To Buy American, or Not to Buy American

by Guest Columnist Chris J.

A lot of people have been asking me lately about my opinion on a “buy American” provision in any economic stimulus/spending/ employment bills. Before giving the issue its due consideration, my answer was a flippant “I’m for it!” My thoughts on the matter were along the same lines as just about everyone else that gives that answer: Keep the money in our country, don’t export the jobs, and bring our trade deficit back into line.

After the application of my brain, I have changed my mind. Not because I am anti-protectionist (although, as it turns out, I am), not because any one of the reasons listed above is wrong, but because all of them are ass backwards.

Buy American is a noble sentiment conceived with good intentions… it just doesn’t mean what a lot of people think it means. The car industry seems to be the paradigm used for this discussion… I also think it will be a good one to illustrate my points:

Honda is owned by a Japanese corporation. General Motors is owned by several American corporations. Mercedes is owned by a German corporation. All of the proceeds from the sale of these vehicles in the US go to their respective companies, right? Well, to be frank, no. Hardly any of them do.

There are so many ancillary goods and services that go into building, delivering, selling, financing, servicing, and operating a vehicle that the phenomenal majority of the revenues of the automotive industry stay right here in the United States. Some of the industries involved in this ordeal that are also 100% in the USA are: financing banks, dealerships (sales, parts, service, etc), product delivery, insurance, real estate, and even corporate services for the US. Each of these industries make an awful lot of money (in most cases they carry profit margins many times that of the manufacturer). Each of these industries is a huge employer of American labor. And each of these industries has many secondary expenses (banking, payroll, corporate insurance, etc) that are also completely based in the US.

You had to have guessed by now that this next point was going to show up somewhere in this essay…

Honda: made in Alabama

Toyota: made in Kentucky

Hyundai: made in Alabama

Mercedes: made in Alabama

BMW: made in South Carolina

GM: made in two Canadian territories and six US states

Ford: made in three Mexican states and five US states

Chrysler: Made in two Canadian territories, two Mexican states, and two US states

All of the factories listed above perform final assembly for vehicles to be sold in the US. There are obviously many more factories for all of these companies around the world. There are also many, many factories that build specific parts for cars. Some are domestic, some aren’t. The obvious question that we’ve all heard before (so forgive me for repeating it): Why are the US companies building in other countries?? (a topic for another day, I am sure… but for now, it serves the purpose of explaining one of the reasons why I don’t like “buy American”).

It goes without saying that all of the employees that work for, near, in conjunction with, or in support of the factories in the US are American labor paid for with American dollars out of the pocket of the car maker.

There’s not much profit money in making cars. I am perfectly fine with friendly nations making a little bit of money on providing us with all the other money involved in the industry… along with a bunch of good jobs, good economy, and good products.

The last good point made in the pro-buy American argument is leveling out the trade deficit. That’s a great idea…. It’s also another point for another day. Fair trade is a really important part of fixing the American economy… let’s do it the right way- with tariffs on imports and taxes on monies leaving the country. The whole world works better with apples to apples competition.

Protectionism breeds hostility and makes enemies of friends. Our country needs all the friends we can get right now. Without good trading partners, our lack of industry will find us in a position of obsolescence and poverty in a matter of decades.

When it’s all said and done, I say buy American… if it makes you feel better. But don’t stress about it too much… most of the money stays here anyway.