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Competition from Mexico

In 1965, a landmark agreement with the United States transformed Canada's tiny car-making industry into a world leader. The Auto Pact created thousands of Canadian jobs and was the backbone for a generation of economic growth. But the Auto Pact also tied Canada's fortunes more closely than ever to its southern neighbour.

The Auto Pact is again a priority when Canada negotiates the North American Free Trade Agreement with the United States and Mexico in the early 1990s. Canada wants to protect its Auto Pact safeguards but at the same time gain access to the large Mexican marketplace with its 85 million consumers. Mexico's auto industry had been essentially closed to foreign competition although Mexico has been able to send its automotive products (produced by American branch plants) to Canada duty free under the Auto Pact provisions.

In the final NAFTA deal, Canada retains its safeguards and the closed Mexican market will be opened to North American competition over a 10-year transition period. While NAFTA appears to be a win-win situation for Canada, there is a downside. Canada must now compete with Mexico for its share of the American Big Three business. The Auto Pact still offers some safeguards for Canada but Mexico's low wages will lure some additional business to the southern locale.
.The North American Free Trade Agreement came into effect on Jan. 1, 1994.
.Since NAFTA, Mexico has surpassed Japan to become the second largest trading partner of the United States, after Canada. Exports to Canada and Mexico account for one-third of total U.S. exports.
Medium: Television
Program: Sunday Report
Broadcast Date: Jan. 1, 1995
Guest(s): Dennis Desrosiers, Buzz Hargrove, Dennis Manning, Larry Pearson
Host: Wendy Mesley
Reporter: Keith Boag
Duration: 3:33

Last updated: January 30, 2012

Page consulted on August 21, 2012

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