Auto Bargaining in Canada, 1965–87
The US-Canada Auto Pact of 1965 created not only a North American market for automotive production and sales but a North American market for automotive investment as well. For the first time, bidding for investment between US states and Canadian provinces was possible. In this new environment, the bargaining power of the Canadian government fell relative to that of Ford and General Motors (GM) because of the new cross-border mobility of production and investment competition among states and provinces. This is indicated by the cost the Canadian federal and provincial governments incurred for automotive investments, as measured by investment incentives given to the automakers. No incentives were provided for the Auto Pact-era plants built in the 1960s; in the late 1970s, Canadian governments gave Ford 12.8 per cent of the value of its investment for an engine plant in Ontario and were prepared to give 15 per cent for a GM parts plant in Quebec which was ultimately not built. In the mid-1980s, the Canadians gave 17 per cent of the capital cost of the GM/Suzuki joint venture in Ontario and provided 43.8 per cent of the cost for GM to modernize its assembly plant in Ste.-Therese, Quebec. These worsening outcomes took place despite the decreasing concentration of the industry (a factor which should favor the host) and without such firm-favoring developments as acquisition of new allies in the host country or new technology beyond the reach of the host government (both more relevant with less developed host countries).
KeywordsEurope Income Explosive Product Line Dition
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