99 91 IMPLEMENTING THE AGREEMENT Implementation by Canada Article II(a) of the agreement provided that the Government of Canada would accord duty-free treatment to imports of the products of the United States described in annex A, not later than the entry into force of legislation in the United States implementing the agreement. However, the Canadian Government implemented its side of the agreement by executive order on January 16, 1965, the date of the signing of the agreement. 1/ While the Canadian Government did not submit the agreement immediately to Parliament for its approval, it did introduce a motion calling for Parliamentary approval of the agreement in May of 1966; it was approved a month later. The Motor Vehicles Tariff Order of January 16, 1965, P.C. 1965-99, provided for duty-free treatment of imports of the products of the United States as specified in annex A of the agreement, subject to the limitations provided in annex A as to who may qualify as a "manufacturer" and be entitled to the benefit of duty-free treatment under the agreement. Annexed to the Motor Vehicles Tariff Order of 1965, P.C. 1965-99 was the Motor Vehicles Tariff Order P.C. 1965-100 which established regulations respecting the entry of motor vehicles under the Motor Vehicles Tariff Order of 1965. These regulations are cited as the Tariff Item 950 Regulations, and have been described in part in earlier 1/ For the texts of the Motor Vehicles Tariff Orders of 1965, see appendix G of this report. 100 92 sections of this report. 1/ The Tariff Item 950 Regulations define the various terms used in annex A and the Motor Vehicles Tariff Order of 1965, and, with some changes, in the "letters of undertaking." 2/ "Canadian valued added and other methods of valuation are described in detail. 3/ In addition, the regulations provide for the regular reporting by the manufacturers of trade under the agreement to the Government of Canada. On the same day. January 16, 1965, the Government of Canada issued an executive order repealing the rebate plan, which had been the subject of a countervailing duty complaint before Treasury. 4/ This order, the Order In Council Repealing the Rebate Plan, P.C. 1965-1/98, amended the "designated period of the Order in Council Establishing the Rebate Plan, P.C. 1963-1/1544, of October 22, 1963, and, with other administrative provisions, terminated the controversial Canadian duty-remission plan. 5/ Under Article I of the General Agreement of Tariffs and Trade (GATT). the Contracting Parties (one of which is Canada) agree to accord immediate and unconditional most-favored-nation treatment to all products of other GATT members. The automotive agreement appeared inconsistent with this obligation, since it provided in article V that [a]ccess to the United States and Canadian markets provided for under this agreement may by agreement be accorded on similar terms to other countries." 6/ However, 1/ See page 81 of this report 101 the Canadian Government took the position that it had not violated the GATT, on the grounds that the agreement, as implemented by Canada, permitted a qualified manufacturer to import motor vehicles and originalequipment parts duty-free from any country. This argument was apparently accepted, since Canada was not required to file a formal request for a waiver. Implementation by the United States United States and Canadian trade-agreement policy The United States-Canadian automotive agreement, an executive agreement which required subsequent implementing legislation by the Congress, differed from the practice followed by the United States with regard to most earlier trade agreements involving tariff changes. 1/ Apparently, the only prior exception was an executive agreement concluded with Canada in 1911. The trade agreements concluded in accordance with the 1934 Trade Agreements Act and some of the trade agreements concluded before 1934 were implemented by the President pursuant to prescribed authority obtained from Congress prior to the signing of such agreements. The remainder of the pre-1934 agreements, except for the aforementioned 1911 agreement with Canada, were concluded in the form of treaties, requiring ratification by the Senate and subsequent implementing 1/ For a brief history of prior trade agreements entered into by the United States involving tariff concessions see Appendix H of the United States Tariff Commission's Report to the Committee on Ways and Means on H. R. 6960, 89th Congress, the Automotive Products Trade Act of 1965, reprinted in Hearings on H. R. 9042 Before the Senate Committee on Finance, 89th Congress 1st Sess. 390 (1965). 102 94 legislation by the Congress. Although a substantial number of these treaties were negotiated, most of them were not ratified and thus did not come into force. The 1965 United States-Canadian automotive agreement and the implementing legislation differ from the multilateral and unconditional most-favored-nation policies that the United States has pursued since 1923. The provision in annex B of the agreement and the Automotive Products Trade Act of 1965, which limits the duty-free treatment accorded by the United States under the agreement to "Canadian articles" (articles having a certain minimum United States-Canadian content), was not in accord with the unconditional most-favored-nation obligations of the United States in the GATT and ultimately required a waiver. 1/ The trade agreements that the United States entered into before 1923 contained (with only three exceptions) conditional rather than unconditional pledges on the part of the United States. That is, the United States agreed to grant most-favored-nation treatment in exchange for some specific concession to be received from the other contract ing party However, in 1923 the United States abandoned this policy and its trade agreements from that year until the signing of the United States-Canadian automotive agreement (January 16, 1965) have contained unconditional most-favored-nation clauses. Under these clauses, the lowest rates of duty which the United States has applied to the products of any foreign country 2/ were required to be extended 1/ See page 98 of this report. 2/ Except products of Cuba and the Philippines, for which preferences had been authorized in agreements with other countries 103 to the products of all other countries with which the United States had such most-favored-nation commitments. In addition, by virtue of the provision in the Trade Agreements Act of 1934 requiring the generalization of trade-agreement rates of duty and similar provisions in the Trade Expansion Act of 1962 and the Trade Act of 1974, these rates of duty have also applied to the products of all other countries, with the exception, since the early 1950's of products of countries designated by the President as Communist-dominated or Communist-controlled. As a result, the United States tariff since the end of World War II has been essentially a single column tariff with regard to products from non-Communist-controlled or -dominated countries. Many of the preferential rates that were formerly applicable to Cuban products under the 1934 agreement with that country were eliminated when the United States became a contracting party to the GATT. Moreover, the preferential rates that are presently specified in the United States tariff schedules for various Cuban products have been suspended since May 24, 1962. Preferential rates for articles of the Philippines which were in effect at the time of the implementation of the United States-Canadian agreement have since been eliminated without exception. to the GATT. At the present time, the United States has unconditional mostfavored-nation commitments to the more than 60 contracting parties In addition, the United States maintains five bilateral trade agreements (viz. Argentina, El Salvador, Honduras, Paraguay, and Venezuela). Furthermore, on January 1, 1976, pursuant to the Trade |