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WASHINGTON (Reuters) -The European Union, Germany, Canada, Japan, Mexico, France, South Korea, Italy and other countries wrote U.S. lawmakers saying a proposed U.S. electric vehicle tax credit violates international trade rules, according to a joint letter made public Saturday.
A group of 25 ambassadors to Washington wrote U.S. lawmakers and the Biden administration late Friday saying “limiting eligibility for the credit to vehicles based on their U.S. domestic assembly and local content is inconsistent with U.S. commitments made under WTO multilateral agreements.”
The U.S. Congress is considering a new $12,500 tax credit that would include $4,500 for union-made U.S. electric vehicles and $500 for U.S.-made batteries. Only U.S. built vehicles would be eligible for the $12,500 credit after 2027, under a House proposal released this week.
Canada and Mexico have issued separate statements in the last week opposing the plan. The U.S. State Department declined to comment Saturday and the White House did not immediately respond to a request for comment.
The proposal is backed by President Joe Biden, the United Auto Workers (UAW) union and many congressional Democrats, but opposed by major international automakers, including Toyota Motor (NYSE:TM) Corp, Volkswagen AG (OTC:VWAGY), Daimler AG (DE:DAIGn), Honda Motor Co, Hyundai Motor Co and BMW AG.
A dozen foreign automakers wrote California’s two senators on Friday urging them to abandon the plan that they said would discriminate against the state.
UAW President Ray Curry said the provision will “create and preserve tens of thousands of UAW members’ jobs” and “would be a win for auto manufacturing workers.”
The EV tax credits would cost $15.6 billion over 10 years and disproportionately benefit Detroit’s Big Three automakers – General Motors (NYSE:GM), Ford Motor (NYSE:F) and Chrysler-parent Stellantis NV – which assemble their U.S.-made vehicles in union-represented plants.
The ambassadors that also include Poland, Sweden, Spain, Austria, Netherlands, Belgium, Cyprus, Ireland, Malta, Finland, Romania and Greece said the legislation would harm international automakers.
They said it “would violate international trade rules, disadvantage hard-working Americans employed by these automakers, and undermine the efforts of these automakers to expand the U.S. EV consumer market to achieve the (Biden) administration’s climate goals.”
The letter added it “puts U.S. trading partners at a disadvantage.”
Autoworkers at the foreign automakers in the countries that wrote are nearly all unionized but not in the United States.
“Our governments support workers’ right to organize. It is a fundamental right and should not be used in the framework of tax incentives, setting aside the opportunities for nearly half of America autoworkers,” they wrote.
