TRADE IN MOTORS.

Auckland Star, Volume 55, Issue 12, 15 January 1924, Page 10

TRADE IN MOTORS.

WHERE AMEKICA GAINS. BRANCH FACTORIES IN CANADA. (From Our Own Correspondent.) SAN FRANCISCO, December 21. Recent complaints in the Australian and Xew Zealand press that American capitalists were foisting their manufactures upon the Antipodes through the medium of branch factories established in Canada by American investors have tended to show that the crafty American automobile magnates have benefitted to the extent of many millions of dollars through escaping big duties in landing their productions in British overseas countries, not only Australia and New Zealand, but Great Britain in a large measure. Dispatches from Detroit, the seat of the American motor car indust y show that conspicuous tariff advantages account for the rapid spread, through the form of branch American plants operated by Canadian corporations of automotive manufacturing into Canada, and in the case of imports into Great Britain there is admitted to be a double advantage. An American car imported into Canada is subject to such a variety of taxes and charges that, when delivered, its cost has grown approximately 55 cents on the dollar over the cost in the United States. There is first the U.S. war tax of 5 per cent, then comes 35 per cent Canadian import tax 6 per cent Canadian sales tax and 5 per cent Canadian excise tax. This holds true, however, only with passenger cars selling up to 1200dols in the United States. On cars over 1200dols the Canadian excise tax is increased to 6 per cent on the first 1200,d01s and 10 per cent on the amount by which the American price exceeds l_oodols, with the result that the total of taxes, duties and charges for importing into Canada a car costing more than 1200dols in the United States. i s approximately 60 cents on the dollar. Duties on Parts. But the total Canadian duties and other charges on parts imported for purpose of manufacture into finished cars is greatly less. Import duty on parts averages about 30 per cent, against 35 per cent for completed cars, and sales tax is 3| per cent instead of 6 per cent. Furthermore, parts so imported are not subject to- the Canadian. 5 per cent, excise duty. The net result is that a shipment of paTts can be imported, all charges paid, for an average of aboiit 44$ cents on the dollar value of parts in the United States, as against 55 cents on the dollar for finished cars under 1200dols, and 60 cents on the dollar for cars over 1200 dollars. . - Thus the estimated 20dols worth of parts in a Ford touring car can go into Canada at 44i p.m. premium, or for SOdols, if in form of auto parts. But the same amount of parts if imported in form of a finished car take charges at the rate of 53 cents or 1 lOdols. But by far the greatest advantage, from tlie maufacturer's standpoint is that the labour cost, dealers' commission and company's profits included in a finished American car entirely escapes all tariff and other charges. Since the Canadian tariff and taxes are based on American selling price, the less labour applied before export the less the dutiable value of the product. But the Canadian Government goes further. •. To encourage the use of Canadian labour in manufacturing processes the J Canadian Government allows a rebate, of 00 per cent on the duty paid on parts imported when such parts are intended for later export in form of a finished article. This places the Canadian manufacturing plants, except for the =1 per cent residue of tariff, and the 3J per cent sales tax, on practically the same basis as, the American plants as regards costs oT materials and parts. It only remains that labour and overhead costs shall be as low as in the American plants. Additional Advantage. But the Canadian automobile plant has the additional advantage of being able to import cars into Great Britain under 22 per cent duty if at least 25 per cent of the labour performed on them has been applied in Canada, whereas the duty charged on an American car imported into Great Britain is 33 1-3 per cent. This is the opportunity for American capital to obtain lower British duties by using Canadian labour. Using the Ford car as an illustration, the-200dols worth of materials therein, if imported as auto parts, can be taken into' Canada, there manufactured into a car, and later exported at a net duty cost of 1 per cent, or 2dols. This is so because of the Canadian provision for rebating 09 per cent of duty oil materials brought in for. later export. The 3$ Canadian sales tax on 200dols worth of materials amounts to 7.50d018. This makes total charges on the imported materials 9.50db15,. making total cost 205.50d01«. Assuming the labour on a Ford touring car is 52d01s and profit 50dols, these items plus 209.5G_61s material cost make the "factory price for purposes of export to Great Britain 311.50d015. On this sum, because at least 25 per cent represents Canadian labour,' British duty is 22 2-0 per cent, or 60!37d015, while the identical car, if imported direct to Great Britain from the United States, would take a duty of 33 1-3 per cent on 380dols or 126\66d015. The difference in duty is 57.29d015. Tho preferential duty allowed Canadian manufacturers amounts to a discount of 25 per cent of the general "tariff on exports to British West-Indies, New Zealand 17 per cerit, and South Africa 3 per cent. There is no preferential on exports to Australia and India. The extension of American manufacturing plants • into Canada has created an interesting situation in the so-called "Canadian border cities" which line the south side of the Detroit River. There -are 206 idustries in Windsor and the adjoining municipalities'of Walkerville, Sandwich, Riverside and.Ojibway, 00 per cent of which'are branches of American concerns;. of these, are extensions of Detroit companies, the automobile industry predominating. These border, cities have doubled their population to 67,000 in the last six years.