Canada Us Automotive Products Agreement

It was a succinct document that ”aimed to create a wider market for automotive products, in which the benefits of specialization and mass production can be fully realized.” The overall objective is ”to develop conditions in which market forces can work effectively to achieve the most economical model of investment, production and trade”. The agreement also contained two annexes, both drafted by Canada. These limited participation in the auto pact to automakers who had already produced in Canada between August 1963 and July 1964 – including General Motors, Ford, Chrysler, American Motors (acquired by Chrysler in 1987), Studebaker (stopped production in 1966) and Volvo (a small plant in Halifax, which was closed in 1998). They also set a minimum of Canadian value-added that fitters had to achieve. And they did require that a vehicle be produced in Canada for every vehicle sold in Canada. Other automakers around the world have complained to the World Trade Organization that the agreement to abolish tariffs only for the big three companies gave them an unfair selling advantage in Canada. [12] The Liberal government of Lester B. Pearson, in an attempt to increase exports to the United States, negotiated and signed Canada-U.S. Automotive Products Agreement (known as Auto Pact) in 1965. It created a single North American market for vehicles and spare parts. This agreement allowed manufacturers to rationalize their production for a market and reduce consumer prices.

Canada has increased its share in Canada-Usa. The automotive industry at about 10%, twice as much as before 1965. Products had to have 50 percent Canada/US content to qualify. The agreement applied to passenger cars, trucks, buses and original parts for motor vehicles, but excluded spare parts, batteries, tyres and used cars for after-sales. The agreement also prevented Canada from following auto free trade elsewhere internationally, and this North American exclusivity led Transport Canada to adopt the U.S. National Highway Traffic Safety Administration`s Federal Motor Vehicle Safety Standards (FMVSS) rather than participate in the European development of an international consensus on motor vehicle safety and emission rules. [11] While automotive companies in Canada and their industry associations were not actively seeking meaningful changes in automotive rules of origin, they were actively involved in the modernization process and support the final outcome. The agreement led to lower prices and higher production in Canada, creating thousands of jobs and raising wages. These newly created jobs were heavily located in southern Ontario, with little benefit to the rest of Canada. The rules of origin are criteria 2 that have been identified, 2) can be sufficiently produced in the Canada-United States-Mexico (CUSMA) region to benefit from preferential tariff treatment.

They shall ensure that the benefits of the agreement go first and foremost to the responsible producers in the CUSMA countries. After intense diplomatic negotiations in the summer and autumn of 1964, the two countries reached a compromise agreement. The resulting act of judgment was a managed trade agreement that limited the companies that could benefit from it and imposed ongoing conditions or safeguards to ensure the growth of the sector in Canada. The Americans had been looking for a free trade agreement, but Canada wanted a safeguard agreement. A simple free trade agreement, Canada argued, would lead to a sharp contraction of the auto industry in Canada, since all important investment and production decisions would be made in the United States.