What Does “Buy American” Mean?

Yes it can be agonizing being stuck in traffic on the way to Manhattan.  But believe me, far worse is to be stuck in that same traffic while listening to a 45 minute program on NPR about the recovery of the “American auto industry”.  Add to that the many callers to the program who proudly stated something to the effect of, “I think it’s the right thing to do to buy American and therefore I am buying (or bought) a GM/Ford/Chrysler car”.   I respect the intentions of these people, but the hosts of the program, including two industry experts, never informed their callers or there listeners of the facts surrounding such decisions.

It’s safe to assume that the primary aspect of the “buy American” desire is to support jobs for American workers.  This intent comes from a good place.  But if a car buyer wants to support American workers, their decision is much more complex than looking for the logo of the big 3 automakers.

Consider the following, just as examples:

1.  The BMW X3 is designed in California and assembled in Spartanburg, South Carolina.  BMW directly and indirectly employs more than 50,000 people in the state.  That’s 50,000 Americans.  All BMW X3’s sold worldwide are built in Spartanburg.

2.  New car stickers have a required element called “Domestic Content”.  The definition of “Domestic Content”, because of the North American Free Trade Agreement (NAFTA), is parts made in the U.S, Mexico, or Canada.  Theoretically, then, a car could have all its parts made in Mexico and still say it’s domestic content is 100%.

3.  The following “American Cars” are manufactured outside the U.S.:  Chevy Suburban, Ford Fusion, GM HHR, Ford Flex, Fiesta, Lincoln MKZ, Cadillac SRX, Cadillac Escalade EXT, Lincoln MKX and MKT, Chevy Camaro, Equinox, Impala, and the GMC Terrain.  (Not an all-inclusive list)

4.  The following “foreign cars” are made in the U.S.:  Mercedes ML, R, and G-Class vehicles (Vance, Alabama), Honda Accord (Honda makes more cars in the U.S. than they do in Japan, in Marysville, Ohio), Toyota Camry and Avalon (in Georgetown, Kentucky), Toyota Siena and Highlander (Princeton, Indiana), Hyundai Sonata and Elantra (Montgomery, Alabama), and the Kia Sorrento (West Point, GA). Again this list is not all-inclusive.

5.  Transmissions and engines for cars sold in America are made all over the world, including in the U.S.  For example, the Corvette engine is manufactured in Canada.

6.  Given the number of American products (not just cars) that are sold in foreign countries, if even a small percentage of foreign buyers of our products decided to “buy domestic”, our economy would be brought to its knees.  American companies and American employment is heavily contingent on foreign sales, without them we would collapse.  Is it fair, then, to make your key criteria to “buy American” here, but expect people in other countries to “buy American” too?

7.  Expanding on item 6 above, GM employs more people outside the U.S. than they do in the U.S, and they sell more vehicles outside the U.S. than they do inside the U.S.  What if those foreign buyers of GM cars decided to buy domestic?  Ugh!

We live in a very complex, increasingly interdependent economic world.  Given this, we should make our criteria for buying products to be to buy the best product at the most competitive price.  Injecting other criteria (with the exception of a country that uses slave or child labor or engages in unfair trade practices) is a losing proposition in too many ways.  Using “made in x” criteria is almost impossible to do accurately, can lead to trade imbalances, often rewards lower quality or efficiency, and can be hypocritical.

I will never forget two years ago when President Obama announced the Chrysler bailout, and at the end of his speech he encouraged the audience to “buy American cars”, referring to GM, Ford, and Chrysler.  Can you imagine being one of the hundreds of thousands of auto company employees in Kentucky, Ohio, Alabama, or Georgia hearing this?

I say, buy the best product at the best price.  Reward the best producers, which encourages them to stay that way, and sends a message to those who aren’t building quality and/or cost competitive products to start doing so.  This is capitalism at work.

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2 Responses to What Does “Buy American” Mean?

  1. Gene Josephs says:

    Dan, well developed and interesting for all.

    Too bad you are not able to have your articles published on a regular basis in some major newspapers such as WSJ or even the NYT.

  2. Dave Watnick says:

    As a Detroiter, I must say I wholeheartedly agree with this take. If the American automakers want Americans to buy their cars, they need to do just one thing: make cars that are remarkably fuel efficient. If they had had any foresight, they would’ve gone that direction in the ’90s, when the writing was on the wall with regards to the future of fuel and energy. Instead, they decided to cash in on a quick buck, and stake their immediate futures on products like the Ford Excursion, which managed an embarrassing 16 mpg. America lost its comparative advantage in labor long ago, and any advantage we still hold in research and development is on the verge of evaporating. American automakers need to corner the market on ultra-fuel-efficient cars if they are going to have any chance of surviving.

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