Auto pact: Business and diplomacy in the creation of a borderless North American auto industry, 1945--1971

This thesis explains how the Big Three auto makers, General Motors (GM), Ford and Chrysler, helped to facilitate the creation of a continental North American auto industry out of two distinct though interdependent national industries on either side of the Canada-US border. After 1945, the auto industry in Canada entered a long period of decline and by the late 1950s many in government and industry argued that changes were required to improve the sector. Between 1962 and 1964, Canadian policy makers, in the long tradition of state intervention in the auto industry through tariff manipulation, unilaterally initiated two export incentive duty remission programs intended to benefit the Canadian industry and solve the country's balance of payments difficulties. The programs precipitated a major trade dispute with the United States and threatened the trading relationship between the two countries. When bilateral efforts to solve these problems failed, the two governments turned to the US multinationals for a solution and created a new regime, the 1965 Canada-US Automotive Products Trade Agreement (the auto pact). The structure of the North American auto industry, namely the cross-border US ownership and similarities in markets and tastes, allowed the two governments and the Big Three to work together towards the creation a new, managed industry. This regime resolved the immediate problems caused by the unilateral Canadian program and provided a solution for auto producers. The Canadian auto industry was irreversibly integrated into the larger North American sector, and tied the Canadian economy to the fortunes of the United States.