World

Canada may have found an unlikely ally in fight against U.S. auto plan

There's a glimmer of hope for Canadians lobbying U.S. politicians to drop an idea they fear could devastate Canada's auto industry, and it comes from West Virginia. Both of the state's senators, a Democrat and a Republican, have suggested a controversial tax-credit plan in a key American budget bill could be amended or killed.

West Virginia senators — 1 Democrat, 1 Republican — are working to water down a provision worrying Ottawa

U.S. Sen. Joe Manchin controls the fate of President Joe Biden's legislative agenda. And it so happens he's got problems with a provision Ottawa hopes to undo. (Jonathan Ernst/Reuters)

This item is part of Watching Washington, a regular dispatch from CBC News correspondents reporting on U.S. politics and developments that affect Canadians. 

What's new

There's a glimmer of hope for the Canadians who've spent months lobbying U.S. politicians to drop an idea they fear could devastate the auto industry north of the border. 

The source of that hope is from West Virginia, where both state senators — one a Democrat, the other a Republican — have made comments suggesting a controversial electric vehicle tax-credit plan in a key American budget bill could be amended or killed.

Sen. Joe Manchin, the Democrat, had a lengthy conversation this week with Canada's ambassador to Washington, Kirsten Hillman. 

He holds a crucial vote in the Senate that could decide the fate of a $1.75 trillion budget bill that is the most important legislation of Joe Biden's presidency.

Manchin, a self-styled centrist, has been using his clout for months to water down the bill and has made it clear he won't vote for it until he's satisfied. 

Because the Senate is divided 50-50 between the parties, every Democrat must agree to pass the sprawling budget bill — which affects child-care policy, health care, immigration and climate change.

Enter the vehicle tax credit. 

Manchin has now made clear in public comments that he has problems with the current version of the bill's vehicles plan.

Legislation introduced by Democrats would benefit unionized electric vehicle assembly plants in the U.S., like this Ford plant in Michigan. It would disadvantage non-U.S. assembly, U.S. parts exporters to foreign plants, and non-unionized plants in the U.S. Canada calls the plan illegal under trade law. (Rebecca Cook/Reuters)

It offers hefty tax credits to Americans who purchase electric vehicles, yet over time it would be exclusively reserved for vehicles assembled in the U.S. by union workers.

That's caused tremors of concern that assembly plants might move out of Canada and Mexico, and also out of places that don't have union-run plants, especially in the southern U.S.

Manchin happened to be at one such plant on Thursday: a West Virginia facility where Toyota announced a $240 million investment.

In an interview there with Automotive News, Manchin ripped the idea of a credit that discriminated against his own state, and said he expressed that displeasure to the Michigan Democrat who proposed it, Debbie Stabenow. 

He called the plan wrong and un-American.

"When I heard about this, what they were putting in the bill, I went right to the sponsor [Stabenow] and I said, 'This is wrong. This can't happen. It's not who we are as a country. It's not how we built this country, and the product should speak for itself,'" Manchin was quoted as saying. 

"We shouldn't use everyone's tax dollars to pick winners and losers. If you're a capitalist economy that we are in society, then you let the product speak for itself, and hopefully, we'll get that, that'll be corrected."

When asked by the auto-industry trade publication how Stabenow responded, Manchin replied: "Not good. I respect that, because she's fighting for her [constituents] and I'm fighting for mine.... Hopefully, we'll prevail."

Manchin has not been explicit, either in conversations with Canadian officials or in his public comments on Thursday, about what exact changes he'll demand.

The reporter who spoke to Manchin on Thursday said the senator never spelled out the extent of the change he's seeking — and whether he simply wants to scrap the union part of the plan or also the Buy American part, or the entire thing.

Manchin's office did not respond to a request for additional comment.

But the office of West Virginia's other senator did reply, and though she's a Republican, she often appears with Manchin and is aligned on issues with him. 

The office of West Virginia Republican Shelley Moore Capito said she's been clear about what changes she'll try to make to the budget bill, pointing to a media release this week that said she planned to force a vote on three aspects of the bill — including one that would eliminate the vehicle credit.

What's the context

Canadian officials in Washington and Ottawa have been trying for months to get Democrats to relent on this plan.

They fear the $4,500 credit for U.S.-assembled vehicles, which would grow to $12,500 in 2027, would not only steer investment out of Canada but also play havoc with supply chains across the continent and hurt American companies that sell parts to assembly plants in Canada.

Ottawa has said the idea violates international trade agreements, and there's talk in the auto industry of launching a trade case.

Canadian officials have been lobbying U.S. politicians to either drop the Buy American component — or at the very least amend it to include other North American-assembled vehicles.  

One example of that lobbying was a long phone call on Tuesday between Manchin and Hillman, Canada's ambassador to the U.S.

But there's been no evidence the plan might soften. If anything, the Buy American-style provisions have become even more prominent in the budget bill. 

Prime Minister Justin Trudeau plans to press Biden on the vehicles irritant when they meet in Washington next week. (Kevin Lamarque/Reuters)

After Manchin watered down the bill's other climate components, the electric-vehicle credit survived as arguably its most important climate provision.  

The plan appears in the latest version of the sprawling bill, just published by Democrats in the House of Representatives.

But the Senate — and Manchin — also get a say. 

Whatever he and Democrats in that chamber agree to is likely to shape any final version of the bill that could pass both houses of Congress and become law. 

What's next

The autos irritant will be on the agenda next week when Prime Minister Justin Trudeau visits Washington.

He plans to press Canada's case in a Thursday meeting with Biden.

But if developments in recent days are any indication, his most powerful allies on this issue aren't in the White House; they're in West Virginia.

And they include that rarest of senators, Manchin — a Democrat elected in a conservative southern state with non-unionized auto workers and right-to-work laws.

And that Democrat just happens to hold the fate of Biden's legislative agenda in his hands.

It'll become clear within the coming weeks whether Manchin intends to help Biden get his budget bill passed — and, if so, what he'll do to the auto plan that has Ottawa so worried.

now