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IPFS News Link • United States

What Does 'Buying American' Even Mean?

• https://thewirecutter.com

Last year, I decided to treat myself to a set of really good wrenches. After a lot of research, I narrowed my list to three manufacturers that, while not widely known, got rave reviews on obscure forums where professional mechanics gather. Then I noticed that one, Wright Tool of Ohio, makes all of its tools in the US, using only American steel. Motivated not by patriotism but more by plain hometown spirit, I made my choice: Of course I would "buy American."

It felt good to do that. And I'm hardly alone in that feeling. Americans like to support American industry. Polls indicate that about two-thirds of Americans would pay more for US-made products over imports. Why? Largely because American shoppers have long believed in the superiority of American quality, in supporting American industry, and in the idea that "buying American" promotes American jobs.

This "Buy American" bias has long driven American policy. The country's first president deliberately chose "homespun" fabric made in America, not imported from England, to wear at his inauguration in 1789. Nearly 228 years later, America's 45th president promised at his inaugural address in January 2017 to "follow two simple rules: Buy American and Hire American." President Donald Trump's administration has followed through on that vow, issuing a "Buy American and Hire American" executive order and imposing tariffs on imports with the explicit goal of promoting US manufacturing and jobs.

Whether the tariffs will achieve their goal is unclear. Tariffs that make imports more expensive also make domestic goods (and American exports) more expensive. Policies that protect jobs in one domestic industry hurt workers in others. Even the seemingly airtight "Made in the USA" label leaks around its edges: Fakes abound, cheaters go unpunished, goods assembled elsewhere of US-made parts get treated, arguably unfairly, as imports.

As globalization leads the economies of individual nations to become ever more inextricably intertwined, it's particularly hard for shoppers to clearly and decisively support a single country with their purchases.

Given that, the seemingly simple decision to "buy American" becomes complicated.

Trump's trade policy (as reported in The New York Times, Wirecutter's parent company) is intended to encourage domestic industry by making imports more expensive through tariffs. But the line between "imported" and "American-made" has slowly disappeared to the point of near-invisibility in the past half-century. Thanks to free trade, "products are no longer made in one country and sold in another, but are rather made in the world," said Robert Z. Lawrence, professor of international trade and investment at Harvard Kennedy School.

He pointed to cars as an example. "What happens is, components are made in a variety of countries and then assembled in other places," Lawrence explained. "American" automobile parts are made all over the world (including in the US) and compiled into sub-assemblies, like transmissions, elsewhere (often in Mexico). Finally, these sub-assemblies are often, but not always, gathered in the US or Canada for final assembly into vehicles. The American Automobile Labeling Act requires all automakers that sell in the US to list their vehicles' percentage of US/Canada- and foreign-produced parts. It's fascinating to read the complete AALA report (PDF). Ford's most-American-made vehicle, the F-150, to pick an iconic "domestic" model, is just 56 percent US/Canadian. The Honda Accord, to pick an iconic "import," is 65 percent US/Canadian.

The same process cuts the other way, and across industries. Bryan Riley, director of the conservative National Taxpayers Union Free Trade Initiative, gave the example of smartphones. "People see 'Made in China' and think we don't make anything anymore, even though most of that iPhone isn't made in China. They do the final assembly, but the know-how and most of the parts come from other countries, including the United States…. It's no longer 1950, where you can look at something and it's made in the US, or it's made in Germany, or it's made in Japan."

Speaking of "made in": "Made in the USA" labels are a guideline, not a guarantee. The Federal Trade Commission has extremely detailed rules for what qualifies as an American-made product—one that can legally bear the "Made in the USA" label (or language or imagery that suggests it). Qualification boils down to this: The product has to be "all or virtually all" made in the USA, with foreign-made components comprising a "negligible" proportion of the total. This distinguishes "Made in the USA" from another common designation, "Assembled in the USA," which usually indicates that the components are substantially made abroad and put together in the US.

But the label does not guarantee that a product is, in fact, made in the USA. The FTC does not approve its use; that decision remains with the manufacturers. Unscrupulous manufacturers can and do use the label falsely, betting that they'll get away with it. There's little risk in doing so: As The New York Times reported in March, even when cheaters are caught, the FTC often lets them off without so much as a fine. (Ironically, the strict rules also cause some manufacturers to err on the side of caution and not use the label even though their products appear to meet the guidelines.)

www.universityofreason.com/a/29887/KWADzukm