So thank you very much.

Mr. FORD. Let me just mention one thing, Jim. I was looking at a memo that my staff prepared this morning. The figures that you have as of March 1, Mr. Woodcock, on the numbers of workers in Michigan receiving adjustment assistance, list 8,744 at a cost of $7.3 million. And again, while these aren't large figures when taken as a whole, when we were in the process of looking at this independently, we asked the Department of Labor, presumably the same source that you asked, how many were in Michigan on March 1 and we got a different set of figures.

The figures they gave us were 7,889 workers at a cost of $8.2 million per month. It gives you some indication of how this is being handled over there when they are giving out different figures for the same date. within a couple of weeks of each other.

Mr. WOODCOCK. Thank you very much.

Mr. O'HARA. The Subcommittee on Labor Standards will now stand adjourned.

Whereupon, at 12:23 p.m., the subcommittee adjourned, to reconvene at the call of the Chair.]

OVERSIGHT HEARINGS ON THE IMPACT OF THE CANADIAN-AMERICAN AUTOMOTIVE AGREEMENT ON EMPLOYMENT IN THE UNITED STATES

THURSDAY, MAY 6, 1976

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON LABOR STANDARDS,

COMMITTEE ON EDUCATION AND LABOR,

Washington, D.C. The subcommittee met at 9 a.m., pursuant to call, in room 2257, Rayburn House Office Building, Hon. John H. Dent (chairman of the subcommittee) presiding.

Members present: Representatives Dent, Gaydos, Cornell, Zeferetti, Ashbrook, Erlenborn, and Goodling.

Staff present: Julie Domenick, research assistant; J. Charles Neerin, minority counsel.

Mr. DENT. The hearing will come to order.

This morning we are privileged to have with us William D. Eberle, President and chief executive officer of the Motor Vehicles Manufacfarers Association, and Frank S. Day, president, The Condamatic Co. of Warren, Mich.

The purposes of these hearings is to exercise our oversight capacity matters dealing with international trade as it pertains to employment in the United States. Accomplished within this particular jisdiction, of course, is the American-Canadian Auto Pact. We are conducting these hearings because we are still in the midst of Leavy unemployment in the auto and related industry.

The concern of this committee is with one economic factor-jobs production work. So, this morning, I'm happy to have with us Mr. William D. Eberle, and I'm sure his testimony will be very Table to the committee.

You may proceed.

STATEMENT OF WILLIAM D. EBERLE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, MOTOR VEHICLES MANUFACTURERS ASSOCLATION

Mr. EBERLE. Mr. Chairman, thank you very much. I am delighted o be here. To facilitate our discussions, I'd like to offer two stateets for the record: One, a long background statement; the other, a ort overall statement with our positions. I'd like to be able to marize the key points of this, if I may.

Mr. DENT. That's satisfactory with the committee.
Documents referred to follow:]

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72-532-76——————5

BACKGROUND STATEMENT OF MOTOR VEHICLE MANUFACTURERS ASSOCIA THE UNITED STATES, INC.

INTRODUCTION

This statement is submitted by the Motor Vehicle Manufacturers Asscof the United States, Inc. (MVMA),1 for the hearing record of the Subcon on Labor Standards of the Education and Labor Committee of the U.S. H Representatives. It is intended to assist the Subcommittee in its deliberat the impact of the U.S.-Canada Automotive Products Trade Agreemen employment in the United States.

MVMA appreciates the opportunity to participate in the Subcomm investigation. The Agreement has now been in effect for just over eleven Because of its unique and highly complex nature, and because of the high economic activity associated with it, it is appropriate that its effects be ret The study prepared by the U.S. International Trade Commission and is: January of this year provides a good starting point for a dialogue. Thi committee's investigation will continue the process.

This statement is divided into three sections. The first details the events l up to the negotiation of the U.S.-Canada Automotive Products Trade ment, viewing it from two perspectives: as a compromise to avert a po trade dispute and as a tool to integrate the automotive industry in North Ar The second section outlines the objectives and the terms of the Agreemen third section describes the operation of the Agreement in the eleven years been in force with respect to its effect on production, employment, trade anc aspects of the North American automotive industry.

An appendix to this paper takes up the problem of measuring trade transe under the U.S.-Canadian Automotive Products Trade Agreement. Inconsist in the measurement of these transactions have been a source of continuin troversy and have affected every evaluation of the Agreement, leading t understandings of the total impact of the Agreement on both the United and Canada.

Perspective on the agreement

The U.S.-Canadian Automotive Products Trade Agreement must be vie its two aspects: first, as an imaginative solution to a complex problem in Canadian bilateral trade relations; and second, as an instrument that pro the rationalization and integration of the automotive industries of both com Confronted with a large and persistent trade deficit and a stagnant auton industry in the late 1950's and early 1960's, the government of Canada, in t of 1962, unilaterally conceived and implemented a duty remission plan to co both problems. The plan was soon alleged by some interests in the United to be an unfair trade practice, a violation of the U.S. countervailing duty st Had an investigation been conducted and a finding been reached confirmir allegations, the U.S. government would have been compelled to take acti neutralize the Canadian plan.

The prospect of a resulting trade war between the two countries, each of was the other's best customer, was very real and threatened disruptive 1 cussions far beyond the automotive sector. Once this danger was averte negotiation of the Agreement, President Lyndon Johnson stated: "We faced by the prospect of a wasteful contest of stroke and counter-stroke, ha to both Canada and to the United States and helpful to neither. Our broader relations with our Canadian friends would have suffered strain." 2

In addition, it had long been recognized in both countries that there economic benefits to be reaped from integrating automotive production in countries into a truly North American industry. By 1964 it was possible to the Canadian market for automobiles as a "natural extension" 3 of the market. The two countries made up a "single great North American indust Three facts bear out these assertions.

(1) Production in Canada was overwhelmingly (over 97 percent) by subsidi of United States motor vehicle manufacturers.

1 MVMA represents nine of the United States' major automobile and truck manufacturers. MVMA bers include: American Motors Corporation, Checker Motors Corporation, Chrysler Corporation. Motor Company, General Mctors Corporation, International Harvester Company, Walter Motor Company, Warner and Swasey Company, Badger Division, and White Motor Corporation.

2 President Lyndon Johnson's message on H. R. 6960, transmitted to the Congress on March 31, 19 reprinted in Hearings on H.R. 6960 Before the House Committee on Ways and Means, 89th Cong., 1st S 1965. Hearings on H. R. 9042 Before the Senate Committee on Finance, 89th Cong., 1st Session (1965) (E after cited as 1965 Senate Hearings].

(2) Most of the workers on both sides of the border were organized by the same international union.

(3) To a considerable extent, the Canadian industry was located in Ontario, in close proximity to the border with the United States and the location of much of the U.S. motor vehicle manufacturing industry.

Thus the imperatives of an imminent trade war and the logic of industrial coordination and integration led to intense negotiation between the government of Canada and the government of the United States during the latter months of 1964 culminating in the U.S.-Canadian Automotive Products Trade Agreement. It is our belief that the Agreement represents a reasonable response to the problems and opportunities in the automotive sector in North America when Wewed in the context of the available alternatives. The U.S. motor vehicle Manufacturers did not initiate the negotiation of the Agreement. In hearings accompanying Congressional consideration of legislation implementing the Agreement, however, they maintained that it was a "workable solution," and they Hedged their cooperation with the governments of both countries to implement the Agreement and related legislation.

On balance, the U.S.-Canadian Agreement has had a beneficial impact in terms of production, productivity, trade and employment. Evaluated against the outlook daring the period before it was negotiated, the Agreement stands as a major Success in U.S.-Canadian trade relations.

While the major U.S. motor vehicle industry took no position on the Agreement during its negotiation, it had adapted to the rules laid down by the governments of both countries and views the Agreement favorably today. Termination of the Agreement now would have a crippling effect on the U.S. motor vehicle manufacturing industry and thus on the U.S. economy. The effects on Canada of a termination of the Agreement would be equally devastating.

ART I. HISTORICAL BACKGROUND OF THE NORTH AMERICAN AUTOMOTIVE INDUSTRY Since its earliest days, the automotive industry of Canada has been much maller than the industry in the United States. The principal Canadian producers re subsidiaries of the U.S. manufacturers. At the same time, this industry has istorically ranked among the largest of Canada's manufacturing industries, in country eager to enlarge the manufacturing sector of its economy to reduce raditional dependence on primary (agriculture and mineral extraction) economic ctivities. The convergence of these factors guided both the evolution of the anadian automotive industry and the policies and actions of the Canadian

overnment toward it.

The beginnings of the Canadian automotive industry are usually traced to the rmation of Ford Motor Company of Canada in 1904. Studebaker followed in 10. General Motors in 1918, Chrysler in 1921, and the Nash Motor Company redecessor to American Motors) in 1946. Until 1962, virtually all of the passenger Is and an overwhelming proportion of the commercial vehicles produced in Canla were the products of these five subsidiaries of U.S. companies. In 1963, Volvo, Swedish concern, established a production facility and was followed by several her non-American producers. Nevertheless, the overwhelming proportion (more an 97 percent) of vehicles produced in Canada continued to be turned out by bsidiaries of the major U.S. motor vehicle manufacturers.

In the beginning, motor vehicle manufacturing in Canada was little more than assembly of the finished product from parts imported from the United States. is was less true as time went on and components began to be supplied by local Trees. By the 1920's indigenous Canadian production covered a wide range of rts, including engines, wheels, and body components. From the outset, Canadian Emercial policy had encouraged manufacturing in Canada. The primary inuments employed were the tariff and local content requirements. The Canadian market was attractive to U.S. companies because of its recoged potential for growth. Assembly in Canada for the Canadian market was ractive because in the early years of the industry, the Canadian tariff on ported vehicles was 35 percent. In addition, Canadian automotive exports (if contained at least 50 percent Canadian content) enjoyed preferential access British Empire markets.1

This secess explains, in part at least, the high level of Canadian exports prior to World War II. This or was of less significance after World War II, however, because of the declining competitiveness of North sican type cars abroad.