John Stossel: The Stupidity of "Buy American"

[nobody's_hero]

The only reason Nissan is even bothering to do it here is because there is a tariff on imported cars wholly assembled outside the US.

Pretty telling too, that 5000 people show up to fill 1600 jobs.

Not sure what it tells when 5000 people show up for 1600 jobs. I mean, those other 3400 people will just be free to move into rocket science according to free traders. Their capital is freed-up so they can buy more or something. I don't really understand why they're looking for jobs though, since the assumption is that they actually have money to divert to other things.

Anyway, this makes me wonder if tariffs aren't necessarily the armageedon-bringer which we are expected to believe they are.

Let's think about it:

Nissan and other manufacturers moved to the U.S. because of our tariffs on imported cars.
I know of a Kia plant in Lagrange, Georgia. I think there's a BMW plant in Tennessee.

Why?

Because it's actually cheaper to manufacture the automobiles here rather than import them?

If that's the case . . . it might explain why China has seen an influx of manufacturers wanting to tap the market there. It costs too much for companies here in the U.S. to produce goods and export them to China, so they did what Nissan and Kia did, they moved to the target country and started producing, to avoid tariffs.

China has figured out the puzzle, it seems.

 

[Bordillo]

Not sure what it tells when 5000 people show up for 1600 jobs. I mean, those other 3400 people will just be free to move into rocket science according to free traders. Their capital is freed-up so they can buy more or something.

Anyway, this makes me wonder if tariffs aren't necessarily the armageedon-bringer which we are expected to believe they are.

Let's think about it:

Nissan and other manufacturers moved to the U.S. because of our tariffs on imported cars.
I know of a Kia plant in Lagrange, Georgia. I think there's a BMW plant in Tennessee.

Why?

Because it's actually cheaper to manufacture the automobiles here rather than import them?

If that's the case . . . it might explain why China has seen an influx of manufacturers wanting to tap the market there. It costs too much for companies here in the U.S. to produce goods and export them to China, so they did what Nissan and Kia did, they moved to the target country and started producing, to avoid tariffs.

China has figured out the puzzle, it seems.

you are neglecting another major cost, which is shipping. The shipping costs alone make cheaper to produce cars in a country where you intend to sell them versus a cheap labor country that you have to then ship them out of

 

[nobody's_hero]

you are neglecting another major cost, which is shipping. The shipping costs alone make cheaper to produce cars in a country where you intend to sell them versus a cheap labor country that you have to then ship them out of

Sure, it's expensive, but we just shipped in a bunch of parts to build a bridge. Apparently, the companies who used to make bridge parts moved to China because they could sell bridge parts to both the Chinese and the U.S. without having to deal with tariffs in China (it's like a one-way valve in China's favor, and has been for some time). If the U.S. reciprocated with tariffs, perhaps the companies would build bridge part factories here and in China so they could tap both markets.

Of course, any minute now, someone's gonna mention something again about 'divison of labor'. We'll talk about how the U.S. workers who might be building bridge parts are now free to move into more skilled jobs, except for the small hiccup in the theory, which is that most are either working at places like McDonalds, Wal-Mart, or unemployed, at the moment.

This leads me to believe, as I have for some time, that we're not witnessing a natural shift in the market, wherein people graduate to other professions when the market dictates that 'unskilled' labor should be sought elsewhere. What we've witnessed is a massive void caused by government-created (the U.S. and/or Chinese government) trade imbalances courtesy of 'free trade agreements'.

Furthermore, we mock people who fall into the unemployment void with comments like, "OMG they took 'er jerbs!!" or dismissively (unrealistically), "Just find something else to do."

 

[sorianofan]

Just bought a VW Golf TDI. Screw the UAW.

VWs fuggin suk.

 

[Anti Federalist]

Anyway, this makes me wonder if tariffs aren't necessarily the armageedon-bringer which we are expected to believe they are.

Let's think about it:

Nissan and other manufacturers moved to the U.S. because of our tariffs on imported cars.

I know of a Kia plant in Lagrange, Georgia. I think there's a BMW plant in Tennessee.

Why?

Because it's actually cheaper to manufacture the automobiles here rather than import them?

If that's the case . . . it might explain why China has seen an influx of manufacturers wanting to tap the market there. It costs too much for companies here in the U.S. to produce goods and export them to China, so they did what Nissan and Kia did, they moved to the target country and started producing, to avoid tariffs.

China has figured out the puzzle, it seems.

It is cheaper but only if you include the tariff costs.

Remove the tariffs, and it becomes marginally cheaper to shift it all offshore, shut down the plants building the best selling cars in the US thus freeing tens of thousands of middle class people to pursue their dreams of a $19,500 a year Wal Marx career.

 

[Tod]

Buying American is fine, as is selling to Americans. But the $, it seems to me is in selling to as broad a base as possible, meaning globally. If you can't sell globally, there isn't much point in buying globally as it sends money out of the country. Better that the limits of the closed system be the US in that case than sending money outside the country. Best is when the closed system CAN be global on an even playing field.

 

[Bordillo]

Sure, it's expensive, but we just shipped in a bunch of parts to build a bridge. Apparently, the companies who used to make bridge parts moved to China because they could sell bridge parts to both the Chinese and the U.S. without having to deal with tariffs in China (it's like a one-way valve in China's favor, and has been for some time). If the U.S. reciprocated with tariffs, perhaps the companies would build bridge part factories here and in China so they could tap both markets.

Of course, any minute now, someone's gonna mention something again about 'divison of labor'. We'll talk about how the U.S. workers who might be building bridge parts are now free to move into more skilled jobs, except for the small hiccup in the theory, which is that most are either working at places like McDonalds, Wal-Mart, or unemployed, at the moment.

This leads me to believe, as I have for some time, that we're not witnessing a natural shift in the market, wherein people graduate to other professions when the market dictates that 'unskilled' labor should be sought elsewhere. What we've witnessed is a massive void caused by government-created (the U.S. and/or Chinese government) trade imbalances courtesy of 'free trade agreements'.

Furthermore, we mock people who fall into the unemployment void with comments like, "OMG they took 'er jerbs!!" or dismissively (unrealistically), "Just find something else to do."

Most economists would probably argue that the shift to china is due to labor costs, not the lack of tariffs. So are you arguing that we should set tariffs on all chinese imports equal to the difference in wages paid in america/china for that particular industry. The only person that gets hurt by that is the consumer.

Here is my example

U.S. factories can make widgets for 8$
Chinese factories can make widgets and ship them to the U.S. for 4$

If we add a 4.01$ tariff on the chinese import of widgets, we would force the consumer to buy the 8$ widget, and protect the widget factory. Sounds great right?

the 4$ that the widget customer in the U.S. would save is now given to the U.S. government in the form of a tariff, or in higher prices as the result of a tariff. I would argue that it is much better for the U.S. economy if the consumers had that extra 4$ instead of the government. You also fail to recognize that the majority of the U.S. economy is service based, so the majority of that 4$ stays within the country either through spending, investment or saving.

just my 2 cents

 

[Krugerrand]

Most economists would probably argue that the shift to china is due to labor costs, not the lack of tariffs. So are you arguing that we should set tariffs on all chinese imports equal to the difference in wages paid in america/china for that particular industry. The only person that gets hurt by that is the consumer.

Here is my example

U.S. factories can make widgets for 8$
Chinese factories can make widgets and ship them to the U.S. for 4$

If we add a 4.01$ tariff on the chinese import of widgets, we would force the consumer to buy the 8$ widget, and protect the widget factory. Sounds great right?

the 4$ that the widget customer in the U.S. would save is now given to the U.S. government in the form of a tariff, or in higher prices as the result of a tariff. I would argue that it is much better for the U.S. economy if the consumers had that extra 4$ instead of the government. You also fail to recognize that the majority of the U.S. economy is service based, so the majority of that 4$ stays within the country either through spending, investment or saving.

just my 2 cents

Be very careful citing "most economists." Most economists thought the bailouts were a good idea. Most economists thought Cash for Clunkers was a good idea. Most economist thought inflated housing prices were a good thing.

Let's stick with your $4.00 widgets. Were do you get the money to purchase the $4.00 widgets? A "service" based economy is virtually impossible to maintain. Eventually the resources you have get consumed, and there is nothing left of value to use to purchase those bargain priced widgets.

EDIT to clarify - a "service" based economy is a "consumption" based economy. One can only consume wealth sans production (generating wealth) until the store of wealth is gone or until the line of credit is revoked. -

Keep in mind this "free-trade" partner of yours has its currency pegged against yours. (BTW - This is why the cost is lower from China, not the labor costs.) Once they realize that your dollars are worthless and remove that currency peg - you will not be able to buy $4.00 widgets from them anymore. The widgets will cost $32.00. Of course, you could go back to buying $8.00 widgets, except that your manufacturing plant no longer exists.

I'm all for free trade ... but the reality is we can only control one side of the free-trade arrangement. You can put your head in the sand and let the other side manipulate that "free trade" and in doing so lose all of your ability to manufacture - to produce goods - to generate wealth, or you can take steps to counter the manipulation of the "free trade" that's happening on the other side of the "free-trade" equation.

(BTW, there was a time when $0.02 could buy something. Be attentive to currency manipulation.)

 

[Cutlerzzz]

Be very careful citing "most economists." Most economists thought the bailouts were a good idea. Most economists thought Cash for Clunkers was a good idea. Most economist thought inflated housing prices were a good thing.

Every single Austrian Economist that has ever lived supported Free Trade. Free Trade is based on irrefutable self evident logic.

Let's stick with your $4.00 widgets. Were do you get the money to purchase the $4.00 widgets? A "service" based economy is virtually impossible to maintain. Eventually the resources you have get consumed, and there is nothing left of value to use to purchase those bargain priced widgets.

EDIT to clarify - a "service" based economy is a "consumption" based economy. One can only consume wealth sans production (generating wealth) until the store of wealth is gone or until the line of credit is revoked. -

Service based economies tend to develope after industrial revolutions, in economies where only a small portion of the population is needed to physically produce vast amounts of goods. Service sector based economies are generally an economy evolved from an industrial economy, just like how industrial economies are evolved forms of agricultural economies. Service sector jobs pay more on average and require more skill than industrial economies.

Because productivity is so high in the manufacturing sector, there is no need to employ most of the population in manufacturing. Just having a fraction of the population working in manufacturing supplies enough goods. See this graph.

This frees up labor to go towards higher paying, more skilled service sector jobs. It is just like how it used to take 95% of the population farming just to feed the population, but the industrial revolution enhanced farmers productivity to the point that the population could be feed by just having a fraction of the people working in farming. That enabled people to leave the fields to go towards higher paying manufacturing jobs.

 

[Krugerrand]

Every single Austrian Economist that has ever lived supported Free Trade.

When your trading partner is using an artificially pegged currency, by definition free trade is out the window.

The next question is "how should a country proceed when the trade situation is NOT free." Should it allow the country to be bled dry of its means of production?

Of course, if we were to use sound money, this issue would be almost irrelevant over night.

 

[Cutlerzzz]

When your trading partner is using an artificially pegged currency, by definition free trade is out the window.

Good. All the better for the United States. We would be best off if China, and every other country in the world had their people work all day and night to give us trillions of dollars worth of free stuff. Instead, they are doing the next best thing and giving us a discount.

 

[Krugerrand]

Good. All the better for the United States. We would be best off if China, and every other country in the world had their people work all day and night to give us trillions of dollars worth of free stuff. Instead, they are doing the next best thing and giving us a discount.

I guess there is such a thing as a free lunch.

On one hand I would agree completely - EXCEPT - there is no possible way to maintain this indefinitely. We're going to wake up from this fairy-tale dream world with a dollar that won't buy squat and no means to produce anything because we dismantled it all when we were high on the Free-China-Stuff-Drug.

see post:

That's exactly what has happened in California. Some of the world's best farmland, paved over and covered in cheaply made cookie cutter houses on postage stamp lots. Plus the environmental extremists in government shut off irrigation water to orchards, so that eliminated even more production.

On the other hand, even if we could maintain this indefinitely, I have serious concerns with foreign nationals owning our country. Sovereign Trust Funds are the result of what you are suggesting. I cannot believe they will have our best interests at heart as they make their decisions as owners of our country.

 

[Cutlerzzz]

I guess there is such a thing as a free lunch.

On one hand I would agree completely - EXCEPT - there is no possible way to maintain this indefinitely. We're going to wake up from this fairy-tale dream world with a dollar that won't buy squat and no means to produce anything because we dismantled it all when we were high on the Free-China-Stuff-Drug.

If the dollar won't buy squat, that just proves the point. It's going to collapse; it's worthless paper that gets its value by decree. Getting all of the physical goods (which have real value) we can in exchange for worthless paper is the best option.

Manufacturing is at all time highs, and it is a low skill job any monkey can do. It would not take long to switch a small portion of our population to manufacturing.

 

[Krugerrand]

If the dollar won't buy squat, that just proves the point. It's going to collapse; it's worthless paper that gets its value by decree. Getting all of the physical goods (which have real value) we can in exchange for worthless paper is the best option.

Manufacturing is at all time highs, and it is a low skill job any monkey can do. It would not take long to switch a small portion of our population to manufacturing.

How quickly can you grow an orchard?

 

[Krugerrand]

Good. All the better for the United States. We would be best off if China, and every other country in the world had their people work all day and night to give us trillions of dollars worth of free stuff. Instead, they are doing the next best thing and giving us a discount.

I forgot to ask ... so you think this abandonment of free trade (currency manipulation) is great, but other 'violations' of free trade are bad. How can I tell which ones are good and which ones are bad?

 

[Cutlerzzz]

How quickly can you grow an orchard?

I don't know. A google search would probably tell me though.

I forgot to ask ... so you think this abandonment of free trade (currency manipulation) is great, but other 'violations' of free trade are bad. How can I tell which ones are good and which ones are bad?

Currency manipulation is not an abandonment of Free Trade, it is just an idiotic policy. Chinese currency manipulation helps the US because it artificially reduces the prices of Chinese imports, lowering prices in the United States.

 

[nobody's_hero]

When your trading partner is using an artificially pegged currency, by definition free trade is out the window.

The next question is "how should a country proceed when the trade situation is NOT free." Should it allow the country to be bled dry of its means of production?

Of course, if we were to use sound money, this issue would be almost irrelevant over night.

It's a bit like the Non-agression principle. It's a great principle as long as everyone follows it. No doubt the world would be much better off if everyone followed it. No doubt we'd be much better off if the world followed truly free-trade and the proverbial chips were allowed to fall where they may.

But our so called free trade agreements essentially allow our competitors to be agressive and restrict our ability to fight back.

So we keep getting punched in the face, and if we so much as raise a hand, it's "OMG protectionist alert! Protectionist alert!" lol

 

[specsaregood]

When your trading partner is using an artificially pegged currency, by definition free trade is out the window.

Let's not put it on our "trading partners". we are using an artificially propped up currency and by definition that is what is making free trade an impossibility.

 

[Anti Federalist]

How quickly can you grow an orchard?

Or consider the oil embargo of 1973.

OPEC decided to no longer sell to us, and damn near turned our lights out.

Energy production is something that can be spooled up in a year or less, if you really put the effort into it.

Means of producing vital consumer goods, including food, can take much, much longer, as you have correctly noted.

Let some of the countries that are supporting us decide that they have had enough of our military shenanigans, and turn off the supply of manufactured goods.

Then the shit will hit the fan.

 

[Krugerrand]

Let's not put it on our "trading partners". we are using an artificially propped up currency and by definition that is what is making free trade an impossibility.

That's fair. And, I don't' mean to put China down ... generally I think they've been making brilliant decision - but of course, that's with their own interests in mind.