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Toyota Selling Cars to South Korea—From the United States

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Unread 12.28.11, 09:17 AM
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Toyota Selling Cars to South Korea—From the United States

On 12.28.11 09:00 AM posted by Bryan Riley

Toyota recently announced it will begin exporting U.S.-built Camry cars and Sienna minivans to South Korea from plants located in Kentucky and Indiana. The cars will be shipped through the Port of Hueneme—ironically, one of the California ports that Occupy Wall Street protestors recently attempted to shut down.

Some people may wonder why Toyota would ship U.S.-built cars 7,000 miles to South Korea instead of shipping Japanese-built cars 130 miles across the Korean Strait.

One reason is the recently approved the South Korea–U.S. Free Trade Agreement (KORUS), which reduces South Korea’s tariff on passenger vehicles from 8 percent to 4 percent, and eventually to zero. Tariff reductions in KORUS make U.S.-manufactured cars more affordable in South Korea, while also making Korean-manufactured autos more affordable in the United States.

Critics called KORUS a disaster: “Americans need jobs, but it is impossible for them to support their families if they are forced to compete against workers earning almost non-existent wage rates.” Toyota’s employees in Kentucky and Indiana would surely disagree.

Another reason cited by Toyota officials for their added U.S. exports is the falling value of the dollar. Today one dollar is worth about 78 yen, down 37 percent from 2007, when one dollar was worth 123 yen. The lower value of the dollar tends make U.S. exports more competitive while raising the cost of imports.

Finally, Japan is still rebuilding from this year’s earthquake and tsunami. In March, immediately following this natural disaster, Toyota’s production of cars in Japan fell to the lowest level since 1976.

Toyota is not the only carmaker putting more Americans to work. BMW and Mercedes-Benz reportedly have been expanding their U.S. facilities and exporting more cars from the United States. According to The Wall Street Journal, Honda is adding 1,000 new jobs at its Greensburg, Indiana, Civic factory and expanding all of its North American facilities to boost production by up to 40 percent. A spokesman for Ford Motor commented, “We see a pretty favorable trade environment developing.”

Overall, carmakers and suppliers will add 167,000 new U.S. jobs by 2015, according to the Center for Automotive Research. This would be a rare piece of good news for the struggling U.S. economy.

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