The horror, the horror. No, we aren't referring to those blue berets that U.S. athletes will wear at the opening Olympic ceremonies in London this month. We mean the horrified reaction from American politicians that those uniforms are made in China. Someone should tell these folks that if you want to have exports, you also need imports.
Olympic uniforms are an easy patriotic riff, but no doubt they were contracted to be made in China to save money. Where would you rather have the U.S. Olympic Committee spend its marginal dollars—on training for the athletes to win more medals, or on high-priced berets? What's the more patriotic decision?
More broadly, imports of all kinds drive American jobs and export competitiveness. Most goods imported by the U.S. are used to make other goods. The Washington-based Trade Partnership, which studies such things, says that 62% of the $2.2 trillion of imports in 2011 were inputs for producers.
These include oil, precious metals, minerals, green coffee and lumber. But the list also includes motor vehicle parts, semiconductors, aircraft engines and parts, steel products, fertilizers, plastics and machinery and other equipment. American companies buy these products, make other things with them or add value and then sell their output at home and abroad. If they can't buy these imports at good prices, U.S. producers can't compete globally.
Protectionists portray imports as coming from Third World sweat shops that undercut American labor. But half of U.S. imports come from such developed countries as Canada, Japan and Germany. In 2011 imports from low-income countries amounted to less than 1% of the U.S. total.
Even finished goods imported by the U.S. often have a U.S. export component. Today's manufacturers, no matter where they are located, use an international supply chain that employs Americans. U.S. research, development and design—high-paying jobs—are behind much of what is made overseas.
And what about those Ralph Lauren-designed berets? Well, the American Apparel and Footwear Association says that while their industries are now dominated by imports, these two markets in the U.S. employ more than four million people in everything from design to marketing, merchandising and retail. The International Trade Commission says more than half of the value of imported apparel sold in the U.S. is American. The Commerce Department says that more than 50% of direct importing operations in the U.S. are small businesses.
Imports also raise U.S. living standards. According to Cato Institute trade analyst Dan Ikenson, prices of many tradeable goods like electronics, toys, furniture and apparel in the U.S. have been dropping over the last decade even as the price of nontradeables like health care and education have increased sharply. President Obama says he wants to double U.S. exports from 2009 to 2014, which makes sense even if the government will have little to do with it. As the U.S. Chamber of Commerce points out, 80% of the world's purchasing power is outside the U.S. along with 95% of consumers.
But this export boom won't happen if the U.S. doesn't keep its own markets open. Protectionism will impoverish our best customers. And there is a risk that trading partners will retaliate with their own new trade barriers. Both would be devastating for U.S. producers: Fast-growing middle-income countries like Mexico and China are also the fastest growing export markets for the U.S.
A half dozen Democratic Senators—led by Chuck Schumer, who else?—have introduced a bill to require that future uniforms be made in America. These are the same geniuses whose tax-and-spend policies make the U.S. economy less competitive. A country that worries about where its Olympic clothes are made has bigger competitive problems than those berets.
Wall Street Journal, July 15, 2012