Brexit, that date back years
One Politico piece from Berlin (new window) suggested European politicians are just looking to use the U.S. as an easy scapegoat
It’s a particularly fraught moment in trans-Atlantic affairs as the European economy suffers the brunt of the war in Ukraine and officials there say U.S. subsidies are weakening (new window) trans-Atlantic unity at this perilous period
The Europeans are hoping for an amicable resolution through a U.S.-EU body (new window) that holds a ministerial meeting in several days
Their options are limited, though
Final details of U.S. rules expected imminently
The uncomfortable truth is that taking the complaint to the World Trade Organization is a slow process at the best of times and it’s perhaps downright pointless now; the WTO dispute process no longer works properly (new window)
The U.S. has boycotted the organization’s appellate body after its longstanding complaints about the organization went unresolved
It’s way too early to assess the international impact of the Inflation Reduction Act, said one prominent auto-industry analyst
We haven’t even seen the fine-print details for the electric vehicle credit: they’re still being drafted, though they’re supposed to take effect in weeks
U.S. regulators are gathering input (new window) as they draft the regulations. Unsurprisingly, the Europeans are submitting alarmed comments (new window), casting the vehicle credits as discriminatory and illegal; the Canadian government (new window) submission is, equally unsurprisingly, more sanguine
All the devil in the details is happening right now [with the writing of those regulations],
said Kristin Dziczek, an auto-industry analyst at the U.S. Federal Reserve Bank in Chicago
We don’t know yet how that plays out
Canada worries about some parts of U.S. law
She also cautioned that certain parts of the Inflation Reduction Act might also hurt Canada: for example, there’s a credit (new window) for companies building clean-energy (new window) projects, worth an estimated $31 billion (new window) over a decade, and it goes only to U.S. companies
She said that could be worth thousands per vehicle and pull investments from other countries, including Canada and MexicoThat’s difficult to compete with
Acknowledging that potential pressure, Canada has just responded with (new window) its own tax credit for manufacturers, worth up to 30 percent
Some in the auto sector aren’t even certain the consumer credit that attracted so much relief in Canada will actually amount to much, based on their read of the language in the law
They say it’s possible no cars (new window) will benefit from the credit, at least not for now; they say it requires North American battery content that simply doesn’t exist yet (new window)
1ST ALL-CANADIAN ELECTRIC VEHICLE PARTIALLY UNVEILED AT WINDSOR PARTS SHOW
1 month agoDuration1:55Automotive Parts Manufacturers’ Association president Flavio Volpe teases the Project Arrow vehicle in Windsor
Still, Volpe said, there’s a bigger-picture story here
And that is that car companies are making long-term decisions about where to build electric vehicles and they’ve just been told, in U.S. law, that if they build cars in Canada and Mexico, they will qualify for consumer credits in the colossal U.S. market.
Companies are in the business of making bets many years in advance. It takes that long to develop a product,
Volpe said
If you’re going to make a bet, as a carmaker, Volpe said, you’re going to bet that preferential treatment for North American cars will last
Both he and Dziczek concurred that Canada’s proximity to battery-making minerals worked in its favour: the domestic industry is still in its infancy but the Canadian (new window) and American (new window) governments are both looking to fund its development
Volpe said it’s simply easier to build near raw materials. Dziczek, of the Federal Reserve, saidCanada has a natural endowment that should be an advantage
CBC News
