Over the past few years I’ve had a number of arguments with people who seem to believe that, for whatever reason, they shouldn’t pay any attention to the 94% of Planet Earth that isn’t the United States. Some of it can probably be explained away as jingoistic nationalism, or willful ignorance (assuming there’s any difference between those categories), but some of it appears to be business people who genuinely believe that if your company has a purely domestic focus there is no reason you should ever consider what the various International markets are doing. It’s an amazing example of 18th or 19th Century thinking, and there’s no telling how many more companies it will do in over the next few years. And it doesn’t help that the people in Washington apparently don’t grasp this either…
As noted in this article from the Wall Street Journal Online last week, one of the provisions in our $787 billion economic stimulus package was a “Buy American” provision, which requires anybody receiving those funds to spend them on American-made goods (and services, one assumes) wherever possible. On paper, it looks like an entirely logical idea; since this is government funding, provided by America’s long-suffering taxpayers, as much of it as possible should be put back to work here, where it can provide jobs, stimulate the local economy, and hopefully help those same taxpayers to earn even more taxable income and keep the whole loop going. Unfortunately, this fails to take into account the fact that other countries (or at least the people who live in them) have feelings, too – and some of them are just as susceptible to jingoistic nationalism as we are…
The example given in the story is a firm doing business in both the United States and Canada, which is ideally suited for stimulus-package products, but is losing about 25% of its business because many of the Canadian cities and towns the company does business with are refusing to spend anything on American goods or services until this “discriminatory” practice is rescinded. While there’s no way to be sure how widespread this problem may become, the WSJ article notes that exports to Canada are down over $5 billion for 2009 – and the year isn’t over yet. Nor is there any way to be sure what other countries may also be curbing their spending on American-made products. All we know for use is that our country’s foreign trade imbalance has been a huge problem for several years now, and this is not going to help…
Of course, foreign trade relations has never been an American strong suit. From the early days of this country we seem to have been better at making excuses than at making healthy trade relationships. But in the 21st Century, it would appear that telling other countries that they should let us do whatever we want in foreign trade because we’re defending the free world with our nuclear arsenal, or because without us you’d all be speaking German (or Japanese), or because our manifest destiny demands that we be complete jerks to everyone that stands in our way, or that we’re still breaking free from the tyranny of King George, or any other lame excuse we can think of is no longer going to work. Whether the issue is pure food, product safety, or just being more diplomatic in how we phrase government money giveaway legislation, it might just be time for us to start caring about the International Markets…
Because, as I’ve noted before in this space, it doesn’t matter whether or not you believe in the Global Economy; the Global Economy believes in you. And if we don’t start being better neighbors, no amount of free money giveaways are going to stimulate our economy to do anything…
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2 comments:
There is another reason that the "Buy American" dictum is at best in need of clarification: Are we referring to American profits or American jobs?
I recall a news item from several years ago. A small New England town needed to purchase a new snowplow. The town had a "Buy American" preference in its bylaws, so when the top two bids were submitted by John Deere and a Japanese company whose name I can't recall, the town contracted with John Deere. Unfortunately, the Japanese company manufactured its American-market snowplows in the United States, while the John Deere was built in Mexico.
Your readers might (correctly) point out that the average consumer doesn't purchase municipal-grade snowplows very often. Let me offer a smaller-scale example of the same point: I drive a Honda. My Japanese-nameplate car was actually built by American hands in Marysville, Ohio. My purchase of a "Japanese" car supported American jobs.
Furthermore, those Americans who work at the Honda plant then took their paychecks and went to the grocery store... most of your readers will recognize the multiplier effect from Economics 101.
As you often say, it's worth thinking about.
Actually, you can find similar examples all over the manufacturing sector. I recall a study from back in 2006, where a research team took the current-year Honda Civic and the current-year Ford Mustang down to the individual parts and back-traced all of them to the source.
Sure enough, the "foreign" Honda contained about 57% U.S.-made parts, while the "domestic" Ford contained only 41% of parts made in this country. In this case, Honda was not only building cars in the U.S., it was also purchasing more of its parts and materials here than the flag-waving All-American firm...
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