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issue: December 2002 APPLIANCE Magazine

APPLIANCE Line
No Longer Made in the USA


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Editorial from Diane Ritchey, Editor, APPLIANCE Magazine

If there is anything positive that came out of the attacks last year in New York and Washington, D.C., it was an increase in patriotism for the U.S.



Diane Ritchey, Editor

According to a survey by Vornado Air Circulation Systems in Andover, KS, U.S., there also appeared to be a "Made in America" sentiment when it came to purchasing products that have been manufactured in the U.S.

Approximately 99 percent of respondents to Vornado's Made In America survey reported they would purchase American-made products. A significant percentage, 42 percent, said they would purchase American-made products even if priced higher than comparable

foreign-made products. In one of the cities where the survey was conducted, three-quarters of the respondents said they would purchase American-produced items even at a higher cost. More than 40 percent of respondents said that buying American-made products was more important to them now, and 69 percent said that a purchase of American-made products made a difference both in an uncertain world and in an uncertain economy.

But what happens when production for a majority of the goods they are purchasing is taking place outside of the U.S.? For the past few years, manufacturing in the U.S. has been experiencing "corporate globalization" - a buzzword that refers to moving capital, goods, and services across borders. This strategy can save companies millions, and consumers can reap benefits such as access to other countries' products, often at lower prices.

The list of companies that have moved their manufacturing outside of the U.S. is long. Most recently, compressor maker Tecumseh announced it was moving its production from the U.S. to India. Earlier this year, Maytag Corp. transferred four assembly operations to a maquiladora in Reynosa, Mexico and had additional plans to transfer 12 others. Then there is General Electric Co., a leading advocate of globalizing production. It uses Mexican factories to make everything from medical diagnostic gear to appliances.

The reality is that the manufacturing world is international. But some have trouble stomaching that belief when it comes to lost jobs for Americans. Such is the case regarding the North American Free Trade Agreement (NAFTA) of 1994, which frees up the flow of goods and services between the U.S., Mexico, and Canada. NAFTA in particular has been singled out as the reason that some Americans have lost their jobs. According to a report by the Economic Policy Institute in Washington, D.C., U.S. between 1993 and 2000, NAFTA is said to have claimed 766,030 American jobs. The state of California reportedly suffered the most, with 82,354 jobs lost and traditional industrial states such as Michigan, Pennsylvania, New York, Ohio, Illinois, and Indiana each lost more than 20,000 jobs. The NAFTA at Seven report says that number does not take into account the jobs shifted to China, Singapore, Indonesia, the Philippines, and the rest of the world beyond the NAFTA zone. The report does not take into account new jobs created by NAFTA.

Proponents of NAFTA, however, point to how foreign trade is the area of greatest growth potential for the U.S. According to the Office of the United States Trade Representative, NAFTA has actually helped to strengthen the U.S. economy. For example, during NAFTA's first 5 years, U.S. goods exports to U.S. NAFTA partners Mexico and Canada increased by approximately U.S. $93 billion or 66 percent. Export growth to Mexico and Canada alone accounted for more than 40 percent of U.S. export growth to the entire world.

Consequently, according to the USTR Office, formal trading arrangements can ultimately help the U.S. weather the shifts in the global economy. Therefore, although in the short term a small number of American employees may lose their jobs, a greater number can benefit from newly created jobs, an even greater number may benefit from low-cost products, and everyone in the U.S. benefits from a stronger economy due to healthy international trade and strong trading neighbors.

Expanding NAFTA or adding formal trading arrangements was exactly the message behind Fast Track trade bill 215-212 in the House of Representatives earlier this year. In a midnight session at the end of July, Republicans cut a deal, which led to the passage of the bill, in which President Bush can expand NAFTA to an additional 31 nations through an agreement called the Free Trade Area of the Americas (FTAA). Under Fast Track authority, President Bush can strike trade deals with other countries that Congress could accept or reject, but not amend. Other nations no longer have to negotiate twice with the U.S. - once with the President and a second time with Congress.

The National Association of Manufacturers (NAM) was a supporter of the Fast Track legislation. "After eight years without TPA [Trade Promotion Authority], we have a lot of catching up to do in terms of lowering trade barriers in other countries," said NAM Executive Vice President Mike Baroody. "Since we started, the world has enacted 60 new free trade agreements, for a total of 190, of which the United States is a party to exactly three."

Frank Vargo, NAM vice president for international economic policy, argued that there are four separate negotiations that have been stalled waiting for the Fast Track legislation - with Singapore, Chile, the Free Trade Area of the Americas, and in the World Trade Organization. The reaffirmation of America's traditional bipartisan consensus on free trade should help to bolster the nation's struggling economic recovery, Mr. Vargo noted, by providing a means for leveling the global playing field. "Exports account for one fourth of U.S. economic growth," he said. "It's time for us to get back into the global trade game and begin knocking down the barriers faced by our products and services abroad."

As we start a new year with high hopes for an economic recovery, opening new export markets may be the best medicine. While "Made in the USA" may no longer be the case for the U.S., American consumers should realize that "Made Elsewhere" may be the U.S.'s best chances for improving its prospects for economic growth and a stronger U.S. trade leadership, especially when the rest of the world - Europe, Japan, China, and others - have accelerated their regional and bilateral negotiations. The U.S. cannot afford to fall further behind.

 

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