Three basic objectives were set out in article I of the agreement. The first is to create a broader market for automotive products to permit achievement of the full benefits of specialization and large scale production. The second objective is the liberalization of United States and Can-dian automotive trade in respect to tariff barriers and other factors tending to impede the trade, with a view to enabling the industries of both countries to participate in the expanding total market of the two countries on a fair and equitable basis. The third objective is the development of conditions in which market forces may operate effectively to obtain the most economic pattern of investment, production and trade. In article I the Governments also agreed to avoid actions which would frustrate the achievement of these objectives. Operating provisions In article II (a), the Government of Canada agreed to accord duty free treatment to imports of the products of the United States described The in annex A of the agreement, at a date not later than the entry into force of legislation contemplated in paragraph (b) of article II to be passed by the United States Congress implementing the agreement. extent of duty-free treatment to be accorded exports of automotive products of the United States to Canada was subject to the provisions of annex A. These provisions will be described in conjunction with the effect of the so-called "letters of undertaking" in subsequent sections of this report. 1/ See page 84 of this report. the Goretament of the Snited States agreed to seek enactment of lepsiaın arzın duty-free treatment of imports of the products of Canaca described in annex B. during the session of the Tnited States Congress commencing on January 4, 1965. The Government of the United States also agreed. in seeking such legislation, to seek authority permitting the implementation of such duty-free treatment retroactively to the earliest date administratively possible following the date upon which the Government of Canada accorded duty-free treatment. The Government of the United States agreed to accord dutyfree treatment to the products of Canada described in annex B promptly after the entry into force of the anticipated legislation. Thus, the two Governments agreed in article II of the agreement to provide duty-free treatment for imports of certain automotive products from the other contracting party. However, annexes A and B to the agreement govern the extent of duty-free treatment accorded automotive imports by the Governments of Canada and the United States, respectively. These provisions governing the duty-free treatment of imports will be examined in subsequent sections of the report. Article III of the agreement provides that the commitments made by the two Governments in the agreement should not preclude action by either Government consistent with its obligations under part II of the General Agreement on Tariffs and Trade. Such actions include the imposition of antidumping or countervailing duties or import restrictions pursuant to escape-clause or national-security provisions. A recent action of this kind taken with respect to automotive trade covered by the agreement 81 73 has been in response to a complaint filed by United States Congressman John Dent under the Antidumping Act of 1921, as amended, alleging in part that new passenger automobiles imported from Canada were being dumped in the United States. 1/ The Department of the Treasury is currently investigating the complaint. In article IV, the two Governments provide for further consultation with respect to matters covered by the agreement. Paragraph (a) of article IV is a general consultation provision enabling either Government to request consultations on any matter relating to the agreement. Paragraph (b), without limiting paragraph (a), provides for special consultation between the two Governments with respect to problems of United States automotive producers who did not at the time of the signing of the agreement have production facilities in Canada. In this regard, paragraph 3 of annex A provides that a manufacturer not meeting the requirements of annex A could nevertheless be designated as entitled to duty-free treatment in respect to the goods described in the annex. The requirements of annex A, as previously noted will be discussed in detail in subsequent sections of this report. 2/ Paragraph (b) of article IV further provides for special consultations which might be needed with respect to the operation of new auto motive producer s becoming established in Canada. This provision was apparently intended to provide a procedure for consultation should non United States-Canadian firms become established in Canada without being An additional complaint filed by the UAW on July 11, 1975, did not name Canada as than-fair-value in the United States. the source of automobiles allegedly sold at less 2 See page 102 of this report. 72-532 0-76-15 82 74 required to undertake significant production in Canada. The United States-Canadian content requirement for duty-free entry into the United States in paragraph 3 of annex B also anticipates this problem. 1/ Paragraph (c) of article IV provides for a comprehensive review no later than January 1, 1968, of the progress towards achieving the objectives set forth in article I. During the review, the Governments were to consider such further steps that would be necessary or desirable for the full achievement of these objectives. This review did take place in 1968. In article V the two Governments agreed that either or both countries could conclude similar agreements with third countries, providing access to the Canadian and/or United States markets, of the kind provided by the agreement. Article VI, provided for the provisional entry into force of the agreement on the date of its signature and its definitive entry into force when notes were exhanged between the two Governments giving notice that the appropriate action in their respective legislatures had been completed. Appropriate action for the U.S. Government consisted of the enactment of a proposed Automotive Products Trade Act of 1965. Appropri ate action for the Canadian Government entailed consideration of the agreement by the Canadian Parliament. The implementation of the agreement will be considered in greater detail in subsequent sections of this report Article VII established an unlimited duration for the agreement, with the qualification that each Government could terminate the agreement 1/ See page 77 of this report. upon 12 months written notice to the other Government of its intention to terminate. Provisions affecting duty-free entry into the United States-- Article II(b) of the agreement provided that the Government of the United States would seek legislation authorizing duty-free treatment of imports of the products of Canada described in annex B, and accord dutyfree treatment to such imports. Annex B specifies those products of Canada which are entitled to duty-free treatment. 1/ Annex B specifies two general categories of products of Canada which are entitled to duty-free entry into the United States. Para graph (1) lists motor vehicles for the transport of persons or articles currently provided for in items 692.02, 692.04, and 692.10 of the Tariff Schedules of the United States (TSUS) and chassis there for, but not including electric trolley buses, three-wheeled vehicles, or trailers accompanying truck tractors, or chassis therefor. Paragraph (2) specifies fabricated components, except trailers, tires, or tubes for tires, for use as original equipment in the manufacture of motor vehicles of the kind described in paragraph (1). However, the items described in paragraphs (1) and (2) as entitled to duty-free entry into the United States are subject to a United States-Canadian content limitation which is set forth in paragraph (3). Paragraph (3) provides that articles of the kind described in paragraphs (1) and (2) above include such articles whether finished or unfinished but do not include any article See appendix C of this report. |