April 22, 2012

Book Review: Buying America Back

After becoming a mother, my attitude towards many different things has changed dramatically.

For example, I've started to use organic products, even if they cost a lot more than the non-organic ones. I've also banned a lot of toxic substances from the home, like strong detergents and VOC paints.

The next step that I've been trying to implement is buying as little as possible "Made in China". But this step has proved very difficult, because no matter how much I try, the Made in China is just about everywhere.

Reading this book "Buying America Back", by Alan Uke, has helped me understand the background of what is happening in America, why so much comes from China, and what I can do to try and change this situation.

To begin with, I have nothing against China, except after having a baby and reading about those babies that were killed by tainted formula, I started to pay more attention to products that come from China.

It has become more and more an issue. There have been so many toys made in China with toxic lead and then exported to the US. And then those toys make the recall list. And so again, as a mother, it is my duty to pay attention and try to protect my child.

Obviously, my first reaction was to stop buying things made in China. Ha! Would it only be that easy! No matter how hard I tried, I couldn't escape Chinese products... they are everywhere. And what's worse is that most of the time there is no corresponding "Made in America" product. There just isn't.

Why not?

Buying America Back was written to explain this phenomenon.

It's written by Alan Uke, a San Diego businessman who has owned his own company for more than 40 years. And who has tried very hard not to outsource any of its business. He has been trying to keep it in America. For the Americans. But he will also tell you that it has been hard and that he might have to give in one day, if he wants to continue being profitable.

Why?

Because, like Alan explains, we are at a point where America has been outsourcing almost anything and everything possible. Because it's cheaper if they work on it overseas. Because it's cheaper if we use their employees. This way it will cost less for us, too. Sounds great, doesn't it? Well it's not.

By thinking this way for the past, who knows? 50 years? America is now in a position where it imports more than it exports and the resulting national debt just keeps on growing.

But it's more complicated than that, because we can't even just decide today to stop importing, since we don't have the means to produce ourselves the things we are importing.

We have lost manufacturing industries.

Since using cheaper and imported products, the need to produce them at home has diminished and so many manufacturing companies have disappeared. As cheap imports have freely flowed in, factories have closed. Jobs have disappeared.

When we buy manufactured goods, we get the goods and the foreigner gets the money. When we buy the manufactured goods at home, we get both the goods and the money. Abraham Lincoln

From the book:
"Manufacturing jobs are crucial to our local economies and our country as a whole. It is estimated that one manufacturing job creates four or five indirect jobs elsewhere in the economy." "If we allow our manufacturing sector to continue to fall away, as is the current trend, the entire economy will suffer unprecedented disaster, and we will all have to settle for a far lower standard of living with staggering unemployment and little hope for the future."

This does not sound promising at all. And here is more:

"Commercial ships brimming with Chinese goods are arriving at American docks and leaving empty"

Yes, because that's the irony: Chinese give us so much, but they don't want anything American back... well except iPods and iPhones.

"Even though we invented and originally manufactured the computer here, we have currently outsourced that production to such and enormous extent that China's number one export to the United States is computer equipment - to the tune of $46 billion a year!" "Instead, America's top export to China is waste paper and scrap metal, totaling $8 billion in 2010."

Chinese people don't buy American products. Now I'm not saying they have to, but in order to keep a balanced trade, and considering all that we import from China, then Chinese should buy more from us. But they don't. So we give them all of our money, and most nothing comes back to us.

In contrast, and as an example of fair and balanced trade, our import/export with England is perfectly balanced, meaning they import from us as much as we import from them. And this keeps the money flowing between our countries in a way that benefits us both.

The book goes on to demonstrate how other countries buy local products because they understand that it benefits them, even when the product is not necessarily the best.

French people buy French cars. Nine out of the top ten cars sold in France in 2010 were French. German people buy German cars. The top 22 cars sold in Germany in 2010 were German cars!

Six of the top ten cars sold in America in 2010 were Japanese. 
It pretty much sums it all up.

Americans have succumbed to this idea that cheaper is a better deal. Walmart and Target have become richer than rich. And we have homes full of "cr@p". Things that don't last long because they are not made well. Things that can hurt us because who makes them doesn't care if they harm us. 

But I'm also aware that Chinese people are not swimming in our money, either. The poor workers get like 50 cents an hour. So where does all of our money go? The owners of those sweatshops. Those people must be rich-rich-rich!

In any case, going back to how we should start to act...

One thing I loved reading in the book is how Walmart failed in Germany. Ha! Germans thought that Walmart products were inferior to German-made products (and they are right!) and so they never shopped there. And so Walmart packed and left Germany! Aufidersen!

It also seems that Walmart is having a though time in Japan, but it's still trying to convince those pesky Japanese that they should buy cheap junk instead of better stuff. ;)

This also because Japan, like South Korea, values strong domestic consumption, especially in difficult times.

"In contrast, in times of economic difficulty, Americans are often urged to go shopping and to consume more, but since most of the products they end up buying are imports, the money just flows out of the country and this creates extremely little long-term stimulus for the economy."

So what is the answer? Simple: Buy more American products.

But there is a problem: We have no idea where most products are made/produced, so how can we find the American ones? 

This is intentional, of course. Most companies don't want you to know where a product is made, especially if it's not made in the US.

Current regulations require companies putting out products to list only the country where the "last major transformation" of the product took place. Essentially this means goods that are manufactured, assembled, designed, and packaged in several different countries... are wholly misrepresented as to their country of origin. 

The final product will simply say "Made in China" or "Made in Taiwan", leaving out information that may have discouraged or, alternatively, encouraged you to purchase the product.

FTC regulations state that in order to qualify for the "Made in USA" label, a product has to be "substantially all" made in the USA.

But the FTC doesn't have and active enforcement unit that regulates any false use of the "Made in the USA" label, and a lot of companies brand their products as "American" when in fact they are mostly made somewhere else.

The book provides the game Scrabble as an example: the package says "Made in USA", but the tiles, the racks and the letter bags are all made in China. So only the board itself and the packaging are American-made.
So how are we supposed to buy American when we can't even surely know if a product is American or not?

Labeling is the answer. 

Just as, after so much pressure, all foods have to have a nutritional label on them, Alan Uke now suggests to have an "origin label" on every product. A label that identifies all of the countries that have contributed to the manufacturing of that product:

China = 80%
Vietnam = 8%
Japan = 5%
Egypt = 3%
Taiwan = 2%
Thailand = 2%

But he also suggests to add the trade ratio of the US with that country, so that the consumer can make a better informed decision.

China = 80%  Trade Ratio = 0.25 (which means for every product the buy from us, we buy four from them)

This way you would know not only where the product was manufactured, but also if that country has a healthy trade with the US. Other interesting trade ratios:

Balanced Trade:
United Kingdom: 0.97
Poland: 1.00
Switzerland: 1.08
Spain: 1.19
We export more than we import from these countries:
The Bahamas: 3.94
Jamaica: 5.07
United Arab Emirates: 10.2
Somalia: 15.00
Senegal: 42.82
Kosovo: 112.00
We import more than we export from these countries:
Taiwan: 0.73
Germany: 0.58
Japan: 0.50
China: 0.25
Vietnam: 0.25

So if you had to choose between two similar products, one made in Japan and the other one made in Spain, you would have all the necessary information on the label to pick the Spanish product because you would know that it would better benefit the American economy.

But until this labeling system becomes a reality (hopefully it will) the only solution is to be a better consumer, and to be more discerning about the things we buy. By looking for better made products and favoring when possible the American-made, the big companies will eventually get the message that we are done buying junk. As a result, we won't need to outsource and rely on cheap work-force anymore, and the production of manufacturing goods will resume in America. Factories will reopen and many new jobs will reappear.

It sounds too good to be true. But it's possible, even if it will take many years. We need to do this. For ourselves, but more so for our kids. Get involved and sign the petition at: buyingamericaback.org

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Disclosure: I've received a copy of the book for reviewing purposes. NY Spender is not being compensated monetarily for this review.

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