324. Memorandum From the President’s Special Assistant for National Security Affairs (Bundy) to President Johnson1


  • Progress on Canadian Auto Parts and the Need for a Bargain with Wilbur Mills

As you may remember, the Canadian auto parts row has been one of the most troublesome issues between us and Pearson’s Government for about a year. The Canadians put on a tariff scheme, designed to [Page 692] stimulate production in Canada, which sharply penalized independent American auto suppliers. In response to their spurs, Doug Dillon has been urging us to apply a countervailing duty against Canada; this is what the letter of the law seems to him to require, but the trouble is that it would start a major trade fracas with the Canadians and do no one any good.

Common sense has now prevailed, and a possible bargain is shaping up which has the support of all departments of your Government, most of the auto industry, and—we are confident—the Canadians. It is as follows:

Canada and the United States would eliminate tariffs on automobiles and most automobile parts originating in the other country.
Canadian Government would make a side deal with the major automobile producers who operate on both sides of the border; the producers would commit themselves to increase somewhat the fraction of their output originating in Canada. The shift is to take place over four years and would be made easy by the rising market for automobiles both here and there; it should cause us very little trouble. (Justice has some anti-trust worries about this, but nothing very serious.)

The big companies are all in line (Ford and Chrysler with gusto). The only negative reaction has come from some independent parts producers. One company, Modine, with parts—plants employing a total of about 1,250 workers in Indiana, Illinois, Kentucky and California, is openly hostile. The bulk of the parts industry, however, is either in favor or neutral.

The UAW would be prepared to support the proposal if they can be assured that there will be adequate provision for dislocated workers. Labor believes we can work this out with Reuther and his people.

The immediate problem is to get Wilbur Mills to agree to push the necessary implementing legislation. You do not now have authority to reduce U.S. tariffs to zero on goods from a particular country. The plan is to tack an appropriate amendment to the Tariff Act of 1930.

From a preliminary check by the Ford people, it appears that Mills would be receptive to pushing this through quickly, right after Medicare. If you instruct us to proceed, Dillon will talk with Mills and try to get a clear commitment on this point. This particular matter should take only 3-4 days of hearings. So it will delay other items very little. Henry Wilson in O’Brien’s office concurs in this tactic.

The matter is fairly urgent. Doug claims that if the Canadians do not rescind their current tariff scheme he must impose countervailing tariffs by January 1 or face jail. The Canadians would be prepared to rescind in return for an agreement which would commit us to go to the Congress for the necessary legislation during the winter. If you [Page 693] agree, and if Mills is agreeable, we can probably close the deal with Pearson’s people well before January 1. This will be a major achievement, and one with some news value too.

McG. B.

Tell Dillon to work on Mills2

Speak to me

  1. Source: Johnson Library, National Security File, Country File, Canada, Vol. 2. Confidential. A handwritten notation on the memorandum reads: “See if McNamara agrees with this.”
  2. Neither option is checked but another handwritten notation on the memorandum reads: “Mr. Bundy asked Pres. on phone 12/5 and told Bator ok to go ahead.” Representative Mills held hearings April 27-29.