ABSTRACT
This chapter proposes a combination of production subsidies and consumption taxes that would mimic the stimulative effects of more traditional industrial and trade policies, but in a manner that is arguably consistent with the constraints of international trade agreements. It discusses tax-and-grant industrial policy aims to enhance one particular jurisdiction’s share of adesirable, high-value manufacturing industry. The production subsidies, meanwhile, would apply to all automotive manufacturing activity in Canada, regardless of the end market for that output. Multinational companies occasionally try to invoke arguments that their manufacturing operations in a particular jurisdiction might be threatened by measures which negatively impact on sales of their products in that jurisdiction. Vargha identifies the crucial and contradictory feature of trade and industrial development in a liberalized, competitive international marketplace. Lynda Vargha proposes a cooperative effort to support automotive investment and production within the North American Free Trade Agreement (NAFTA) bloc, on the part of all three NAFTA-member countries.
