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AUGUST 2016 •
PPB
• 57
American
Dragon
See my previous comments
concerning Ricardo’s theory of
competitive advantage [If you
produce X efficiently and I pro-
duce Y efficiently, then I
shouldn’t waste my labor pro-
ducing X, and you shouldn’t
waste your labor producing Y. If
each of us does what we do
most efficiently, then we can
trade X for Y and vice versa, and
we’ll both be better off in the
long run]. It’s a great theory—in
a perfect world. Let us also
remember that China is a strate-
gic threat to the U.S., so the
trade policy tail should not be
wagging the foreign policy dog.
ARGUMENT NO. 5:
Government preference for
“Made in USA” is protectionist
trade policy—China cites Buy
America rules as justification
for their own discriminatory
policies.
This is a spin-off from the
“comparative advantage” argu-
ment, often used by multi-
nationals more interested in sell-
ing into China than rocking the
boat with China. If China didn’t
have Buy American laws as an
excuse for their own trade barri-
ers, they would find another
whipping boy.
ARGUMENT NO. 6:
If it’s
good to buy USA-made, isn’t it
even better to buy Texas-
made? And if it’s good to buy
Texas-made, isn’t it better still
to be Dallas-made, etc.?
Hoover Institution econo-
mist David Henderson actually
made this weak “reductio ad
absurdum” argument for a John
Stossel column written in
November 2011. Why is it weak?
Because the debatable proposi-
tion is not whether it is good to
buy “Made in USA;” rather, it’s
whether it is in the best interest
of the U.S. and its citizens for
U.S. government purchasing pol-
icy to establish a preference for
products made in the USA under
reasonable circumstances. This is
a more nuanced proposition than
the one set up by Henderson.
There is no downside to
government-mandated Buy
American laws as long as that
mandate ensures flexibility if the
comparable U.S. product is much
more expensive or simply not
available here in the U.S. Sadly,
the point may soon be moot. The
Trans-Pacific Partnership trade
agreement currently being nego-
tiated may add a number of low-
cost manufacturing countries in
the Pacific Rim to the list of
nations that are not subject to
Buy American laws.
To add insult to injury,
when the fiscal year 2016
National Defense Authorization
Act was unveiled in the House
in spring 2015, the proposed bill
that came out of committee
raised the Simplified
Acquisition Threshold for Berry
Amendment purchases from
$150,000 to $500,000. Instead
of all Department of Defense
purchases over $150,000 being
subject to the Berry
Amendment, the new threshold
would allow any purchase below
$500,000 to be open to imports,
creating potentially serious con-
sequences for many smaller U.S.
manufacturers who rely on
defense contracts. I was person-
ally involved in the lobbying
effort in the House that
reversed this decision, and
remain involved in attempting
to change the Senate version of
the bill that also contains the
increased threshold. Only time
will tell if our efforts are suc-
cessful. Remarkably, I have seen
no metrics during this process
that show how raising the
threshold would provide any
savings for the Department of
Defense.
Ramp Up Port Inspections
Lumber Liquidators is one
of the largest providers of floor-
ing for homes and businesses in
the U.S. In March 2015, a seg-
ment on the CBS News program
60 Minutes
reported that lami-
nated flooring purchased from
Lumber Liquidators, and
installed in possibly as many as
hundreds of thousands of homes,
contained formaldehyde levels 20
times over the legal limit.
Children are the most likely to
be affected by these high levels
of formaldehyde. The laminated
flooring was made in China.
Chapter 6 dealt with the
importance of making FINER
product to more effectively com-
pete with overseas competitors.
However, government also has a
role to play on this issue. U.S.
manufacturers jump through a
number of regulatory hoops to
ensure that their products meet
government-mandated guide-
lines for product safety. Yet the
government agencies that are
tasked with ensuring that unsafe
imports do not reach the con-
sumer are able to test only a
small percentage of the food and
products that arrive at our ports
from overseas.
According to the Consumer
Product Safety Commission
(CPSC) budget request for fiscal
year 2016, more than 80 percent
of consumer product recalls in
2013 involved imported product.
$723 billion in products under
CPSC’s jurisdiction—nearly $2
billion per day—were imported
into the U.S. during that same
year. Yet the CPSC staffs fewer
than five percent of U.S. ports.
The CPSC admits that they
have neither an adequate num-
ber of product inspectors at
ports nor the computer targeting
systems that would allow them
to better identify non-compliant
products.
There is no down-
side to govern-
ment-mandated
Buy American
laws
as long as
that mandate
ensures flexibility
if the comparable
U.S. product is
much more
expensive or sim-
ply not available
here in the U.S.