On the heels of the United States of America hitting the US Debt Ceiling of $14 Trillion dollars and Carlos Santana creating a flood of debate about US Immigration Law, US manufacturing is shrinking as we speak. And, our US Government might actually play a part in the continued contraction – but maybe for good reasons.
On March 21, 2011 the US Air Force requested a waiver from the “Buy American” requirement in its procurement process because it couldn’t but several items within budget – or, rather, those same items were cheaper if bought from China.
“Extensive market research and thorough investigation of the domestic manufacturing landscape” showed [these] items were made exclusively in China. . .
The notice claims.
So, what were these items?
Of the 37 items for which the US Air Force received a waiver from the “Buy American” requirement, these were some:
- ceiling fans
- light fixtures
- towel rings
- shower rods
- handrail brackets
- flat panel displays
- machine tools
And of course, all of this is in the context of US Manufacturing contraction:
. . . over 57,000 factories disappeared from 1999 to 2009.
But, is this such a bad thing?
Globally Integrated Supply Chain
With the world shrinking and supply chains becoming more and more connected, one would be hard-pressed to find purely “built in america” goods or services. And the Pentagon concedes:
Armor plate steel, defense-specific integrated circuits, and night vision goggles are among the items the Defense Dept. has said it must obtain in part from overseas suppliers . . .
And, as supply chains become more connected, we also understand that products have a lifecycle – some are born and some enter the grave. Given this, the argument that manufacturing flight from the United States is entirely bad is actually not a strong one.
A better, more balanced approach is this:
Should the United States be in the business of manufacturing shower rods?
If we step back and begin from a position of logic and not one of dogma, then the question is a fair one.
In some cases, it probably makes sense that some items and components are made outside of America. And, with more and more components made outside of the United States, does it even make sense to have a “Buy American” requirement? What about 50% American? or, 25% American?
What do you think?
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Julien Couvreur says
Protectionist policies are short-sighted and favor some (US screws manufacturers) at the expense of others (people buying screws to build their product). On net, they do not help the country from an economic standpoint. Spending effort to build (virtual and legislative) walls between countries is counter-productive.
That said, in the case of the military, there is a strategic angle when it comes to not being dependent on some (potentially) enemy country. I could understand that argument when it comes to rare earth magnets, but certainly not screws.
It’s hard to put a price on this “independence premium”, especially since the military is tax-funded and monopolistic (i.e. it functions partially outside of the market price system).