Plans to increase a tax credit for electric vehicles containing a U.S.-made battery if the car was assembled in a U.S., union-represented plant is a source of worry for Canada, Prime Minister Justin Trudeau said in French Nov. 18 at a news conference after the North American Leaders' Summit, according to a story from the Canadian Broadcasting Corporation. "This would be quite a problem for vehicle production in Canada," he said. "We stressed this with the Americans throughout our conversations. They've heard us loud and clear." The provisions are part of the Build Back Better bill that passed the House the following day on Nov. 19.
Chambers of commerce in Canada, Mexico and the U.S. collectively are asking each country's leaders to hold each other accountable to fully implement USMCA. In a joint letter Nov. 16, they said, "The Canadian and Mexican private sectors share apprehension over differing interpretations of USMCA’s rules of origin and how the U.S. interpretation of these provisions poses risks to our integrated supply chains." They also said that the Canadian and U.S. private sectors are deeply concerned about Mexico's actions restricting investment in its energy sector. "Attempts to favor state-owned enterprises at the expense of renewable and other private energy providers only undermine investment certainty, put at risk ambitious shared goals to address climate change, and promise both added cost and diminished opportunity for our countries’ workers," they wrote, and said they hope government will engage the private sector in meaningful dialogue in both arenas. They also said in future emergencies like the pandemic, "there should also be greater cooperation on border management to ensure the flow of commercial traffic and cargo."
Witnesses at a joint Energy and Environment and Climate Change subcommittees hearing of the House Energy and Commerce Committee told members that incentives to buy electric vehicles would spur domestic battery manufacturing; that financial support for battery recycling would allow domestic battery production to move away from problematic cobalt imports; and that Buy American rules are critical for supporting domestic factories.
Mexico, not satisfied with the results of consultations over U.S. interpretation of roll-up provisions under USMCA's auto rules of origin, is going to ask for a USMCA dispute panel to be formed, according to unnamed sources quoted by Reuters. The U.S. auto industry was taken by surprise by how rigidly the Office of the U.S. Trade Representative interpreted regional value in super-core auto parts (see 2106180027), and after lobbying Congress was fruitless, Mexico asked for consultations on the issue (see 2108230041) and Canada joined the complaint (see 2108300056).
Although it's not known what sort of electric vehicle purchase incentives might be included in Build Back Better legislation, Canada and Mexico are arguing to congressional leaders that offering larger tax credits for U.S.-assembled electric vehicles hurts both the integrated North American auto industry and undermines the USMCA.
Corruption, poor logistics and overly strict rules of origin are all barriers to Mexico benefiting from companies' decisions to diversify out of China, a panel of experts from Mexico and the U.S. said. Luis de la Calle, a former Mexican trade official who worked on implementing NAFTA and who represented Mexico at the World Trade Organization, said Mexican leaders have a lack of vision to take advantage of this moment, and he said they are also hobbled by what he called "ideological incompetence."
Eighteen of the 36 Texas representatives in the House and both of Texas's senators asked the new ambassador to Mexico to press Mexico to fulfill its promises on approving agricultural biotech products and to keep Mexico's oil industry open to foreign investors. In an Oct. 19 letter, they wrote: "Texas farmers and ranchers have long benefited from free trade with Mexico and Canada. The USMCA locked in key provisions for agriculture and includes state of the art rules on agricultural biotechnology. Rigorous enforcement of these important priorities is vital for Texas producers. Mexico remains the top destination for U.S. agricultural trade -- ensuring that Mexico abides by these commitments remains a top concern for the producers we represent. We also have raised these concerns directly with United States Trade Representative (USTR) Katherine Tai. Proper implementation of the USMCA is a top priority and the U.S. must engage at all levels of government to ensure that the American people can reap the full benefits from this important trade agreement."
U.S. Trade Representative Katherine Tai and Labor Secretary Marty Walsh held their first meeting with the Labor Advisory Committee for Trade Negotiations and Trade Policy, and, according to a summary provided of the meeting, held "robust discussions" on USMCA implementation, digital trade, and "how China’s non-market policies undermine American workers and domestic sectors. Ambassador Tai reiterated her commitment to re-aligning the U.S.-China bilateral trade relationship in a way that strengthens the American middle class and allows our workers and businesses to compete fairly."
The Commerce Department published notices in the Federal Register Oct. 18 on the following AD/CV duty proceedings (any notices that announce changes to AD/CV duty rates, scope, affected firms or effective dates will be detailed in another ITT article)::
Heavy truck parts destined for a U.S. assembly plant cannot qualify for USMCA benefits under tariff shift rules, CBP told Mitsubishi Electric's Automotive division. Under USMCA, the original equipment starter must have 60% North American content under a net cost method, or 70% under a transaction value method; that percentage will go up in July 2024 to 64% or 74%, respectively, and 70% or 80% in 2027.