If the Trump administration’s “Made in America” week is demonstrating anything, it’s that even in a globalized and open economy, our nation remains a manufacturing powerhouse.
The range of goods on display at the White House this week is quite amazing: a helicopter, fire engines, an earth mover, cowboy hats, flags, candy, golf clubs, rum; the list goes on. The “Made in America Product Showcase” featured at least one item from each of the 50 states.
{mosads}After viewing the display, no one can credibly say, “We just don’t make anything anymore in America.” Perhaps unintentionally, the Trump administration has provided tangible evidence that in an increasingly trade-intensive economy, Americans continue to make globally competitive products that appeal to American consumers. We don’t need government trade barriers and “Buy American” rules to make us buy what our fellow Americans produce.
Critics of trade argue that the imports unleashed by “bad trade deals,” from NAFTA to China’s entry into the World Trade Organization, threaten America’s manufacturing base and have wiped out millions of factory jobs. This is bunk.
Manufacturing in America remains robust. In 2016, the U.S. manufacturing sector produced $2.1 trillion in value added to the economy. That’s a 40-percent increase since 1997. The National Association of Manufacturers figures that if America’s manufacturing sector were a separate country, it would be the ninth-largest economy in the world. The decline in manufacturing jobs is not because of falling output, but because of impressive productivity gains fueled by automation.
Americans who want to “Buy American” are free to do so, as long as they think the product and the price are right for them. A new Reuters/Ipsos poll found that 70 percent of Americans think it’s important to buy American-made products, provided the price matches or is close to the foreign-made alternative. But that sentiment is not an argument to limit their choices through government pressure or coercion.
A policy of free trade and open global competition is perfectly compatible with a thriving U.S. manufacturing sector. Expanding trade enabled by free trade agreements does not necessarily mean we produce less stuff in America, but it does steer Americans to produce a different and higher-value mix of goods for sale at home and abroad.
Free trade means we can produce more of what we are really good at making, and import those goods that other countries are relatively better at making. That means we import more clothing, shoes, furniture, toys and assembled electronics, while we export more jetliners, microprocessors, chemicals, pharmaceuticals, refined petroleum products and farm goods, such as beef and soybeans.
Even when Americans buy imported goods, we are indirectly supporting those “Made in America” products that appeal to global consumers. When we purchase imports, the dollars we spend flow into global exchange markets, where they quickly return to the United States to either invest in our economy or to buy our exports.
By the way, trade isn’t just about goods. We are the world’s number one exporter of services, from tourism and travel to financial services and business consulting. When Americans import, we are also enabling our fellow citizens to export more of their valuable services to global consumers.
This is a win-win for America. As consumers, we benefit from lower prices, better quality and more variety because of import competition, while the demand for U.S. exports allows our economy to move up the value chain, producing the type of goods that tend to create better-paying jobs for American workers.
The danger of the Trump administration’s “Made in America” campaign is that it could easily morph into an assault on the freedom of Americans to spend their hard-earned dollars as they choose. Forcing us to “Buy American” through trade barriers or restrictions on government procurement would result in higher prices for consumers, taxpayers and import-consumer industries and fewer export opportunities for the most competitive U.S. sectors. U.S. economic growth and living standards would suffer.
Free trade is the best deal for America — for American consumers and for those American producers who are the most able to sell their “Made in America” products to willing customers at home and around the world.
Daniel Griswold is a senior research fellow and co-director of the Program on the American Economy and Globalization at the Mercatus Center at George Mason University. He can be followed on Twitter @danielgriswold and at his blog at madabouttrade.com.
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