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World Trade Organization Upholds Challenge to Canada/US Auto Deal

1 June 2000

    Geneva - A World Trade Organization appeals ruling upheld a previous panel 
ruling that declared a 1965 pact between Canada and the United States to be 
discriminatory towards Japanese and European auto manufacturers.

    The deal between the two North American countries grants US car 
manufacturers the right to import cars and parts duty-free in exchange for 
Canadian production using minimum levels of local content.  Other automakers 
have to pay duties of 6.1 per cent on imports of vehicles and parts.

    Officials from the European Commission said the decision should have a 
important positive effect on the European automobile industry by leveling 
the playing field in the Canadian market.  The Japanese reaction was 
slightly less enthusiastic, saying that they hoped Canada would eliminate 
tariffs for all car imports, instead of raising tariffs on imports from the 
US, which might depress sales.

    The appellate body ruled that the pact with the US breached the WTO's 
non-discrimination precept and that the duty exemption constituted a 
prohibited export subsidy.  Under WTO rules, illegal export subsidies must 
normally be withdrawn within 90 days of the formal adoption by the WTO's 
dispute settlement body of the panel and appellate body reports. This must 
be done within the next 30 days.


MJR