Should You "Buy American"?

The television network ABC has been carrying on a year-long "Made in America" campaign, to point out to its viewers what products are made in America, with the idea that, if consumers are aware of what brand names are of American manufacture, they will (hopefully) prefer to buy those products.

In Seattle, a local organization tried to get a buy-American advertising campaign onto the sides of public buses; but the Seattle transit authority declined the ads, saying that they were espousing a politically and economically controversial position.

There was considerable outcry over this, and the transit authority reversed its position. In this instance I think I agree with the "buy American" organization and not the transit authority: I don't see anything particularly controversial about the advertising or its aims.

Nowadays, practically everything one buys in the US seems to be made in China; and to some degree—probably a considerable degree—that represents manufacturing jobs lost to American workers. And we currently have a rate of unemployment in the US that is unacceptably high.

Entire industries in the US have been pretty much destroyed—for example clothing manufacturing (as of quite a while ago) and more recently, shoe manufacturing.

Who is to blame? I want to look at several parties and maybe assign some blame to each.

First, China does not play fair. They keep the exchange rate for their currency relative to the dollar very low. Thus Chinese-made merchandise can be sold ridiculously cheaply—even after the wholesalers and retailers involved add on shipping and import duties to the items' cost. (It might surprise you that the shipping and duty really don't come to that much.) So American producers simply can't compete.

Second, look at merchandisers like Walmart. It's in the nature of capitalism that a retailer which can sell something more cheaply than its competitors has a competitive advantage. Chances are, the customer does not look to see where the item was made (which of course is what the campaigns are all about) but simply goes with the low price. And the cheaper item these days, is usually Chinese made.

So now, third, the consumer: A lot of consumers not only like to save money, they need to save money. This is the situation of some families, particularly lower income families with several children: if they can get their purchases more cheaply, that may mean that they can buy shoes or winter jackets for all of their children, instead of for only one or two. Even if they don't pay attention to where those items are made, and maybe don't care, I think they deserve some sympathy.

I think yet another party should get some of the blame. I'm pretty sure that a $60 or more Tommy Hilfiger or Polo Ralph Lauren shirt, which is made in a third-world country, does not have to be made in that third-world country to be profitable for Hilfiger or Polo--or for the retailer. When the item is on sale and its price is reduced to half, I promise you the store is still making a profit.

Now one exception to all this is cars. I had a neighbor who, when I was extolling the reliability of the Honda I owned at the time, said, "I think that if you're American, you should buy an American car." Well, nowadays, in this age of the global economy, it's not so simple. Did you realize that the price stickers on cars in the showroom are required to show the percentage of "domestic [parts] content"? I saw a Ford Taurus where the domestic content was only 65%. It's not too uncommon for an "American" car to have its major parts, like transmissions, made in Canada or Mexico or an Asian country.

And look at the cars with Japanese brands which are assembled in US plants. Assembly in the US means US workers have employment when you buy that vehicle. And the domestic content might actually be higher than that Ford Taurus: a lot of parts like windshields, headlights, batteries, tires, and power-window controllers probably come from domestic suppliers, and major components may be made at the assembly plant.

The same ABC network did a little study in which they tried to determine which car purchases would produce the most jobs for American workers; and they found that buying a Toyota Camry would actually produce more jobs than a certain car with an "American" nameplate.

So, if you want to "buy American" when you are car shopping, don't pay the main attention to the name: you can look at where the vehicle was assembled—that's on the sticker, too—or, more importantly, look at that "domestic content" number.

Update, July 4, 2012.
Here is an article on this subject from AOL Autos:
http://autos.aol.com/gallery/the-most-american-cars/?icid=maing-grid7|main5|dl7|sec1_lnk2%26pLid%3D175630

Update, June 8, 2013
An interesting little sidebar in the July, 2013 issue of Car and Driver:

Globalization means that even domestic automakers are importers, bringing Buicks from South Korea, Fords from Turkey, and all manner of Chrysler models from both north and south of the border. In fact, only one volume brand is solely American-made: Jeep. All Jeep vehicles are assembled in either Detroit; Toledo, Ohio; or Belvidere, Illinois.

Two comments on this: First, it is to be hoped that this news about Jeep does not impel lots of people to go buy Jeeps because recent news has it that Jeep has a serious design defect which makes the gas tank likely to explode in rear-end collisions, and the NHTSB has been pressuring Chrysler to recall Jeeps to fix the problem
Second, as I have often said, the people who are trying to "buy American" and go buy Fords, Chevrolets, and Buicks are misguided.

Copyright © 2011 by Richard Stein