Biden sticks to it. . . Canada

The manufacturing plant of Canadian Electric Vehicles Ltd. in Parksville, British Columbia, Canada on February 26, 20...


The manufacturing plant of Canadian Electric Vehicles Ltd. in Parksville, British Columbia, Canada on February 26, 2020.


Photo:

James MacDonald / Bloomberg News

Canadians are known for their kindness, at least by international diplomat standards. It should therefore be noted that our neighbors to the north are increasingly frustrated with the way President Biden and the Democrats are treating them.

The latest evidence comes from a rigid letter from two Canadian ministers to US senators opposing subsidies for electric vehicles in the Build Back Better legislation. Finance Minister Chrystia Freeland and Trade Minister Mary Ng announce their strong climate credentials. But they say they “are deeply concerned” that the EV credits in BBB violate the United States-Mexico-Canada trade agreement.

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“The proposal is equivalent to a 34% tariff on electric vehicles assembled in Canada,” they write to the two Senate party leaders and six presidents or rank members. “The proposal poses a significant threat to the Canadian auto industry and constitutes a de facto repeal of the USMCA.

They refer to the bill’s tax credits for consumers who buy an EV. The credit is $ 8,000 if the vehicle is manufactured in a non-union US plant, but is $ 12,500 if it is manufactured in a unionized plant. The credit decreases by $ 500 if the car’s battery is not made in America, and after 2026 only cars assembled in the United States could qualify for the base credit of $ 7,500.

Canadians are correct that the subsidies would hurt the country’s auto industry, which exports a huge chunk of its production to the United States. It would also hurt American auto suppliers. Vehicles assembled in Canada contain 50% American content, and the country imports approximately $ 22 billion a year in American auto parts.

BBB’s domestic content provisions are blatant protectionism that violates the commitments of the United States’ World Trade Organization as well as the USMCA. Tax credits and union-only provisions are one way to protect less efficient U.S. producers (

Ford

and GM mainly) and limit competition.

“The issue is at the top of Canada’s agenda with the United States,” they write. Without a “satisfactory resolution,” they “will have no choice but to react forcefully” by initiating dispute settlement action under the USMCA and imposing tariffs on US exports to Canada. They list the American products that would be affected by the new Canadian tariffs.

They also say they view EV credits as a change in the USMCA. Canada will respond by suspending the concessions it made in the trade agreement that are important to the United States. Watch out, Wisconsin dairy farmers.

Canadians can be forgiven for wondering what the Biden Democrats have against them. First, Mr. Biden canceled the Keystone XL pipeline that would have transported Canadian oil. Then he imposed new tariffs on softwood lumber. He also failed to support U.S. treaty obligations and to order Michigan Governor Gretchen Whitmer to cease efforts to shut down Pipeline 5, which carries petroleum products to the Midwest.

The BBB trade dispute shows how climate subsidies will become new vectors of protectionism. Canadians want the United States to extend electric vehicle subsidies to Canadian vehicles, but American taxpayers would then subsidize foreign production. Better to ditch the subsidies and let EV automakers compete on their own merits.

Newspaper Editorial Report: Best and Worst of the Week by Kim Strassel, Bill McGurn, Jillian Melchior and Dan Henninger. Images: AFP via Getty Images Composite: Mark Kelly

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Published in the print edition of December 14, 2021.

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Biden sticks to it. . . Canada
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