U.S. envoy says Canada has nothing to fear from protectionist rhetoric
The private sector would never opt to invest in an emerging industry in Canada when the U.S. was putting up such enticing incentives just south of the border.
Canada threw a “hissy fit” over President Joe Biden’s original plan to boost the sales of American-made electric vehicles, the U.S. envoy to Ottawa said on May 3 as he insisted that his country is not out to undermine its largest trading partner.
The stated goal of David Cohen’s appearance at the Wilson Center’s Canada Institute in Washington, D.C., was to finally put to rest the persistent Canadian fear that’s conjured every time his boss utters the words “Buy American.”
But his characterization of Canada’s months-long, ultimately successful bid to be carved in to Biden’s tax-credit scheme, which originally reserved the sweetest plums for union-built vehicles assembled in the U.S., is likely to raise some eyebrows.
“Canada, using a technical term, threw a hissy fit,” Cohen said of the reaction, upon his arrival in Ottawa in December 2021, to Biden’s original suite of tax incentives.
He said he was taken aback to hear Canadian stakeholders and the federal government both saw the plan as an “existential threat” to Canada’s auto sector — and even more surprised to learn Canada was not yet building EVs.
“I went to my friends in Canada and said ‘I’m struggling to understand how the inapplicability of a tax credit, to a segment of your industry that currently produces no vehicles that are eligible for it, is an existential threat to the entire Canadian economy.”
The “less jazzy” explanation he got, Cohen said, was that the private sector would never opt to invest in an emerging industry in Canada when the U.S. was putting up such enticing incentives just south of the border.
“So I said, ‘Well, you know something? That’s a fair argument. Why don’t you use that argument?'” Cohen said.
“So they adjusted their advocacy in private, in a very appropriate and a very good way, and now electric vehicles manufactured or assembled in Canada are written in to the (Inflation Reduction Act) as being eligible for the tax credit.”
Cohen cited that fact as just some of the evidence that the U.S. is not out to punish Canada, but rather to “build a resilient, powerful, prosperous North American economy.”
Flavio Volpe, president of the Toronto-based Auto Parts Manufacturers’ Association and a central player in Canada’s lobbying effort on the EV tax credits, said the results should speak for themselves.
Volpe called Cohen’s comments an “interesting characterization of our successful work to get the optimal result,” adding that in bilateral disputes, Canada often needs to raise its voice to be heard.
“Nobody listens to whispered requests for attention or relief.”
Cohen noted, as Biden often does, that Buy American policies have been on the books in the U.S. since the 1930s. They are limited to federal procurement projects, with no explicit impact on private commercial trade, and resemble similar procurement rules that exist in other countries, including Canada.
He didn’t mention “Buy America,” a separate set of regulations that apply to state and municipal infrastructure projects that include funding from federal departments and agencies — and which are often the bigger concern in Canada.
The infrastructure bill, passed in 2021, includes procurement spending that totals less than one per cent of the overall U.S. economy, and represents a tiny fraction of overall Canada-U.S. trade, Cohen noted.
He also mentioned the US$250 million currently available to Canadian critical mineral operations under the Defense Production Act, which has long allowed Canadian companies to be designated as domestic producers in matters of national security.
And he cited the specific example of Li-Cycle, a Toronto-based lithium battery recycling operation that’s building a new plant in Rochester, N.Y., with more than US$370 million worth of help from the U.S. Department of Energy, thanks to the IRA.
