This Month in
Labour History

Canada-U.S. Auto Trade

The past year has been one of an ongoing trade war with the United States that has upset years of trade-based policy with one based on the emotional whims of the US President.

The first commercially produced car in Canada, the Le Roy came on the market in 1902. It was actually a close copy of the popular American “Oldsmobile”. Two years later, Henry Ford established Ford of Canada to produce his famous Model T’s. This was the beginning of the Canada-U.S. auto industry.

In January 1965, Canada and the U.S. singed a trade deal called the “Auto Pact.” For years the deal was credited for giving stability to the domestic Canadian auto industry. It set rules for the manufacture of cars in both the U.S. and Canada. The Auto Pact meant the removal of tariffs taxes between the two countries. Parts and vehicles could travel freely across the border. There were job guarantees stating automobile production in Canada would not fall below the 1964 levels.

With the pact industry gained increase efficiency and reduce production costs in Canada. It had stability to plan long term. The removal of taxes lowered vehicle prices for consumers. The result was a win for the Canadian car industry. A stronger economy as more jobs were created. Wages increased, and in a short time the auto sector became Canada’s most important industry.

In 2001 the World Trade Organization (WTO) ruled that the Auto Pact was illegal as a violation of the “Free trade Agreement” (NAFTA) which had its own terms. Then in President Trumps first term a new agreement was signed. The Canada-United States-Mexico Agreement (CUSMA) came into effect on July 1, 2020. This new agreement included new provisions for environmental protection, labour rights, and intellectual property, all without tariff taxes. The aim was to create balanced, reciprocal trade and support economic growth and job creation in North America.

However, the second term of the President had been focused on massive tariff taxes and retaliatory taxes from Canada. These measures are increasing production costs by hundreds of millions to billions of dollars. These taxes are transferred to higher prices for consumers. Supply chain disruption with parts crossing the Canada–U.S. border multiple times; being repetitively taxed. Generally, an economy that is becoming unstable. Stability is needed by business, workers, and communities. Without agreements that can be counted on communities in Ontario will suffer the economic impacts of job losses. Raising taxes in an erratic way is counter to the trade policy envisioned in the 1965 “Auto Pact.”