Posted on 09/18/2009 9:09:18 AM PDT by SeekAndFind
Earlier today, Doug Bandow weighed in with some commentary on the problems that Buy American provisions are creating for both Canadian and American businesses. Let me reinforce his view that such rules are anachronistic and self-defeating with some thoughts from a forthcoming paper of mine about the incongruity between modern commercial reality and trade policies that have failed to keep pace.
Even though President Obama implored, “If you are considering buying a car, I hope it will be an American car,” it is nearly impossible to determine objectively what makes an American car. The auto industry provides a famous example, but is really just one of many that transcends national boundaries and renders obsolete the notion of international competition as a contest between “our” producers and “their” producers. The same holds true for industries throughout the manufacturing sector.
Dell is a well known American brand and Nokia a popular Finnish brand, but neither makes its products in the United States or Finland, respectively. Some components of products bearing the logos of these internationally recognized brands might be produced in the “home country.” But with much greater frequency nowadays, component production and assembly operations are performed in different locations across the global factory floor. As IBM’s chief executive officer put it: “State borders define less and less the boundaries of corporate thinking or practice.”
The distinction between what is and what isn’t American or Finnish or Chinese or Indian has been blurred by foreign direct investment, cross-ownership, equity tie-ins, and transnational supply chains. In the United States, foreign and domestic value-added is so entangled in so many different products that even the Buy American provisions in the recently-enacted American Recovery and Reinvestment Act of 2009, struggle to define an American product without conceding the inanity of the objective.
The Buy American Act restricts the purchase of supplies that are not domestic end products. For manufactured end products, the Buy American Act uses a two-part test to define a domestic end product: (1) The article must be manufactured in the United States; and (2) The cost of domestic components must exceed 50 percent of the cost of all the components. Thus, the operational definition of an American product includes the recognition that “purebred” American products are increasingly rare.
Shake your head and chuckle as you learn that even the “DNA” of the U.S. steel industry, which pushed for adoption of the most restrictive Buy American provisions and which has been the manufacturing sector’s most vocal proponent of trade barriers over the years, is difficult to decipher nowadays. The largest U.S. producer of steel is the majority Indian-owned company Arcelor-Mittal. The largest “German” producer, Thyssen-Krupp, is in the process of completing a $3.7 billion green field investment in a carbon and stainless steel production facility in Alabama, which will create an estimated 2,700 permanent jobs. And most of the carbon steel shipped from U.S. rolling mills—as finished hot-rolled or cold-rolled steel, or as pipe and tube—is produced in places like Canada, Brazil and Russia, and as such is disqualified from use in U.S. government procurement projects for failure to meet the statutory definition of American-made steel.
Whereas a generation ago the cost of a product bearing the logo of an American company may have comprised exclusively U.S. labor, materials, and overhead, today that is much less likely to be the case. Today, that product is more likely to reflect foreign value-added, regardless of whether the product was “completed” in the United States or abroad. Accordingly, Buy American rules and trade barriers of any kind (as appealing to politicians as they may be) hurt most American businesses, workers, and consumers.
It’s time to wake up and scrap these stupid rules.
CATO, you can buy chinese sh*t all you want. I’ll stick with US made
‘Buy American’ is nothing more than a political stunt designed to help politicians get re-elected. It doesn’t help create new jobs.
I understand it sounds great to say we want stimulus funds to buy stuff made by Americans. It’s simple to think we’ll get the most out of these funds by buying everything from American companies. But that logic is too simple.
The truth of the matter is we live in an interconnected world.
Right now, American companies manufacture products in China, Canada, Mexico, and many other places around the world. And foreign companies have manufacturing facilities in the US and employ American workers.
I read an article in the Wall Street Journal earlier this week that points out just how bad the situation is.
The article points out cities are trying to put American workers back to work rebuilding our outdated sewage systems. But essential parts of these systems are built in Canada.
Thanks to the ‘Buy American’ provision, these projects are being delayed. The cities are being forced to seek an exemption from the provision. The result is American workers who could be working on these infrastructure products aren’t.
There aren’t any official statistics on how many projects are being delayed because they need foreign made parts. And there’s no list of how many exemptions have been sought.
But I can tell you only $13 billion of the stimulus funds have been paid out so far. And that’s a far cry from the amount of funds that are available. I don’t think its a leap to say stimulus funds are being delayed because of the ‘Buy American’ provision.
>> I’ll stick with US made
Good idea - try ‘n find it.
Have been doing so for years. That’s why I largely shop online. The WalMarts/Targets/Sears/HomeDepots are stocked with crap.
If you really believed that, you'd probably have to turn off the power to your home since you're indirectly paying for Chinese made power distribution equipment when you pay your electric bill.
You can’t. I bought a set made in the Phillipines. An ally, not a communist enemy.
What chinese made power distribution equipment. I’m a power engineer, and that is one area that US made still is dominant.
Exactly.
Why should Government be allowed to get between me and the people I want to buy stuff from? Unless of course it’s something evil like cigarettes or non-Union cars?
Before long, the effete traitors will have to move to their communist country of preference, and a little after that, no one on this planet will work high steel for them during lightning storms or stand in pools of water to do welding.
My shoes are 100% made in usa. My jeans are 100% made in usa. As is my bunkbed for my kids I just bought (could have saved $100 and got it from china), my new screwdriver set, the nice vase I bought my wife, the new light fixture for my gate, etc etc.
It takes some research, and some phone calls, but no more time than standing behind fat ladies in stretchy pants at walmart waiting to buy their chinese versions.
Why would they declare war on us when they can wage it silently while dumb****s in stretchy pants shop at walmart to help em build their war machine.
Having Americans suspicious of China is not a unusual idea.
Cato doesn’t make products. We can’t all work at think tanks, stupid.
Hehe, I’ll buy Chinese: http://www.lahiguera.net/cinemania/actores/jet_li/fotos/49/jet_li.jpg
Pollution Creates "Cancer Villages" in China
'Is the growth worth it?
For who?
Want to trust agricultural goods from China?'
Whores.
I don’t trust communists. Not ones in Moscow, S. America, China, or the WH.
Your personal preference is your personal decision. My question is this -— are you favor in the US government INTERVENING so that Americans will for forced to buy locally ?
So in a nutshell that are saying, “because we changed all the free trade laws, and outsourced all the manufacturing offshore, you can’t tell what is American anymore, so give it up”.
Depends. Generally no. Military hardware. Absolutely. Banning chinese. Absolutely.
I agree. It seems to me that buying the product of our fellow countryman’s labor will enable him to purchase the fruits of our own labor. Why shouldn’t I prefer to do business with my countrymen. I don’t listen to the pie in the sky globalists. Do they think the rest of the world will rise to America’s standard of living as a result? I think the opposite is more likely.
Some people will point to the reality that it is indeed difficult to find products made in the USA and that the countries of the world are economically interconnected, but I don’t believe that it is futile or counterproductive to look out for ourselves.
Absolutely true. I bought a vacuum cleaner from Wal-Mart. It literally backfired within a month and caught fire. Threw it out. Look for any small appliance, it's made from cheap plastic and good luck if it even works right out of the box. People throw away money on the stuff.
If you can find used tools buy them. Maybe that's why the feds now have to go after garage sales.
I have gone online and bought quite a few nice American made products. People think they are saving money but in the long run you pay 3-5 times buying cheap that won't last, to something that lasts a long time.
America passed laws to keep us safe, especially in the food industry, and now unscrupulous people get around those laws in the global trade. Plus, China enslaves its workers,persecutes and kills Christians, and you are feeding that beast
My shoes are 100% made in usa:
So are mine.....I buy New Balance...now if I could find some made in the USA socks, running shorts and shirts,I’d be all set.
“Buying American” doesn’t help “America,” and buying foreign products doesn’t hurt “America.” It takes the most naive form of collectivism to believe the opposite. To put it another way, the trade deficit is nothing that needs resolving. It’s a deficit only because not everything is being counted. If you only looked at your expenditures and ignored your income, you’d be horrified by your personal deficit. But of course you would be missing the full picture.
The so-called trade deficit refers to the current account, which keeps track of Americans’ exchanges of goods and services with people in other countries. If in the aggregate during a given calendar year, the dollar value of the goods and services we buy from foreigners exceeds the dollar value of what we sell to them, that difference is said to be the trade deficit.
But this is obviously a half-told story, because foreigners can do things with the dollars they earn other than buy American goods and services. They can invest in the United States by purchasing stock in companies or corporate bonds. That’s good for Americans because it helps create new products and job opportunities. Foreigners can also buy government securities. (There’s an easy way to keep foreigners from being creditors for the U.S. government, if that bothers anyone: stop deficit spending.)
The point is that when you count everything — purchases, investments, and dollar holdings — the books must balance. It’s an accounting certainty.
But surely “buying American” can’t hurt, can it? Yes it can. It can hurt particular groups of Americans. If we buy Toyotas and Hondas, Japanese people will have dollars with which they can buy, say, American lumber. (They can’t spend dollars in their supermarkets.) But if a wave of counterfeit patriotism sweeps the country and we buy only American-made cars, those Japanese won’t have the currency they need to buy the lumber. The lumber companies will have fewer sales and will lay off workers. Has America been helped by the “Buy American” policy? Not at all. Some Americans will benefit, but others will suffer.
We live in a global marketplace with a vast division of labor — the greatest exercise in worldwide cooperation ever seen. Nations don’t trade with each other. Individuals do. Just because two people are Americans, it doesn’t mean their interests are identical. If a Japanese auto corporation offers me a vehicle with the features I want at a price I like, I have a harmony of interest with that group of Japanese. “Buying American” would not make me better off. But it would hurt some Americas: remember the lumber workers.
If American automakers get the government to make it harder for me to buy a Japanese car, my interests are hardly served. So how can that policy be said to be in America’s interest?
It is time we got over the trade foolishness that is displayed daily in the nation’s newspapers and news programs. Voluntary exchange is good for buyers and sellers, or it would not take place. That the parties live in different countries is irrelevant.
This table shows that the United States imported $65 billion worth of power generation equipment to the US in 2008, while the US exported just $9.7 billion to China.
Additionally, China globally exported $268.6 billion worth of power generation equipment.
Now I suppose that doesn't prove there's a Chinese made piece of equipment between you and the coal, or nuclear material, or natural gas used to make electricity. But given the numbers, I'd be surprised to discover it was all US made.
I’m wearing very nice made in the USA socks I got from Cabelas.
What if we buy our traitorous blackguard car from a foreign-owned factory on American soil? Would that be ok with you?
Or what if we buy a Benedict Arnold-mobile from a foreign manufacturer that had a plurality of American shareholders? Is that allowed?
I have a solution to these impossible quandaries. People buy what they want, from whomever they want. If people want to buy the best stuff, they can. If they want to buy the cheap stuff, they can. My plan is: Government gets out of the way of the market..
And those crypto-socialists who want to protect shoddy unionized domestic production by forbidding consumer choice in the name of 'patriotism' - they can go read a history book. Maybe one about the workers paradise of Communist East Germany, where protectionism was amazingly successful and produced the best society ever
I buy American raised and caught produce and fish because it is a superior product. I will NOT buy, say, a car, however, just because it was made in our country. While it is an added bonus that my Hyundai was made below the Mason-Dixon line, I would have still bought it had it been made in Korea.
Shorts:
http://www.soark.com/shorts_distance.shtml
Socks:
http://www.shoebuy.com/new-balance-usa-socks.htm
http://www.foxsox.com/defaultEcomm.aspx
Shirts:
http://www.allamericanclothing.com/shirts.html
http://www.madeinusaforever.com/clabdeortwsh.html
This whole "going green" is one big scam, when you realize that it's forced on us, yet China and other global giants are busy raping the earth, all over the world, for it's minerals, cheap labor, and polluting everything as it goes. It's nuts
Make sure you buy the right ones. 75% of New Balance shoes are made overseas, up from 30% in the mid-90s.
Excellent post from you. Bookmarked.
I can’t believe there are so many socialists on FR, happy to tell the rest of us who we can trade with - effectively telling us how we should live our lives for the greater good of the American Collective.
Exactly the same disastrous steps - a economic downturn followed by ‘patriotic’ protectionism - took place just before the Great Depression. God forbid we should learn anything from history.
My wife bought some nice Reeboks made in China, when they came out of the box, the shoe string holes were painted on, lol, lol
Well, in all the systems I’ve designed and seen for industry and utilities, I’ve yet to see or spec or use anything from China.
Turbines - no.
generators - no.
Substations - no
PLC controllers - no
breakers - no
Transformers - no
network protectors - no
Synchronizers - no
transmission cables - no
Not to say their aren’t chinese products out there. I’m sure there are. But precious few between my house and the Grand Coulee dam.
Of course most of those crappy WalMart vacuums say “USA and/or Imported” for their parts and manufacturing on the website. I buy quality, don’t care where it’s made.
The other little problem we have with China and who knows who else, is poison dog and baby food, tires that separate and blow out, fake medicine and the list goes on. Plus, true or not I don’t know, but there was a story about a radioactive toaster oven , so what the heck are they using to make products
I sure wish those Japanese would buy more lumber. I live in a lumber town (Black Cherry Capitol of the World!)and that business is hurting.
I don’t doubt that your economic theory is sound. However, I believe one has to take into account the fact that this is an upredictable world and we deal with unpredictable trading partners. I wish to have essential products produced and distributed by someone who has a bond with me. The more local the better. If that doesn’t translate into the most efficient use of labor and resources, that is a small price to pay. I’m not advocating reversing the industrual revolution here.
For what it’s worth; we’re all colletivists in some sense. If I found a boy who cost less and worked harder than my own, I’d still keep mine.
Hi agere_contra, I hope your not referring to me as a socialist. I made my case as to why I prefer my own as best I could. I don’t presume to make up your mind up for you or force your hand.
Just bought an Oreck. Works way better than the hybrid clunker we had before which lasted two years.
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