Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



There They Go Again - U.S. Auto Protectionism at its Worst

Senators Tom Harkin (D-IA) and Debbie Stabenow (D-MI) announced that they plan to introduce an amendment to the Senate stimulus package that would help American automakers sell their cars, while also taking older, less fuel-efficient cars off the road. The Sell Fuel Efficient Cars Amendment would provide a rebate of $10,000 to buyers who trade in a car more than ten years old for a new car assembled in the United States. So much for President Obama's statements that the stimulus will be consistent with international obligations.

This is a blatant violation of GATT Article III - national treatment - because it favours domestic production over foreign production. It violates both the GATT 1994 and NAFTA Chapter 3. It may also be an illegal subsidy under the WTO Agreement on Subsidies and Countervailing Measures as it is clearly a benefit that is specific to the U.S. automobile industry.

Canada, and the province of Ontario, should voice their displeasure about this amendment because Canada will be hurt the most of any of the U.S. trading partners. The Sell Fuel Efficient Cars Amendment will have the effect of causing North American automakers to decide to close Canadian plants and move all "assembly" to the United States. North American automobile manufacturers are now incentivized to move production of new fuel efficient vehicles and and new model of vehicles to U.S. plants. If this should happen, it will cost Ontario thousands of jobs.

The North American auto industry was built under the Canada-United States Auto Pact. There has been a long-standing agreement between Canada and the United States to build a North American auto industry on both sides of the border. The Senate Amendment turns a blind eye to history and the international obligations of the United States.

If this Amendment is passed, Canada should bring this matter to a NAFTA panel under NAFTA Chapter 20 or to the WTO Dispute Settlement Body. This kind of trade distorting measure is the reason national treatment is a bedrock principle in international trade law. The harm that such protectionism can cause will be witnessed in the decisions of companies and the trade distortion and harm it causes.

For more information, please contact Cyndee Todgham Cherniak at Lang Michener LLP (416-307-4168).

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