Biden to face push back on EV rules at first Three Amigos summit in 5 years

Source: By Steve Scherer in Ottawa, Dave Graham in Mexico City and Jarrett Renshaw in Washington, Reuters • Posted: Wednesday, November 17, 2021

Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan, U.S. August 29, 2018. REUTERS/Rebecca Cook/File Photo

WASHINGTON, Nov 17 (Reuters) – Leaders of the United States, Canada and Mexico will meet together for the first time in five years on Thursday to promote North American economic integration, but disputes over proposed EV tax credits and “Buy American” policies backed by President Joe Biden could dominate.

Biden has revived the so-called Three Amigos summit to be held at the White House on Thursday afternoon for the first time since 2016. Former President Donald Trump ditched it in 2017. Bi-lateral meetings will be held earlier in the day.

The three-way meeting is about furthering North American economic cooperation, but both Canada and Mexico are worried about Biden’s ‘Buy American’ provisions and a proposed electric vehicle tax credit that would favor unionized, American-based manufacturers.

The United States is the biggest trading partner for both Mexico and Canada, and cars and trucks are the most-traded manufactured commodity between the three countries, said Colin Robertson, a former Canadian diplomat who is now at the Canadian Global Affairs Institute think tank.

“The North American automotive industry is deeply integrated and competing as a bloc in the manufacture of a world-class e-vehicle and battery industry makes good economic sense for all three countries,” Robertson said.

Both Canada and Mexico want a level playing field as they compete to lure companies to set up plants for the EV supply chain in their countries. And the United States is seeking alternate suppliers to China of critical minerals used in batteries, which Canada could provide.

The social spending and climate bill being considered in Congress includes up to $12,500 in tax credits for U.S.-made EVs, including a $4,500 credit for union-made vehicles. The bill is a key pillar of Biden’s domestic agenda.

The additional union tax credit for union-made vehicles faces opposition from U.S. Senator Joe Manchin, a Democrat from West Virginia. With an evenly divided Senate, Manchin has the power to block the proposal.

Biden will visit a General Motors Co electric vehicle assembly plant in Detroit on Wednesday to show his support for the shift to electric car production.

In the sweeping tri-lateral meeting, the White House has said it is aiming to create a “regional vision for migration”. Other subjects include fighting COVID-19 and climate change together.

However, the bilateral meetings are likely to be where more pointed discussions are held.

Besides the EV tax credits, Canada’s Prime Minister Justin Trudeau is likely to bring up Enbridge Inc’s (ENB.TO) Line 5 pipeline, which the state of Michigan wants to close on environmental grounds.

For Mexican President Andres Manuel Lopez Obrador, the bi-lateral meeting could be where Biden brings up the contentious plan to change the constitution to give Mexico’s state-owned power company priority in the electricity market at the expense of private investment, notably in renewable energy.

Lopez Obrador argues the step is necessary because past governments rigged the market in favor of private interests, but the legislation has drawn fire from the U.S. government and business groups, which are concerned it may not be compliant with Mexico’s obligations under USMCA.

Federico Peña, a former U.S. energy secretary, told Reuters that he hoped Mexico would try to iron out its differences lest it create a precedent that sullied its reputation.

“For Mexico to still be respected as a country for investment, it has to be very mindful about changing contracts radically to the detriment of companies that relied on the good faith of negotiations of the previous administration,” he said.

The leaders started holding the Three Amigos summit in 2005 and met most years until 2016.

Reporting by Steve Scherer in Ottawa, Dave Graham in Mexico City and Jarrett Renshaw in Washington, writing by Steve Scherer; editing by Richard Pullin

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