Unanticipated Outcomes: Lessons from Canadian Automotive FDI Attraction in the 1980s

In the 1980s, the Canadian automotive manufacturing industry grew from three significant players to eight, growth that was facilitated by public policy schemes that were bold, calculating, and provocative. The decision to introduce direct incentives was pivotal, generating anxiety at both the federal and provincial levels. However, the evolution of a series of additional policy tools, each holding tangible value, proved just as important. These included waiving Auto Pact liabilities, the introduction of targeted duty remission plans, adjustments to Voluntary Export Restraints, and manipulations of the Foreign Investment Review Agency. These elements were under the management of Canada's federal government, making it a far more active participant in automotive foreign direct investment (FDI) attraction than its US equivalent. While some observers believe that the approach that public policy-makers brought to automotive FDI attraction during the period this article explores might hold lessons for present day practitioners, the reality is that the evolution of global governance structures precludes access to many of the tools that were deployed with such effect in the 1980s. Despite the subsequent changes, the relevance of coherent, well-timed industrial policy endures.