316. Memorandum of Conversation1


  • Auto Parts


Mr. Ball said there was a considerable problem over the Canadian auto parts measures. He said we might not be able to keep from levying countervailing duties. He noted that the Treasury had already obtained [Page 676] a number of complaints, and many companies are alleging that their businesses have been adversely affected by the Canadian policy. Concern has developed in the Congress. A company has the right to make use of its legal remedies, and the courts would have to decide whether the Canadian measure is or is not a subsidy. Our lawyers think it is.

Mr. Martin said that previously the Canadian view of the problems of secondary industry was that the plan for automobiles could be followed in other industries—this however turned out not to be possible, and there was no intention of applying it. He said he thought some United States people might be exaggerating the effects of the Canadian measures. For example, Studebaker had made a decision which probably would have been made anyway, without the Canadian measures. Studebaker has a simpler and more efficient operation in Canada, and it gave them some opportunity to stay in business.2 Mr. Martin hoped that our perspective and view of mutual interest would lead us to discourage the idea of countervailing duties.

Mr. Ball said we were getting a crescendo of complaints from parts manufacturers in the United States, and there was active Congressional interest, and there would no doubt be speeches in Congress. From the point of view of the United States Government it was difficult to explain a shift of production from the United States to Canada when United States unemployment is worse than Canada’s and when our balance of payments situation is also worse than Canada’s.

Mr. Martin said he thought the parts people would in due course do a lot of business, and that the total result would not be inimical to the parts industry in the United States. Canadian interests are also affected, and there are complaints from people in Canada. Mr. Martin referred to the television interview he had given in September and to the United States concern over it. He said it should be remembered that what a politician says is only good for twenty-four hours.

Ambassador Butterworth noted that the Canadian measure was encouraging United States investment in Canadian production facilities, and Mr. Martin said that they did not mind further investment. The Ambassador remarked that we did not want to increase our investment in Canada necessarily; we were more interested in having existing investment treated fairly.

Mr. Ball wondered if there would be Canadian interest in establishing a joint group to examine the auto industry on a continental basis, to see what might be done of a broad and general nature. Mr. Martin [Page 677] said he had had no opportunity to discuss this with his colleague Mr. Drury. There was no objection to consultation, but the policy had been announced and was in effect, and there could not be much thought of changing it.

(Later, with Prime Minister Pearson present.)

Mr. Ball suggested the question of a joint study of the auto industry to Mr. Pearson, and the response came from Mr. Martin, to the effect that Canada has given exhaustive attention to all possible alternatives. Mr. Martin said it would be regrettable if the impression got around that changes were likely, since the policy has been announced and is in effect.

Mr. Ball said he felt it necessary to make two points: one, that Congress is getting disturbed and that there will be speeches and consequent excitement. The second point is that some company may apply for the application of countervailing duties, and this may release a chain of events which we cannot control. Mr. Martin said no subsidy was involved. Mr. Ball said that there is a real possibility that the courts in the United States might find that there was.

Mr. Pearson said that there had been quite a talk about this between him and the President, particularly on the Studebaker case. He said he had explained to the President that the Studebaker situation would have existed just the same. He said the President seemed worried over a possible flood of cheap cars from Canada but he thought he had reassured the President on this point. He had explained the structure of Canadian car costs. Mr. Ball remarked that the Studebaker letter to its suppliers had been terrible, in that it sounded like that of a politician. He went on to say that the formulation is not applicable to other industries, and that Mr. Drury had said it could be used only in an industry that was American-controlled.

  1. Source: National Archives and Records Administration, RG 59, Conference Files: Lot 66 D 110, CF 3258. Limited Official Use. Drafted by Armstrong and approved in U. The memorandum is Part 13 of 14. Part 4 is Document 315; the other memoranda of conversation are ibid. The meeting was held at the White House.
  2. Reference is to the decision of the Studebaker Company to move some of its auto parts production to Canada.