Made (or not) in the USA

The outraged politicians seem to have read a recent report that an overwhelming majority of people from all political stripes said they support “Buy America” policies that would mandate taxpayer money be spent only on goods made in the U.S. Nearly 90 percent of Republicans and independents and 91 percent of Democrats said they support the policies, according to a survey by The Alliance for American Manufacturing and the United Steelworkers. Ironically, these policies wouldn’t apply to the U.S. Olympic team, which is privately funded.

However, the legislators have conveniently forgotten that it was, and is, U.S. government policy to allow free trade with China. With the enthusiastic support of U.S. multinational companies, the U.S. has watched China undercut U.S. manufacturers for years. Ralph Lauren’s decision to outsource the uniforms was certainly a bad PR move, but it was a good bottom-line decision.

The whole affair reminded me of a scene from the great movie “Casablanca.” Humphrey Bogart’s character, Rick, is asking Captain Renault, the local gendarme, why his club is being shut down. “I’m shocked, shocked to find that gambling is going on in here,” says the captain, just as a club employee hands Renault his cut from the club’s casino. Like Renault, U.S. legislators are shocked, shocked to find U.S. companies manufacturing in China, even as they fill their campaign coffers with contributions from companies that profit from it. 

The uniform flap does, however, serve to highlight the return of the “Made in America” debate. Despite the U.S. being completely enmeshed in the global economic system, during times of economic distress we return to this argument. Ironically, uniform-gate occurred at a time when U.S. manufacturing is growing much faster than the rest of the economy. Low labor costs, a low U.S. dollar and a reevaluation of outsourcing have spurred creation of more U.S. manufacturing jobs. A recent MIT survey stated 14 percent of U.S. manufacturers have plans to bring production back to the U.S. from abroad.

However, with more foreign companies manufacturing in the U.S., it’s getting harder to say what a “Made in U.S.A.” product really is. Japanese companies have built cars in the U.S. for years, and, in terms of labor and parts, their “American” content rivals that of cars made by U.S. companies, which outsource large portions of their cars’ content. And “all-American” GM makes as much money from its Chinese operations as it does in the U.S.

The aerospace industry is just as confusing. Boeing sends much of its parts manufacturing to other countries in an effort to get companies in those countries to buy its planes, which Boeing then assembles in the U.S. Meanwhile, its archrival, France-based Airbus, is building an assembly plant in Mobile, Ala., in large part to build political support when it bids on U.S. defense business. And a Chinese company wants to buy bankrupt Hawker Beechcraft Corp., the Kansas-based private aircraft maker.

It’s clear that the days when most products used in the U.S. were made in the U.S. by U.S. companies staffed by U.S. workers are over. Take the metalworking industry. If you attend IMTS 2012, you’ll once again see companies from all over the world selling cutting tools, machines and accessories. Most of the “foreign” companies have extensive U.S. operations, employing thousands of Americans to sell their wares to U.S. companies and machine shops. Some, like DMG/Mori Seiki USA and Mazak, are building or expanding U.S. manufacturing operations. Plus, consider that U.S. manufacturers are growing, in large part, by increasing their exports, not by selling more products in the U.S.

Any investment, be it U.S. or foreign, in U.S. manufacturing is good for American workers. If the prognosticators are right, U.S. manufacturing still has a good future. Who knows? Maybe a U.S. company will be making uniforms for some other country’s Olympic team.

—Alan Rooks, Editorial Director