Aug 12, 2022

Canada’s trade minister praised US passage of a landmark tax and climate-change bill, playing down the potential for conflict over what was left out of it.

Mary Ng said legislation approved Friday afternoon by the House of Representatives represents a diplomatic victory for Prime Minister Justin Trudeau’s government. She led the push against an earlier proposal that would have restricted electric vehicle tax credits to cars and trucks built by unionized US workers, making it harder for Canadian auto plants to compete.  

“This recognizes the importance of the integrated supply chain that has always been Canada and the United States in making automobiles,” Ng said by phone from her district in suburban Toronto. “It’s really good for workers and it’s really good for jobs.”

The Inflation Reduction Act that’s now headed to President Joe Biden’s desk includes language that applies the incentives to vehicles built anywhere in North America. But it was stripped of a change that would have brought the US in line with a global deal on a 15 per cent minimum corporate tax.

Canada intends to impose a so-called digital services tax of its own on big technology companies, if a global tax pact falls apart without US support. Ng’s counterpart in Washington, Trade Representative Katherine Tai, has warned Canada not to follow through with a digital tax, arguing it would discriminate against US companies.    

“We’re not going to go it alone unless we have to, and that isn’t until 2024,” Ng said Friday. “We’re going to work very hard with the OECD and the United States to get that multilateral arrangement across the finish line.”

Former Treasury Secretary Lawrence Summers decried the stripping of the minimum corporate tax from the Democratic-led bill this week, telling Bloomberg Television the global deal “may well collapse” as a result. 

Ng declined to pile on to that criticism. “What we are very pleased with is what is in this bill that has been passed,” she said, arguing it fulfills the road map Biden and Trudeau agreed to on “working together on the recovery from COVID-19, protecting jobs and committing to fight climate change.” 

She added that the bill passed Friday “meets the obligation of USMCA and CUSMA” -- as the overhauled North American free-trade agreement is known in the US and Canada, respectively. The earlier version with the exclusionary EV tax credits didn’t, she said.