The simple 25% “chicken tax” workaround is producing truck beds locally for pickups imported into the U.S. from Japan, a strategy also used by other importers. Under NAFTA, the beds from Mexico come into the U.S. virtually tax-free as well.
Commemorating ten years since breaking ground in Mexico, Toyota Motor Manufacturing, Baja California, aka TMMBC, donated $10,000 today to the Boys and Girls Club of Tecate and three Toyota Tacoma pickups to local nonprofit groups.
TMMBC represents more than $180 million investment with capacity to build 57,000 mid-size Tacoma pickup trucks and 200,000 truck beds per year, which allows it to escape paying the so-called “chicken tax” on imported trucks. (Milestones – 40 Years of Toyota Auto Body – Thanks to a Chicken Tax) Last October, Toyota said it would increase TMMBC’s capacity to 63,000 annually starting mid-2014. This increase will create 50 jobs bringing total TMMBC employment to 1,180.
GM returns to the mid-size pickup market next year with Missouri-built trucks. Chrysler and Ford abandoned the segment years ago.
This is not exactly Ross Perot’s giant sucking sound of U.S. jobs going to Mexico under NAFTA, but a loss nonetheless since in total Perot was right about the negative effects of NAFTA on U.S. workers. Some estimates say as many as 5,000,000 jobs were destroyed, a process that is ongoing with automakers, among others, continuing to expand in Mexico. Ford Motor is now moving engineering jobs to Mexico to cut costs.
The chicken tax was the result of a trade war between the U.S. and France and Germany, and the U.S. imposed a 25% tax on imported light trucks initially targeted at Volkswagen in 1963 because our alleged allies were blocking imports of cheap factory-farm produced American chickens with high tariffs – thus the chicken tax name.
The simple workaround is to produce truck beds locally for pickup trucks imported into the U.S. from Japan, a strategy also used by other importers. Under NAFTA, the beds from Mexico come into the U.S. virtually tax-free as well.
In one of the ironies of history, Ford Motor, part of the then dominant Detroit Three companies that lobbied the Johnson Administration for protection against imported light trucks, now uses the same tax dodge by performing minor work on its Turkish-built Transit Connect van outside the incoming port of Baltimore to lower its tax rate to 2.5%.
So as of today, so much for the Obama Administration’s pledge, err political blather, to eliminate needless government regulations. The chicken tax stands after all these years. Moreover, so much for the Administration’s promise to create American manufacturing jobs. As to Ford’s conduct, well make up your own mind, but if the laughable proposition that “corporations are people” is used, then hypocrite applies.
Ultimately, the Japanese Big Three – Toyota, Nissan and Honda – built plants in North America, much to the regret of the Detroit Three, who have been losing market share to them for decades.
