Total North American production (Table No. 4 on page 38) expanded from approximately 10 million units in 1964 to 14 million units in 1973; production fel to 10.4 million in 1975 as a result of the recession. Table No. 4 also shows, at the time the Agreement was signed (1965), the United States produced 93 percent of all motor vehicles manufactured in North America while Canada produced (assembled) 7 percent. From 1971-1973 the United States produced 89 percent of all North American vehicles while the Canadian share increased to 11 percent. In 1975, the U.S. share was 86 percent while Canada's was 14 percent, the result of the lesser impact of the recession in Canada in 1975. In the first quarter of 1976, the U.S. produced 87 percent and Canada 13 percent of total production. TABLE 4.-TOTAL MOTOR VEHICLE PRODUCTION: UNITED STATES AND CANADA, 1955-75 One source of controversy surrounding the Agreement has been how to mos accurately measure trade transactions under the Agreement. A joint U.S.-Cans dian Committee was able, in 1970, to achieve a reconciliation of the difference between official U.S. and Canadian data. That reconciliation forms the basis fo the data in the Annual Report of the President to the Congress on the Agreement an is also the basis for the data contained in this statement. An appendix details th main issues in measuring this trade. The marked integration of the North American automotive industry brough about by the Agreement fueled a tremendous expansion of bilateral trade i automotive equipment between the United States and Canada. In 1964 toʻs bilateral trade in automotive equipment was over $700 million. In 1975 this trad reached a level of over $13 billion, a 19-fold increase. U.S. exports 27 to Canada these products rose from $900 million in 1965 to $7.6 billion in 1975. U.S. imper from Canada rose from $200 million in 1965 to $5.7 billion in 1975. Composition of Trade.-Trade under the Agreement includes assembled vehic (passenger vehicles, trucks, buses) and original equipment parts. As the ta below shows, the United States has sustained a net deficit annually in trade w Canada in assembled vehicles. The balance has varied substantially from year t year, reflecting changing consumer demands or varying makes and mode produced in the two countries. 27 In this paper, U.S. export data cited are actually official Canadian import figures. See appendix, page for explanation. 1 In this paper, U.S. export data cited are actually official Canadian import figures. See appendix, p. 5, for explanation. Source: 7th and 9th annual reports of the President, statistics Canada The deficit resulting from this net U.S. importation of assembled vehicles is more than compensated for by the large U.S. surplus in original equipment parts exports to Canada. The table on the next page shows the bilateral trade in original equipment parts under the Agreement. 1In this paper, U.S. export data cited are actually official Canadian import figures. See appendix, p. 5, for explanation. Source: 7th and 9th annual reports of the President. Trade Balance.-At the time the Agreement was inaugurated, U.S. government officials anticipated 28 that the traditional U.S. trade surplus with Canada in automotive equipment would be maintained under the Agreement, though at a reduced level. This judgment was predicated upon the expectation of a vigorous (though not high by the standard of previous Canadian experience) rate of growth of demand for new vehicles in Canada. This expectation was not realized and there was a steady reduction in the favorable U.S. trade surplus in automotive equipment in Canada. In 1970 the United States recorded its first deficit in automotive trade with Canada, a deficit of $196 million. Modest deficits continued to be registered in 1971 and 1972, exacerbating broader U.S. balance of payments problems. In 1973, however, the balance once more turned in favor of the United States. A $1.2 billion surplus was recorded in 1974 and it was followed by a $1.8 billion surplus in 1975. $5,000 $4,000 $3,000 "US Exports" are based on Canadian Import statistics. SOURCE: President's Report to the Congress NOTE: 1964 through 1975 Data excludes snowmobiles The cumulative net surplus accruing to the United States under the Agreement (excluding trade in snowmobiles) exceeds $5.7 billion. Despite the volatile swings in the balance from year to year, the annual average surplus received by the United States was $518 million over the life of the Agreement, virtually equivalent to the U.S. surplus prior to the implementation of the Agreement. Balance of payments implications The balance of payments implications of the Agreement are broader than but include, the trade flows of assembled vehicles and original equipment components discussed above. A balance of payments analysis of the Agreement must take into consideration, in addition to trade in vehicles and original equipment parts: trade in raw materials employed in automotive production; trade in related automotive products and services such as tooling and dies; and capital flows--both U.S. direct investment outflows and net income inflows. As discussed earlier (page 33), investments in Canadian motor vehicle manufacturing operations were financed primarily out of Canadian affiliates' retained earnings and minimal borrowing in Canada. Hence, the balance of payments analysis may be restricted to so-called "current account" transactions. Due to the difficulties of collecting data on non-automotive product transactions directly related to the Agreement, the analysis of the balance of payments impacts of the Agreement conducted by the U.S. International Trade Commission and reported here relies only upon information reported to the U.S. International Trade Commission by the major motor vehicle manufacturers. TRADE BALANCE OF AMC, CHRYSLER, FORD, AND GENERAL MOTORS WITH CANADA FOR RAW MATERIALS, PRODUCTION MACHINERY AND EQUIPMENT AND MISCELLANEOUS SERVICES RELATED TO THE PRODUCTION OF AUTOMOTIVE PRODUCTS, 1964-74 [In millions of U.S. dollars] * Includes tooling and engineering services. * The ITC reports 46.9 for 1964 and 68.6 for 1967 reflecting typographical or arithmetic error. Source: U.S. International Trade Commission report on the United States-Canadian automotive agreement: Its history, terms, and impact, Committee on Finance, U.S. Senate, 94th Cong., 1st sess., January 1976, p. 326. As the table above shows, the automotive related products and service trade was in surplus throughout the 1964-1974 period. The deficit in raw materials trade (which itself is a benefit since it creates employment in the U.S. as the materials are fashioned into products) was more than compensated for by a net surplus in exports of machinery and equipment and other (which includes tooling and engineering charges). To this surplus must be added the net income payments from affiliated Canadian motor vehicle manufacturers to their parent corporations in the United States. These averaged $65.8 million annual for the 1965-1975 period (see discussion on page 33). Thus, the total (including automotive trade, page 39) cumulative balance of payments impact of transactions under the Agreement resulted in a surplus exceeding $7.2 billion for the United States between 1965 and 1975. "1985 Senate hearings. 72-532-76—————6 Employment The growth in North American demand for new motor vehicles during t year period in which the Agreement has been in effect has caused a sigr expansion of production facilities and employment on both sides of the I Total employment in the automotive industry has grown over 18 percen 1964 as the table on the following page shows. Based on the figures in this table, since the Agreement went into effect, 1 jobs have been created in the automotive manufacturing industry in the 1 States and about 39,000 jobs in the Canadian industry, a ratio of over two a half new jobs in the U.S. industry for every one in the Canadian. Autor employment in the United States has risen 14 percent since 1964 compare 56 percent increase in Canada. The higher percentage growth in Canada ( attributed to the fact that the Canadian automotive industry was a grea smaller than its U.S. counterpart when the Agreement was initiated and sequent percentage growth would be proportionately greater in Canada be of the smaller base. The more severe recession in the United States in 1974 is also a factor. Viewing these figures in terms of total North American industry employ it is possible to see any shifts in the relative positions of the United State Canada. In 1964, the year before the Agreement went into effect, 92 percent North American automotive industry workers were employed in the United and 8 percent were employed in Canada. In 1974 (preliminary), the United { share of total North American employment was 89 percent and Canada's was 11 percent. The increased growth in employment in the North Ame automotive industry that has occurred while the U.S.-Canadian Autom Products Trade Agreement has been in effect, has been distributed rougl the same proportion as before the Agreement went into effect. There was a relative improvement for Canada vis-a-vis the United States. However, in ab terms, both countries greatly improved their net positions. TRENDS IN MOTOR VEHICLE INDUSTRY EMPLOYMENT 1 1970 affected by General Motors strike. Canadian employment statistics from 1965 on from data compiled by Sta Canada. Source: U.S. Department of Labor, Bureau of Labor Statistics, "Employment and Earnings in the U.S. 1909–70," 1 date from monthly report, "Employment and Earnings." Estimating the employment impact of the agreement Worker Dislocation (Adjustment Assistance). Both the United States and Can established special programs to help firms and workers who may have been located during the transition to a more highly integrated North American dustry. From 1965-1968 some 5,700 (7/10ths of one percent) workers out of approximately 800,000 U.S. automotive workers applied for adjustment assista Of those workers applying, 2,500 (3/10ths of one percent) were certified elig for assistance and they have since received $3.5 million in benefits. During same period, approximately 8,600 (10 percent) Canadian automotive workers of the approximately 84,900 Canadian automotive workers and several sn Canadian firms were certified eligible for assistance payments or loans unde similar Canadian program. Since the expiration (in 1968) of the special adjustment assistance program the Automotive Products Trade Act, there have been three cases in which adju |