Our company's founder, Soichiro Honda, argued more than 60 years ago that protectionist trade policies were counterproductive. "I simply cannot go along with the idea that in order to protect our jobs we should set limits on the import of foreign cars," he said."Technological competition should be conducted by technological means. No matter what barriers we put in their way, quality products will always find a way in. Good products know no national boundaries."
But his argument was not about protectionism in America. He was speaking out against trade restrictions in his native Japan at the time. Our company was able to come to the U.S. almost six decades ago, just 11 years after it was founded, because the U.S. embraced free trade. For nearly 60 years, the U.S. economy and our customers have reaped the benefits.
Since Honda began building products in America almost four decades ago, we have invested more than $20 billion in building our U.S. operations, employing some 31,000 Americans in the development, production and sales of our products, with the support of more than 600 U.S. supplier companies. Every year, we buy more than $27 billion in parts and materials in this country.
When we first entered the car market in 1970, 100 percent of the vehicles that we sold in the U.S. were imported. Now, four and a half decades later, Honda has built more than 25 million cars in the U.S. – with 12 manufacturing plants producing a full line of Honda and Acura products, paying more than $2.3 billion in wages each year.
Honda also has invested in advanced technology through 14 R&D facilities in the U.S. These operations and the Americans who work in them have researched, designed and developed more than 30 car and light truck models. And when it came time to pursue the field of aviation, we chose the U.S. as our world headquarters. Our innovative HondaJet was developed and is built at Honda Aircraft Company in Greensboro, North Carolina. The turbofan engine that powers the HondaJet is built nearby in Burlington, North Carolina.
Spurred on by free trade and open markets, Honda products have led the way in the advancement of numerous environmental and safety technologies that have benefited people and the environment. Our customers, as well as the communities where we live and work, have benefited with access to high quality, high value and innovative products – and good paying jobs. So, the ability to operate in this country unimpeded by protectionist policies and tough tariffs has been a win-win for all.
It is with this backdrop that we must consider the current environment – with trade barriers being erected in the U.S. and reciprocal actions from our trading partners. Over the past two months, import duties (taxes) as high as 25 percent have been imposed on aluminum and steel, and $34 billion worth of products from China. Other countries have reacted in kind, and duties have already been imposed on components and products that Honda makes here in the U.S. and exports to other countries.
Now, the U.S. Department of Commerce is studying whether duties – perhaps as high as 25 percent – should be imposed on every vehicle and auto part from outside the United States. This includes vehicles Honda produces in our neighboring countries, Canada and Mexico. It also includes a relatively small number of vehicles we build at Honda facilities in Japan and Great Britain that are sold here. The fact is that Honda produced in the U.S. more than 65 percent of the cars we sold in the U.S. last year – among the highest percentage of any automaker. Based on existing trade agreements with our historic trading partners, Canada and Mexico, more than 90 percent of the vehicles we sold in the U.S. last year were built in North America. The impact of duties of this magnitude – which would classify vehicles made in Canada and Mexico as imports – would only harm U.S. customers.
These harmful duties would not be limited to finished vehicles. They also would apply to component parts, raising the price of all vehicles Honda and other automakers sell in the U.S., including those we make in Ohio, Alabama and Indiana. Not a single car built in the U.S. by Honda, GM, Ford or any other automaker, is made entirely with U.S. parts. Every automaker uses both domestic and globally-sourced parts, so all cars built here would be impacted – potentially with higher prices and limited availability.
All of these trade actions are further complicated by uncertainty associated with the renegotiation of the North America Free Trade Agreement (NAFTA) among the U.S., Canada and Mexico that allows parts and vehicles to flow across the borders of the three countries duty-free and with minimal administrative delay. NAFTA has been in effect for more than two decades and, while it is in need of modernizing, the core purpose of the agreement remains just as important today – the creation of a North American economic powerhouse that is globally competitive.
The United States is a wonderful place to manufacture cars, along with other products. It has a skilled workforce that is dedicated and capable, a robust infrastructure, a strong R&D network and an extensive supply base that has allowed Honda to prosper along with our American suppliers, dealers, associates and our customers. So, what are the implications of all of these new trade-related taxes and limitations? Businesses covet stability and predictability. We are making investments that often have implications five or ten years into the future. For instance, we also export cars from the United States, a strategy that takes years to plan. Now, the certainty and predictability of free and open markets that have made America an attractive place to do business are becoming unsteady.
Honda is committed to working with decision-makers in the U.S. and elsewhere in North America to preserve our region's longstanding history and culture of free trade. It is our belief that maintaining an open and free trading market in America will enable Honda, along with other global companies and the U.S. economy, to thrive and prosper.
Executive Vice President
Honda North America, Inc.