The Auto Pact: A Nail in the Coffin of Canadian Automotive Industry

In 1965, Canada and the United States signed the Auto Pact, a trade agreement that aimed to strengthen their automotive industries by eliminating tariffs on automobiles imported between the two countries. The pact was a game-changer for the US auto industry, which saw Canada's deficit disappear within the first six years of its implementation. The pact also led to the creation of a robust and lively automotive market in Canada, employing over 100,000 people across the country.

However, as time went on, the Auto Pact began to take its toll on the Canadian automotive industry. The money-centric relationship between Canada and the US continued to flip favor back and forth, with the US eventually emerging with a surplus of just over a billion dollars. This perpetuated the auto industry's dominance in Canada, making it impossible for independent Canadian car makers to compete. By the mid-80s, Honda, Isuzu, and Toyota had gained significant presence in Canada, taking up more than 16% of the market on their own.

Despite this, Canada attempted to find a way to stay relevant in the automotive industry. They made a separate agreement with Japanese automakers, known as a duty-remission incentive, which removed taxes on imported cars if they were manufactured in Canada and then exported to the US. This created a middleman situation for Canada, where foreign companies could sell Canadian-made products to the US without any tariffs.

However, looming renegotiations led to the implementation of free trade agreements between Canada and the US. The first such agreement came into effect in 1989, which eliminated all taxes on cars and car parts between the two countries. This had a profound impact on the automotive industry, as it largely benefited US-based companies due to their larger size and technological superiority.

The new free trade agreement was later incorporated into NAFTA, which effectively canceled out the Auto Pact's preferential treatment for Canadian automakers. The pact was eventually replaced in 2001, but its effects were already felt. Trade minimums had surpassed the one-to-one production-to-sales ratio set by the Auto Pact, and US and Japanese companies had effectively swallowed up the entire independent Canadian automotive market.

Despite this, there is still hope for Canada to make a mainstream product in the car world. There are smaller, unique, and impressive Canadian car companies that have managed to carve out their niche in the industry. The Prevost company, for example, is known for its tour buses and motor homes, which are truly massive vehicles with some of the largest sizes allowed on the road.

The H3-45 VIP, manufactured by Prevost, is a prime example of this. This vehicle is 45 feet long and boasts 500 horsepower, generating 1750 foot-pounds of torque. It's a behemoth on wheels, making it one of the largest vehicles allowed on the road. Another Canadian car company worth mentioning is the Campagna Corporation, which has created the T-Rex three-wheeled car. This unique vehicle has garnered attention and interest from automotive enthusiasts around the world.

In conclusion, while the Auto Pact may have been a successful agreement for Canada in terms of economic benefits, it ultimately proved to be detrimental to its own automotive industry. However, this has not stopped Canadian companies from innovating and finding new ways to compete in the global market. The Prevost company and Campagna Corporation are just two examples of how Canadian ingenuity can lead to unique and impressive products that showcase the country's capabilities.

WEBVTTKind: captionsLanguage: en- Canada has given the worldsome truly great things:the telephone, poutine, one ofthe coolest YouTube channels,just to name a few,and also the Dodgechallenger Hellcat Demon.(car zooming)That's right.Some of the most iconicAmerican muscle carsare actually Canadian,but Canada itself doesn'thave its own major car brand.What's up with that?It's a bit weird to me that a nationthat's so clearly capableof producing a vehiclefor the mass market has nomass market vehicle of its own.So why exactly doesn'tCanada make their own cars?We're gonna take a look at why that is,and how a secret dealmay have sealed the fateof the Canadian car's extinction.- Welcome to theGreat White North day.- Thanks again to Rayconfor sponsoring this episode of Wheelhouse.You know, Jeremiah is always talkingabout how his Raycon EverydayE25 earbuds helped him driftaway from the stresses of daily life,so I figured I'd see whatall the fuss is about.(glass shatters)Ah!What?(jazzy piano music)- Key Ticklin' Tony?- Afternoon, Nolan.- Where am I?- You're in a Raycon spot, Nolan.Why don't you sit downand rest those weary bonesand let the music guideyou on a spiritual journey?- How long can I stay here?- Well, Raycon's Everyday E25earbud gives you six hoursof playtime, and while they'reexquisitely comfortable,they sound just as good asthose other premium earbudsat half the price.- How does it end?- All you have to sayis head on over to buyraycon.com/donut,or click the link in the descriptionto get 15% off your order,and hey, Nolan, guess what?- What's that, Key Ticklin' Tony?- It was me all along, Nolan, Uncle Jerry.Listen, I don't ticklekeys, but I do tickle legs.Give me those legs.Ah!(gasps)(panting)- That was weird.Canadian car brands came intofruition in what's known asthe Brass Era of the lateteens and early 1920s,when cars and trucks had all the hinges,handles, and headlampsfinished in brass trim.Canada had managedto cultivate 11 major automotivemanufacturing marques,including Brooks, Gray-Dort,McLaughlin, Chatham,Redpath, and several others.That's right, Redpath, as in Zach Redpath.He's sitting right there off camera.Canadian auto companieswere primarily basedout of Ontario, due to itsclose proximity to Detroit,home of Ford, Chrysler,and GM, AKA the Big Three.By 1923, Canada was thesecond largest automakerin the world.However, the industryas a whole struggled with inefficiency.Canada also had high tariffson all trades to the US.When the Great Depression hit,it crippled the independent auto industry.By 1931, 75% of all Canadiancompanies went belly up.Can I get an F in chat?This was the first nail in the coffinfor Canada's native car industry,but the Big Three stayed in Canada,because they were alreadyusing Canadian factoriesto build American models.This also gave them accessto British nations as well,because Canada was partof the British Empire.This relationshipremained largely unchangedfor the next several decades(horn blares)with American carsbeing produced in Canada,and mostly being shipped(cash register dings)back to the US for sale.Because of a lack of car sales in Canada,this caused a large deficit with the US,like 785 million bucks.Basically, Canada was payingmore money to send carsto the US than they weremaking by selling cars madein Canada to Canadians, butmore money was only partof why Canada was having more problems.In 1964, Canada and the US got togetherto address the moneyissues that had developed.What resulted was something calledthe Automotive ProductsTrade Agreement of 1964,better known as the Auto Pact.Before the Auto Pact,post-World War II prosperityhad jump started car salesall over North America, butCanadian manufacturing plantscouldn't keep up with demand.This resulted in less businessbetween the US and Canada,which was bad for Canadianmakers and dealers.Solving this problem was the founding ideaof the Auto Pact.The officially statedgoals of Auto Pact wereto cut production costs,reduced prices on cars for Canadians,reduce the trade deficit,and create a broader automotive market.This pact specificallysaid that there would bea minimum production tosales ratio of one to one,meaning that for everyvehicle sold in Canada,a vehicle must be produced in Canada.Since there were basicallyonly big American car brandsthat still existed in Canadawhen the Auto Pact was created,the cars getting producedfor the American marketand the cars being soldto the Canadian marketwere basically all US models,but the one sold toCanadians were modifiedfor the Canadian market,resulting in some interestingCanada spec'd models basedon American cars.Canada got--Canada.Canada, huh.Canada.You say it one too many times,and it starts to lose its meaning.Canada got rides like the Acadian Canso.Acadian was a Canadian sub-brand of GM,and got sold through Pontiac dealers,and it was kind of a beast.Using the chassis fromthe Chevy II platformand styling cues from Pontiac,(blender whirring)the Acadian Canso was a bitof a parts blended special, but it worked.It kind of looks like a lightweight GTO.The top trim level camewith a 396 cubic inch V8,and a four on the floortransmission, sounds awesome,and in 2012, one of these things soldat auction for $73,700.(cash register dings)Not bad for a cut and shut car.Chrysler did the same sort ofthing with their Dodge trucks.To get their workhorsesto the Canadian market,a sub-brand called Fargo came into play.- Oh, you betcha, yeah.- Ford followed suit withtheir F-series line of trucks,rebranding the vehicle as a Mercury,and Ford sold Mercurybadge F-series trucksto Canadians, simplyreplacing the F with an M,and calling it a day.Ford did this again withtheir Falcon drive Frontenac.Frontenac, I'm just gonna say it,which was basically a FordFalcon with a boatload(cars crash)of maple leaves plasteredall over it, and an all-new grill.Heck, even the hubcaps had maple leavespressed straight into them.Awesome.In the first six years of the Auto Pact,Canada eliminated the entire deficitwith the US auto industry.The pact was proving its worthand helping to create a more robustand lively automotive market in Canada.It actually worked.Nice.(siren blares)Between 1966 and 1977, themoney-centric relationshipbetween Canada and the USping-ponged its favor backand forth, and eventuallygrew to a US surplusof just over a billion dollars.This also perpetuated the auto industryto become the number one exportindustry in all of Canada,employing over 100,000people across the country.This ingrained the Big Threeinto the automotive industry in Canada.This didn't have any direct benefitsfor creating a high-volume Canadian car brand,but the benefits helpedso many other aspectsof Canadian life, like the workforce,technology advancements,and a booming economy,but in many ways, thiswas yet another nailin the Canadian auto maker coffin.However, other nations tooknotice of the Auto Pact,and started their own relationshipswith the Canadian workforce.Foreign manufacturers glomming onto the booming Canadianautomotive manufacturing industrywanted to get in onthat sweet Tim Horton'sWayne Gretzky coffee,which, if you didn't know,is a coffee with ninesugars and nine creamers,because Gretzky's number is 99.It's also known as acup of pure energy.(wind whooshes)We should harness it to power our grid.Through the 70s, Honda, Isuzu,and Toyota gained presence in Canada.They weren't part of the Auto Pact,but this didn't stopthese Japanese companiesfrom taking up more than16% of the market in Canadaand the United States allon their own by the mid-80s.Canada made a separate agreementwith these Japanese companies in the formof something called aduty-remission incentive,which essentially removesany taxes on productsthat were imported into the country.The side effect of thiswas very interesting,and kind of weird.(horn blares)Because Japanese automotivemanufacturers set up shop in Canada,Canada was able to tie theminto the duty-free exportsto the United States,so long as those Japanesecars were Canada made.Pretty clever.Because Canada wasn'ttechnically violating anyof the stipulations of the Auto Pact,it was allowed to continuewith their middleman status,and keep a steady flowof foreign cars builtin the Great White Northand then sold to the US.With looming renegotiations,the US had two objectives on their mind:one, eliminating dutyremissions into Canadaand adopting free trade between nations.Prior to these upcoming negotiations,the pact was great for theCanadian workforce and economy,but it was driving nail after nailinto the independentCanadian auto industry,which has pretty much become nonexistentin terms of market share.In 1989, the free tradeagreement came into effect,which got rid of any tax costsbetween Canada and the USfor all cars and car parts,while still maintainingthat one-to-one productionto sales ratio.But because of the nowfrictionless movement of productbetween two nations,- You know, frictionless.- it largely benefited US-based companiesbecause of them being so much largerand having better technologythan essentially any companythat had a presence inthe entire continent.This new free trade agreementlater got incorporatedinto NAFTA, which overruledany preferential treatmentthat the Auto Pact had put in place.The Auto Pact was canceled in 2001,but it didn't matterbecause trade minimumswere already well abovethe one-to-one minimum.US and Japanese companieshad effectively swallowed upthe entire independentCanadian automotive market,(horn blares)and Canada had becomethe go-to manufacturer for a large portionof the Big Three's catalogs,as well as for Honda and Toyota.But that's not to say therewasn't any hope for Canadato make a mainstream productin the car world, though.Even though Canada largely catersto the big boys in the automotive realm,there are still somesmaller, and very unique,and I think pretty cool,Canadian car companies.(funky music)Prevost is a Canadian tourbus and motor home company,and the machines they make areimpressive, to say the least.There are literally some ofthe largest vehicles allowedon the road.There's the H3-45 VIP,which is 45 feet long with 500 horsepower,making 1750 foot-pounds of torque.It's a big boy.Another cool Canadian car companyis the Campagna Corporationand their T-Rex three-wheeled car.I remember seeing this thingon "Ride With FunkmasterFlex" back in the day.Their track-ready model, called the RR,is powered by astraight-four Kawasaki motor,making 200 horsepower, and asix-speed sequential gearbox,and the thing only weighs 998 pounds.This thing's a beast.(dinosaur roars)Another crazy car brand outof Canada is called Conquest Vehicles,and they make something calledthe Knight XV, or Knight 15.I'm gonna say XV, 'cause itsounds more intimidating.It's an insane, bulletproof,uber-luxurious SUVthat's built to customer specoff of the Ford F550 platform.Just look at this thing.The Ford Excursion is Bruce Banner.The Knight XV is the Hulk.My personal favorite carthat's currently being produced in Canada(engine zooms)is made bya supercar company called Felino.Their cB7 and cB7R super carsare powered by 6.2 LS V8.Nice.(siren blares)The cB7R is the race spec variant,and it can produce 700 horsepower.The company was startedby Canadian race championAntoine Bessette in 2010,and they've been buildingbespoke track day machinesfor clients since 2017.This one looks awesome.It looks like somethingout of science fiction,but don't forget, though,we also have the Canadians to thankfor some of our favorite cars.Literally every single Dodge Challengerand Charger is produced in Ontario.Think about that.(engine zooms)The Dodge Demon,an 840 horsepower,all-American drag stripmonster, is Canadian.With that considered,I really wish it came witha flannel seat option.Canada also makes the ToyotaCorolla and the Honda Civic,as well as the Toyota RAV4.We can also thank theamazing Canadian designersand engineers that builtthe all-new Ford GT.This is like America's mascot.It's a Ford distilled into asupercar, and it's Canadian.Ultimately Canada forsakeits own independent automotiveindustry for the abilityto provide a more robustand fruitful workforcefor the people that live andwork in Canada, and in a way,that's the most Canadianthing I've ever heard of.What's your favorite thing from Canada?Jim Carrey is Canadian.Avril Lavigne is Canadian.JB, yeah, who could forget the Biebs?Canadian.I'm actually a quarter Canadian.My grandmother was from Edmonton, Alberta.Go Oilers!So I can say Canuck.(laughs)Be kind, see you next time.Love you, Canada.(upbeat music)