How Mexico plans to team up with Canada to combat U.S. auto irritant

December 17, 2021
How Mexico plans to team up with Canada to combat U.S. auto irritant
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A senior Mexican cabinet member says she’s planning a multi-front effort against what she calls the biggest trade irritant in North America right now.

And she’s hoping to team up with Canada.

Mexican Economy Secretary Tatiana Clouthier meets virtually today with Canada’s Trade Minister Mary Ng as they campaign against a U.S. electric-vehicle tax credit.

Both countries say the U.S. proposal would destroy jobs and break trade agreements, with Clouthier calling it her country’s most pressing economic issue with the U.S.

“This is the main issue,” Clouthier said in an interview with CBC News. 

The plan’s protectionist aims, she said, contradicted all the talk of co-operation at the recent North American Leaders’ Summit and the spirit of the new NAFTA.

“This is totally the opposite.… All of a sudden you have a switch that we don’t understand.”

The good news for Canada and Mexico is they appear to have gained time: the U.S. legislation containing that tax credit appears stalled, at least temporarily.

Political, legal, economic responses

Democrats have failed to pass their Build Back Better bill as hoped for this year because one Democrat, West Virginia’s Joe Manchin, insists the plan is too expensive and is demanding major changes.

Opponents can now spend the coming weeks refining their response.

Canada’s push has centred on threatening tariffs and the possible suspension of parts of the new North American trade pact.

Mexico is weighing a series of responses, Clouthier said — legal, political, economic, and on unrelated issues.

WATCH | How Biden’s tax incentive for electric vehicles is being received: 

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On the eve of a North American Leaders’ Summit, U.S. President Joe Biden’s big tax incentive for U.S.-produced electric vehicles is creating tension, with some saying it’s a job killer for the Canadian auto industry. 1:56

For starters, she’s flying to Washington on Sunday and plans to meet not just with U.S. decision-makers but with members of the Mexican-American community.

If U.S. Democrats make economic moves that hurt Mexico, they risk a backlash from Mexican-American voters, she warned.

Clouthier is inviting Mexican-Americans to contact their senators.

A power that Mexico has, and Canada doesn’t 

“It seems they’re looking for votes … [in the midterm election] next year. If that is so, there can be consequences,” she said.

That speaks to one thing Mexico has in the U.S. that Canada doesn’t: serious demographic numbers and the political power that flows from that.

When told there are fewer than one million Canadians living in the U.S., Clouthier replied: “We have 38 [million].” 

The Democrats’ controversial proposal is now in limbo. This week it became clear that U.S. Sen. Joe Manchin, seen here, wants big changes to the broader legislation. (Jonathan Ernst/Reuters)

After that trip to the U.S., Clouthier will meet with her boss, Andres Manuel Lopez Obrador, the president of Mexico. 

They’ll discuss whether Mexico should warn that other areas of co-operation with the U.S. hinge on whether this irritant gets solved.

She said she sees this as connected to the broader U.S. relationship and will talk to Lopez Obrador about whether he wants to threaten effects on other fronts.

She said Mexico is analyzing other economic steps, when asked whether it might produce a list of threatened tariffs, like Canada.

“There will be consequences [for this],” Clouthier said. “There is no way there cannot be consequences.”

U.S. President Joe Biden is shown touring a GM plant in Michigan last month. The plant would benefit from the electric-vehicle proposal, while non-U.S. and non-union plants would be disadvantaged. (Jonathan Ernst/Reuters)

Finally, she said, she intends to talk to Canada about the different legal means of fighting the vehicle credit, whether at the World Trade Organization or the CUSMA dispute panels.

She said Mexican officials have been talking to Canadians about this irritant nearly every day. 

It’s worth noting that the recent history of North America suggests Canada-Mexico co-operation has its limits.

Canada and Mexico also have irritants

In renegotiating the new NAFTA, the countries entered the negotiations largely allied against then-U.S. President Donald Trump, then wound up crossing each other, cutting separate deals with the U.S. when given the opportunity; first, Canada by aligning with the U.S. on auto rules that favoured higher-wage countries instead of Mexico, then Mexico closed out an agreement without Canada.

Clouthier was asked: Wouldn’t either country, Canada or Mexico, jump if given a chance at a sole exemption from the U.S. rule?

She conceded that every country must defend its interests. But she said the continent will be better off if it thinks and acts as one region, saying: “How far can we walk together?” 

There already is one Canada-Mexico irritant brewing. It involves energy, and proposed Mexican reforms that would re-nationalize parts of that sector.

Clouthier, centre, meets today with Canadian Trade Minister Mary Ng, left. Here they are in July in Mexico with their U.S. counterpart Katherine Tai. (Edgard Garrido/Reuters)

The Canadian government and business community have denounced the move, and critics warn it violates multiple chapters of the new CUSMA pact.

That’s just a few years after Mexico underwent an extensive effort to privatize that sector; now the Lopez Obrador government has suggested shifting course.

A bill proposed by the administration would amend three articles of Mexico’s constitution in re-nationalizing swaths of the sector.

What’s next on controversial Mexican energy plan

It would cancel current power-generating contracts; give a state utility more power to operate the market; and also give that same utility a guaranteed share of over 50 per cent of the market.

The Wall Street Journal reports that Mexican national guard troops have already sealed the gates of a U.S.-owned fuel terminal, and Republicans are pressing the U.S. administration to push back.

The Mexican Congress plans hearings on the energy reform next year.

Clouthier suggested the policy could be adjusted; she said her department will share its own analysis soon with the Congress about the national and international repercussions of the bill.

“That’s part of what we do for any initiative, not only this one. On the things that we believe can be changed or adjusted,” she said.

“Congress has to see the whole picture,” she said, noting that includes the effect on trade agreements.

“That’s part of the analysis we have to do. The national and the international [effects].”



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