Obviously, if it was cheaper to do, US businesses would have sourced locally. “Education” has nothing to do with it when economics always work out the truth in the end.
So, what you are actually saying is that free trade agreements do not create demand for growing local resources—which it shouldn’t, because it’s far cheaper to buy from the other country.
It’s simple logic.
I still like your writing style, sir.
Thank you!
But it CAN be cheaper in the long run to source domestically, if we have enough such agreements and we take the long view.
Let’s use round numbers. Say we’re making a $100 product that uses $40 worth of domestic raw materials and components; the remaining $60 is labor, overhead and profit.
We might be able to have more profit if we re-source more of those materials to China; maybe we’ll get it for $30 in materials instead of $40.
The advantage of a free trade agreement is that it makes the FINISHED product more competitive by becoming duty free. We might save $10 in components, which feels huge to us... but if that Chinese sourcing causes our $100 finished product to be dutiable in our customer’s country, and his duty rate is 5% or 10% or even 15%... then our cheapness has caused our product to be uncompetitive.
Our savings start costing us money.
The more free trade agreements we have, the more valuable FTA qualification becomes. If we make our product out of entirely or almost-entirely domestic USA parts, our finished product will most likely be duty free in Canada, Mexico, Australia, Chile, Panama, South Korea, Peru, Columbia, Nicaragua, Costa Rica, Honduras, El Salvador, Guatemala, Morocco, Singapore, Oman, Israel, Bahrain, and Jordan.
The more internationally we market our product, and the more FTAs our government signs, the better we are rewarded for sourcing our components domestically.