Auto Talk: GM: Canada Should Levy Tariffs, If Canada's Auto Pact's Scrapped

It's not often an automaker will ask a government to apply tariffs on imports. But that's the position General Motors Corp. is taking in Canada, where status of the Auto Pact - a 34-year-old trade deal with the U.S. - is being threatened.

Earlier this year the World Trade Organization issued a preliminary finding that the Auto Pact discriminates against certain companies and countries, thereby violating WTO rules. A final ruling could come as early as this month, but isn't likely before next year.

Under the Auto Pact, member automakers - in this case GM, Ford Motor Co. and DaimlerChrysler AG - are able to import vehicles into Canada duty-free from countries other than the U.S. That means GM and Ford can bring in Saabs and Volvos from Sweden, GM-partner Suzuki Motor Corp. can import vehicles from Japan and DC can sell German-built Mercedes models, without paying the normal 6.1% tariff.

The Auto Pact, established in 1966, was designed to encourage investment in Canada, while allowing automakers to rationalize production there. Prior to that, high tariffs forced car manufacturers to operate 18 assembly plants in Canada to build just 533,000 vehicles to meet local demand.

The flap with the WTO is a result of protests by Japan and Europe, which complained many of their carmakers were being unfairly excluded from the pact. For example, Toyota Motor Corp. and Honda Motor Co. Ltd. don't enjoy the benefits of the Auto Pact, despite both having extensive investments in Canada. Japan and Europe are calling for Canada to drop all tariffs.

GM Chief Economist Mustafa Mohatarem says Canada should appeal the WTO ruling because it sets a dangerous precedent that could prevent countries from offering investment incentives to corporations. But failing that, he'd like to see Canada apply its tariffs to all carmakers, rather than drop them altogether. "What should Canada do (if it loses an appeal)? First and foremost, not reduce its tariffs," he says. "Canada already is one of the most open markets in the world."

Don't Understand? You're Not Alone In a laughable display of pomposity, Ford Motor Co. showed up at the recent Tokyo Motor Show with an inoffensive but outlandishly awkward concept car - the 021C - to prove the hipness of its design department. This gawky hairball concept was hacked up by one Marc Newson, an Aussie designer who, until this unholy commission from Ford, had done some extremely hip bottle openers and toilet-paper holders. Ford then trotted out VP of Design J. Mays to ensure that the great unwashed masses understood how cool Ford Design must be if it would commission a designer who'd never done anything automotive before. For those who still didn't get it, Ford had a browbeating backup plan: By saying, "If you don't get the O21C, don't worry - you probably weren't meant to." To admit that the 021C was lame was to concede you're too old or geeky to understand Genuine Cool, particularly as defined by Mssrs. Newson and Mays. At best, the O21C was mildly amusing, imminently forgettable - and not very original, appearing to be a revisitation of the Ford Cortina (see photos). And if most of the automotive establishment is too old to understand, when did Mssrs. Newson and Mays drink at the fountain of youthful insight? We don't know about Mr. Newson's age, but J. Mays is working on 50. Forget the designer-babble, Ford. Focus some of this newfound, almighty design wisdom on your production models, like Taurus - the car that's gone from "gotta-have-one" desirability to back-of-the-lot rental car in just a decade.