Obama Team Considers Encouraging Buying “American”. What Does That Mean?

Wednesday, January 14, 2009 4:59
Posted in category Uncategorized

In the recent Bloomberg article Obama Says U.S. Must Act Swiftly to Address Economy, the following passage jumped out at me:

Obama’s advisers are considering including a “buy American” provision in the economic-stimulus legislation that the incoming administration has made its first priority.

“We are reviewing the buy American proposal and we are committed to a plan that will save or create 3 million jobs, including jobs in manufacturing,” said Jen Psaki, a spokeswoman for Obama’s transition team.

Harkening back to the days where Schumer was looking to pass pro-American legislation, I was shocked to see that the President’s team was looking at taking protectionist measures to this level.

Before I pass final judgement though, I think it is important to know more about what “buy American” means.  After all, it is not as simple as it was in the 1980’s when “Buy American, it could be your job” was the mantra of American industry’s response to Japanese imports.  Now, American products are made all over the world, and while you will find “Made in China” labels on many items, the reality is not as simple as advertised – a point I made in my post nearly 2 years ago Are Trade Stats the Best Measure of Success?:

How are American products manufactured in China, and sold in China, being fully considered by politicians, economists, and writers? After all, Motorola, Dell, Nike, GE, Corning, GM, McDonalds and several thousand other manufacturers are successfully selling billions of dollars worth of mobile phones, chemicals, computers, food products, etc manufactured in China to Chinese buyers…

At the core of my inquiry is that according to traditional statistics, American branded products produced by American companies in China are NOT being considered American… and thus in my mind, this is where the disconnect lies.
Taking this a step further out on the limb, the more success American companies have manufacturing and selling in China, the wider the trade gap gets as they open further facilities in China to meet demand and good that use to be counted as “American” are now considered “Chinese” by traditional statistics.

So, with this in mind and under this context, that I would like to see the following:

1) Obama’s team begins to speak publicly about the benefits that have come from globalization
2) A strategy/ tariff that fully considers the fact that American products made in China are different than Chinese products, and that their differences are important enough to require a different policy.
3) A targeted approach that would encourage investment from firms of all national origin to produce in the US.
4) Matching these policies closely to policies addressing the rampant consumerism issue that has also played significantly into the economic imbalances.

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6 Responses to “Obama Team Considers Encouraging Buying “American”. What Does That Mean?”

  1. Dan says:

    January 15th, 2009 at 1:46 pm

    I am shocked that you were shocked.

  2. Shawn in Melbourne says:

    January 15th, 2009 at 5:14 pm

    Hi Rich,

    I agree with your four wishes completely–but I am not optimistic our politicians in the U.S. will move forward with such sophistication. My take on each point:

    1) Possible, if the new trade representative from Texas and Treasury appointee are lead voices. Less likely if the new Labor Secretary, Solis, and other politicians with little or no business experience have more input.

    2) Not sure if politicians will believe Americans can understand the subtleties. Personally, I believe we need to educate the general public on these finer points.

    3) Yes, a Japanese company, for example, producing in the U.S. should be considered ‘American-made’ and enhanced federal level incentives to pour FDI into the U.S.

    4) Yes, agree–temper expectations so that people understand the goal isn’t to return us to a demand level that was built on such consumerism.

  3. Rich says:

    January 15th, 2009 at 9:08 pm

    Dan.

    I am only shocked that we have still not (as enlightened people) come to understand that there are way to protect markets that are productive, and those that are simply destructive.

    R

  4. Rich says:

    January 15th, 2009 at 9:16 pm

    Shawn.

    Thanks for you comments. How is the move going?

    Where I see the real issue here is that politicians are simply thinking short term. “Buy America” will get them some increased polls, and may even provide a boost to products with American brands that are Made in America.

    However, long term there is no benefit to this.

    Why would Toyota or Lenovo continue to invest in the US when “Buy American” is more about brand recognition than about country of origin. this only exacerbates the problem through lost investment, jobs, and taxes in the US.

    At the same time, a trade barrier like this is only providing an artificial barrier. the move does not mean that US branded/ US made products are actually any better, and at some point things will just go back to normal anyway.

    R

  5. Shawn in Melbourne says:

    January 15th, 2009 at 9:55 pm

    Hi Rich,

    The move has its problems, as it happened quickly…will share details another time!

    On this post, I guess we will see quickly what approach comes out of the new administration. Let’s just hope the short-term thinking politicians are not the winners!

  6. Wendy Rosen says:

    January 24th, 2009 at 3:29 pm

    Every nation encourages domestic purchases. Many have cabinet level positions that promote domestic manufacturing and cultural products. While large scale manufacturing in America is shrinking… tiny start-ups by women are flourishing… and will continue to flourish as long as women need flexibility in their lives for care of children and elders.

    The “benefits” of free trade have filled our closets and trash cans with stuff we don’t need or use… just because it’s cheap and cheaply made. We need tariffs to cover the costs of our landfills, port security and clearance as well as product testing. Small towns and big cities are seeing a resurgence in the “town potter” the local “glassblower” the “custom jeweler and furniture maker”. Young people find true value in supporting local coffee shops, buying handcrafted uique items, and they have found adventure in the seach for the best eco and health related foods and produce. There’s so much that we can do that doesn’t qualify as “protectionism”….

    1. We can add 100,000 jobs overnight if we create shops in our national parks to sell domestic craftwork and affordable art.

    2. We can create roadside shops featuring “Made in Maryland” or “Made in Texas” on our inter-state highway system just as North Carolina, West Virginia, and Kentucky already have

    3. We can assist small businesses by providing low interest loans for consolidation of debt that is now on credit cards… with even higher interest rates.

    4. We can demand that imported products stop attempting to defraud consumers by their “AmericanStyle” descriptive text and packaging.

    5. We can demand that all imports provide Country of Origin marking that is PERMANENT and INDELIBLE… just as our laws have clearly stated for more than 75 years.

    6. We can provide American cottage industry and artisans with legal assistance to defend their copyrights when they are attacked by retail big box stores and foreign manufacturers.

    7. We can demand that trade show producers create “arbitration dispute committees” for exhibitors who are charging design theft.

    8. We can provide low interest loans for guilds and incubators who are ready
    to bring groups of small producers to a broader audience through exhibiting at a regional or national trade show for their American made products.

    These actions …some cost a few million, others cost nothing could save
    millions of jobs in our country.

    Our SMALL businesses, not our large businesses are the source of new
    jobs. Previous recessions and the accompanying rising unemployment rate has always created new small businesses… we just need to encourage them and protect them from our oppressive financial institutions.

    Wall Street has created a merged and acquired group of mega-firms that have monopolized business sectors and provide little service, quality and often negligence. Small businesses are more likely to act ethically and impact the local community positively.