The Truth About Cars » Free Trade Agreements The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Tue, 29 Jul 2014 21:42:50 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Free Trade Agreements Japanese Automakers Find New Export Base, Opportunity In Mexico Tue, 11 Mar 2014 14:45:26 +0000 Mazda3s Loading Onto Three-Tiered Train Car

Within four months of each other, Honda, Mazda and Nissan have opened new factories in Mexico, taking advantage of the opportunities within the nation’s automotive industry to grow a new export base into the United States, Latin America and Europe while also gaining ground in the rapidly expanding local market, all in direct challenge to the Detroit Three and other automakers on both sides of the border.

Automotive News reports Mexico will become the No. 1 exporting nation to the U.S. by 2015 at the earliest in large part due to the 605,000 units per year added by the three Japanese automakers. Meanwhile, Toyota will begin production in 2015 at Mazda’s newly opened Salamanca plant prior to deciding whether or not to build a new factory of their own. Nissan’s premium brand, Infiniti, may also set-up shop in Mexico.

In turn, the Japanese will see benefits from the move, from mitigating losses from a weaker yen in exports from home and greater profit due to cheap labor, to no tariffs on exports to the U.S. due to the North American Free Trade Agreement and improved product availability resulting from shorter distances between markets.

Speaking of free-trade agreements, Japanese automakers will also have access to some 44 countries and up to 40 million sales annually as a result of Mexico’s many agreements, allowing them to take on competitors in Latin America and Europe.

Finally, the Japanese have taken market share away from the Detroit Three in Mexico’s own automotive market, holding a collective 42 percent over Detroit’s 35 percent in 2013, when just four years earlier Detroit dominated with 57 percent of the market over Japan’s 23 percent.

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Toyota Australia Engine Plant Moving To Thailand After 2017 Fri, 21 Feb 2014 16:30:37 +0000 Toyota Altona Engine Plant

Sources close to Toyota say the engine plant in Altona, Australia will likely be relocated to Siam Toyota Manufacturing in Thailand once the automaker ceases Australian manufacturing operations in 2017.

GoAuto reports that while the company hasn’t officially announced what will happen to the $331 million AUD engine plant thus far, executives inside Toyota Australia have Thailand in mind as a potential new home for some of the tooling currently in use. The factory exports 16 percent of its 2.5-liter four-cylinder engines to Thailand and Malaysia for fitment in Camry and Camry Hybrid models.

Another reason for the move to Thailand? While Toyota Australia builds 100,000 Camry, Camry Hybrid and Aurion models annualy — 70 percent for export markets, such as the Middle East — Toyota Thailand builds 880,000 units annually, exporting a wide range of vehicles to Australia and Association of Southeast Asian Nations — or ASEAN — member states. Furthermore, a free trade agreement between the two countries means vehicles, such as the HiLux and the Corolla, from Thailand enter Australian ports duty-free.

The plant, partially funded by a $63 million AUD contribution from Australia’s Green Car Innovation Fund and opened at this time last year, will close halfway through its expected lifespan of 10 years in 2017, shedding 2,500 jobs with thousands more down the local supply chain in the process.

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Canadian Automakers Make Last Minute Lobbying Effort to Delay Korean Trade Deal Fri, 17 Jan 2014 17:20:54 +0000 southkorea-02

Imported vehicle sales by country. Source: Canadian Vehicle Manufacturers Association

Companies building cars in Canada are lobbying at the last minute to, kill an “imminent” free trade deal between Canada and South Korea that the automakers say would damage the Canadian auto industry and the greater Canadian economy. Ford Motor Co. of Canada Ltd. president and chief executive, Dianne Craig, said on Thursday that the U.S.-Korea trade agreement enacted in 2007 has been a “disaster” for auto makers. Craig urged the Conservative government not to make the same mistake as the United States.

“We understand that [the Canadian government] need[s] to look for what’s in the best interests of Canada,” Ms. Craig said in an interview with Toronto’s Globe & Mail. “But, frankly, autos are the greatest driver of GDP and we think we need to have a pretty strong voice in this conversation. This is not good for autos, which means it’s not good for the economy, which means it’s not good for Canadians.”

According to Ms. Craig, Canadian officials told Ford and other Canadian car companies in December that the free trade agreement with South Korea was “imminent.” Without getting into details, Craig said that the deal currently on the table is worse than what the United States got in 2007, but that the automaker is continuing discussions with the government on the issue.

The fierce opposition from Ford and other automakers has apparently resulted in Ottawa applying the brakes and at least temporarily delaying the agreement. Canadian federal officials won’t comment other than saying that  the government hasn’t yet taken a final position.

Prime Minister Stephen Harper said last week that he “hopes” Canada and South Korea will reach a deal shortly, though he acknowledged the agreement might fall through.

Ford’s position is that instead of a bilateral agreement with Korea, Canada would be better off working through the  current Trans-Pacific Partnership to make South Korea make its markets more open to imports including cars, and end currency manipulation. Canada is one of the twelve Trans-Pacific Partnership negotiating partners. South Korea has expressed interest in joining the TPP and like the other 11 members, including the U.S., Canada has veto power over new members. That gives Canada some leverage beyond the bilateral talks.

Canada had a $2.7 billion (Canadian dollars) trade deficit with South Korea in 2012, and motor vehicles represented more than 80% of that. That year Canada imported 131,174 Korean-made vehicles in 2012 versus exporting fewer than 3,000 Canadian built vehicles to South Korea.

Bringing up the U.S.-South Korea trade deal, Craig pointed out that under that agreement by next year U.S. tariffs on Korean cars will have been eliminated, but that continuing non-tariff barriers have kept American and European automakers from gaining market share in South Korea despite the free trade deal.

“To us, they are not a good fair trade partner and they have proven that in the last two agreements,” Craig said. “That is our concern for Canada. All you have to do is look at the data and it speaks volumes.”

Some Canadians have said that the trade agreement and car imports from Korea just might have to be the price the auto industry has to pay in exchange for the billions of dollars in government assistance to that industry in recent years. Ford itself received a $71.6 million loan from the Canadian government just last year to help pay for some retooling at Ford’s Oakville, Ontario assembly facility. Craig rejected that connection.

“There are many components that go into manufacturing competitiveness in Canada,” she said. “There is a lot the government has done to support our industry. But frankly this [Korea-Canada] agreement would set automotive manufacturing back in Canada.”

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America’s Hot Export Article: “Import” Cars Fri, 07 Dec 2012 13:11:02 +0000


Many people don’t realize that most of the “import” cars bought and sold in America no longer roll off a boat, but off an assembly line somewhere in the American heartland. Or at least in the North American heartland. It comes as an even bigger surprise that these cars are one of America’s most successful export products, going from American ports to many countries in the world – where people often are likewise ignorant of the car’s American origin.

Yesterday, we were surprised by the news that Honda aims to become a net exporter from North America in two years. Numbed by the PSTD of too much moronic electioneering, we often forget that “the American Auto Industry” also consists of names like Hyundai, Volkswagen, or Toyota. “Foreign” automakers employ more than an third of America’s autoworkers, who build more than a third of the Made in America cars.

What is very little known is that for many years, these foreign companies have been exporting an increasing number of the American-made cars. While bailed-out GM is busy creating jobs in China (this year alone, GM built some 2.6 million cars in China, vs. 1.9 million in the U.S.) foreign automakers do more to build export-based auto jobs in the US than the companies rescued in the bailout.

  • BMW exported 70 percent of the 276,000 cars it built 2011in Spartanburg, SC, helping South Carolina overtake Michigan as the No. 1 exporter of automobiles. BMW X3, X5, and X6 go from Spartanburg to 130 countries.
  • Mercedes-Benz exports half of its cars made at its Birmingham, Ala. plant to countries outside NAFTA.
  • Honda started exporting U.S. made Hondas 25 years ago. On Wednesday, the 1 millionth Honda automobile to be exported from the U.S. rolled off the line at the company’s Marysville Auto Plant. The 2013 Honda Accord EX-L Sedan is on its 8,000 mile way to South Korea. Since 1987, Honda has exported more than $22 billion worth of automobiles and components from the U.S. American Honda exports the Accord, CR-V, Civic, Odyssey, Pilot from its factories in the U.S.
  • At Nissan, “the numbers are trending toward Nissan being a net exporter,” a spokesman in Yokohama said. In 2012, Nissan exported 247,779 units from NAFTA, imported 418,248 and built 1,157,612 in the region, for a net import balance of 170,469 units. “The tipping point comes when we localize production of the next-generation Nissan Rogue in the U.S. at the end of 2013,” the spokesman said. Nissan is on pace to sell more than 140K Rogues in the U.S. this year. Once they are built stateside, they will reduce Nissan’s import number to less than 300,000, and with increased exports, Nissan could become a net exporter from North America in 2014. Nissan exports the Altima, Frontier, Maxima, Pathfinder, and X-Terra from its factories in the U.S.
  • Toyota began exporting U.S.-assembled vehicles in 1988, and now exports U.S.-assembled vehicles to 21 countries around the world. These exports are expected to increase in calendar year 2012 to more than 130,000 units – a 52% increase from last year and an all-time high for Toyota. The company began exporting Indiana-assembled Sienna minivans and Kentucky-assembled Camry sedans to South Korea last year. Other exports include the Kentucky-produced Avalon sedan, the Indiana-produced Highlander and Sequoia SUVs and the Texas-produced Tacoma and Tundra pick-up trucks. In November, Toyota announced the export of U.S.-assembled Venza crossovers to its distributor in South Korea.
  • Subaru exports the Legacy, Outback, and Tribeca from its factories in the U.S.

17 percent of the cars made at Japanese plants in the U.S. were exported in 2011 for a total of 259,908 units. This total is expected to increase drastically in 2012 and in the coming years.

Free trade agreements are a main driver behind these exports. Free trade agreements get rid of a small 2.5 percent tariff on auto imports to the U.S., but they also eliminate often much higher tariffs on auto imports to other countries. This, a low dollar, and volume production in the U.S. make a strong business case for exports from America. A free trade agreement between American and South Korea made transport of “Japanese” cars from America to Korea more attractive than shipping them the much shorter way from Japan.

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Protectionism Kills Jobs. As Demonstrated In Chattanooga Wed, 24 Oct 2012 13:06:15 +0000

There is a shiny new car factory in Chattanooga, Tennessee. People enjoy working at this Volkswagen factory. The factory is airy, there is a lot of space inside and outside the factory for expansion. However, it will be a while until it will make more than the Passat. The people in Tennessee had hopes for Audi moving in here. Instead, Audi decided on going to Mexico. When the new Golf MkVII comes to America, it will be made in Mexico. There is no other car in sight for Chattanooga. Why is the factory, one of the best specimens in Volkswagen’s vast global collection, losing out on new jobs? The Chattanooga Times Free Press thinks it knows the reason: Lack of free trade agreements.

“A lack of free trade pacts between the United States and other nations may steer future VW production to Mexico rather than Tennessee, according to industry experts and others.”

Mexico has free trade agreements with 44 countries. The U.S. has 19.  Most recent FTAs were spearheaded by Republican presidents. Under the Obama administration, only three FTAs were added, two insignificant (with Panama and Colombia). The significant agreement with Korea was signed by G.W. Bush in 2007, it was renegotiated by the Obama administration, a watered-down version was signed in 2010. At least 17 new unfinished FTAs, among those an agreement with the EU, and the Trans-Pacific Partnership (TPP), are treading water.  Japan is not even included in the TPP, also because of shrill and often perplexing opposition by a Japan-bashing alliance between the UAW and the Detroit 3.

A lot is said about FTAs making imports cheaper. What is often forgotten is that FTAs make exports competitive. With the low dollar, America could be an export machine, and FTAs could be the motors. Why is this engine stalled? Cars shipped from Chattanooga to Hamburg (no FTA) cost 10 percent duty. Cars shipped from Puebla to Hamburg (FTA) cost none. No wonder the jobs go to Mexico. The wages are not the reason. Wages amount to approximately 10 percent of a car’s cost … the saved customs duty can finance the whole payroll. While Mexico turns into an export powerhouse, the unemployed north of the border pay higher prices, driven up by a trade war flamed by union interests.

And it’s not just Mexico… thanks to strong trade relations with the EU, Brazil is benefitting as well, gaining $4.4b in new VW investment.

America’s inability or unwillingness to secure more FTAs is killing America’s transplant auto industry, and preventing Obama from achieving his stated goal to grow jobs by doubling exports. This is particularly ironic considering that Obama has touted the bailout, the Korean FTA and a loan guarantee program as aimed at boosting America’s exports. FTAs boost exports. Protectionism kills jobs and causes inflation.

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