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Michigan Official Lambasts Canadian Advantage in Trade Agreement

September 24, 1986

WASHINGTON (AP) _ Canada’s unfair trade practices and favored status in a commerce agreement with the United States are undermining America’s ability to compete for foreign auto plants and related jobs, a Michigan official says.

Marc Santucci, director of Michigan’s Office of International Development, told a House subcommittee Tuesday that the auto-producing state of Michigan isn’t out to ″destroy the automotive industry in Canada,″ but favors healthy competition between the two nations.

″We believe the competition should be fair, and at this time the Canadians are both keeping the aces and stacking the deck,″ he said.

Santucci said the 1965 U.S.-Canadian Auto Pact is a free trade agreement skewed in Canada’s favor, and that trade inequities are being heightened by recent expansion of a Canadian duty remission program.

″The (auto) pact, in combination with duty remission programs, provides significant investment incentives for foreign auto manufacturers and original equipment component suppliers to locate in Canada,″ Santucci told the House banking subcommittee on economic stabilization.

But Pierre Gosselin of the Canadian Embassy said the auto pact is a ″success story″ that has benefited both nations through increased U.S.-Canada trade, with the United States the dominant trader in most years.

Gosselin said the Canadian duty remissions program is similar to programs offered by the United States to lure foreign investment, and violates no trade regulations.

The subcommittee chairman, Rep. John LaFalce, D-N.Y., said the duty remissions, now in effect for 10 companies that export Canadian auto parts and import automobiles to that country, appear to violate at least the spirit of the Auto Pact and may run counter to world trade rules.

″These schemes are currently being used as investment incentives by the Canadian government with non-Pact countries such as Japan and Korea and are eroding the benefits of pact membership for U.S. firms,″ LaFalce said. ″In addition, they may be encouraging auto parts suppliers to locate in Canada and encouraging Japanese plants in the U.S. to source their parts from Canada.″

The 1965 agreement is designed to allow duty-free trade of most automobiles and auto parts within North America.

Thomas Hanna, president of the Motor Vehicle Manufacturers Association, told the subcommittee that the Auto Pact has been valuable in limiting trade barriers between the United States and Canada.

However, Hanna said its effectiveness has waned with increased sales by new companies that aren’t covered by the agreement and with Canada’s duty remission program, which gives foreign automakers - other than U.S. companies - as much as 100 percent duty rebates on cars shipped to Canada if the automakers agree to build in Canada or use Canadian auto parts.

James Conner, executive vice president of the Motor and Equipment Manufacturers Association, said the Canadian remissions currently aren’t widespread enough to ″pose a serious threat on an industry-wide basis,″ but could harm specific U.S. companies.

Michigan Gov. James Blanchard, aided by Rep. John Dingell, D-Mich., has vigorously opposed Canada’s duty remission program. In April, U.S. Trade Representative Clayton Yeutter wrote Dingell that the remissions appear to violate world trade rules and would be a topic of discussion in U.S.-Canada trade talks.

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