Automotive Products Trade Agreement
Encyclopedia
The Canada—United States Automotive Products Agreement, commonly known as the Auto Pact or APTA, was an important trade agreement between Canada
and the United States
. It was signed by Prime Minister
Lester B. Pearson
and President
Lyndon B. Johnson
in January 1965.
It removed tariffs on cars
, truck
s, bus
es, tire
s, and automotive parts between the two countries, greatly benefiting the large American car makers. In exchange the big three car makers (General Motors
, Ford
, and Chrysler) and later Volvo
agreed that automobile production in Canada would not fall below 1964 levels and that they would ensure the same production-sales ratio in Canada.
Before the Auto Pact the North America
n automobile industry was highly segregated. Because of tariffs, only three percent of vehicles sold in Canada were made in the United States, but most of the parts were manufactured in the U.S. and overall Canada was in a large trade deficit with the States in the automobile sector.
The Pact caused vast and immediate changes. Canada began to produce far fewer different models of cars. Instead, much larger branch plants producing only one model for all of North America were constructed. In 1964, only seven percent of vehicles made in Canada were sent south of the border, but by 1968, the figure was sixty percent. By the same date, forty percent of cars purchased in Canada were made in the United States. Automobile and parts production quickly surpassed pulp and paper
to become Canada's most important industry. From 1965 to 1982, Canada's total automotive trade deficit with the U.S. was $12.1 billion; this subsumed a surplus of around $28 billion worth of assembled vehicles and a deficit of around $40.5 billion in auto parts.
The two nominal goals of APTA were to reduce production costs in Canada by dint of more efficient production of a smaller range of vehicles and components, and to lower vehicle prices for consumers. The agreement is said to have benefitted Canadian workers and consumers by dint of lowered prices and increased production creating thousands of jobs and increasing wages. These newly-created jobs were highly localised to southern Ontario
, with little employment benefit to the rest of Canada. The jobs created by the new market conditions under the pact were almost exclusively blue collar
; administration, research and development remained in the United States. This transfer of control of Canadian automaking operations to their US parent corporations substantially reduced the autonomy of the Canadian operations with respect to vehicle and component specification, design, and sourcing; manufacturing and production, branding and marketing, corporate policy, etc.
The agreement also prevented Canada pursuing free trade in automobiles elsewhere internationally, and this North American exclusivity led Canada to adopt the technical regulations of the U.S. National Highway Traffic Safety Administration
rather than participating in the European-based development of international consensus on auto safety and emissions regulations.
The Auto Pact was abolished in 2001 after a World Trade Organization
ruling declared it illegal, though by that time the North American Free Trade Agreement
had effectively superseded it.
Economy of Canada
Canada has the tenth largest economy in the world , is one of the world's wealthiest nations, and is a member of the Organization for Economic Co-operation and Development and Group of Eight . As with other developed nations, the Canadian economy is dominated by the service industry, which employs...
and the United States
Economy of the United States
The economy of the United States is the world's largest national economy. Its nominal GDP was estimated to be nearly $14.5 trillion in 2010, approximately a quarter of nominal global GDP. The European Union has a larger collective economy, but is not a single nation...
. It was signed by Prime Minister
Prime Minister of Canada
The Prime Minister of Canada is the primary minister of the Crown, chairman of the Cabinet, and thus head of government for Canada, charged with advising the Canadian monarch or viceroy on the exercise of the executive powers vested in them by the constitution...
Lester B. Pearson
Lester B. Pearson
Lester Bowles "Mike" Pearson, PC, OM, CC, OBE was a Canadian professor, historian, civil servant, statesman, diplomat, and politician, who won the Nobel Peace Prize in 1957 for organizing the United Nations Emergency Force to resolve the Suez Canal Crisis...
and President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Lyndon B. Johnson
Lyndon B. Johnson
Lyndon Baines Johnson , often referred to as LBJ, was the 36th President of the United States after his service as the 37th Vice President of the United States...
in January 1965.
It removed tariffs on cars
Automobile
An automobile, autocar, motor car or car is a wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor...
, truck
Truck
A truck or lorry is a motor vehicle designed to transport cargo. Trucks vary greatly in size, power, and configuration, with the smallest being mechanically similar to an automobile...
s, bus
Bus
A bus is a road vehicle designed to carry passengers. Buses can have a capacity as high as 300 passengers. The most common type of bus is the single-decker bus, with larger loads carried by double-decker buses and articulated buses, and smaller loads carried by midibuses and minibuses; coaches are...
es, tire
Tire
A tire or tyre is a ring-shaped covering that fits around a wheel rim to protect it and enable better vehicle performance by providing a flexible cushion that absorbs shock while keeping the wheel in close contact with the ground...
s, and automotive parts between the two countries, greatly benefiting the large American car makers. In exchange the big three car makers (General Motors
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
, Ford
Ford Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
, and Chrysler) and later Volvo
Volvo Halifax Assembly
The Volvo Halifax Assembly Plant located in Halifax, Nova Scotia was opened on 11 June 1963 by H.R.H Prince Bertil. It was the only North American assembly plant Volvo ever opened. Volvo decided to open to the plant to bypass hefty North American import tariffs on foreign goods and to capitalize...
agreed that automobile production in Canada would not fall below 1964 levels and that they would ensure the same production-sales ratio in Canada.
Before the Auto Pact the North America
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...
n automobile industry was highly segregated. Because of tariffs, only three percent of vehicles sold in Canada were made in the United States, but most of the parts were manufactured in the U.S. and overall Canada was in a large trade deficit with the States in the automobile sector.
The Pact caused vast and immediate changes. Canada began to produce far fewer different models of cars. Instead, much larger branch plants producing only one model for all of North America were constructed. In 1964, only seven percent of vehicles made in Canada were sent south of the border, but by 1968, the figure was sixty percent. By the same date, forty percent of cars purchased in Canada were made in the United States. Automobile and parts production quickly surpassed pulp and paper
Pulp and paper industry
The global pulp and paper industry is dominated by North American , northern European and East Asian countries...
to become Canada's most important industry. From 1965 to 1982, Canada's total automotive trade deficit with the U.S. was $12.1 billion; this subsumed a surplus of around $28 billion worth of assembled vehicles and a deficit of around $40.5 billion in auto parts.
The two nominal goals of APTA were to reduce production costs in Canada by dint of more efficient production of a smaller range of vehicles and components, and to lower vehicle prices for consumers. The agreement is said to have benefitted Canadian workers and consumers by dint of lowered prices and increased production creating thousands of jobs and increasing wages. These newly-created jobs were highly localised to southern Ontario
Southern Ontario
Southern Ontario is a region of the province of Ontario, Canada that lies south of the French River and Algonquin Park. Depending on the inclusion of the Parry Sound and Muskoka districts, its surface area would cover between 14 to 15% of the province. It is the southernmost region of...
, with little employment benefit to the rest of Canada. The jobs created by the new market conditions under the pact were almost exclusively blue collar
Blue collar
Blue collar can refer to:*Blue-collar worker, a traditional designation of the working class*Blue-collar crime, the types of crimes typically associated with the working class*A census designation...
; administration, research and development remained in the United States. This transfer of control of Canadian automaking operations to their US parent corporations substantially reduced the autonomy of the Canadian operations with respect to vehicle and component specification, design, and sourcing; manufacturing and production, branding and marketing, corporate policy, etc.
The agreement also prevented Canada pursuing free trade in automobiles elsewhere internationally, and this North American exclusivity led Canada to adopt the technical regulations of the U.S. National Highway Traffic Safety Administration
National Highway Traffic Safety Administration
The National Highway Traffic Safety Administration is an agency of the Executive Branch of the U.S. government, part of the Department of Transportation...
rather than participating in the European-based development of international consensus on auto safety and emissions regulations.
The Auto Pact was abolished in 2001 after a World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
ruling declared it illegal, though by that time the North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...
had effectively superseded it.
External links
- CBC Archives A multimedia look at the Canadian auto industry before and after the trade agreement.