Canada has nothing to fear from U.S. protectionist rhetoric, envoy to Ottawa insists

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.”

From the outset of his speech, Cohen said he was out to debunk the perception in Canada — “noise,” he called it — that the administration’s legislative priorities are rooted in “the alleged protectionist policies of the United States.”

He cited the administration’s signature victories, including the Bipartisan Infrastructure Law, the Inflation Reduction Act (IRA), the CHIPS and Science Act and the existing Defense Production Act as evidence to the contrary.

“I’ve said that I think this view is the product of largely uninformed opinion. That’s me being diplomatic,” Cohen said.

“So I want to take this opportunity to be clear, to be absolutely clear: America is not pursuing protectionist trade policies, and any intimation that these programs and legislation are protectionist could not be further from the truth.”

As evidence, he cited the sheer magnitude of the Canada-U.S. trade relationship: C$3.25 billion in trade between the two countries each day, supporting millions of jobs in both, and growing by 19 per cent year over year in 2022.

He 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.

“They don’t feel like they’re being hurt by Buy American,” said Cohen, who said he met Li-Cycle executives at a recent conference in D.C.

“Buy American didn’t stop them from getting a $370-million grant from the United States government. And they’re not discouraged at all in applying for additional funding to support their lithium recycling business.”

But the fact they are building the plant in the U.S. and not in Canada speaks volumes, said Scotty Greenwood, CEO of the Canadian American Business Council.

“Competition makes us each better and our ultimate competitors and adversaries are in other places in the world — that’s true,” Greenwood said.

“But to say that there’s zero protectionism, and then to give an example of U.S. government money going to a Canadian firm to open a facility in the U.S., it’s precisely the point — the incentives work.”

This report by The Canadian Press was first published May 3, 2023.

James McCarten, The Canadian Press

by The Canadian Press

Canada has nothing to fear from U.S. protectionist rhetoric, envoy to Ottawa insists

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