Buy America, weaken America
The Durabrand 10-inch portable DVD player available at Wal-Mart retails for $199.94. A group of senators would like to raise the price to $254.67. The Creative Zen Nano Plus 512-megabyte MP3 player seems like a bargain at $89.72; less so at $114.39, the price the senators would prefer that you pay. The price hikes would be the result of a 27.5 percent tariff on goods imported from China, a proposal sponsored by Democrat Chuck Schumer of New York and Republican Lindsey Graham of South Carolina that is scheduled to come up for a vote in the Senate this week.
Schumer and Graham aren't crazy, of course—they know better than most that taking money out of voters' pockets is a sure way to be sent packing. In other words, that 27.5 percent price hike won't be coming to a retailer near you anytime soon. But as an attention-getter, it's pretty good, and attention is what the two senators, and a number of colleagues who support them, are after. The chief bogeyman they want to flog is China's communist government, which—according to Schumer and the rest—deliberately keeps its currency undervalued in order to sell more cheap imports to the United States and other countries. Reasonable economists differ on that question. The tariff, if you buy the argument, would bring prices on Chinese imports closer to their unsubsidized value, leveling the playing field for honest tradespeople in, say, New York and South Carolina, who can't possibly produce goods as cheaply as the Chinese and still earn enough wages to buy all the DVD and MP players that they need.
Like all smart politicians, the senators are more focused on issues in their own backyards than on issues across the Pacific Ocean. And the unpassable tariff is really meant as a rallying cry for a problem once, perhaps twice, removed: U.S. manufacturing jobs that are vanishing faster than Jack Abramoff's buddies. Just prior to leading a congressional trip to Beijing last week, Schumer released a report showing that the state of New York has lost 105,000 manufacturing jobs over the past five years. That drew predictable rhetoric suggesting that China, with its unfair trade practices, reached right into New York and stole the jobs from under the senator's vigilant eyes. Graham represents a state that has been decimated by a loss of textile jobs (but has benefited from a high-tech manufacturing plant operated by German automaker BMW). By traveling to China, the senators promised, they would deliver the message that Americans aren't going to put up with this, not without a lot of congressional bellyaching, at least.
If the Chinese want to argue with Schumer and Graham, the most effective thing they could do is pull out a globe and point to Detroit. Right there, in the middle of middle America, is a case study, getting longer every month, in what happens to companies propped up by protectionism, "buy America" populism, and the legacy of oligopoly: They become complacent, uncompetitive, and obsolete. General Motors once dominated the U.S. market for automobiles, with nearly a 60 percent share. By dismissing hungry competitors, neglecting quality, and assuming it owned its customers for life, GM squandered well over half of that market. Unionized workers, by insisting on the right to receive pay and benefits richer than those earned by autoworkers anyplace else in the world, have helped drive profit margins negative on GM cars. And now GM and its employees stand to pay a terrible price. GM has offered buyouts to its entire hourly workforce. Massive offshoring may become mandatory to slash costs. Possible bankruptcy is on the horizon. Oh, and GM's vehicles have become so unpopular that few Americans consider them as a first choice when setting out to buy a car.
advertisement
