Tag Archives: jobs

Does “Buy American” expand USA jobs or manufacturing?

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Today, I received a chain letter from a relative and very close friend. She rarely forwards mail that ends with an urgent and passionate demand to “pass it along”. That’s just one step above the ones that tell you about the misfortune that will visit those who fail to pass it along.

But this individual is wiser than me and always speaks the truth. She is not given to scams, and so I carefully read the chain letter. You may have seen this one. It has already caught fire…

In a spasm of patriotism and economic self-determination, the letter implores every American to Buy American. It doesn’t go into the reason. After all, it’s self evident that buying goods made in your own country will expand jobs and manufacturing in your country. Right? Instead of justifying the urgent advice, it describes how consumers can find the origin of consumer products by inspecting the UPC code. The author includes a small table. It shows the relationship between the first digit of a UPC code and the country that manufactured the product.

I won’t include the original email in this post. It’s not that I don’t respect my friend. Rather, my decision is based on these things:

  • Reposting it here does not help to explain my point of view
  • It’s a chain letter! A reliable indicator that it must be wrong
  • I don’t want to attract search engines based on the content of a chain letter

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Hi Ruth. There are two issues here:

  1. Do UPC product codes really tell the buyer about the country of origin.
  2. Is “Buy USA” a solution to unbalanced trade and a shrinking manufacturing base?

1.  Do UPC codes show origin ?   Answer: “Not at all !”

I own a block of UPC codes to use on computer products (or whatever I choose to sell). Blocks of unused codes, or more precisely, the manufacturer code prefix is sold without asking about the products that I intend to assign or where they are manufactured. Quite simply, no one ever asked me about the things that I make. I only know that when I began selling network gear and software on Amazon, I needed to buy UPC codes and they told me how to do this.

If a manufacturer or bundler does not need thousands of codes, but needs only a few, the unused subsets are sold between previously authorized parties. Although the issuing organization discourages this practice, it is perfectly legal and there is an active market for codes issued to small vendors. Here too, the story is the same. You can by the code from owners in any country and they don’t ask for what products you intend to use the code.

This may seem contrary to the UPC purpose. If the product and country are not registered, how can the cash register/lookup mechanism know about the product and its value at the point of sale. The answer is simple. That information exchanged between the wholesaler (or mfg) and the retailer whenever a new stock item is contracted.

One final note: You may have seen some internet sites that tell you what product is associated with a specific UPC code. Yet, there is no international registry of code relationships! This information is compiled after the fact from consumers and from sites that advertise the products. It’s easy to do, because many retailers use the UPC code number as their own SKU (the inventory stock number).

2.  Does “Buy American” expand US jobs or manufacturing?

Unbalanced trade and a shrinking US manufacturing base is a very serious threat to our way of life. On this, we agree…

To many, it would seem that the way of re-balancing trade and expanding our own manufacturing base is to persuade consumers to Buy American. Presumably, this argument says that it is more important to be patriotic than to base a purchasing decision on quality, features, value, safety, design, or other aspects.

I am not sure that I agree. While I am very concerned about saving US jobs (including my own!), I see a terrible conflict between this logic and basic economic principles…

In the 70s, the US was caught off guard by expansion in Japan, a strict adherence to quality standards, a very close relationship between vendors and manufacturers, and a just-in-time manufacturing. If Americans had stuck to the principle of buying American, we would have had overpriced cars that fall apart quickly. More importantly, our autos would be rejected by European and emerging nations, because of an artificially inflated demand and very poor quality.  But this didn’t happen. The market turned to Japanese cars (especially new upscale brands, Lexus and Acura. What was the result of the flight from Michigan? In the  80s & 90s, the US rebounded in both quality and cost because of two things: Competition and Free trade.

I am not fully convinced of my own argument, and like many people, I look for products sourced and made in America. But I haven’t found fault with the logic in free and open trade. There are some persuasive argument that claim that we lack a “level playing field” with our trading partners. They pollute, use slave labor, subsidize domestic industries or erect Tariffs to deter our goods from selling into their markets. Some of this reasoning makes sense, but not all of it. It’s rare for me to admit that the “jury is still out” on this one, but in fact, I have not yet formed a bull-nosed, WildDuck opinion about these issues. Perhaps this is why I am more carefully buying American.

Dear reader: What do you think? Might the Buy American campaign have unintended consequences that dilute or contradict the economic goal? I invite your comment.

After years of buying from China, time to pay the bill

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I wrote this in April 2011 as feedback to this article in PC World.
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After decades of buying from China, it’s time we paid the bill.

Step back from rhetoric & ideology. What, exactly, do we expect the Chinese to buy with all the dollars that they’ve amassed? What happens if we try to dictate their options? –Making available just a few items at the bazaar?

Most Americans want balanced trade. Trade is balanced by encouraging foreigners to return dollars to America. That means purchasing goods & services or investing (purchasing equity or debt). But purchasing debt isn’t real balance. It postpones and magnifies a trade imbalance.

The Chinese have built vast quantities of products that we consumed for more than 30 years. For whatever reasons, they have built them cheaper and responded quickly to consumer demand, and with sufficient quality and style that we loved acquiring them.

Now China has pockets stuffed with dollars. There are so few places that want those dollars, the logical recourse it to spend before it depreciates. That’s logical. Getting them to use those dollars is what we want.

The US exports movies, airplanes, weapons & software, and we charge foreigners to attend our Universities. On the international stage, that about sums our brag sheet. But when we consume trillions from foreigners, do the promissory notes that we issue (“dollars”) limit them to these few commodities? What else can the Chinese purchase that isn’t manufactured closer to home, better, and in larger quantities? They export the really big ticket items themselves–like skyscraper contracting, oil drilling, nuclear technology!

When a foreign corporation or government wants to purchase something significant from the US, suddenly we stop yelling “Buy American” and we start yelling “Security Threat!”. Poppycock! If we create such enormous red tape that international telecom players cannot acquire or invest in one another, we reduce liquidity and further weaken our dollar. Face it: Our start up companies are commodities as certainly as a retail copy of Windows, a Boeing jet or a patent portfolio. When we turn up our nose at healthy interest in intellectual trade or infrastructure acquisition, we are not protecting our interests. We are simply informing trading partners that they were fools to trust us, and that the dollars they stockpiled can be redeemed only in Hollywood films.

It’s natural to be skeptical. China is controlled by an authoritarian dictatorship. Citizens lack social & political freedom. But don’t be misguided about their economy – both within and abroad. It is lubricated by capitalism and is more adaptive and free-wheeling than our own. Whatever their shortcomings, we accepted these when they were selling. We must also allow them to buy. Our technology plays are the only thing on our menu.

Conclusions:

  • A) If we refuse to allow the Chinese to repatriate dollars or offer them only the local goods of our choosing – typical of a Banana Republic – then they will dump our dollars and also stop buying our debt. It would crush our economy in a heartbeat.
  • B) If we allow those with large stockpiles of our dollars to use them as they see fit, the dollars will return to build factories, create jobs, and produce good, old fashioned innovation. But this won’t happen with newly printed dollars. It doesn’t work that way, because that weakens both parties and makes our factories unattractive. It must be the dollars that we willingly handed over for TVs, computers, shoes, toys and even building materials. We must accept that we owe China—big time! For decades, we passed off pictures of George & Ben in exchange for tangible goods. We knew the Chinese crafted high tech goods for less and that the political system was repressive. But we looked the other way. We really wanted those things! Whether you like their government or not, we promised to expend future time and resources supplying their children with commensurate goods.


Why does China say “America works for us”
Click image to learn why (video = 1min)

This video was commissioned in an effort to defeat Obama’s 2010 universal health care bill. It has terrific shock value. It depicts what China believes to be our economic weakness. I won’t comment here about health care or stimulus economics. It’s unrelated to my point. But the video also depicts what Chinese believe to be their imminent destiny, perhaps at America’s expense.

They deserve all of the positive things they have earned. Although it’s natural to whine and complain about an uneven playing field, and our past glory (Automobile assembly, television, the moon landing and the Internet), China is winning in the global economy and any trade in which we engage is, by definition, fair. In fact, the only uneveness in the playing field of international trade is just the opposite of popular perception: It has been tipped in our favor for the entire 20th century!

We must get it through our heads that capitalism is not a contest! This simple truth is often overlooked. The emergence of China as an economic superpower is a good thing. Not just for the Chinese, but for every American. If we keep our own ship in order, the result will be an abundance of goods and services from both sides because we will have affluent trading partners, broader access to labor and markets, and eventually, democratic trading partners.

– Ellery Davies|
Ellery clarifies law and public policy. He is a frequent columnist and TV commentator.