EU-built electric vehicle tax credit approval will face internal and foreign disputes

Internally, several automakers are opposing the additional federal tax incentive of $ 4,500 for electric vehicles built by unionized factories. Tesla has been very vocal about it and was joined by a dozen foreign automakers urging the two California senates to oppose any rule. “Who don’t treat California auto workers as equal to all other American auto workers.” “

Automakers in other states that make cars in non-union factories can request the same from their senates and representatives. Republican governors from 11 states sent a letter to Congress saying such a move would discriminate against workers who have chosen not to unionize. And this is a crucial point to consider.

Unionization is voluntary. If workers decide not to join a union, that decision should not become a competitive obstacle to them. If the vehicles they produce don’t sell well because of fewer incentives, their jobs are on the line. The $ 4,500 tax incentive may make unionization compulsory, and recent UAW corruption scandals do not help. At the same time, non-union workers have less bargaining power to demand better working conditions. It puts them between a rock and a hard place.

However, the main problem with the plan can come from abroad. Offering a tax credit for cars made exclusively in the United States will lead to an international challenge to the legislation, which will no doubt be characterized as protectionist. According to Reuters, Canada and Mexico have already said that the $ 4,500 VE the tax incentive could harm the USMCA (United States-Mexico-Canada) trade pact.

Expect disputes to hit the WTO (World Trade Organization) from other countries, especially South Korea and Germany. China could possibly join them if Chinese companies decide to sell their electric vehicles in the United States as well. In short, Biden might be able to approve the union-related tax incentive, but it could cause more problems than it is designed to solve.