Trade protectionism and industrial decline : a hegemonic analysis of U.S. auto trade policy toward Canada during the postwar period

This study tests the contention of the hegemonic stability theory that trade protectionism follows industrial decline of a hegemonic country, citing examples from the U.S. foreign policy toward Canada in automotive trade during the postwar period. Superior economic power of the United States enabled the country to take leadership for more than a decade after the Second World War to create world order and a liberal economic system exemplified in free trade. Since around 1970s, however, decline of the U.S. economic and industrial power has been observed, particularly in the field of automotive industry. Statistical data presented in this thesis showed the growing penetration of the U.S. market for automobiles by foreign manufacturers and the stagnant grow thin the U.S. domestic production of automobiles, representing the decline of U.S. competitiveness in this industry. Moreover, a problem of Japanese auto exports to the United States were brought forth in the 1980s and resulted in trade friction between the United States and Japan, which caused mounting protectionistic sway in the U.S. Congress against the Japanese auto industry. A comparison of the two case studies conducted in this thesis showed the shift occurred in U.S. foreign trade policy toward Canada as the U.S. competitiveness in auto industry declined and the external environment changed (such as the emergence of Japan as a major auto exporter). The first case study deals with the Auto Pact of 1965, a sectoral free trade agreement between the United States and Canada. Considering that the Auto Pact resulted from a unilateral Canadian effort to regain trade balance with the United States by increasing its production and exports of automobiles and that the Auto Pact contains substantial safeguard to the Canadian auto industry, it may be concluded that the U.S. policy in this case was generous to Canada, tolerating Canada's protectionism at the time in order to achieve a freer trade and reciprocity in the future. The second case study deals with the Canada-U.S. Free Trade Agreement, focusing on the automotive trade aspect of the agreement. Contrary to the previous Auto Pact, the U.S. policy toward Canada which was examined in this example seemed to have become increasingly protectionistic and self-centred. This policy shift is observed in such aspect as the termination of the Canadian safeguard, introduction of tougher North American content requirement and limiting the Auto Pact to the original member manufacturers back in the 1960s. Therefore, in conclusion, this thesis upholds the theoretical contention of the behaviour of a declining hegemon, such as growing protectionism, with respect to the case of U.S. automotive industry.Arts, Faculty ofPolitical Science, Department ofGraduat