Canada-US Automotive Products Agreement

Canada-US Automotive Products Agreement (Autopact), a conditional free-trade agreement signed by Canada and the US in January 1965 to create a single North American market for passenger cars, trucks, buses, tires and automotive parts. In Canada FREE TRADE does not apply to consumer sales; it applies solely to manufacturers who meet certain conditions. Under the agreement, motor-vehicle manufacturers are obliged to maintain the same ratio of production to sales in Canada as existed in the 1964 model year; to maintain Canadian value-added or Canadian content equal to the 1964 model year; and have been required (from 1965 onwards) to increase Canadian value-added by 60% of the growth in the value of passenger cars sold (50% for trucks and 40% for buses).

Between 1965 and 1982 Canada had an overall automotive trade deficit of $12.1 billion with the US, with a surplus of about $28 billion in assembled vehicles and a deficit of about $40.5 billion in automotive parts. Canada had overall surpluses in 1970, 1971, 1972 and 1982. Since 1982 Canada has had a continuing surplus with the US. In 1982-86 exports were $135.5 billion and imports were $112.9 billion, for a 5-year surplus of $22.5 billion.

The 2 principal purposes of the Autopact were to lower Canadian production costs through more efficient production of fewer lines of motor vehicles and parts, and to lower consumer prices. However, critics note that the industry has remained essentially foreign controlled and that Canadian subsidiaries are less autonomous than they once were. In addition, they note that the industry spends little on research and development in Canada. Automotive industry employment totalled 70 600 in 1965, reached about 125 000 in 1978 before falling to about 99 000 in 1982. Since then employment has recovered to about 140 000.

Under the Free Trade agreement negotiated with the US in 1987, Canadian safeguards would remain, with North American auto producers losing their right to import parts and vehicles duty-free from other countries unless the safeguards were met. Japanese and other offshore automakers would not be able to join the Autopact. The Canada-US pact can be terminated at any time by 12 months written notice by either government.

Author DAVID CRANE

Links to Other Sites
DaimlerChrysler Canada Inc.
The website for DaimlerChrysler Canada Inc., the third-largest manufacturer of passenger cars, trucks and automotive components in the Canadian auto industry. Also funds many charitable programs in Canada.