Can 'Made in America' Survive in a Global Economy?
Anchor, Worldwide Exchange
Every year nearly 30 million people visit the 19 Smithsonian Museums in Washington, D.C. to see some of our nation’s most prized historical artifacts.
But visitors seeking souvenirs from "our nation's attic," as the museums are known, have recently been surprised to find one very un-American artifact in the museums' gift shops: a stamp that reads “Made in China.”
“I think it is utterly absurd and frankly insulting that the patriotic American mementos [visitors] are taking home today are stamped with the words ‘Made in China,’” said U.S. Representative Nick J. Rahall of West Virginia, top Democrat on the House Transportation and Infrastructure Committee.
Earlier this year, Rep. Rahall introduced the “Buy American at the Smithsonian Act of 2011” because “I don’t think our nation’s attic should be stocked with goods from China that could be made in the United States.”
The Smithsonian is an example of the state of American manufacturing today. As more steps of the manufacturing process are outsourced to other countries, American products are harder to find, and often more expensive to purchase.
Critics argue that as manufacturing moves overseas, American jobs go with it. However, some companies have committed to bringing manufacturing back home, recalling some of the “Made in U.S.” zeal of the 1970s.
Take bubble gum and baseball cards.
“Very few brands are part of the DNA when you're growing up, and Topps is one of them,” said Ryan O’Hara, the company’s CEO. Topps was founded in 1938 by the Shorn brothers as a gum company. In 1952, the company introduced its baseball cards.
“The company's been a pillar in America off the back of baseball cards ever since,” said O’Hara.
Topps executives recently made the tough decision to renew their lease in New York City’s Manhattan, a move that may cost more money but remains true to the company's American roots.
“We decided that being an American company and being located in the heart of New York, where we've always been, made a lot of sense," O'Hara said.
Mark Perry, professor of economics at the University of Michigan, argues that despite global market pressures, U.S. manufacturing, taken by itself, would currently rank as the sixth-largest economy in the world, just behind France and ahead of the United Kingdom, Italy and Brazil.
Perry also said that, at $2.155 trillion, total U.S. manufacturing output is 45% higher than China’s. Despite the increase in output, however, the number of jobs in the U.S. manufacturing sector is down by more than seven million since the late 1970s.
Some of the job loss can be blamed on new technologies and computerized manufacturing, which cut down on the need for manual labor. Outsourcing to countries with lower wages also reduces jobs available in the US.
But Rep. Rahall argues these short-term savings are going to cost the American economy in the long term.
“What is too expensive — and what we can’t afford, quite frankly — is to continue sending American jobs overseas to China, India, and elsewhere,” he said.
Hel added that Americans should see buying “Made in US” products as helping their neighbor, and the national economy, to recover.
“Americans often seek out products that are made in America, and I think most are willing to pay a little extra if they know the money will support American jobs,” he said.
Restoring all-American products to the country’s prized institutions, starting with the Smithsonian Museums, is an important step, Rahall said, both as a stimulus to the economy and a national moral boost.
“No one can argue with a straight face that making the Smithsonian sell American-made products will solve our trade deficit, or it will be responsible for our economic recovery,” he admitted.
“But, it certainly sends the wrong signal, and is highly ironic, that the American mementos that American tourists take home from their American capital are made – not in America – but in China. I think that needs to change.”
Garry Ridge, CEO of WD-40 , is the proud head of one of America’s most recognizable brands. It was formed in San Diego in 1953 to create a line of rust-prevention solvents and degreasers for use in the aerospace industry.
Almost 60 years later, Ridge, who is from Australia, doesn’t see the company as exclusively American.
“We’re a global company that happens to be based in San Diego, but once upon a time we lived in a house, in a street, in a suburb, in a city in the world…today we live in a house of the world,” he explained. He also noted that half of the company’s business is now outside of the US.
Michele Wucker, president of the World Policy Institute, argues that “Made in America” isn’t a clear-cut problem or solution; rather, it is a complex game of give-and-take within a global market.
“There’s no doubt that many of the jobs that used to be American mainstays are now located in other countries, but that’s only half the picture of globalization,” she said.
“I haven’t seen nearly enough attention paid to the companies that have been able to keep or even add to jobs by buying parts overseas at far less than they would cost in the United States; or those whose sales overseas have grown dramatically, while the lion’s share of their jobs stay in America.”
Products from global companies like WD-40 may not be “Made in America,” but the jobs created in America and abroad still have a large impact on the nation’s economy.
According to Ridge, efficiency should take priority over nationality when deciding where to set up operations. It depends on cost effectiveness, which sometimes benefits U.S. manufacturers, and other times not.
“We need to be the best we can be, to be the most competitive we can be,” he said. A closed market will only stunt innovation in the long run, which could result in the U.S. economy falling farther behind, he said.
Consumers are often led to believe that, because a product has a “Made in USA” label, it is automatically of higher quality than foreign goods. However, the “Made in the USA” label simply means that the product is made with “all or virtually all” components in the US.
Some have argued the “Made in USA” label is too exclusive and can actually hurt the economy by discouraging consumers from buying goods that are not completely made within US borders, but which benefit the country by creating jobs or promoting innovation.
“The general consensus seems to be that this designation should be made by who gets the primary benefit or value of the sale,” said Jim Amos, CEO of US-based frozen yogurt giant Tasti D’Lite. “If the United States is the primary beneficiary of the sale, why should the seal of ‘made in the USA’ not be used even if a minor percentage of the product is outsourced elsewhere?”
Further, U.S. labor laws and environmental standards are typically more stringent than in other countries, meaning many products are more expensive to manufacture entirely on home turf.
Fred DeLuca might be the closest example we have of the quintessential “American Dream” in action. When he was 17, DeLuca borrowed $1,000 from a family friend in 1965 to start his first sandwich shop, with the goal of paying for college.
Today, his shop, Subway, is the largest sandwich franchise in the world, with 34,000 locations in 94 countries and sales of more than $13 billion in 2009 alone.
But when asked if large corporations have a responsibility during these tough economic times to buy American to create more American jobs, his answer was clear: No.
“Here in the United States, the American manufacturers earned our business and we're happy to buy from them,” he said. “I don’t really think it's important to just say ‘buy American’ for the sake of buying American.”
Now with small stores in 94 countries all over the world, DeLuca said that it would be nearly impossible to run his business with the kind of precision it needs without franchising to small business owners.
“These are small businesses,” he said. “And if we have the local people run the stores, they can do an excellent job, and they can benefit from the power of the brand.”
According to Karen Mills, administrator of the Small Business Administration, fostering these small businesses, whether within a franchise or not, is crucial to an American recovery.
“We’re seeing enormous opportunity for small businesses to export goods and services,” she said.
Mills works with the SBA on the National Export Initiative, which helps small businesses with capital, advice, and connections that help them get access and opportunity to exporting. The goal is to double America’s exports over the next five years.
“Small businesses are key," she said. "People value American products and now with technology, small businesses have the tools they need to market and sell abroad.”
Watch "Made In America," a special series by Nicole Lapin, on "Worldwide Exchange," 4 a.m.-6 a.m. ET on CNBC.