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Made in America Mistake

in Finance & Business/Politics by

As the United States removes itself from the Trans-Pacific Partnership, global trade is at risk. Is this trade important, or is it better to buy goods “Made in America”?

President Trump argues that isolationism can bring back American jobs, but this does not appear to be the case. Instead, it could hurt both national prospects and international relations.

North American Free Trade Agreement (NAFTA)


Approved in 1994 by Bill Clinton, NAFTA remains highly controversial.

The original goal: create a continental free trade zone that would maximize trade and output by creating a freer marketplace.

Has it worked?

Walter Kemmsies wrote:

40% of what the U.S. imports from Mexico is derived from U.S. sources. “This is the symbol of the success of NAFTA.” Twenty years ago, he estimates, that percentage was less than 5%.

NAFTA succeeded, but what does it mean to the American people?

Jobs

Opponents often cite the loss of American manufacturing jobs.

However, a Wharton study found that “Supporters of NAFTA estimate that some 14 million jobs rely on trade with Canada and Mexico combined, and the nearly 200,000 export-related jobs created annually by NAFTA pay an average salary of 15% to 20% more than the jobs that were lost, according to a PIIE study. Furthermore, the study found that only about 15,000 jobs on net are lost each year due to NAFTA.”

Even then, more jobs are lost to automation and modernization thanto cheaper international labor.

Low-skilled or non-professional human labour is relatively expensive compared to that of machines . As we move to the future, the need for manufacturing jobs will continue to decrease due to the automation of the manufacturing industry.

It isn’t worth blaming NAFTA, when it isn’t at fault. Rather, we should look at automation, and figure out how to employ American’s in sustainable, non-automatable, non-outsourceable ways.

us factory with goods made by robotsMade in America

So the individual solution proposed to this problem, buy American.

This is no longer possible.

If a single company manufactures a product abroad, all others must as well to stay competative.

Why?

Only 9% of people pay more for a product made in America. To make an item in America is to raise the price, and people will not pay the difference in the price increase.

Quality

Often seen as being higher in quality, there is no logical backing behind buying goods made in America

When a product is made in America, the cost of labor is increased. Then the company needs to cut costs in other ways.

The easiest ways to cut costs is to use lower quality materials, which are bad for you, or to cut labor costs.

Cutting labor cost can only occur in one manner, getting rid of the worker (automation) or making the cost per worker wildly more efficient (so, more outsourcing).

Perpetuation of Nationalism


To say “Made in America” perpetuates negative ideas. This idea reinforces, with a positive feedback loop, the superiority of one’s own nation. It hurts global relations.

We are conditioned to see domestic goods as better, and thus we label them as superior. Often, we do this simply because of societal expectations. Thus, bias perpetuation occurs despite what we already determined as most logical.

Conforming to this ideology hurts international relations. Global trade has lead to an unprecedented age of peace and economic prosperity, all of which rose out of the ashes of World War II. By thinking globally, peace may be better maintained.

Should you buy American?

It is up to you, but realize, it won’t help bring back manufacturing jobs.

 

 

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