General Motors Corp. is pushing for changes in U.S.-Canada auto trade relations to address the effects of growing foreign competition in the North American auto market.
Auto trade between Canada and the United States has been carried out since 1965 under the Automotive Products Trade Agreement, commonly known as the Auto Pact. That agreement requires U.S. car companies to produce the equivalent of one vehicle in Canada for every U.S. vehicle sold in that country.
The agreement also requires U.S. companies to use 60 percent Canadian content in all vehicles produced or sold in Canada.
In return, U.S. car companies were granted free movement of finished vehicles and parts over U.S.-Canadian borders.
But the pact is causing problems for U.S. car companies because Japanese, Korean and other foreign auto makers doing business in Canada do not operate under the same auto trade and content requirements, says General Motors Corp. Chairman Roger B. Smith.
The Auto Pact should be amended to impose similar obligations on foreign competitors, Smith said in a Toronto speech Wednesday night on the occasion of the 20th anniversary of the agreement.
"We need to be sure that it fits the current competitive picture and seek ways to review it and adjust it to the more complex environment of the 1980s," Smith said in an address to the Automotive Parts Manufacturers Association of Canada.
"The challenge today is to reconcile a bilateral agreement -- negotiated when import duties were higher and when third-country competitors were relatively insignificant -- to the realities of today's multilateral competitive environment," Smith said.
Auto industry analysts contend that U.S.-Canada auto trade relations also should be reexamined because of changing labor conditions in the Canadian motor vehicle manufacturing industry. Those changes were highlighted in December when the Canadian branch of the United Auto Workers union announced its independence of and its intent to break away from the U.S.-based UAW.
The Canadian UAW is regarded as more militant. That reputation was enhanced last year when the Canadian union struck GM and got $1.14 an hour more for its members than wages given GM's U.S. workers in a new three-year contract.
The Canadian UAW's defection sent shock waves through the hierarchies of U.S. auto companies. And rumors still persist in Detroit that the U.S. car companies will spend the next two years positioning themselves -- diversifying their supplier bases, for example -- so that they would not be vulnerable to labor unrest in Canada.
But Smith was conciliatory in his speech. "I look forward to . . . working with [Canadian UAW leader] Bob White and his membership to keep our North American industry the . . . industry it must be for continued success," Smith said. He said that "the quality of the Canadian work force" -- about 125,000 auto industry employes -- "has always been one of the strong points for doing business" in Canada.
The total annual value of bilateral automotive trade between the United States and Canada has grown from $1.2 billion in Canadian currency in 1965 to more than $50 billion in that currency today, Smith said. (One U.S. dollar was the equivalent of 75.29 cents Canadian in yesterday's exchange rates.)
Over the last five years, GM's income in Canada was $1.5 billion in that country's currency. But GM invested $4 billion in that time and has plans to invest substantially more in Canada in the future, Smith said.
Favorable changes in the current auto trade agreement would help ensure future investment by GM, Smith indicated. But he said he was not suggesting "any wholesale attempt" to rewrite the pact. Improvements in the agreement should come about cautiously, and should be based on the belief that "effective trade policies must always be flexible and responsive to change," Smith said.