The North American Free Trade Agreement hasn’t lived up to its promises.
In the early 1990s, there were many discourses and discussions about, rationalizations of, and promotional efforts for two upcoming political/ economic events that would affect the automotive industry. The two events were NAFTA and additional transplants. Many people within the PIE group (Politicians, Importers, Economists) of both U.S. and international origin were actively assuring the American public that these programs would create more jobs, grow our manufacturing base, ease our trade deficits and reduce imports. At the same time, and from the other side of the political/economic/industrial spectrum, quite a few individuals retorted that in general, and particularly as these actions were to relate to the automotive industry, the predicted benefits were PIE in the sky.
A bit of digging around in the past 10-year automotive data is quite conclusive; the predicted benefits are not to be found. For those of you who do not care to weed through the data, a reasonably brief synopsis follows. The top box in the accompanying and somewhat busy group of tables tells us that in the U.S. during 2004 there were 5.304 million fewer vehicles produced than sold, compared to 3.201 million in 1995, thus indicating an increasingly negative economic burden during each of the 10 years. The second box details the weakening U.S. 1995-2004 production ratio within NAFTA. The third box details an increase of 1.387 million sales of direct off-the-boat imports during the 10-year period. These two factors, more direct imports and NAFTA slippage, caused the change shown in the top box.
Box four lists the major players by rank for 2004 sales of direct imports. As the numbers indicate, every manufacturer, U.S.-, Asian- or European-based, is involved, but Toyota and Hyundai each create considerably more negative cash flow from our economy by the use of these direct imports than do any of the others. The left side of box five details the 10-year change in direct import sales with Hyundai and Toyota, the hard-chargers and Nissan — capacity constrained at home — actually down in count. As the middle of box five indicates, Hyundai and VW produce no vehicles in the U.S. an d F ord h as t he highest production-to-sales percentage. In the right of box five we find the gross production vs. sales loss, ranked by size of loss. Toyota and GM lead the list and the Toyota loss, coming primarily from the direct imports round in the fourth box, is a considerable economic drain. GM, having few direct imports, builds their lost units primarily in the less economically damaging NAFTA neighbors.
The exact tracing of every individual production unit of every brand within the back-andforth of NAFTA, plus balancing the massive direct imports against the few direct exports is beyond my data system (or any other that I know of) but the publicly available bulk data provided by the manufacturers and carried in the attached tables clearly indicates a significant and increasing loss of U.S. vehicle production relative to demand.
A short and quick analysis: during the past 10 years, U.S. automotive production has stagnated in the face of greater demand, there is no significant increase in jobs, as jobs are simply transferred from older plants and products to newer plants and products, direct imports have ballooned and the economic conditions within NAFTA do not favor U.S. production. The evidence clearly shows the PIE people were grossly inaccurate, or deliberately misleading, in their automotive projections. There is no doubt that globalization is an obvious and inescapable reality but it is odd that the discussions about the end results, particularly the escalating billions of dollars of trade deficit and national debt, are often unrealistic.
1995-2004 – Pie in the Sky
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