Balance of Payments:
B = m + x + c – (ml + xl + cl)
Point number 1: Prior to opening the Honda plant as a direct investments by Honda Japan in Ohio, Honda Japan used to export 200,000 cars annually at an FOB price of $15,000 per car.
Point number 2: Honda’s Ohio plant currently produces 200,000 cars annually, and out of this total production it exports 100,000 cars at an export price of $15,000.
Point number 3: In order for Honda of Japan to produce cars in Ohio, it brought in $200,000,000.00 in direct investments.
Point number 4: Honda currently imports various components (i.e., engine parts, etc.) estimated $3,000.00 for each car produced in Ohio.
Point number 5: Honda, prior to its investment in Ohio, used to import tires and other components from Ohio, estimated at $1,000.00 per car for 200,000 cars.
Point number 6: Honda sends the equivalent of $2,000.00 dividends/profits for the 200,000 cars produced in the United States back to its parent in Japan.
Please explain and analyze the balance of payments as it relates to Hondas investments in the United States in terms of; export reduction vs. export stimulus, import stimulus vs. import displacement, and capital inflows vs. capital outflows.