The apparent disappearance of the Build Back Better (BBB) law in the United States is a “Christmas present” for Mexico, according to the Minister of the Economy, Tatiana Clouthier.
Democratic Party Senator Joe Manchin announced on Sunday that he would not support the BBB, thereby killing the bill, which has already been approved by the United States House of Representatives.
If passed, the BBB would increase the credits available to US consumers who purchase US-made electric vehicles (EVs) from US $ 7,500 to US $ 12,500. The law also contains a series of other provisions related to infrastructure construction, children’s education, climate change and social policy.
The Federation of Mexican Employers (Coparmex) warned earlier this month that the bill posed a threat to the Mexican auto industry, while the federal government said it would retaliate trade if the bill was passed by the US Congress in its present form.
Coparmex and the government have said the bill violates provisions of the United States-Mexico-Canada Agreement (USMCA), the free trade pact that came into effect last year.
Clouthier celebrated Manchin’s rejection of BBB on Monday in a Twitter post in which she wrote: “It looks like our Christmas present has arrived early.” At the top of the post was a link to a newspaper article El Financiero with the headline “Mexico and Canada Breathe: US Senators Will Reject Electric Car Subsidies.”
“We are very pleased because our efforts are resonating, strengthening Mexico’s position against the US-made electric vehicle incentive initiative,” Clouthier said.
While BBB’s future is uncertain – Senate Democrats were due to meet on Tuesday to try to chart a course for the US $ 1.75 trillion package – experts who spoke to the newspaper Milenio warned that the United States plan to offer additional incentives to consumers who buy electric vehicles made in the United States and the Mexican plan to reorganize the electricity market to favor the Federal Electricity Commission, owned by the State, could spark a trade dispute between the two countries.
US companies have denounced the proposed electricity reform, arguing that it violates the USMCA.
“Although these are independent paths, each of the actions unfortunately overlaps,” said former Minister of the Economy Ildefonso Guajardo, now a federal deputy.
He said if the electricity reform passes Congress – a vote is expected in April – private companies will sue Mexico through the investment court system. There is also the possibility of a state-to-state dispute. If the United States wins, it could impose tariffs on Mexican exports, Guajardo said.
For its part, Mexico should take steps to deter an increase in incentives that apply exclusively to electric vehicles made in the United States, he said, citing tariffs on some US products as an option.
The former economy minister, the previous government’s chief USMCA negotiator, said the Mexican and US government proposals send the message that it is okay to violate the New Trade Pact.
“And this is to the detriment of the future and the growth of the region,” Guajardo said.
The Biden administration’s EV plan is “aberrant… a very bad strategy… and sends the wrong signals,” he said.
“I would expect the US Congress to correct the course, but we have to see the final decision. The position of… Tatiana Clouthier was correct,” Guajardo said, referring to the minister’s warning. ‘Economy earlier this month that the government would retaliate if BBB passed the Senate in its current form.
Juan Carlos Baker, CEO of Ansley Consultores and trade negotiator for the previous federal government, also advocated the imposition of tariffs if the United States violates the USMCA with its incentives for electric vehicles.
“… It’s just a matter of selecting a range of products, determining the tariffs and publishing them in the Federal Official Journal,” he said.
Regarding the proposed electricity reform, Baker noted, “I have no doubt that the United States and other countries will use [retaliation] mechanisms. That is what they are used for: to guarantee respect for commercial rights.
With reports from El Universal and Milenio