This item is part of Watching Washington, a regular dispatch from CBC News correspondents reporting on U.S. politics and developments that affect Canadians.
A long-awaited announcement from U.S. President Joe Biden is going to make some Canadians unhappy.
Biden released updated highlights of his key budget plan Thursday and it includes language Ottawa has been urging against: a Buy American-type provision for the auto sector.
It involves a tax credit for U.S.-made cars that the Canadian government describes as potentially damaging, and also illegal under international trade law.
It came in an announcement from the White House of its list of priorities after months of negotiations among Democrats resulted in a smaller version of its original multi-trillion dollar budget package.
One idea that made the cut: a $12,500 USD tax credit for people who buy electric vehicles, with clear conditions: “[The] tax credit will lower the cost of an electric vehicle that is made in America with American materials and union labour,” said the White House announcement.
What’s the context
Ottawa has been fretting about this idea for months, as has the Canadian auto industry. Those concerns were publicly voiced in a letter last week to nearly a dozen U.S. officials by Canada’s Trade Minister Mary Ng.
Its stated concerns are threefold: Potential future job losses in Canada, alleged violations of international trade agreements and disruptions to cross-border supply chains that could also hurt Americans who supply parts to Canadian plants.
The move comes as the auto sector is making long-term decisions about where to build future electric fleets and the fear in Ottawa is that the tax credit creates an unfair incentive to invest in the U.S.
Biden unveiled the nearly $2 trillion suite of programs Thursday before leaving for G20 and climate summits in Europe.
This budget package forms the heart of his domestic legislative agenda — touching on climate change, child care, health care and corporate taxes.
However it’s a much more modest package after some democratic senators insisted on trimming numerous ideas from Biden’s plan. Among the ideas nixed were his most important climate policy forcing utility companies to go green.
Eager to have a policy to show at the UN climate summit in Glasgow, and to make progress on some priorities before a batch of state-level elections next week, Biden revealed his remaining priorities for the budget bill; the vehicle tax credit included.
The Buy American vehicle idea was initially championed by Michigan Democrats in both chambers of Congress.
There’s still no guarantee this will become law. Progressive Democrats are deeply disappointed in the reduced scope of the bill and it’s unclear if it will receive the votes required in the House of Representatives and Senate.
In fact, there’s not even final text of the bill yet. What Biden released Thursday was a list of highlights of his proposed package.
Earlier detailed versions of the tax credit were published in both the House and Senate and they set aside chunks of the $12,500 for electric vehicles assembled in the U.S.; in five years, according to the original draft, the entire $12,500 credit would go to U.S. vehicles.
Representatives of the Canadian auto industry have hinted that they envision lawsuits if the measure goes forward.
The Canadian government did not make that explicit threat in Ng’s public letter, but it did describe the idea as contrary to international trade rules.