Recently, we participated in an exceptional business delegation of business, government and higher education representatives from Arizona to Mexico City.
An important part of this mission was devoted to meeting many leaders of the Mexican federal and legislative administration, including the Secretary of the Economy Tatiana Clouthier.
One area of shared concern is a major part of President Biden’s Build Back Better plan that pushes for the purchase of electric vehicles (EVs), albeit only for certain union-backed entities.
Incentives and tax credits, if properly designed, can be an effective tool to accelerate the electrification and uptake of transportation, as well as to strengthen electric vehicle manufacturing and international cooperation in the fuel chain. procurement to put North America on the path to competition with China.
This would be particularly beneficial in Arizona, where we are already seeing tremendous growth in the electric vehicle industry. Mexico is also experiencing significant growth and investment in the manufacture of electric vehicles and components.
Bill would subsidize 1 vehicle that is not in production
Sadly, the House-passed version of President Biden’s Budget Reconciliation Expenditure Bill includes a proposed tax incentive for electric vehicles that, if passed, will damage the burgeoning electric vehicle manufacturing industry. Arizona’s rise by disrupting trade with Mexico and the integrated supply chains upon which our electric vehicle manufacturing is based.
The credit proposed in the Build Back Better plan would increase EV credits up to $ 12,500 per vehicle, including a credit of $ 4,500 for U.S. union-made vehicles, plus $ 500 for U.S.-made EV batteries. United.
Problematically, the tax credits would only apply to electric vehicles assembled in the United States with at least 50% parts made in the United States. If the proposal is accepted, only the Chevrolet Bolt EV and Bolt EUV, none of which are currently in production or available for purchase, would be eligible for the credit.
Unsurprisingly, the Mexican and Canadian governments are actively lobbying against the tax credits, claiming they violate the United States-Mexico-Canada (USMCA) trade agreement.
Representatives from the two countries, with whom the United States shares a well-integrated supply chain cooperation with economic benefits for all of us, expressed disappointment that the United States is doing anything to significantly undermine trade relations with the United States. their main trading partners.
Countries and manufacturers oppose it
But it’s not just Mexico and Canada opposing it – France, Germany, Italy, Japan and South Korea also opposed the provision and sent a message to the Biden administration stressing that the proposed tax credit would violate international trade laws.
Additionally, other major automakers have opposed the provision, including BMW, Daimler, Honda, Hyundai, Tesla, and Toyota, whose companies are branching out into the production of electric vehicles but lacking manpower. syndicated work and would not be eligible for all credits.
We in Arizona know how essential supply chain cooperation is to our economy. Mexico is Arizona’s largest trading partner by a factor of four, with two-way trade worth more than $ 16 billion in 2018.
Arizona and Mexico are the leaders in the automotive industry, with nearly $ 1.7 billion in auto parts net trade annually, together producing 1,488 vehicles per day and employing more than 50,600 people.
For years, Arizona has worked with government and business leaders to improve border infrastructure to support international trade at our six border entry points, including upgrading infrastructure to the point entry from Nogales, Arizona, which has resulted in nearly $ 60 million in private investment. for warehouses and distribution centers.
Let’s transform the industry, let’s not hinder it
At a time when we can dramatically transform the electric vehicle industry, we should consider policies that support the manufacturing of electric vehicles in Arizona and the integrated supply chain upon which this sector relies, thereby increasing the global economic competitiveness of the world. North America as a whole.
As Luz María de la Mora, Undersecretary for Foreign Trade of the Secretariat of the Economy of Mexico, said: “By dislocating supply chains in an emblematic sector that generates great opportunities in all three countries, we let’s go against a competitive and integrated North America.
It seems clear that this tax credit, as currently drafted, is geared more towards protecting unions than incentivizing the production of electric vehicles and strengthening the global economic competitiveness of the United States.
Even though the larger Build Back Better bill appears to be on life support, we urge our state’s congressional delegation, especially our U.S. Senators, to ensure that this part of the legislation is not included in any final agreement. .
Todd Sanders is President and CEO of the Greater Phoenix Chamber. Jaime Molera is the former Arizona Public School Superintendent and Arizona Principal for The Western Way, a nonprofit that supports market-based solutions to environmental challenges.