A plane carrying International Trade Minister Mary Ng landed Wednesday in Washington, D.C., where she will press congressional leaders on “harmful” Buy American and electric-vehicle policies that Ottawa has warned could spell the end of “tens of thousands of jobs in Canada.”

Canadian industry observers also have a message, though: those policies will cost jobs in the U.S., too.

At issue is a bill working its way through Congress, which has not yet been finalized, that would tie US$4,500 in electric-vehicle credits to union-made vehicles produced in the U.S., make US$500 in rebates conditional on U.S.-manufactured batteries, and require vehicles to be assembled in the U.S. to qualify for the entire US$12,500 tax credit beginning in 2027. The United Auto Workers union—which represents U.S. workers from Ford, Stellantis and General Motors—favours the deal, saying the credits will “create and preserve tens of thousands of member jobs” in the U.S.

Despite the Trudeau government’s efforts to bring EVs to the top of the agenda of trilateral talks last month, U.S. President Joe Biden didn’t offer firm support for Canada’s auto sector.

When asked about the Buy American plans earlier in the fall, Finance Minister and Deputy Prime Minister Chrystia Freeland said she was sending a message to her U.S. counterparts: “What Canada is saying to our partners is, ‘Our procurement opportunities will be open to your companies just as much as your procurement opportunities are open to ours.’” 

Like Freeland—and unlike the UAW—Canadian industry observers told The Logic the U.S. plan will hurt workers on both sides of the border.

Angelo DiCaro, director of research at Unifor, said Biden’s otherwise pro-worker policy could cause job losses both in the U.S. and Canada alike, forcing automakers to quickly remap supply chains that have depended on trading parts across borders. While unions often find themselves on opposite sides of the negotiating table from automakers, the prospect of a lose-lose outcome for workers in both countries was also raised in a November meeting between industry members and the Canadian government.

“The level of integration between the Canadian and U.S. industries is so interwoven, it’s so tight, that it’s almost impossible to disentangle what is a U.S. and what is a Canadian car,” DiCaro said, pointing to parts ranging from window glass to stamped parts that come from U.S. factories to Canadian assembly plants. “Excluding that car from that list will hurt workers in all those facilities that feed that.” 

Despite the potential for the Build Back Better Act to backfire on the U.S. auto industry, Biden faces political pressure to incentivize U.S.-based manufacturing, as many of the very workers brushing shoulders with the U.S. president are publicly criticizing automakers’ decisions to invest in Ontario instead of the U.S. 

In some ways it feels like a David versus Goliath battle convincing the U.S. to consider Canada in its plans to rebuild its own economy. While U.S. leaders consider close trading partners just a few of many stakeholders to consider, Canada has staked the jobs of hundreds of thousands of workers on the proposition that if we shipped 93 per cent of our most valuable exports to one country, that country would never let us down.

Industry observers say it’s a battle that nonetheless must be fought—and fought strategically. If tax credits bring down the price of U.S.-made EVs relative to Canadian-made models, any dent in sales could hurt Unifor’s chances to bargain for new contracts in a couple of years, said DiCaro.

In response, the prime minister is reportedly poised to challenge the bill under free-trade agreements. Ontario Premier Doug Ford said last month he had a plan to attract battery plants to the province, while leaders in Quebec are personally promoting its battery industry to EV makers. 

Meanwhile, the industry has advocated for a carve-out for Canadian suppliers in the U.S. law, despite Biden’s waffling. And Unifor national president Jerry Dias has called for Canadian union-made electric vehicles to be included in Biden’s tax credit, and that Canada should consider temporarily cutting parts supplies to the U.S. in order to prove how integrated the market is. 

But are Ontario—and Canada, and Quebec and other provinces—doing enough to convince the U.S. to buy Canadian? It’s been over a year since initial government funding was announced for Ford, with little word on whether a similar deal will be offered to other manufacturers like Stellantis. Ontario, in the midst of convening a Transportation Electrification Council, has yet to take up industry recommendations to restore EV subsidies and will likely be challenged on the issue in the next election.

For Canada, the rise of electric vehicles has been viewed as an opportunity to restore its former automotive glory, and policymakers and the auto industry have been working to retool supply chains and plants.

Ford and GM’s EV contracts were seen as major wins for Unifor last year after the auto industry’s contributions to GDP peaked in 2005; 2018 and 2019 marked the first years in decades that Canadians bought more vehicles than were domestically manufactured, with the exception of 2009, according to the Trillium Network for Advanced Manufacturing. Yet last year, an industry executive with knowledge of the contract negotiations told The Logic the new-EV pattern is unlikely to repeat, despite their big investments in making such cars south of the border. 

DiCaro said some oft-discussed policies to punish the U.S., like a reciprocal “made-in-Canada” tax credit, would only limit Canadians’ access to EV stipends and force Canadian companies to look to unfamiliar markets in Europe and Asia.

“There are still lucrative parts to be built: batteries, electric motors included, transmissions included. But there’s fewer of them. That means that there’s more competition to land those product programs,” he said. 

“We saw what happened in southern Tennessee, where governments were basically ponying up close to a billion dollars of public money.” 

Rebekah Young, an economist at Scotiabank Canada, said Canada’s production and rich mineral supply chain may be necessary to meet U.S. EV sales targets and Canada’s mandate that all new light-duty cars and passenger trucks should be zero-emission by 2035. Plus, by 2027 there could be a new U.S. administration, a resolution of trade disputes or even a new agreement in place. 

But companies also love certainty, and the risk is they won’t have incentive to invest in Canada if they foresee the open market closing, she said. Young added that the sheer size of the U.S. market means that even a small uptick in EV purchases there could be key to restoring employment in Canada’s auto sector. 

She said the trade agreements that have integrated Canada and U.S. auto supply chains have become both a model of free trade for other industries, but also, potentially, a vulnerability.

When workers at what was Canada’s largest workplace at the time, Ford, went on strike in the 1940s, they gained power to fight a giant corporate machine. Then came bigger forces: Japanese and other Asian manufacturing prowess, the 2008–09 recession and much-maligned bailout, and now the double-whammy of a semiconductor shortage and a continued pandemic. DiCaro said federal and provincial governments are positioning themselves as open to investment, but it will need to be a constant focus to achieve success.

“We’re on the cusp of advancing our capacity for developing critical minerals that serve as inputs in electric vehicles,” said DiCaro.

“Canada … has all of the ingredients you need to become an electrical powerhouse. And a policy like this is intended to throw a wrench in that.”