446 basis to all automotive manufacturers who had production facilities in Canada at the time the Agreement was negotiated. Therefore, Canada did not consider it necessary to obtain a GATT waiver for its Order-in-Council implementing duty-free treatment effective January 18, 1965. In recognition of the need for a transitional period for the smaller, higher cost Canadian industry to adjust to the competitive pressures of the larger North American market, certain restrictive measures were set forth in Annex A to the Agreement: (1) Only bona fide Canadian vehicles manufacturers may import automotive products duty-free; and (2) in order to be considered "bona fide," manufacturers must meet certain minimum Canadian value-added and Canadian production-to-sales ratio requirements. Since the duty-free import privilege in Canada is limited to vehicle manufacturers, individual Canadians who import motor vehicles from the United States must pay the Canadian duty of 15 percent ad valorem. In contrast, anyone in the United States may import a finished vehicle covered by the Agreement duty-free. This restriction on duty-free import privileges in Canada has contributed somewhat to the persistance of higher prices in Canada since it eliminates the competition dealers would otherwise experience from the opportunity for individual duty-free importation by private citizens. 447 5 In both countries, only bona fide manufacturers may import original equipment parts and accessories duty-free In addition to the limitations set under the Agreement. forth in Annex A, the Canadian Government was given by the motor vehicles manufacturers certain Letters of Undertaking to increase Canadian value-added. These letters expired on July 31, 1968. Production in the Motor Vehicle Industry: United States and Canada. U.S. and Canadian motor vehicle production declined 19 percent in 1974 to a total of 11.6 million vehicles, compared to the 14.3 million vehicles produced in 1973. Production declined in both countries, but substantially more in the United States than in Canada. The decline was 21 percent in the United States and 3 percent in Canada. The U.S. share of total units produced was 86.8 percent, a decrease from 88.9 percent in 1973. Motor vehicle production in the United States in 1974 included 7,324 thousand cars and 2,745 thousand trucks, a decline of 24 percent in auto production and 9 percent in truck production compared to 1973.4/ The 1974 production level was the lowest since 1970 when 8.3 million vehicles were produced. Canadian auto production declined 5 percent to 1.16 million cars in 1974, compared to the record 1.23 million in 1973. In contrast to autos Canadian truck production rose 4 percent in 1974 to a record 362 thousand trucks.5/ Retail Sales.6/ The United States had 90.2 percent of the total U.S.-Canadian retail market in 1974. Retail sales of motor vehicles in the United States dropped 21 percent in 1974 to 11.6 million from the record 14.6 million vehicles sold in 1973. Auto sales dropped 4/ Table 2 page 26 5/ Table 3 page 27 6/ Table 1 page 25 449 drastically, 22 percent, from 11.4 million cars in 1973 to The decline in sales of North American 8.9 million in 1974. cent drop in sales of cars imported from overseas. The retail sales of imported cars in 1974 were 1.4 million compared to 1.8 million sold the previous year. Retail sales of trucks declined, but less than autos. United States truck sales in 1974 were 2.7 million units, a decline of 13 percent from the 3.1 million trucks sold in 1973. Retail sales of imported trucks were 171 thousand in 1974, a drop of 25 percent from 1973. Total Canadian retail sales of motor vehicles rose 2 percent to 1,249 thousand in 1974 from 1,227 thousand in 1973. Retail sales of autos declined 3 percent to 943 thousand in 1974. Canadian sales of North American type cars rose 2 percent to 799 thousand, while sales of cars imported from overseas (excluding United States) fell 23 percent to 144 thousand in 1974. Cars imported from overseas took 15.3 percent of the total Canadian market in 1974, compared to 19.4 percent in 1973. Canadian truck sales continued to rise and in 1974 were 370 thousand units, 20 percent above sales in 1973. 450 8 Expenditures by Automobile Manufacturers for Plants and Equipment. The major motor vehicle manufacturers invested $1,949 million in new plant and equipment in the Expenditures were $1,842 United States and Canada in 1974. million in the United States and $107 million in Canada. Compared to 1973 these expenditures are an increase in investments of 9 percent in the United States and 24 percent in Canada. Relative Prices of Automobiles. Automobile price com parisons in this section are based on factory list prices because the manufacturer suggested retail prices in the United States and Canada are not comparable, due to the existence of different excise taxes in each country, see tables 6, 7.and 8.7/ The U.S. and Canadian prices in each table are of identical, popular model cars with comparable standard equipment. Factory list prices in Canada ranged from 5.2 to 11.9 percent higher than in the United States at the introduction of the 1975 models. The 1975 model year price differences were somewhat less than those for the 1974 models which ranged from 10.1 to 13.8 percent and considerably less than the 1965 price differences which were from 21.2 to 44.9 percent. Changing U.S.-Canadian currency exchange rates can obscure changes in the price differential over time. Therefore, the tables showing the price differences for typical models 1965 to 1974 are prepared using the December 1974 exchange rate for all years. 7/ Table 6 page 30; Table 7 page 31; Table 8 page 32 |