159 151 IMPACT OF THE AGREEMENT ON THE UNITED STATES BALANCE OF PAYMENTS Some Statistical Problems The balance of payments records the flows of goods, services, and money during a given period. Thus, unlike the automotive products trade balance which includes only United States-Canadian trade in completed motor vehicles and original-equipment parts it includes, in addition, commodity trade directly related to automotive trade; dividend income flows from direct investment; fees and royalties; and capital movement for the motor-vehicle products sector. secondary and tertiary effects from automotive products trade and investment that are difficult to measure but if measured would give an accurate and precise evaluation of the total impact of the agreement on the United States-Canadian balance of payments. Obviously, there are Nevertheless, an estimate can be made of the important balance of payments items that are directly linked to the automotive-products sector. Operations of the Agreement that Impinge on the In the case of the United States-Canadian automotive agreement the long-term capital account will not be discussed since all automotive direct investment expenditures by the Big Four that took place in Canada since 1964 were from Big-Four affiliates' retained earnings and were not from capital outflows from the United States parent firms. For this reason there are no balance of payments effects related to the Big-Four United States affiliates' direct automotive investment expenditures in Canada. No comparable data on such expenditures by smaller 160 152 motor-vehicle producers or independent parts producers are available. Data available from the Big Four motor-vehicle manufacturers for measuring the current account automotive balance includes three major categories: (1) trade in automotive products; (2) trade in raw materials and other automotive related products and services; and (3) net investment income received. Trade in automotive products 1/ and net investment income 2/ have been discussed previously. United States-Canadian trade by the Big Four resulted in United States deficits for raw materials, and United States surpluses for production machinery and equipment and for miscellaneous services throughout the 1964-74 period. 3/ Specifically, the 1964-74 average annual deficit for raw materials was $53.2 million; for production machinery and equipment the average annual surplus was $31.7 million; and for miscellaneous services the annual surplus was $105.7 million. The average annual trade balance for the three automotive related categories for the 1964-74 period was a surplus of $84.2 million. Thus, unlike the motor-vehicle products trade balance which fluctuated from surplus to deficit to surplus, the automotive related products and services category was in surplus throughout the 1964-74 period. The United States had a surplus in the automotive related current annual balance of payments with Canada from 1965 4/ to 1967; the average 1/ See page 133 of this report. 2/ See page 147 of this report. 3/ See tables 113 and 114 of this report. 4/ Data on automotive current account balances are not available for the years prior to 1965. 161 153 annual surplus was $485.6 million. 1/ From 1968 until 1973 this balance was in deficit by an annual average $294.1 million. In 1974 the net automotive-products trade balance was in surplus by $565.5 million. The cumulative trade balance for automotive products from the beginning of the operation of the agreement in 1965 until 1974 was a surplus of $257.6 million. The United States balance of trade with Canada in raw material and other automotive related products and services was in surplus throughout the 1965-74 period. The average annual United States surplus in raw materials and other automotive related products and services was $84.2 million. Net investment income received from Canada averaged $65.8 million annually for the 1965-74 period. The total current account balance with Canada combines the net balance of motor-vehicle products trade, the net balance of automotive related products and services, and the net investment income received from Canada. The current account balance was in surplus from 1965 to 1968 and from 1973 to 1974. 1972. The cumulative current account balance from the beginning of the operation of the agreement in 1965 until 1974 was a surplus of $1.8 Deficits were accumulated from 1969 until Billion. 1/ See table 115 of this report. 72-5320-76-20 162 154 IMPACT OF THE AGREEMENT ON EMPLOYMENT Employment Trends, 1960-74 Although United States employment in the motor-vehicle industry is more than ten times as large as Canada's, Canadian employment has increased at a faster rate since the United States-Canadian automotive agreement went into effect. The United States total annual employment averaged 699,000 for the 1960-64 period prior to the agreement. 1/ For the 1965-74 post-agreement period U.S. annual employment averaged 866,100, an increase of 23.9 percent over the pre-agreement 1960-64 annual average. Total Canadian annual employment in the 1960-64 period averaged 33,000, during the the 1965-74 post-agreement period it averaged 56,700, an increase of 72.9 percent over the pre-agreement period. The Canadian share of total United States-Canadian employment increased from 4 percent in 1960 to nearly 7 percent in 1974. Average annual employment of production and related-workers in the United States averaged 521,000 for the 1960-64 pre-agreement period and 656,000 for the 1965-74 post-agreement period, for an increase of 25.9 percent. 2′ Average annual employment of production and related workers in Canada for the 1960-64 period was 24,000; it averaged 43,000 for the 1965-74 post-agreement period, for an increase of 79.3 percent over the pre-agreement period. The Canadian share of total United StatesCanadian production and related workers in the automotive-products industry increased from 4 percent in 1960 to 7 percent in 1974. In the first 1/ See table 116 of this report. 2/ See table 117 of this report. 163 155 6 months of 1975 the Canadian share increased further to more than 9 percent as a result of Canada's less precipitous decline in the employment of production and related workers for the 6 month period. Overall, United States employment of production and related workers in the motor-vehicle industry for the Big Four peaked at about 755,000 workers in October and November of 1973, 1/ the end of the biggest year on record for United States motor-vehicle production. By March 1974, employment had declined to 595,000 workers, or by 160,000 workers (21 percent). Following some improvement during the spring, summer, and fall of 1974, during which employment increased to 692,000 workers, it fell again to its low point, for the current energy-and recession-induced decline, of 472,000 workers in February 1975, or 283,000 workers (37 percent) below the record employment level of October 1973. At its low point in February 1975, employment was 142,000 workers (23 percent) lower than in the comparable months of 1974 and 243,000 workers (34 percent) lower than in February 1973. The United States employment situation improved after February 1975 to a total employment of 621,000 workers in September 1975 only 60,000 (9 percent) less than in September 1974, 101,000 (14 percent) less than in September 1973, and 130,000 (17 percent) less than the record month, October 1973. Employment in Canada was never as adversely affected as that in the United States either by the energy crisis or the recession. Canada's record employment was reached in November 1974 and amounted to 53,000 production and related workers. 2/ 1/ See table 114 of this report. See table 115 of this report. |