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Canada and Ford Canada are lobbying the Canadian federal government to replace
the now defunct 1965 Canada/United States auto pact with a system of assistance
that would not be so open to a challenge from the World Trade Organisation.

Both vehicle makers want Ottawa to adopt a system known as "substitution
drawback," and have been lobbying officials and politicians since February
to push it through.

Under the proposed new system, all car manufacturers would receive a credit
for the value of vehicles exported outside North America to compensate for the
duty of 6.1 percent that the companies must now pay on vehicles that are imported
into Canada from outside North America.

Under the auto-pact some American-owned producers were allowed to import cars
into Canada duty-free from anywhere in the world, providing they had a manufacturing
base in the country.

This arrangement was abolished after the European Union and Japan challenged
the agreement through the WTO.

The Canadian government has agreed to consider the proposal because of the
industry’s importance to the country’s employment, supplying one in seven jobs,
although the Toronto Globe and Mail has reported that it is worried that it
might be challenged by the WTO as an export subsidy.

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