After 22 years at a Chrysler Canada plant in Windsor, Ont., 39-year-old Michael St. Croix, a former assembly-line worker, was promoted to an inspection job on the loading dock. It meant an end to the repetition and monotony of the line in favor of a higher-paying position with more responsibility, checking parts as they arrived at the plant. But like auto industry workers across Ontario, St.
Croix is concerned for the first time that his long-term job security may be bargained away in free trade talks with the United States. For one thing, an external affairs department document which became public last month stated that the production safeguards contained in the Canada-U.S. Auto Pact were no longer needed. Then, U.S. trade ambassador Peter Murphy told a New York audience two weeks ago that the auto industry, which represents onethird of the trade between the two countries, should be addressed in talks. “We never used to talk about the Auto Pact until a few months ago,” said St. Croix.
“Now, it’s a daily topic of conversation.”
That is just one of many problems currently facing the North American auto industry. Some U.S. politicians and industry experts contend that the Auto Pact is being eroded by an influx of foreign-based manufacturers and, as a result, must be re-examined. As well, they say that they are disturbed by a Canadian duty remission scheme, which reduces tariffs on Asian and European imports. Meanwhile, many federal Liberals and New Democrats say that they suspect the Conservatives may sacrifice the safeguards of the Auto Pact in order to persuade the United States to exempt Canada from its sweeping coun-
tervailing-duties laws. Discontent is also brewing among Canadian vehicle and parts producers, who argue that Ottawa should be demanding from offshore manufacturers who are locating here the same level of investment commitments required under the Auto Pact.
The trade agreement known as the
Auto Pact was a landmark achievement when it was signed on Jan. 16, 1965, by Prime Minister Lester Pearson and President Lyndon Johnson. It spells out arrangements for duty-free movement of vehicles and original parts, excluding tires and tubes, between the two countries. The agreement contains a crucial safeguard for Canada: American manufacturers must produce one vehicle in this country for every one sold here. At the same time, American automakers agreed to meet Canadian-content requirements of 60 per cent for cars and 50 per cent for trucks.
Since the signing, the pact has brought Canada billions of dollars worth of investments, dramatically
increased production of vehicles and parts, and created thousands of jobs. In this decade alone, said Norman Clark, president of the Motor Vehicle Manufacturers’ Association, which represents nine companies that account for 99 per cent of motor vehicle production in Canada, U.S. automakers will invest $12 billion expanding,
upgrading or building new plants in Canada. Canadian automotive output has more than doubled, to 1.9 million vehicles last year from 846,609 in 1965. Direct employment by the industry last year stood at 130,000, but auto production generated a total of about 428,000 jobs in related industries, said Clark.
Throughout much of the public debate on free trade during the past year, politicians and officials have remained largely silent on the Auto Pact. But now the agreement and its job-generating safeguards appear to be at the centre of the discussions. During a conference on free trade in New York two weeks ago, negotiator Murphy said that the two countries cannot
ignore an industry that accounts for one-third of their bilateral trade. And even if the free trade talks fail, the United States may want to re-examine the auto industry, he said.
Canada’s official position has been that the Auto Pact does not have a place in the free trade talks. Following the latest round of free trade bargaining last month, Canada’s chief negotiator, Simon Reisman—who negotiated the Auto Pact on behalf of Canada in 1965—flatly declared, “At our main negotiating table we haven’t talked about the auto industry.” He maintained there was no reason to discuss the Auto Pact because it had not created any problems for the North American industry.
But last month New Democratic Party Leader Ed Broadbent obtained a document sent to External Affairs Minister Joe Clark by Thomas Bernes, an official in Clark’s department. It was intended to prepare the minister for an Oct. 27 meeting of the federal cabinet’s priorities and planning subcommittee on trade. In the document, Bernes cites an unnamed study that “suggests it is time to review the Auto Pact in light of the experience and changed circumstances of the past 22 years.” He recommended that Clark support the proposal and added that the Auto Pact’s safeguards had outlived their usefulness. Wrote Bernes: “Nevertheless, there remains a widespread belief that the safeguards are still central to the health of the industry.”
The leak produced a largely predictable torrent of political rhetoric from the opposition parties and the labor movement. But it also raised some intriguing speculation about where the negotiations are headed and their potential impact on various regions of the country. Steven Langdon, NDP MP for Essex-Windsor, said that the Conservative government wants the United States to exempt Canada from its countervailing laws, which allow the United States to place a tax on Canadian imports to offset the value of subsidies, which have generally been used against resource and agricultural producers. In return, he said, the Tories are prepared to give up regional industrial development subsi-
dies, which largely benefit Quebec and the Atlantic provinces. But that alone may not satisfy the Americans, and as a result the Conservatives are prepared to sacrifice the Auto Pact’s safeguards as well, reasoned Langdon.
Still, the free trade teams may be forced by changing market conditions to examine the industry and the Auto Pact. When the deal was originally negotiated, foreign carmakers held only 10 per cent of the Canadian market,
compared with 30 per cent now. Companies that fell under the terms of the pact represented 99 per cent of North American production in 1965. By 1990, analysts estimate, their share will fall to 75 per cent because of the influx of foreign manufacturers. As well, many industry experts say that they expect North American manufacturing capacity to reach 16 million vehicles a year by 1990, but demand to lag behind at 12.5 million. As a result, they foresee plant closures and job losses among
North American producers.
The industry also faces what many insiders view as another disturbing trend: the development in Canada of a two-tiered automotive policy with different rules, commitments and standards for North American and foreign-based manufacturers. Vehicle and parts manufacturers have lobbied Ottawa for years to apply the Auto Pact’s Canadian-content rules to Asian producers who are setting up in Cana-
da. Most of the new plants will be assembly operations using imported parts. Stephen Van Houten, manager of business planning and trade policy for General Motors of Canada Ltd., voiced his concerns to the Commons external affairs and international trade committee last month. “What we have done in Canada is encourage politically rather than economically motivated investments,” said Van Houten. “But they are going to mean net employment losses.”
An external affairs department official said that Ottawa has pressured Asian automakers to conform to the demands of the Auto Pact. But, said the official who asked not to be named, “they are resisting on the grounds that they don’t know the Canadian autoparts industry very well.” Still, Michigan Gov. James J. Blanchard, for one, last week asked U.S. Trade Representative Clayton Yeutter to renegotiate the Auto Pact, arguing that it primarily benefits Canada. Said Blanchard’s deputy press secretary, Thomas Scott: “There is really no doubt that as key congressional leaders increase their understanding of the Auto Pact, and as the trade balance worsens, there will be strong pressure for remedial action.” For some time the workers on the
auto-assembly lines have known that the auto industry is no longer as straightforward and secure as it once was. Declared Chrysler employee St. Croix: “We’ll be out on the streets if we lose the Auto Pact.” That concern may well be exaggerated. But it is clearly one that is strongly felt by the people who man the plants.
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