In an earlier article, it was noted that a change in automotive policy might possibly meet the approval of both protectionists and free traders: the change might lead both to an increase in the volume of domestic production of the item in question, and to a decrease in the total excess costs of production. (In the event of both these results being achieved, the percentage decrease in per unit excess cost would of necessity be greater than the decrease in total excess costs.) This paper evaluates the probable effects of the US-Canadian automotive agreement of 1965 on the basis of these two criteria. In addition, the distribution of efficiency gains from this agreement will be discussed. Equity is an obvious consideration here, and there is also some question whether the division of gains may jeopardize the competitive position of the Canadian industry after 1968.