Automotive Products Trade Agreement

The Canada—United States Automotive Products Agreement, commonly known as the Auto Pact or APTA, was an important trade agreement between Canada and the United States. It was signed by Prime Minister Lester B. Pearson and President Lyndon B. Johnson in January 1965.

It removed tariffs on cars, trucks, buses, tires, and automotive parts between the two countries, greatly benefiting the large American car makers. In exchange the big three car makers (General Motors, Ford, and Chrysler) and later Volvo agreed that automobile production in Canada would not fall below 1964 levels and that they would ensure the same production-sales ratio in Canada.

Before the Auto Pact the North American automobile industry was highly segregated. Because of tariffs, only three percent of vehicles sold in Canada were made in the United States, but most of the parts were manufactured in the U.S. and overall Canada was in a large trade deficit with the States in the automobile sector.

The Pact caused vast and immediate changes. Canada began to produce far fewer different models of cars. Instead, much larger branch plants producing only one model for all of North America were constructed. In 1964, only seven percent of vehicles made in Canada were sent south of the border, but by 1968, the figure was sixty percent. By the same date, forty percent of cars purchased in Canada were made in the United States. Automobile and parts production quickly surpassed pulp and paper to become Canada's most important industry. From 1965 to 1982, Canada's total automotive trade deficit with the U.S. was $12.1 billion; this subsumed a surplus of around $28 billion worth of assembled vehicles and a deficit of around $40.5 billion in auto parts.

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