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Trump’s criticism of Toyota’s plan to build Mexico plant ignores reality

The Yomiuri ShimbunA political leader of an economic power interferes in the business strategy of an individual foreign company. Unreasonable demands made by taking advantage of a powerful position would be undeniably harmful.

U.S. President-elect Donald Trump has called on Toyota Motor Corp. to scrap its plan to build a new plant in Mexico, saying in a tweet, “Build plant in U.S. or pay big border tax.”

Trump has viewed moving U.S. manufacturing jobs abroad as a problem. Shortly after the turn of the year, major automaker Ford Motor Co., which was a target of Trump’s criticism, canceled a plan to build a new factory in Mexico. Trump has even aimed an attack at a foreign company — Toyota.

Trump has threatened to impose heavy tariffs on companies if they move plants out of the United States. He has vowed to give companies incentives, including subsidies and tax breaks, if they do not relocate their plants and keep them in the country. Such tactics as forcing manufacturers to stay through negotiations have caused a buzz.

If a president forges “secret deals” with individual companies, foreign firms that shy away from opaque business environments could leave the United States. If the number of companies wary of the United States’ country risks increases, the world economy could stagnate.

Under the North American Free Trade Agreement (NAFTA), U.S. tariffs on auto products imported from Mexico are zero. The U.S. levy on auto imports from other countries, set under the World Trade Organization (WTO), is up to 2.5 percent.

No help for U.S. consumers

Would what Trump calls “a border tax” violate international agreements?

If Trump wants to enhance the United States’ regional competitiveness, he has no choice but to make steady efforts to create a transparent environment in which companies feel comfortable investing.

Trump also lacks understanding of Toyota’s plan.

Toyota plans to start operations at the new factory in 2019 to produce about 200,000 Corolla cars a year. The automaker will neither close its U.S. factories nor relocate them to Mexico.

In response, Toyota said in a statement, “Production volume or employment in the U.S. will not decrease as a result of our new plant” in Mexico.

Automakers favor Mexico as a production center as they can take advantage of the “zero tariffs” under NAFTA, and also cheaper labor.

If the United States imposes high levy rates, prices of currently affordable passenger cars — major auto products made in Mexico — will jump. Even if production is moved to the United States, the cars would be sold for higher prices due to the higher labor costs. Either way, Trump’s stance would significantly undermine the interests of U.S. consumers.

Japanese automakers, having learned from the auto trade friction between Japan and the United States in the 1980s, increased efforts to boost local production and created 1.5 million jobs in the United States. Trump should squarely look at the efforts and contributions made by Japanese automakers over the past quarter-century.

(From The Yomiuri Shimbun, Jan. 7, 2017)Speech



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