Reposted from: Can American Manufacturing Be Saved? Alan Uke and Underwater Kinetics is a CPA member and supporter.
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Does this book hold the key to Restoring American Prosperity?
Every day Americans face choices on what products to buy to meet their every day needs. A 2010 Harris poll, showed three in five Americans (61%) say they are more likely to purchase something when the ad touts it is “Made in America.” Recently, an ongoing poll on www.ewednewz shows that 61 percent say they would buy American products if they existed.
Take a look at what you have in your own home and check the country of origin label. If you have set up your residence in the last 15 years, it is likely that most everything was made somewhere else besides America. It is highly likely that the majority of the products were “Made in China” because so much of the manufacturing of consumer products has been shifted offshore to Asia, especially China.
As our country slogs along in a recession that has never ended for many, more and more Americans are realizing that making and buying products made in America is essential to strengthening our economy, creating jobs and balancing our trade deficit.
San Diego entrepreneur and businessman, Alan Uke, has written a book, Buying American Back: A Real-Deal Blueprint for Restoring American Prosperity, that provides a simple solution that “puts control in the hands of American consumers to make powerful buying choices to boost our economy and create jobs,” as well as reduce our trade deficit.
Mr. Uke is the founder and president of Underwater Kinetics, which he started 41 years ago as a sophomore at the University of California San Diego. He holds more than 40 patents, and the majority of his SCUBA diving and his industrial lighting products are exported to more than 60 countries.
In his introduction, he writes, “Our future as a nation and as individuals is being threatened. Since our spending habits as consumers have contributed to this situation we can change our spending habits to reverse it… in order for a change to happen, consumers must demand to be more honestly and completely informed about what they are buying and where their money goes. To this end, we are starting a consumer movement to bring this to the attention of Congress…The goal of this movement and of this book is to encourage people to change their buying habits toward purchasing things that help the U. S. economy and job situation.”
In chapter 1, Mr. Uke states that because consumer spending makes up 70% of the U. S. economy, we consumers have been encouraged to spend in order to spur the economy. The problem is that when the majority of the consumer goods we buy are imported, our shopping doesn’t support our own economy and create jobs. Our money goes to support the economies of foreign countries. Mr. Uke writes, “In order to support our economy and American industries, we must have easily accessible, clearly communicated, and truthful information about a product’s entire origins.”
In chapter 2, Mr. Uke shares his perspective as a business owner stating that “despite the challenges and the heartache, I like making my products in the U. S. because I want to help our country.” He could move his production to Asia like many of his competitors, but he wants to keep his factory here in America, see more companies return, bringing jobs back with them, and see the American worker regain security and prosperity. As I have pointed out in my book and previous articles, he writes that “U. S. factories lost 5.2 million jobs from 2000 to 2010″ while large, multinational corporations hired 2.4 million workers at their oversees operations.
In chapter 3, “The Importance of Manufacturing in America,” I really like his illustration of the jar of marbles that we as a nation have to use to trade with. When we buy something within the U. S., the marbles stay in the jar, but when we buy something from another country, the marbles go out of the jar. If they buy from us in the same amount that we buy, then the number of marbles in the jar stays the same, but if we buy more than they buy, our jar of marbles begins to empty. Our jar is becoming empty because in 1960, only 8% of the manufactured consumer products Americans purchased were imported, but today 60% are imported. Our deficit with China alone reached $260 billion in 2010, and the Department of Commerce estimates that each $1 billion in trade deficit translates to about 13,000 lost jobs. Manufacturing jobs now only make up 9% of the American workforce.
Imports to the U. S. now represent 17% of the gross domestic product (GDP) while manufacturing’s share of the U. S. GDP has dropped to 11.5%. Alan quotes economist Ian Fletcher, who stated, “We could quite literally export our entire manufacturing output and still not balance our trade,” and concludes that “we are importing almost 25% more than we are exporting.”
Mr. Uke emphasizes that he isn’t against trade because “it’s good for business,” “good for foreign relations,” and good for development in all sectors of the economy.” However, it’s important for us to have balanced trade because “in 2010, each person’s share of the annual trade deficit adds up to about $2,700.” He comments that “creating free-trade agreements around the world are devastating for our country because they only benefit big businesses that can boost their profit margins by replacing our American workforce.”
In chapter 4 on “How Competing Countries are Succeeding,” Mr. Uke provides insights into how Germany, Japan, and South Korea have managed to keep a strong manufacturing base and successfully export more manufactured goods than they import. One of the key factors is that consumers in these countries prefer to buy products made in their own country even if they cost more than imports.
Chapter 7, “The Label Game,” discusses the fact that current information provided on country of origin labels is “misleading, incomplete, inaccessible, or all of these.” In order to have a “Made in USA” label, a product has to be “substantially all” made in the USA, defined as follows by the Federal Trade Commission:
“The product was last substantially transformed in the United States and U. S. manufacturing costs are at least 75% of the total manufacturing costs; or
The product was last substantially transformed in the United States and all significant parts or components of the product were last substantially transformed in the United States.”
The vagueness and looseness of these definitions have led companies to intentionally mislead the public with brand names that imply that the product was made in one country when it was actually made in another, such as expensive “American Girl” dolls that are actually made in China. Labels that say “assembled in the United States from domestic and foreign components” are even more confusing and vague.
It’s even worse for consumers who purchase products online or from catalogs ─ no information on country of origin is required to be provided. It is estimated that 11% of all retail sales will be Internet sales by 2015. A few companies, such as Levi Strauss, Patagonia, and Nike provide the locations of manufacturing plants around the world on their websites, and New Balance goes a step further in providing a comprehensive listing “detailing exactly which of its shoes are made in the United States, which ones are assembled or only partially made in the U. S., and which ones are entirely imported.” Mr. Uke recommends that consumers be provided the country of origin information they need at the point of sale whether at a store or online.
In chapter 6, Mr. Uke presents his proposal for the U. S. government to require detailed country-of-origin labels for all manufactured products similar to the nutritional information labels now required on packaged food products. These labels now list all ingredients, the nutritional information about the food, and the possible presence of eight of the most common allergens in the product. He feels that it is important for consumers to not only “see the last place where the product was manufactured. You should be able to discern what portion of its components came from other places.”
So far the only industry that provides detailed country of origin information is the automobile industry. The American Automobile Labeling Act of 1992 “requires all cars to have labels displaying the percentage of American/Canadian parts content, the country of its assembly, as well as the country of origin of the engine and transmission…Any car with less than 70% American/Canadian content is classified as an “import.”
Chapter 7 describes what “The Transparent Label” would be: one that would include the cost by country of origin by both percentage and trade ratio, as well as the location of the company’s headquarters. The percentage is the total cost of the product that is produced or transformed in a particular country. The trade ratio describes the amount of exports vs. imports for a country in relation to the United States. “A healthy, balanced trade ratio is close to 1.0″ ─ equal exports to imports. A number more than one means more U. S. exports to that country than imports from that country, and a number less than one means more imports from that country than U. S. exports to that country. Part Two of the book provides information on our major trading partners by detailing the state of their manufacturing and what kind of trade balance we have with that country. For example, we have a balanced trade relationship with New Zealand at 1.02, Switzerland at 1.06, and the United Kingdom at .97 whereas our balance with China is .25.
According to Mr. Uke, accessibility is just as important as accuracy. A consumer should
be able to review this data before making a purchase whether it is in a store, online, or through a catalog. Since manufacturers succeed by providing products that consumers want to buy, the “ultimate goal is to apply consumer pressure on companies in order for them to see a direct, profitable benefit in relying on American labor and components.”
Accurate labeling of the percentage of the product that is attributable to the U. S. will benefit manufacturers because consumers can select products that have the highest content of American parts and labor even if it doesn’t qualify for a “Made in USA” label under current law.
The last chapter shows how Americans can make every dollar count by choosing what products to buy. Mr. Uke writes that “it is really, we, the consumers, who are the power that can initiate the change…This power is located in the sum of our buying decisions. Our climb back to the top begins with where you spend your next dollar.”
If every American would make the decision to buy American products and avoid imports from countries with which we have a deficit trade balance, we could make a real difference in our nation’s economy. That’s why Mr. Uke has called on Congress to pass a resolution to make July 1 to 7 “Buy American Week.” Whether or not this resolution passes, I urge every American to make a personal resolution to “buy American” that week and continue doing so thereafter.
Dear Mr. Uke I want to thank you for your very correct opinions and passion to bring free and fair trade back to Americans. I agree with your plan to label all products correctly for content ,to empower the consumer with content knowledge and to recognize and establish a formal week to observe and awaken all Americans about the need and importance of free and fair trade policies. I hope this movement will spill over into congressional legislative laws that will turn the tide of trade deficits into our favor and to once again restore manufacturing as a stronger part of our economy once again and reduce the huge trade deficit to a greater balance….Thank You Sir and I support your efforts 1000%. Sincerely,William Ryan of Rochester,Mi.
Isn’t it interesting that WalMart Canada advertises itself as a good corporate citizen of Canada and encourages its suppliers to use Canadian-made goods and services to the maximum extent possible? Why hasn’t WalMart USA done something similar? The answer must be that Canadian consumers are acting in their overall best interests and haven’t drunk the always-low-prices Kool Aid. American consumers could be at least as influential as their Canadian counterparts, even with WalMart, if they would make the effort. Alan Uke is reminding ourselves that once again the enemy is us.
China Watcher,
Are you under the impression that there are U.S. manufactured alternatives for a significant portion of the consumer goods that we buy?
It has been my experience that, where U.S. made alternatives exist for common products, the U.S. price is three to ten times the price of the Chinese made product. If you are going to claim that U.S. made products are of “higher quality,” I would ask you to explain that in terms of material and workmanship — component by component. In other words, HOW are they better?
Walmart claims to offer the lowest price, always. This includes price-matching any advertised price. If this is not true, how would you explain Walmart’s unprecedented growth?
If your explanation for Walmart’s success relies on their “sticking it to” their customers, what chance would any sort of grassroots “Buy American” campaign have?
The big problem here is that we are allowing a national policy of trade to become just one of consumer choice.
Consumer incentives, especially when being squeezed, are to go with the lowest price for the same product.
Externalized costs like the costs to the domestic economy by not buying from the domestic economy, pollution or labor problems in other countries, or even strategic costs to the country as a whole are rarely related to consumers when they are shopping.
All of the above are functions that policy makers should be addressing so that the externalized costs are included in the price of the product.
Instead, we have a “free trade” mantra that makes sure that Americans end up paying for these externalized costs without really even knowing it or having the connection between the price and the product and the consequences of purchasing a foreign or domestic product (let alone the controversy over transparency of Country of Origin Labeling).
All of these amount to a major policy failing of politicians in the U.S. who would rather talk about working on a better employment picture than actually making policy that creates the correct incentives.
One of the benefits of having the world’s currency is that your currency is strong compared to other currencies. The down side to that benefit is that it can, with the wrong policies, encourage your economy to be off-shored or in the present case, gamed on a strategic level by countries like China. Our policy makers are just not smart enough to see any of this happening and voters are clueless because the choice they see is a one sided pitch to their self interests which excludes the externalities that end up hurting them.
Our country, if it is the strongest in the world, should be taxing goods that come into the country to pay for that strength. Instead, we follow this free trade mantra that strategically weakens the country. Tax payers end up paying for the strong defense of the world or borrowing money from others to do so. Everything gets leveraged in the economy to unsustainable levels for in country citizens while out of country sovereign players like China gain IOUs.
The borrower is slave to the lender and we have already seen politicians vocalizing this fear. They have set up a system of rules that are just plain bad for the country while benefiting the oligarchs willing to sell the country’s standards to the lowest common denominator in the world and increasing the power of oligarchs under the control of communist countries who have learned how to game them.
It isn’t just about consumers “buying American”, it is about changing the rules of the game (our politician’s responsibility to the nation) so that the the country and its citizens are not so easily sold out. Right now we have either the most incompetent or corrupt politicians who don’t seem to see past their easily manipulated self interests. They can’t see the country’s interests but for the people bankrolling their campaigns and the propaganda that concentrates the wealth of the country into the hands of those patriotically corrupt players in the economy who are selling out the country.
Walmart is among the worst. It is what happens when the country puts money and its power as the first principle while pandering to the principals who have figured out how to arbitrage the nation’s wealth out to others while the profit handsomely.
This isn’t a new phenomena. People in power have often benefited themselves over their country. Generals in the Revolutionary War did the same thing. Think of Benedict Arnold. The really bad thing is that our country is being run by what amounts to a majority of Benedict Arnolds whether they are smart enough (competence) to realize it (corruption) or not.
Tom T.
We have been waging “Buy American” campaigns for the past 25 years. The result is always the same: the jobs continue to go offshore.
For those who would suggest that it’s harmless, I would argue that it will delay any government action to fix the problem. Only government action will bring back the jobs. Until a critical mass of the citizens demand government action, the situation will continue to get worse.
The sort of false hope that these efforts produce will cause voters to fall for the same old hollow promises they have been buying for decades.
This will provide one more excuse for members of Congress to put off doing anything substantive to fix the problem.
Until Congress gets serious about mandating “balanced trade,” or, at least, some sort of protective tariffs, our jobs, our economy and our wealth will continue to decline while feeding China’s rapid growth.
Some points:
We have to lobby like the National Rifle Association, giving out letter grades before every election based on how representatives voted. It’s a simple system and a letter grade “sticks” with a candidate.
Unless there’s a geo-political crisis with China, the masses aren’t going to suddenly develop a patriotic buying frenzy. One action that is relatively low cost and politically easy is to keep supporting Chinese dissidents in order to provoke a Beijing response. The more saber-rattling the Communist Party engages in, the more animosity we generate against them, the easier it is to taint Wal-Mart, Target, Sears, Home Depot, etc. as trading with the enemy.
When we start more protectionist trade legislation, the free-trade fundamentalists (Chamber of Commerce, CATO, Reason, Koch, Club for Growth, Patton Boggs, etc.) can then be labeled traitors and Quislings. You have to split the anti-NAFTA/Pat Buchanan/Lou Dobbs faction of the Tea Party from the establishment “RINO” GOP. You also from the split the Silicon Valley “New Democrats” from the Rust Belt/America First Democrats. Finally, the independent swing voters have to be convinced that a pro-manufacturing agenda is not a bail-out for the unions or a sweet-heart deal for crony companies.
Another strategy is to undermine the World Trade Organization entirely. Signatories follow the rules for as long as everyone else is. If the US starts breaking the rules, everyone else will feel it easier to do so until no one cares about open access. Tariffs go up and every country has to re-negotiate bi-lateral deals with every other country.
When things heat up, we send the message to importers that the gates may be closing soon, so hedge your bets and locate some facilities inside the US if you still want access to it.
American-made products can be priced the same as Chinese products if we automate and cut down on the operating costs (cheap gas/nuclear energy and severely deflated healthcare costs).
Great points, Shawn. Another point we need to continue to point out is not just the trade deficit, but the total amount of trade we have with China. Every bit of that trade takes away from domestic suppliers, not just the deficit. The trade deficit is just the amount ahead they are in the trade game. It doesn’t show how much we end up using China’s employed for our goods. I am not anti-China— I just want our politicians to look out for our nation instead of theirs. That includes allowing Chinese citizens to earn dollars to create demand instead of the government capturing all that value through a pegged currency.
Bruce’s point is correct that reliance on personal nationalism -ie buying American- isn’t going to stop this ship from sinking although it is something we try to do personally. Allowing a system where some cheat the economy and actually get ahead of competitors is the policy problem that has to be fixed. I sure like Shawn’s ideas on grading these groups so the correct label is attached to their ideology. It is something that can be conveyed easily and backed up by persuasive arguments as Ian and others are doing.
Shawn, I think the Japanese were pretty good at supply shocks as a non trade barrier when they slowed imports into their economy. It does work and other countries are masters at it while our trade deficit shows how deficient our political system is at dealing with these issues. Our own Senator from our state is running campaign ads that show him to be completely qualified to be a deacon in any church but very little when it comes to substance (yes, he was the one that Jon Stewart gave Jamy Dimon “extra attention” at the dog and pony show Senate Hearing). Until there can be some accountability put on these politicians, they will continue to act as if they are running in a popularity contest where nothing matters but their image. Their policies are wrecking the economy and someone needs to call them on it.
American-made products can be priced the same as Chinese products if we tax them at the border instead of subsidize their entrance to U.S. shelves. Our system is structurally set up to be gamed. Our politicians are not smart enough to see that it is happening. Instead they continue to get paid off by those gaming the system.
Patriotism over self interest should not be left to soldiers while corporations rake in the benefits as they are doing. We are incentivizing the wrong behaviors and ones that are destroying the nation’s economy.
Tom T.