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End of auto pact threatens Canadian auto industry
Date: Mon. Feb. 19 2001 5:28 AM ET
The Canadian auto industry will reach the end of an era Monday, when the 36-year-old auto pact expires, leaving corporate and political leaders to try to find a way to retain Canada's position in the industry.
Last year, the World Trade Organization ruled that the pact had to expire, because it worked as an illegal export subsidy that favoured the Big Three North American manufacturers over ones based in Europe and Asia.
The loss of the principle that governments should have some say in corporate investment decisions is a long-run danger to us,
says Jim Stanford, a Canadian Auto Workers union economist. We will still have a very strong industry but in 10 or 20 years, there's no guarantee it will be that way.
Though the pact expires February 19, many analysts say it died more than a decade ago, when the Canada-U.S. free trade agreement -- and later NAFTA -- allowed products to flow across borders duty-free.
But the auto pact did indeed provide a vital launch-pad for Canada's prominence in the auto sector.
The 1965 agreement forced auto makers to build at least as many vehicles in Canada as they sold here.
Canada is currently the fourth largest auto manufacturer in the world.
In the mid-1970s, Chrysler built a large van plant on Windsor's Pillette Road to avoid falling behind the pact's production quota, thus avoiding millions of dollars in tariffs.
I feel the auto pact has given me 25 years of work at Chrysler and I hope to retire here,
said Chrysler employee Tom Masse. My father worked there, my brothers worked there.
It's the most sucessful two-way trade agreement on any particular product in history,
said industry analyst Dennis Desrosier.
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But today, the Chyrsler plant's usefulness -- and thus, its future -- hangs in the balance, with 800 workers set to be laid off by July.
Politicians and industry leaders alike will continue to push Canada's image as a winning auto maker, with a low dollar, labour costs and corporate tax rates.
And so far, U.S. auto companies have even stayed above the quota in recent years, producing twice as many cars in Canada as they've sold.
In the meantime, the CAW is putting together a framework for a long-term strategy that will help secure Canada's current level of auto-sector investment.
The plan calls for Ottawa to put policies in place that encourage more fixed investment and to entice production without violating international trade rules.
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