The Real Problem With “Buy American.”

Over at Townhall today, Pat Buchanan has a column called, “‘Buy American’ — or Bye-Bye America.” Here’s an excerpt from it,

For the stimulus bills of both Houses have a “Buy American” provision mandating that in “public works” only U.S. iron, steel and manufactures be used. The provision came out of the appropriations committee of the House on a 55-to-0 vote.

The Senate watered it down by declaring the Buy American provision must be consistent with all U.S. trade commitments. But Congress is sending a message: The rebuilding of America is to be a project of, by and for Americans, not outsourced. Sen. McCain’s free-trade amendment, to strip all Buy American provisions from the bill, was routed 65 to 31

The reaction of Barack Obama, a NAFTA skeptic in 2008 with bumper stickers that read, “Buy American, Vote Obama,” was to genuflect to the gods of globalism and recant his economic patriotism.

“I think it would be a mistake … at a time when worldwide trade is declining, for the United States to start sending a message that somehow we’re just looking out after ourselves,” he told Fox News. We don’t want to “trigger a trade war,” he told ABC.

Apparently, Obama was unnerved by rumbles from Europe, which is threatening to drag us before a World Trade Organization tribunal and have “Buy American” banished forever.

Three things.

#1) Saying “buy American” is always popular — and it’s a great impulse. If you’re going to reward someone with your dollars, it’s better to reward a fellow American than a foreigner. However, 98% of Americans will simply buy whatever they think the best deal for them is, no matter where the product is made.

How many people even look at a product to see where it was made in the first place — and in these days of international corporations, how accurate are the labels? If an American company buys American parts, flies them overseas using an American company, has them assembled in China, ships them back with an American shipping company, markets them through an American firm, and sells them in an American store, how much does that “made in China” label really mean?

#2) Protectionism harms our economy. It leads to trade wars — and, yes, we can come out on top in a trade war — but, the fact is that nobody really “wins” a trade war. Both sides get hurt. Additionally, we hurt ourselves as much as other nations when we put tariffs on foreign goods.

If you buy a product from Brazil that normally costs a dollar and it costs you a dollar fifty because of a tariff, you have less money to spend than you otherwise would have. Sure, some American company that’s now cost competitive may benefit from it — but at the price of harming a considerably larger number of other Americans who are being forced to pay more than they otherwise would have.

Additionally, if Americans can’t build a product as cheaply and effectively as people in another country can, then it makes sense to let them build it so that we can free up labor in this country to do the things we can do well in this country.

#3) Getting to the crux of the matter, protectionism and saying “Buy American” should set off alarm bells. Why? Simple: if American products are excellent, why would we need to protect them from competition or tell people to “Buy American?”

Some people just don’t think we can compete anymore with small, poor nations that pay their workers a dollar a day. However, that’s horse crap. It costs a lot of money to ship products overseas. You have cultural differences, language barriers, corruption, bribes, poor infrastructure, uneducatd workers, mediocre productivity, etc., etc., etc.

Moreover, most people tend to think foreign workers outwork Americans because so many of the immigrants who come here are real hustlers. What you have to remember is: the sort of person who goes through the hassle of becoming an American immigrant so he can make a better life for his family is probably closer to the cream of the crop in the country he came from, rather than the run-of-the-mill worker. American workers are actually extremely productive as you’ll see when you look at this excerpt,

American workers stay longer in the office, at the factory or on the farm than their counterparts in Europe and most other rich nations, and they produce more per person over the year.

They also get more done per hour than everyone but the Norwegians, according to a U.N. report released Monday, which said the United States “leads the world in labor productivity.”

Each U.S. worker produces $63,885 of wealth per year, more than their counterparts in all other countries, the International Labor Organization said in its report. Ireland comes in second at $55,986, ahead of Luxembourg, $55,641; Belgium, $55,235; and France, $54,609.

The productivity figure is found by dividing the country’s gross domestic product by the number of people employed. The U.N. report is based on 2006 figures for many countries, or the most recent available.

Only part of the U.S. productivity growth, which has outpaced that of many other developed economies, can be explained by the longer hours Americans are putting in, the ILO said.

The U.S., according to the report, also beats all 27 nations in the European Union, Japan and Switzerland in the amount of wealth created per hour of work – a second key measure of productivity.

…The ILO report warned that the widening of the gap between leaders such as the U.S. and poorer nations has been even more dramatic.

Laborers from regions such as southeast Asia, Latin America and the Middle East have the potential to create more wealth, but are being held back by a lack of investment in training, equipment and technology, the agency said.

In sub-Saharan Africa, workers are only about a twelfth as productive as those in developed countries, the report said.

…China and other East Asian countries are catching up quickest with Western countries. Productivity in the region has doubled in the past decade and is accelerating faster than anywhere else, the report said.

But they still have a long way to go: workers in East Asia are still only about a fifth as productive as laborers in industrialized countries.

The vast differences among China’s sectors tell part of the story. Whereas a Chinese industrial worker produces $12,642 worth of output – almost eight times more than in 1980 – a laborer in the farm and fisheries sector contributes a paltry $910 to gross domestic product.

The difference is much less pronounced in the United States, where a manufacturing employee produced an unprecedented $104,606 of value in 2005. An American farm laborer, meanwhile, created $52,585 worth of output, down 10 percent from seven years ago, when U.S. agricultural productivity peaked.

So, if American workers are more productive than our counterparts overseas, why would American companies want to relocate?

That’s easy: high taxes that rob companies of the profits they’ve earned. Ridiculous regulations that keep people in the back, working on paperwork, instead of out on the floor working. Unions that have been given so much power by the government that they end up destroying the companies they work for over the long haul (See the Big 3). An out-of-control legal system that allows workers and customers to make millions of dollars, whether they’re right or wrong, if they have a slick lawyer and a dumb jury.

Put another way, most American companies would probably prefer to stay in America and employ American workers, but the government puts so many burdens on them that they drive them into the arms of foreign nations. The solution to that problem is not saying “Buy American” or protectionism; it’s taking the burdens off of these businesses so that they will continue to provide good jobs for Americans and more tax revenue for the government.

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