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Made in America (or some such place…)

Despite the fact that xenophobia coupled to defunct economics is the driving force behind the “buy America” or “made in America” movement, it has no shortage of followers.  The idea, of course, being that employing millions of people here to screw stuff together and then charging more for the end product is somehow better than moving those people to skilled jobs, outsourcing the mindless work, and then enjoying the higher standard of living that comes with cheaper products.  After all, why bother with a high standard of living when it means that people who dropped out of high school don’t get the opportunity to make $70 per hour sweeping floors for the union?

And beyond that, the whole economic concept is backward.  We ship these jobs overseas so that we don’t have to do them; what we import we import because we can.  The idea of the “trade balance” as an indication of the relative economic power of a country is so outdated that it belongs more in mercantilist 17th century Spain than modern America.  I know it is difficult to put the concept to rest because of the visceral reaction many people have to its nationalist implications, but it is so far beyond good sense that it constantly surprises me how so many people think it important.  In no place is this sense of importance greater than in automobile manufacturing.

I suppose, then, that I should be less than surprised that MSN is offering up yet another article about it, entitled “Do You Really Drive an American Car?”  I’d rather not split hairs about what makes a car “American” (which bafflingly includes Canada but not Mexico, or Central America, or South America), but I do think it’s important to point out the fact that the lines are so completely blurred these days that the idea of an “American” car is about as fluid as Washington’s definition of “fiscal responsbility.”  That hasn’t stopped some people from drawing lines:

What most people see as “American” cars, the UAW does not. It bans Hondas, Toyotas, Volkswagens and all other foreign-branded cars from union property, as well as those cars from Detroit’s Big Three automakers for which final assembly occurs outside U.S. borders…

Okay, so nothing that is foreign branded is allowed.  What about the Honda Accord, with 80% American-sourced parts, built in Alabama or Ohio?  Even MSN has noted that it seems like that’s more American than the Corvette, with only 75% American parts, albeit assembled in Kentucky.  And of course, the ostensibly American Buick Regal is built in Germany with 21% American-sourced parts.  When compared with the stated cause of the “buy America” crowd, it is inane to write off the Honda.  Its production involves many thousands more American jobs than the other cars.  And the idea that the money “goes back to the headquarters” is similarly ridiculous; it’s a public company.  If you want Honda to be a domestic manufacturer, buy the stock.

But domestic branding is only part of the equation.  It has to be screwed together here too, for some inexplicable reason.  A domestic-branded car, like the Lincoln MKZ, which is assembled in Hermosillo, Mexico, is also not considered “domestic,” and thus excluded from UAW parking lots.  But what if all of the parts were sourced in the U.S. but it was screwed together in Tijuana?  How is that worse than having all the parts for a domestic-branded automobile made in China but screwing the car together in Flint?  What is it about assembly jobs that makes them sacrosanct?

Obviously, the answer should be “nothing.”  But the fact that auto assembly jobs are so fiercely protected reveals two very important truths.

First, the job priorities of the “buy America” crowd are simplistic and counterproductive.  Auto assembly jobs are more demeaning, lower paid, less fulfilling, and more dangerous than the jobs that replace them when they are outsourced.  Take Apple’s iPhone for instance.  Which jobs would you rather choose from?  In America you might design computer chips, manage the supply chain, write software, analyze data, render product designs, engineer phone parts, and audit the company.  In China, you get to screw the phone together and …well, that’s it really.

Second, and the greater point, is that it highlights the economic stupidity of the mercantilist view of the trade balance.  Remember that, in the ultimate trade balance tally, those aforementioned iPhones are being “imported” into the United States.  But what’s the relative value-add?  When you could train monkeys to screw these phones together, the total value of the assembly work is justifiably only a tiny percentage of the value of the phone.  And why would we choose to pay more for so little value? 

What really goes into the products doesn’t necessarily go into the trade balance accounting.  By way of further example, one of America’s greatest manufacturing strengths is in the semiconductor sector.  AMD exports 87% of its products; Qualcomm ships out 94%.  What comes back to America is what cheap foreign labor put into a box and glued together.  However, that final product is invariably more expensive, given that most consumers don’t find bare computer chips to be all that useful.  Meaning the trade balance is skewed.  This seems to be a lesser point to everyone but macroeconomists and union bosses.

So when it comes to our manufactured products, we should be asking more pertinent questions than whether it is “made” here.  Where is the expertise?  Where is the value-add?  Where is the heart and soul of the product?  It is not in the assembly, and I cannot fathom why we should want it to be.

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