Auto Pact

During the glory days of auto manufacturing in North America, Canada ensured its place in the emerging industry with the Canada—United States Automotive Products Agreement1 (commonly known as the Auto Pact or APTA). It was an early Canada-US trade agreement. It was signed by Canadian Prime Minister Lester B. Pearson2 and US President Lyndon B. Johnson in January 1965.

More about “Managed Trade” than Free Trade, the Auto Pact tied Big Three3 (Ford, Chrysler, GM) automobile manufacturing in Canada to market share, guaranteeing that the proportion of manufacturing in Canada would be equal to the size of the market for buying new cars – if not the size of the cars (The first autos manufactured during the period were often the size of small hockey rinks).

The peak of the branch plant economy [see branch plant] that flourished in Central Canada for more than a century following the imposition of MacDonald’s National Policy, the Auto Pact was seen as a huge net gain for Canada through the decades. In reality, other factors (exchange rates, labour costs, domestic US politics, supplier chains, health costs, etc.) have caused Canada’s level of automobile production to wax and wane. Nonetheless, the Auto Pact played a singular role in popularizing the notion of negotiated trade arrangements between Canada and the US. As such it was a constant refrain for advocates of a comprehensive Free Trade Agreement during the 1988 election.4 [See Worthwhile Canadian Initiative]

By 2014, auto production in Mexico exceeded that of Canada – a sign of the increasingly continental aspect of manufacturing in North America. So, one could say that as cars became smaller, the spread of their manufacturing became larger. To that point, Honda Civics are now made in Alliston, Ontario and Volkswagens are made in Mexico.

Image Source: Wikimedia Commons

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