The end of World War II brought significant, long-term international change. International institutions like the United Nations were formed to organize and order the global community. One such institution was the General Agreement on Tariffs and Trade (GATT), established in 1947, when 85 countries signed a multilateral agreement to eliminate any discriminatory tariffs. GATT was based on the principles of free and open global trade. The agreement laid the foundations for a framework to settle trade disputes, and helped to encourage freer trade between Canada and a multitude of nations.
Another important trade agreement established during this time was the Automotive Products Trade Agreement of 1965, also known as the Canada-US Auto Pact. This agreement ensured free trade of many auto-related goods (i.e., without tariffs) between the two manufacturing powerhouses; it also ensured that the major auto manufacturers in Ontario could sell their products to the United States, and that Canadian consumers could buy cars and other auto goods from America. While the Canada-US Auto Pact may have decreased local consumption of Canadian-produced cars, it also lowered the cost of many auto parts and encouraged foreign direct investment from the United States into Ontario’s (and Canada’s) auto sector, ultimately improving efficiency in production. Trade between the two nations in the auto industry skyrocketed. When the pact was first enacted in 1966, Canada exported less than $900 million in parts and vehicles to the United States, and imported $1.5 billion; in 1977, Canada exported close to $10 billion, and imported around $11 billion.
Ironically, the Canada-US Auto Pact was found to be contrary to World Trade Organization rules in 2001, but by that point, the North American Free Trade Agreement (NAFTA) had superseded the pact (NAFTA will be discussed in a future post).
Read part 12 of our blog series here,