Import

Made in China, Sold in America

posted by Customs & International Trade Law Blog October 22, 2009 14 Comments

This weekend, I visited both Lowe’s and Home Depot looking for some new plants for my backyard. As I walked by all the newly arrived Christmas merchandise, I casually picked up a few to see where they were made.  You guessed it, from Santa to Rudolph, one by one they all clearly stated “Made in China”. I finally did find one item that stated “Assembled in USA from foreign and domestic components.” I was getting frustrated. After all, as a customs and international trade attorney for the past 20 years, including the first 5 as an attorney for U.S. Customs, I have made a living doing international trade. I wondered, what happened to our balance in international trade? What happened to “Made in America”?

Everyone knows that mountains of Chinese goods are daily shipped to and sold in the United States, but what about the reverse.  Fortunately, I also have that perspective, as I visit the People’s Republic of China (PRC) at least once a year for U.S. based clients importing from China or Chinese companies selling to the United States. I travel to China on an airplane, am transported to the hotel by car, and sometimes go down to the bar to have a drink.  The plane is made by Boeing, the car is a Ford, the hotel is a Sheraton, and the drink is a rum and Coke (Bacardi and Coca-Cola).  All of those iconic names are pure Americana. 

With 1.4 billion people in China, no wonder American companies,and the rest of the world, are tripping over themselves to get into the Chinese consumer market.  On October 28-29, 2009, United States Department of Agriculture Secretary Tom Vilsack will participate in the U.S.-China Joint Commission on Commerce and Trade (JCCT) meeting in Hangzhou, China, along with U.S. Trade Representative Ron Kirk and U.S. Commerce Secretary Gary Locke.  Since China’s accession to the World Trade Organization in 2001, the country has become one of the fastest growing markets for U.S. agricultural, fish and forest exports. U.S. exports to China increased from $2.2 billion in 2001 to $13.2 billion in 2008. Today, China is the fourth largest market for U.S. agricultural exports, and the largest for soybeans, cotton, hides and skins.

Chinese culture is 4,000 years old, and it was the Chinese who invented the compass, writing paper, and gun power, among hundreds of other items.  More recently, the Chinese have contributed greatly to making items affordable at your local department store.   While I certainly admire the cultural achievements of China, and especially its incredibly rapid economic development over the past 20 years, for some reason, I am still perturbed that so many of the everyday items I use come from China – from books I check out at the local library which say “Printed in China” to the 13 different styles of bird feeders that I recent looked at while visiting a Wal-Mart. Every single one of the bird feeders was “Made in China”!

Don’t get me wrong. I love to live in a world where my pasta is from Italy, my olive oil is from Spain, my asparagus is from Peru, my wine is from Australia, and my cheese is from France.  But why does it seem that so much of what you can buy in the stores, and not just bird feeders, is from China? From bicycles to basketballs…heck, even this Microsoft Wireless Comfort Keyboard 4000 that I am typing on right now is prominently marked “Made in China”.  I challenge you to find a television that says “Made in USA”.

Our trade balance with China is totally out of whack.  America needs to keep inventing, building, and selling its ideas and products to China, and to the rest of the world.   U.S. Government policies should encourage investment in the United States, and exports to China and the rest of the world.  Otherwise, in another 20 years, the powerful, American iconic companies such as GE, IBM, GM, Coca-Cola, Microsoft, Apple, and Boeing will dwindle and even disappear altogether, as Chinese companies continue to expand market share worldwide.

Did you know that in 2008, for the first time in history,  there was more foreign direct investment into China than the United States, or that China now graduates 10 times as many engineers from college compared to the United States.  Or that there are more Chinese people who speak English than the approximately 300 million Americans. Those are alarming statistics.

We need to be more sophisticated and welcoming of foreigners. Did you know that many of the street names in Beijing are in English as well as Mandarin? Can you imagine all the streets in Washington, D.C. being in English and Mandarin?  Two way, free and fair trade is the answer to creating a balance of international trade.

In conclusion, I sure do look forward to my next trip to Beijing. I love Peking Duck, the Forbidden City, and the Great Wall.  Hopefully, I will find on a restaurant menu a Napa Valley sauvignon blanc wine and Florida oranges, watch CNN International, admire the Chinese who increasingly follow the American traditions of Halloween and Valentine’s Day, see Chinese children’s books with Disney characters, and grab a mocha latte at the local Starbucks.  Yes, international trade and travel is a great thing. We just need more of it to be from America. 

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14 Comments

Larry Staton Jr. October 22, 2009 at 7:32 am

Exports are real costs and imports are real benefits (i.e., Y = C + I + G + NX). They ship us real goods (televisions, keyboards) in exchange for shiny baubles (US dollars). Sounds like a good trade to me.

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Henley Jones October 22, 2009 at 8:08 am

Peter, this is a great article.

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Mabel Villiers October 22, 2009 at 9:16 am

The US needs to stop giving the importers such great incentives for the importation of their goods from China. This is why US manufacturers have suffered so much. If the US stops these “incentives” and start giving local US companies tax breaks for manufacturing the goods in the US maybe we can help our economy climb up again!

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Bianca M. October 22, 2009 at 9:38 am

My son and I always check the country of origin before purchases and typically the rule of thumb is find the item that is not made in China and purchase that one. This way we still support international trade (which my job depends on) and at the same time we are helping another country. Do we support American made items? Yes we do, unfortunately “Made in America” is not the norm.

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John Price October 22, 2009 at 11:52 am

I enjoyed your article and it touches on some very sensitive issues, which I feel compelled to comment on. Some of the points below were covered in your article and others were not. What triggered my desire to write is that I strongly believe that we are focusing on the wrong issue or rather an incomplete issue when we worry about trade balances with a country like China…. so here goes….

Before we boohoo the outsourcing of $5.00 toys to old ladies and prisoners in central China, one should ask the following questions:

– does any American want their children to grow up to work in a factory that assembles plastic toys, or computers, or weave clothing, or for that matter, assemble cars? Our education level, innovation standards and investment climate enable us to aspire to higher value employment. In 1900, 50% of Americans were farmers. Today, less than 2% of them are and if we did not inject billions of dollars into protecting industrialist level farmer “tycoons”, probably the number would be closer to 1% of Americans as farmers. We should not bemoan the loss of low skilled jobs that are replaced by higher productivity technology or Chinese labor.

– since when does our economic model focus on full employment? We tried that model at times in the past, and it led to inflation, a drop in real wages and declining productivity growth. The best jobs are created when capital is free to invest in the highest returning businesses, not in the highest job creating industries. That is why in spite of declining US employment in manufacturing, the total manufacturing output value of the US remains unchanged (if not slightly increasing) at 25% of the world’s total, versus about 15% for China.

– The US/Chinese trade balance is not a complete picture (and Ian can respond more intelligently than I to this…) but the US exports both high value components and intellectual property (the latter not showing up in trade stats) to computer, toy, and other component manufacturers in places like Taiwan, Thailand, Japan, Korea and others that gives us more balanced trade with those folks before they go on and re-export to China who assembles and ships to the US. It is equally erroneous to look at the Korea trade surplus with China with concern.

– The right questions to worry about in the US are the issues that erode our competitiveness at present and moving forward:

1. How can we continue to leave open the gates of immigration of highly skilled engineers, designers, programmers, financiers, market experts and others that give us a competitive advantage. I’m talking about separating the immigration controls on low skilled labor that does little to augment our competitiveness from those PhDs that we educated and then sent packing because we won’t issue H1 visas….

2. How can we reform entitlement programs in the US so that we can begin to pay down our fiscal deficit and by doing so continue to attract global investors into our capital markets. Deficits lead to devaluation that leads to investor panic. Without that capital, our industries cannot borrow at cheap rates and our currency loses even more value, which triggers its own downward spiral.

3. How can we reform healthcare to lower the ridiculous cost burden of the health system, which has grown from less than 1% of GDP in 1935 to 14% of GDP in 2009.

4. How can we unburden our education system from the clutches of teachers unions and bureaucratic school boards such that public education can continue to be publicly funded but privately administered and radically decentralized so that schools curriculum and graduate expertise can begin to resemble the diversity of the economy that employs our graduates.

5. How can we radically simplify our tax system to remove the loopholes that reward the well advised rich at the expense of the middle class. So that we also stop subsidizing at huge immeasurable costs certain industries like grain agriculture and consumer home ownership, or fossil fuels, none of which do much to make us a more competitive economy.

Bottom line…. we have some serious issues to contend with in this country…. Chinese trade imbalance ain’t one of the them….

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Earl W. October 22, 2009 at 11:53 am

Your thesis – that more of the stuff you buy should be made in America – is fundamentally unsound. Over the last 60 years the U.S has used its competitive advantage in research and innovation to move constantly upward on the manufacturing ladder to where our companies are making more high-tech, high-profit items than low-cost, low-profit consumer items. This has increased jobs and wages for workers. The problem is that so much of this activity is invisible because most of what we’re turning out doesn’t show up on store shelves. In addition, the value of U.S. companies has skyrocketed as they have used globalization to lower their costs and deliver more profits to shareholders, driving the stock market to unprecedented heights (the recent downturn notwithstanding) and increasing the wealth of Americans. How would you go about reversing this trend, by having the government dictate what companies can produce and how? The end result of such a misguided policy would be higher prices for businesses and consumers and a sharp decline in the market forces that drive innovation. There is so much more to the trade imbalance than the offshoring of manufacturing, and so little agreement on what effects that imbalance actually has on our economic well-being. We need answers and solutions, not more jingoistic complaints.

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Ian McCluskey October 22, 2009 at 11:57 am

Eloquently written, as usual, but I think your story only serves to further reinforce some basic misconceptions about international trade, the global supply chain, the “importance” of manufacturing and the real meaning of “Made in …”.

The most enlightening article that I have read in recent years about international trade is entitled “The Ipod Has Global Value”, which illustrates the complexity of global production and the complete inadequacy of our current statistical trade regime to measure international trade accurately.

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LaurenM October 22, 2009 at 12:40 pm

What about our other exports to China? KFC, McDonalds, Starbucks are everywhere, I hope that counts for something in your book 🙂

The fact of the matter is that our manufactured goods can’t compete in the market due to costs and currency valuation. I would argue that US companies should increase exports to Europe where the weak US dollar gives us an advantage at the moment allowing them to hopefully establish themselves before recent bilateral trade partners gain free access.

Also lots of American companies (ie. Microsoft, the maker of your keyboard) manufacture their products in China and other countries, then ship them to the world – hope this counts for something too. It’s not just Chinese companies taking over the whole trade balance.

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Al Germi October 22, 2009 at 2:20 pm

I just returned from a 2-week business trip to China and Vietnam, and had Kathy accompany me.

I must tell you that the American people have no one to fault but themselves. Like you said, we have all that it takes to remain a world power, economically, politically and militarily.

But this is not possible if we are always willing to settle for mediocrity, blame others for our own faults and shortcomings, and have this notion that we are “entitled” to this, that and the other.

With some good leadership, both on a national political level, Wall Street, and in states, cities and towns across this great nation of ours, and a new and energized work ethic, its a matter of time before we lose our position (if we have not already) as a world power. I hope that day never comes.

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Albert Saphir October 22, 2009 at 8:19 pm

Great article.
As a free country we struggle with what’s the right balance. Unfortunately the “Made in USA” is completely outdated, not even the Boeing plane can claim it. Yes it is assembled here, but contains many foreign components and the FTC who regulates the “Made in USA” label is probably 50 years behind reality. I know of MANY US made products that should be labled MADE IN USA, but do not meet the outdated FTC standards. Yes we can blame China, but I would suggest we get MADE IN USA into the 21st century. Once we do that, many companies making products in the USA can again put that label on their products and that will raise awareness, morale and also create more export demand for US made products.

Even when you are overseas, you see items marked Made XYZ all the time, but rarely Made in USA for the same reason. So no one thinks of the USA as a sourcing country. Once people overseas would see more of this, demand will follow. Perception is a big.

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Hector Hernandez October 23, 2009 at 9:39 am

Your last blog on “Made in America” was fantastic !!! I recommend that you watch an HBO special titled
“Rags to Riches ” It’s about the garment industry from the early 1960’s to present time. See statstics below.

In 1965 ( 95% percent of all USA clothing was made in the USA)
In 2009 (5% percent of all USA clothing is made in the USA)

Shocking !!

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Li. T November 12, 2009 at 4:56 am

I think these manufacturers in China may want to tell you how much they have to pay to IBM, Microsoft, GE, GM for intellectual properties and other service fees.

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Debbie R. November 16, 2009 at 3:02 pm

Good article, Peter. A friend shared this with me. When I go clothes shopping I prefer to diversify where my clothes are made, and I refrain from purchasing clothes made in China. Vietnam, Indonesia, Bengladesh, USA, Egypt, Guatemala for me. It is sad to me that Hummer is now owned by a Chinese company. I do believe there are working class people in this country who would work jobs in manufacturing, if they were here for them. No, there are no televisions made in the USA anymore. I am saving to purchase that chair I saw at Baers which is made in Indiana. This is a complex issue. What kind of economy does China have now? The government is involved, yes?

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Jennifer May November 24, 2009 at 6:41 pm

Sadly, bad policy and greed have erased the “Made in the USA” tag from almost everything we buy or consume. Bad policy as in states – like California, New York and Illinois – that continually pass legislation that is decidedly anti-business. Bad policy like giving thug union bosses more power than they deserve. Pad policy like the dozens upon dozens of levels of taxes that businesses must shell out each year (that are NOT required in other parts of the world. Greed as in CEOs (and other executives) doing anything and everything to make themselves richer, at the expense of the working stiffs who really do all the work; Greed as in union bosses forcing work stoppages all in the name of ego. Greed as in the sense of entitlement (as mentioned above) that most other countries don’t offer.

We need to face reality. A perfect storm has been brewing which is making America ripe for the taking.

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