'Buy American' will lose U.S. more jobs
Commentator Mark Perry says the 'Buy American' clause in the stimulus package makes little sense economically, and might destroy more U.S. jobs than it will save.
Mark Perry, professor of economics at the University of Michigan, Flint. (umflint.edu)
More on Commentaries, America's Financial Crisis
TEXT OF STORY
Tess Vigeland: Today the Obama administration announced 10 new projects designed to goose the $700 billion stimulus package. The White House says more than 600,000 jobs will be saved or created. But the package still has that "Buy American" clause that caused so much controversy. And commentator Mark Perry says because of that clause, when it comes to jobs, it may be Americans who lose.
MARK PERRY: "Buy American" provisions make sense politically, because they create huge political payoffs for elected officials who protect jobs in domestic industries. But, economically, Buy American rules, like all forms of trade protectionism, make no sense at all, since research shows that for every job protected and saved, about two jobs are lost.
Why? Because Buy American provisions and tariffs protect inefficient domestic producers from more efficient foreign rivals. Take steel manufacturers. American firms that buy domestic steel are forced to charge consumers more. So retail sales decline, and thousands of jobs are then lost in countless industries that use steel as raw material.
And as American consumers and companies are forced to pay higher prices for products with domestic steel, they have less money to spend on other purchases. That's billions of dollars in sales lost to other industries, resulting in lower production and even fewer jobs.
Protectionism also provokes retaliation. This weekend, representatives of Canadian cities, upset with the "Buy American" rules, voted for "Buy Canadian" policies that could block American companies from bidding on city contracts. The inevitable result will be a decline in trade with our largest trading partner, and a loss of yet more American jobs.
Consider what happened in 1930 when the U.S. raised tariffs on 20,000 foreign goods despite the protests of more than 1,000 economists. Our trading partners fought back, and U.S. exports and imports fell by 70 percent, causing huge job losses here and around the world. In fact, some would argue that it was protectionism that helped to make The Great Depression so "Great."
Buy American provisions ultimately destroy more American jobs than they save. If we want the U.S. and world economies to recover from the recession as quickly as possible, we should end the "Buy American" rules.
VIGELAND: Mark Perry is a professor of economics at University of Michigan in Flint.
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From Charleston, SC, 09/13/2009
How To Create More Jobs America - Survey Results
My recent survey produced a variety of ideas, but most of them had these common elements: replace the Internal Revenue Code with a simpler model, encourage businesses to increase employment, and insist upon tort reform everywhere.
It also brought two disturbing realities into focus: We are painfully apathetic (less than 1% of the people I contacted took the time to respond) and, although we have great problem-solving ideas, few to none of our ideas are included in any of the reforms being considered by Congress.
For those who participated, thank you again. I hope that you will appreciate how I've synthesized your thoughts and suggestions into the commentary. I also hope that you will find the time to address some of these issues more aggressively with blogs, networks, and elected officials.
Major changes are being proposed in six inter-related areas. All the dots cannot be connected in one article. Government revenue is cut in this article and the next without a hint about a replacement plan. I'll get to that later, and painlessly for all of us.
So how do we create more jobs?
What Congress, a long line of Presidents, and much of the population have lost sight of is the fact that even the dirtier businesses are job providers. They must be pampered, not pummeled; supervised and reined in but not tethered and broken.
Business income taxes are 100% inflationary; costs associated with employees (yes, even the minimum wage, which some suggest is the cause of our illegal alien problems) result in fewer employees hired. Period. Capitalism is not broken--- its success formula has been compromised.
Repealing the corporate income tax, and prohibiting any and all levies, fees, charges, and taxes on any form of business could instantly produce millions of job openings, lower prices, and create new business opportunities throughout the economy.
Repealing business income taxes would instantly make export products more competitive in world markets, as businesses reduce prices while maintaining profit margins. Greater profits should translate into growth in economic activity.
Finally, the elimination of these taxes would make all businesses run more effectively because there would be no need to spend money (or create losing transactions) just to cut the tax bill.
For the rest of the article, just Google: "How To Create More Jobs America".
Steve Selengut
http://www.kiawahgolfinvestmentseminars.com
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"
From Houston, 07/02/2009
what about the Buy China, Buy Japan and Buy every other country that restricts our imports? oh forgot about that did ya? who care about Canada we import from them so much more than export. your argument is lame.
From Moore, SC, 06/12/2009
When the US says that no more textiles can be imported, Americans will not be able to clothe themselves. With no competiton, the American textile industry would come back with monopolistic pricing. There would be no incentive to improve the products being made because there would be no competition. The same goes for vehicles, refrigerators, televisions, computers, and everything else that we enjoy in this economy. Americans would wind up with two choices - take it or leave it - if they can afford it! "Buy American" programs cause other nations to take retaliatory measures such as increasing the tariffs on our exports to their countries. If we don't buy from outside the US, we won't be able to export either. Have you any idea of the number of jobs that are linked to exporting? I would dare say more than the number of jobs associated with imports!! Free-trade agreements have been pushed to open foreign markets to our exports. For example, look at NAFTA and the auto industry. The US allows vehicles to enter the US at 2.5% duty. Other countries have a much higher rate. Canada's rate for vehicles is 6.5%, and Mexico's duty rate on vehicles is being lowered - from 50% to 40%!! You see, it is easy to import from Canada and Mexico with the 2.5% duty that is collected, but to export vehicles into Canada and Mexico is prohibitive because of the rates of duty charged by those countries. Then NAFTA passed. Now, using the same rules, vehicles that qualify as "originating" can move from one country to the other at 0% duty. Which direction do you think has had the greatest increase in vehicle movement - into the US, or out of the US into Canada and Mexico? We live on a big, round globe that is surrounded by an atmosphere of competition. That competition cannot be removed by protectionist measures! If attempts to do so are successful, industry will grind to a screeching halt and the quality of life we enjoy in the US will deteriorate rapidly!
From Amberg, Germany, 06/12/2009
I agree with Mr. Perry but, not nearly for the same reasons. First let point out a statement he made: "...Because Buy American provisions and tariffs protect inefficient domestic producers from more efficient foreign rivals." Have you seen the products coming out of China and India with 1000s of recalls. Effiency is obviously not a strong point of some of our rivials. But, what people like Gunars Rauda is not a "Buy American" clause but, the smae advantages that our competitiors. This is the kind of bill Ms. Suzan Carroll-Ramsey out of Charleston, SC is proposing and hope everyone reads her comment here and go to her website ( www.naftz.org). It would also help if our government, instead of helping large companies did more to small businesses (there are programs out there to help) and helped small businesses get there innovations off the ground rather than to corporate giants. Protectionism is not the way, if that's the case, don't drive foerign cars, don't buy televisions or HDTV's or laptops cause I'm pretty sure there is a foerign manufactured part in there. Protectionism is just a politicial tool. We need to keep open markets, but level the playing field, this is what makes America thrive.
From Hollywood, FL, 06/11/2009
I disagree. With few exceptions, All countries, and even all individual US states must become isolationists, so that they may focus on what makes them special as a potential econmony, much as food sages are telling us to grow our food and eat what we can produce locally. We have never needed to focus on "States rights" more than in today's economic crises. Governors should be meeting monthly regionally, and each quarter on a national basis. The state of New York and its undue influence on Washington needs an end run strategy by the rest of the nation to correct the damage.
From NJ, 06/10/2009
Are there any American jobs left to lose? Most manufacturing jobs have been exported. Service sector jobs have been getting exported for the last decade or so. How come there is such consternation when limiting executive pay is discussed, but there is little such concern when non-executive jobs are exported?
06/09/2009
This is a stimulus package from the US for the US. Any other day, before or after this package is already spent on the free market. We are not going to piss away the stimulus to foreign countries. If US Company only buys steel from China, then that's their problem.
From NC, 06/09/2009
The statement(s) about losing "more American jobs" is misunderstood. Yes, in the long run, free trade will lead to more jobs, but this ignores what kind of jobs. Whenever we import more than we export, the result is exporting our standard of living. We got into our current mess via debt (of which, our trade deficit is just one part), so more debt isn't going to solve any problems.
From Long Beach, CA, 06/09/2009
The correct provision for not only stimulus projects but all governmental spending should not be buy American, but buy Democratic. By this I do not mean the Democratic party, but rather Democratic nations including many with very low costs such as Mexico and Liberia. The basic trade policy would be a free trade area of the democracies where any/all democratically elected governments that allow all nations with several basic features of a functioning democratic society (freedom of the press, regular elections with multiple parties, election observers who declare the voting fair, functioning independent judiciary ect) to receive privileged access to the US market.
Why is this a good idea? Democratic countries are on an even playing field. They are likely to not undercut us by cutting corners we can't cut (for an example see China with its 70 hour work weeks, slave like worker conditions and heavily polluting factories with no accountability). They are also likely to be responsive to citizens in a way totalitarian regimes are not. It would spur environmental progress by only dealing with nations where pollution has a meaningful social cost and also would raise the standard of living by encouraging democratic reforms the world over.
When we're undercut by China and other such countries its not on wages (since wages are largely offset by how much it costs to send goods from China to the US especially on large items) but on lax employee safety, workers comp and environmental laws. Only trading at favorable terms would change that and maybe even change nations like China in the process by shifting the incentives.
06/09/2009
So which Americans get fired first?
Those working for the Japanese or those working for the Europeans?
06/09/2009
So which Americans get fired first? Those working for the Japanese or those working for the Europeans?
From Plano, TX, 06/09/2009
The whole idea of having a job is to support a family. Our politicians act like having a job is an end in itself, and that being paid enough to support our families is just some tiny side issue. Homes are not free. Food, utilities, insurance, health care, education and tranportation are not free. Our politicians act like families earning enough income to support themselves is too big a burden on America. And our politicians also think it's too big a burden on America for us poor to have help from the government. Our politicians act like they are doing the American people a favor by taking away our means of supporting ourselves by an honest days work. And when we try to hold onto our means of earning a living, our politicians cry "protectionism". The politicians protect cost of housing and health care. "Do you realize how terrible it would be if real estate investers were to have reduced incomes so that poor people could afford housing" our politicians say. We should be able to buy housing and health care at China import prices.
OK, so in order to keep our jobs we have to drop deeper into poverty until we are as poor as exploited poor people in all those other poor nations. Our politicians must answer the big question, what do we do with all those people in America whose value of their honest days work falls below the cost of keeping their families fed, housed, and healed? It's time our politicians realize that they serve the devil's money, the god on our money, not the God in heaven.
Our politicians should read their bibles and come back to Christ or they will find themselves with that group of people in Matthew 6, who despite their seemingly rightous great works, find themselves not allowed to be with Christ due to their corruption and greed.
From Baltimroe, MD, 06/09/2009
If Mark Perry were talking about a long-term policy decision of protectionism on the part of the U.S., I might agree with him. But I believe the reality of the “Buy American” provision of the stimulus act is that it should be seen as a prod for other nations to incur more stimulus spending in this downturn. Half of the G-20 nations have created small plans, unlike China, Spain, Saudi Arabia and the U.S. which created large ones compared to GDP. Aren't other nations seeking a “free ride” if they don't? China has invested savings and the U.S. is incurring a huge debt to limit the effects of the downturn and quicken recovery. If other countries want to benefit from stimulus funds, they should create stimulus funding!
06/09/2009
All you Buy American fans must also be in favor of sending the foreign companies home.
Why are Americans working for foreign companies?
If American companies are to have no factories outside of the U.S., the foreign companies should do likewise and have no factories in the U.S.
The millions of Americans working for foreign companies should be laid off.
The U.S. should just seal its border to all foreigners, all foreign products, and all foreign companies.
Throw away your Sony T.V.s.
If you used a computer with components from outside the U.S. to reply to or view this web site, throw it away.
I hope none of you commenters are driving foreign cars. Indeed, surely no enlightened reader of this web article is driving a foreign (non-U.S.} car.
From Seattle, WA, 06/09/2009
Quoting Mark Perry, he says “…..Buy American provisions and tariffs protect inefficient domestic producers from more efficient foreign rivals”
I run a fabrication shop in Seattle with 8 employees. We build marketing tools for realestate developers. My company has lost work to China where the average hourly wage is about $1.50 per hour. Maybe Mr Perry is not aware that the minimum wage in Washington State is $8.55 per hour. As an economist, one would think he could do the math. By the way, my average employee earns about $16 per hour, with full medical (that costs me $39,000 for all 8 employees in 2008), 3 weeks paid vacation, and retirement plan matching dollar to dollar. Maybe these benefits are the inefficiencies Mr Perry is referring to. I guess I am not that ruthless of a Capitalist, that I don’t exploit my workers to my personal maximum benefit.
My company has lost work to Mexico where the minimum wage is less than $4 PER DAY ! ! . How does Mr Perry expect American companies to compete with such low wages?
My company has lost work to Canada where my competitors do not have to pay state sales tax when they ship the model into the USA. What that means, if my price is identical to the Canadian competitor, it is actually 9% higher because I have to pay Washington Sales tax. I would suspect Mr. Perry’s response would be that I should cancel all the benefits I offer my employees, so I could be a more efficient producer, and get those jobs from the Canadians.
A second point Mr Perry makes is that if company or individual has to spend more on a domestically produced item, that will leave them less to spend elsewhere. Thus, resulting in reduced sales in other industries. So if my client has $20, buys from my Canadian competitor an $18 product, has $2 left over, goes to Starbucks in Seattle and gets some coffee. Now if he would have bought the same product from me it would have been $20. He could not have spent the $2 at Starbucks. This is what Perry is saying. However, I paid in wages $12 which was spent at local restaurants, clothing stores, Starbucks, hardware stores etc. Another $3 dollars went to purchase materials locally to build the product, $3 went to taxes such as state unemployment. And the last $2 went to benefits, which will still be spent locally – visit to the doctor etc..
Reality is that people in other countries are just as smart, and hard working as Americans, and when their wages are so much lower, we cannot win the competition. If NPR wanted to do some cost cutting, they could replace the host, Tess Vigeland with a host maybe from India at a fraction of the cost. Technology wise it would be easy to air form India. Enormous population of educated English speakers……………………………
From Nampa, ID, 06/09/2009
What Mr. Perry fails to mention is WHY American labor is so "expensive". HEALTH CARE. If the US kept up with the rest of the world and invested to protect it's people, the cost of American labor would not be so high. Not to mention the insane amount of money that these CEO's bring in, that is the TRUE cost of America's labor. American corprations were buying overseas products and raw materials for decades now, and here we are, construction at a stand-still. Mr. Perry you are wrong, my welder husband has been out of job for a year now, and I am pretty sure that buying American had nothing to with the layoff. Mr. Perry's "analysis" is biased, misleading and above all shallow. I am shocked that such a simple mind is teaching at a university.
From Palo Alto, CA, 06/08/2009
Mr. Perry fails to appreciate that for every job saved, an American is able to buy goods, and preferably American-made goods. The Chinese, Japanese and EU haven't opened their markets - because their politicians fear the backlash. Who foots the unemployment bill and food stamps when we are out of work ? We do. Not the companies that are complaining because their overseas earnings will now be taxed. And yes, every other country protects it citizens, physically and economically - free trade is about exploiting other countries' labor and resources, until the price goes up.
From Farmington, MI, 06/08/2009
I am totally against Mark Perry's article. The reason is quite simple: if you look around in the American society, you do not see the nationals from other countries coming and supporting our Social system, paying City, State and Federal taxes. They do not come here to seek medical treatment on a daily or monthly bases, they do not send their children here to spend 12-16 years in our Educational system. They do not spend most of their income here in the states, they do not spend most of their vacation or free time here, they do not come to our sport events to support them.
What hurts me the most is when I see so many Americans buying goods made 100% outside of the US, and destroying the American manufacturing sector. This sector is the backbone of any strong economy, but the people and the Government just do not get it, we are involved in a huge trade deficit and do not know how to protect our nation.
Who is going to be hurt if we impose some protectionism on goods made 100% outside of the US? Not the American people, US has plenty of food, human technological, water and natural resources which are enough to support this country for years to come. Why do not we use these resources to leverage the trade deficit with other countries?
Why the other countries want to sell their products here? To suck the money back into their economies and to build their infrastructures, schools, roads and hospitals.
So in my opinion American People should look at the American products and be proud to buy them. Let's help our manufacturing sector to come back, and give a future to our children. If not all the money poured in our Educational, Medical and Social Systems will be drained little by little due to the fact that manufacturing is loosing the ground.
Do not drive a Toyota Minivan with a sticker of "Proud to be an American" on it, buy an American car and do not even bother about adding a sticker to it.
My respect to ALL AMERICAN PEOPLE who buys AMERICAN MADE PRODUCTS!
From Inland Empire, CA, 06/08/2009
Is Mr. Perry aware that some of the very countries that are complaining about this issue have their own similar provisions in place? A couple of them are Canada and Germany. Lets face it & cut to the bottom line, we just happened to be one of the largest trade markets and nobody wants to miss out on the goods & money to be traded. America buying American would surely put a damper on that.
From Charleston, SC, 06/08/2009
THANK YOU for "Buy America" policy is not good for our economy as it exists at this point in time. I the manager of the Foreign-Trade Zone Program for almost the entire state of South Carolina and a member of the Board of Directors for the National Association of Foreign-Trade Zones - we would appreciate an opportunity to have you feature our program and discuss a bill we have been trying to get support for called TAP - Trade Agreement Parity- we have a strong support base and what we are saying makes sense:
please visit the www. naftz.org site for details.
The "TAP" legislation addresses the fact that due to current trade agreements USA companies are penalized when trying to compete with countries that we have trade agreements with and this legislation proposes that companies are afforded the same duty treatment by USCBP that our trading partners have- at this time US manufacturers have to pay duty on imported components, whereas our competition in Mexico and Canada and other countries with FTAs do not - and the regulatory agency would be the Foreign-Trade Zones Board - the bill does not take a for or against position against trade agreements- it just gives the few US manufacturers a level playing field.
I am a Grantee and not an expert but you can find information and contacts on line or please talk with Ms. Brandi Hanback ,the Chair of the NAFTZ Board of Directors with the Rockefeller Group and her e-mail is bhanback@rockgrp.com or Will Berry , Executive Director or of the NAFTZ at wberry@natz.org - I think this would be a piece of journalism you could sink your teeth into - my e mail is attached and my mobile is 843-297-6742 - please follow up. Thank you
Suzan Carroll-Ramsey
Board of Directors, NAFTZ
Foreign-Trade Zones # 21 & # 38 Manager
South Carolina Ports Authority
Member Station 89.3 Charleston
176 Concord St.
Charleston, SC 29401
(843) 577-8144
(843) 577-8191 fax
(843) 297-6742 mobile
Work e-mail: scarroll-ramsey@scspa.com
Web site: www.scspa.com/business/ftzs/ftz.asp
I look forward to hearing from my favorite correspondent on one of my favorite programs I listen to every day on NPR. Thanks.
From Ann Arbor, 06/08/2009
I hear this far too often to be sure it isn't just propaganda. ("Repeat the lie often enough and people will believe it.")
It might actually be true in an idealized academic-economists' world without trade imbalances. Unfortunately, the much-vaunted "Yankee Trader" loses about ten cents on every dollar of trade. Less trade, less balance of trade deficit.
Like others posing the argument, Mr. Perry only speaks of "higher prices"; he doesn't account for the greater income of his American neighbor (formerly unemployed) who can afford to purchase the (allegedly) more expensive goods.
"Free trade" sounds good, but where is "Fair trade"?
From Ft. Pierce, FL, 06/08/2009
Shame on NPR for allowing this turkey to give a commentary. Is UM at Flint hiring professors or Reagan era political hacks? This argument is the same old baloney the Republicans have been feeding us for the past 30 years. What has it produced: a decimated manufacturing sector and a shrinking middle class. This country has been on the losing side of one sided trade policies for most of my adult life and now we see the results. "Free trade" is nice in theory or if you are Chinaman. The playing field has never been fair and never will be (see artifically pegged currency, see unregulated pollution, see unfair wages, see subsidized industries, like ours, home decor and on and on). Our politicians have been selling us this stuff for years, same old story, same old result. Soon enough we will all be working for China's proxy, Wal-mart for the minimum wage, cannot wait!
From TX, 06/08/2009
Does "Buy American" include "Buy American Labor", i.e. Hire American Labor only?
It should.
We cannot put Americans back to work, if American businesses are allowed to outsource jobs to foreigners.
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