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“Made in the USA”

by Elaine Schwartz    •    Jul 2, 2011    •    330 Views

According to USA Today, “The two ‘most American’ cars are Japanese.”

Cars.com has an American-Made Index. Ranking vehicles by sales, where they are made, and the origin of their parts, they concluded that the Toyota Camry is the most American car you can buy while #2 is the Honda Accord. Each is composed of 80% American parts, and with plants in Kentucky and Indiana (Camry), and Ohio and Alabama (Accord), they create jobs for many Americans because their sales are substantial.

By contrast, it is likely that the full size Ford pick-up you drive was assembled here but primarily has foreign parts.  And your Chrysler minivan, Chevy Camaro, and Ford Fusion were assembled in Canada or Mexico.

Where am I going? To the Bay Bridge. Connecting San Francisco and Oakland, the bridge was described as a structure that would be “made-in-China.” But, according to the web site of one of its primary contractors, a U.S. based construction firm, while the steel is sourced in China, the new bridge actually has Asian, European, U.S. origins. Still, many of the reader comments after the article expressed disapproval of the Chinese connection. To save jobs, they sought a “made-in-the-USA” bridge.

At the end of a 2002 report from the Dallas Federal Reserve Bank called “The Fruits of Free Trade,” is a chart that conveys the cost of policies that save domestic jobs. For apparel and textiles, 168,786 jobs are saved. The cost though, is $33,629,000,000 or $199,241 per job. Why is the cost so high? Because consumers are paying more when there is no competition.

The Economic Lesson

David Ricardo (1772-1823) stated the classic defense of free trade when he expressed the principle of comparative advantage. Trade, trade, trade, he said because each nation then can do what it does best (where it has the comparative advantage) and the whole world benefits through greater efficiency.

An Economic Question: What are the costs and benefits of NAFTA, the free trade agreement the U.S. has with Canada and Mexico?

 

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