Toronto, Ontario -- Canada should negotiate a new auto manufacturing pact with the U.S. and Mexico to secure duty-free vehicle import privileges for the auto manufacturing sector, former Toyota Canada vice-president Stephen Beatty has argued in a new paper published by the C.D. Howe Institute.
“The Trump administration already plans to use tariffs to manage its trade and foreign policy agenda,” wrote Beatty. “Knowing this, Canada needs to seize the initiative and bring forward a win-win plan so the Trump administration can demonstrate results to US voters.... Before the details of the US plan harden, Canada must show how we can partner to take advantage of an updated and improved North American free-trade agreement.”
Beatty proposes a self-balancing duty remission system, where automakers would receive duty-free import rights proportional to their investment in Canadian manufacturing. This approach aims to incentivize increased production within Canada while maintaining competitive vehicle pricing.
“Canada has a competitive auto industry and it is legitimate for [it] to seek to alleviate the distortions – [which are] costly for everyone – that U.S. tariffs would impose on the allocation of production between the two countries.”
The proposed strategy would involve harmonizing regulatory standards among Canada, the U.S. and Mexico, particularly where they relate to digital technologies and security. Beatty argues that such an alignment could facilitate the phasing out of retaliatory tariffs and promote a more integrated North American automotive market.
“If Canada can clearly define in these regulations the protections needed against Chinese imports – and take into account other protections like anti-slavery and anti-dumping laws – the current temporary tariffs could go away. With the elimination of those tariffs, a strong case can also be made to eliminate the Chinese retaliatory tariffs on Canadian agricultural products.”
In developing his proposal, Beatty drew inspiration from the original 1965 Auto Pact between Canada and the U.S. He suggests that a renewed agreement could help Canada navigate the current trade landscape, safeguard jobs and ensure the long-term viability of its automotive sector.
