[CTC] Dems Stand Firm on Pro-Labor Electric Vehicle (EV) Tax Credits

Tue Nov 2 06:34:20 PDT 2021

Politico Morning Trade

— Rep. Dan Kildee <https://go.politicoemail.com/?qs=542aa4cd448e53db9a1b37b05264bf9e06fde3a648a3111bc09648ea3ac981f1694d62cbe273aba950ae01e2b1a1d1f3> (D-Mich.), a key backer of a pro-union electric vehicle tax credit, is pushing back against criticisms from U.S. allies and foreign automakers who want it dropped from the reconciliation package.

…

DEMS STAND FIRM ON PRO-LABOR EV TAX CREDITS: Backers of legislation to subsidize electric vehicle manufacturers that use union labor are pushing back on criticisms from foreign automakers and government officials alike.

Democrats have inserted a provision in their reconciliation package that would provide a $4,500 consumer tax credit for electric vehicles — but only if they are produced with union labor in the U.S. That’s got ambassadors from 25 allied nations riled up enough to write a letter to congressional leaders, arguing the language would hurt foreign-brand manufacturers who build cars in the United States at non-union facilities.

"This legislation, if implemented, would violate international trade rules, disadvantage hard-working Americans employed by these automakers, and undermine the efforts of these automakers to expand the U.S. EV consumer market to achieve the Administration’s climate goals," they wrote <https://go.politicoemail.com/?qs=542aa4cd448e53dbee238cd4b9732fb9e16ed95755b1ae9c158f535999d6a58dc092a57ee4ebfd9e8d7120fd55c813c1>, echoing criticisms from foreign automakers <https://go.politicoemail.com/?qs=542aa4cd448e53db568b4061eb9ef91692f4cfc969108d835f6eaec75a79b3228310cc4292b5e4c0f87831083ec76972> last week. 

But Kildee and his fellow Michigan sponsor Sen. Debbie Stabenow <https://go.politicoemail.com/?qs=542aa4cd448e53dba56347236ad14c8a1a2e4fbddd3bf561ce0f9e78ad33349c0ed47000580eef6a8c6486636a502161> (D) say it will be essential to help deliver on President Biden’s domestic manufacturing and climate goals.

“It is important to note that while many foreign automotive companies have unionized workforces in their home countries, they do not treat their American workers the same way,” Kildee wrote in a statement to POLITICO. “When we spend American tax dollars, we should invest in American jobs that pay industry-leading wages and benefits and ensure the strongest worker protections. Finally, the Biden-Kildee-Stabenow tax credit will also help us meet our climate change goals.”

The tax credit for EVs would increase by $500 if it includes U.S.-manufactured battery cells — another energy sector that Biden wants to prevent China from dominating. But the fate of both those provisions is tied to the Democrats’ ability to push through the mammoth spending bill.

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Earlier context…

Canada, Mexico warn U.S. proposed EV tax credits could violate USMCA
By Margaret Spiegelman, Inside US Trade 
10/22/2021

Canada and Mexico are warning U.S. lawmakers that proposed incentives for U.S.-made electric vehicles could run afoul of the U.S.-Mexico-Canada Agreement, according to letters seen by Inside U.S. Trade.  

Canada’s minister of small business, export promotion and international trade, Mary Ng, in an Oct. 22 letter to U.S. House and Senate leaders, said elements of proposed EV tax credits under consideration in both chambers “would undermine decades of United States-Canada cooperation to foster a mutually beneficial integrated automotive production and supply chain” and would hurt industry in the U.S. as well as in Canada. Ng’s letter was first reported by Reuters <https://www.reuters.com/world/americas/canada-criticizes-proposed-us-ev-tax-credit-says-could-harm-auto-sector-2021-10-22/%20on%20Friday>.  

Her letter raised concerns about incentives for U.S.-made EVs also flagged by Mexican Secretary of the Economy Tatiana Clouthier in Sept. 20 letters to Senate Finance and House Ways & Means committee leaders. 

The Senate Finance Committee has offered an EV tax credit proposal as part of its “Clean Energy for America Act,” while the House Ways & Means Committee’s markup of the “Build Back Better Act” includes its own version.  

Ng said elements of the proposals “would discriminate against EVs and their parts that are produced in Canada, which will be detrimental to our shared interests and objectives, particularly as we seek to develop secure supply chains for these critical environmental technologies.”  

Ng also said Canada was concerned in particular about a provision in the Senate Finance Committee’s proposal that would provide a $2,500 tax credit if final assembly of a vehicle took place in the U.S., another that would provide a $2,500 tax credit if final assembly took place at “a facility represented by a U.S.-only based labour organization,” as well as a provision that would make U.S. assembly “a precondition for the full value of all credits as of 2026.” 

Of concern in the House version are a $4,500 credit if final assembly takes place at a U.S. facility with a collective bargaining agreement; a $500 credit if an EV includes at least 50 percent “U.S. content in component parts” and has U.S.-made battery cells; and a provision that would make U.S. assembly a precondition for full value of credits as of 2027, according to the letter.  

Ng called the proposals “inconsistent” both with USMCA and World Trade Organization commitments. 

“As you know,” she wrote to the lawmakers, “deeper integration is at the core of the year-old USMCA, with its new and stronger rules on labour and rules of origin for vehicles. The USMCA is driving more innovation and production to take place within North America.” 

Clouthier, meanwhile, expressed “strong concern” about the provisions in the House Ways & Means proposal on final assembly in the U.S. and requirements for 50 percent U.S.-made content and U.S.-made battery cells.  

She called the provisions “contrary” to regional value content rules in USMCA and said they should be changed to “include incentives for all North American content and assembly in a manner consistent” with the agreement.  

While Mexico is “encouraged” by recent U.S. actions “to rebuild alliances and strengthen our trading partnership,” Clouthier added, “multiple” domestic content requirements under consideration by Congress could “undermine the positive development of a stronger North American alliance.” 

Mexico in August requested consultations <https://insidetrade.com/node/172029> to resolve differing interpretations of how to calculate regional content for vehicles under USMCA, saying the U.S. was failing to recognize key flexibilities Mexico contended were negotiated to help companies meet requirements that were increased from those under the North American Free Trade Agreement. Canada later that month joined Mexico as a third party in its request. 

Ng warned in her letter that negative effects from the proposed credits on Canadian production could spill over to U.S. companies and workers. She noted that vehicles made in Canada contain about 50 percent U.S. content.  

She also emphasized that Canadian unions and labor standards are “as robust” as those in the U.S. 

The United Auto Workers has called on its members to sign a petition <https://uaw.org/action/> urging Congress to pass the proposal in the House Build Back Better Act for union-made, U.S.-made EVs, saying it would be “a win for UAW members, unorganized autoworkers, and the entire labor movement.” 

Ng also said the proposed tax credits run contrary to U.S.-Canada efforts to cooperate on critical minerals needed to make EV batteries. “Discriminating against Canadian production is inconsistent with the Canada-United States Joint Action Plan on Critical Minerals Collaboration, particularly given our shared objective to develop a sustainable and secure supply of batteries in North America,” she wrote. Canada, she noted, is “the only country in the Western Hemisphere that has all the critical minerals required to manufacture EV batteries.”

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

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