The United States would violate performance requirements within the framework of its commitments in the World Trade Organization (WTO), if it enforces tax credits for electric vehicles proposed by the government of President Joe Biden, the Mexican Ministry of Economy warned.
This initiative is scheduled to be voted on in the US Congress on December 13.
In this regard, Luz María de la Mora, undersecretary of Foreign Trade of the Ministry of the Economy, stated that the performance requirements measure are prohibited in the WTO rules.
Specifically, the type of tax credit that is being proposed conditions the final assembly of the electronic vehicle in facilities in the United States that operate under a unionized collective bargaining agreement.
The tax credit is also conditioned on the components and parts of the vehicle containing at least 50% domestic content and battery cells that have been manufactured in the United States.
Performance requirements
If the initiative is approved, Tatiana Clothier, Secretary of the Economy, said this Thursday, in a virtual press conference, that Mexico would apply commercial retaliation against the United States.
In the latest case of bilateral retaliation, the United States announced on May 17, 2019 an agreement with Canada and Mexico to eliminate tariffs on steel and aluminum imports from Canada and Mexico that it had previously imposed on June 1, 2018 and to Eliminate all retaliatory tariffs imposed on US products by Canada and Mexico.
The agreement also provides for aggressive monitoring and a mechanism to prevent surges in steel and aluminum imports to the United States.
If there are surges in imports of specific steel and aluminum products, the United States can reimpose tariffs on those products.
Any retaliation by Canada and Mexico would then be limited to steel and aluminum products.
Regarding the same case, Mexico imposed punitive tariffs of between 15 and 25% on steel products and some agricultural goods originating in the United States, including legs, shoulders and other types of pork, apples, blueberries, potatoes, cheeses, Bourbon whiskey, plates, sheets, plates, rods, tubes, wire rod and pork sausages.
