Can We Buy American?

Can We Buy American?

The manufacturing base in America has been on a slow but consistent decline since the end of World War II. Creative Destruction, the theory of successful businesses being built upon failed models, proliferated within the United States; more recently our failed domestic industries have been reborn overseas.

In the era of globalization, new factories and resourceful entrepreneurs have found their way to foreign soil finding rewards in cheaper labor, tax advantages and limited government oversight. This raises the question of free competition and whether as taxpayers and consumers we should have access to the best product at the best price regardless of origin, or will ‘buying American’ actually solve our deep-seated industrial problems and encourage domestic efficiency?

A provision within the infrastructure stimulus package includes the phrase ‘buying American’ for many of our domestic regeneration projects. Cement and steel are the major components for building roads, bridges and improving ports. I wonder if anyone in Congress is aware that the largest individual cement facilities in the United States are owned by non-American companies. According to the Portland Cement Association more than 80 percent of the United States cement capacity is owned by overseas corporations. These companies not only produce cement, but in times of high demand, they also import cement to the United States from China, Taiwan, South Korea and other countries.

Some of our domestic steel mills are owned by Russians, Indians (not Native Americans) and foreign private equity firms. Plus not all domestic steel mills can produce the type of steel required for infrastructure. Steel for infrastructure can easily be routed by foreign producers through Mexico and Canada using the NAFTA Protocol and skirt any punitive measures such as the tariffs imposed by the Bush Administration. Even protectionism can be circumvented.

To go a step further, workers will often find their picks and shovels made in China, their earth moving equipment made in Japan and their engineering software enhanced by a technician in India.

This begs the question: What indeed is an American product?

This is a different economic world than the one of our parents. If subsidies or protection are allocated to domestic industries, they must truly be used for improvement to make their products competitive on a worldwide basis and not simply implemented for political advantage. Global economics have become extremely complicated and interlocking relationships make it impossible to deem anything as truly American.

Protectionism during the Great Depression (i.e. the Smoot-Hawley Tariff Act) proved to be one of the greatest disasters to the American economy. This is a time to look beyond popular political expediency and turn this crisis into an opportunity to regain our leadership in business by being creative, realistic and not insular. Retaliatory trade policies can hurt America far more than popular political rhetoric can help.

I have been involved in international shipping and trading, and for nearly 40 years I have seen newly created companies in America born through the global marketplace. Many have thrived and fostered employment. Some continue to expand in spite of the current financial crisis. The future of America is global and any hindrance to that potential will stifle innovation and leave us far behind on the international playing field.

 

 

Tags: American Products, Protectionism