The Continental Integration of the North American Automobile Industry: From the Auto Pact to the FTA and beyond

Abstract

The continental integration of the US and Canadian automobile industries quickly followed the negotiation of a sectorial managed trade agreement—the Auto Pact—in 1965. Thus the recent Canada—US Free Trade Agreement (FTA) will likely have less short-term impact on restructuring in the auto industry than it will in most other industries. The paper begins with an analysis of the significant restructuring that occurred within the North American auto industry during the 1980s in response to the globalization of production and dramatic changes in competitive conditions. The future prospects of the industry as it enters the 1990s are examined with regard to three issues: the likely impact of the implementation of the automotive-industry provisions of the FTA; the consolidation of the significant auto-manufacturing presence in North America established by Japanese automakers during the 1980s; and the fact that, with or without the negotiation of a North American Free Trade Agreement (NAFTA), it appears likely that Mexico during the 1990s will become fully integrated into a truly North American automotive industry.