The next time you're out Christmas shopping, check out price tags on basic color television sets.
For that matter, take a look at the prices for VCRs and camcorders, too. If you haven't been paying attention, you'll notice that these items are a lot less expensive than they were 10 years ago.
Wait a minute … less expensive? How is that possible? Don't these manufacturers have to deal with the same rising costs as the rest of us, like more expensive health care, wages and, in some cases, raw materials?
There are many reasons why these products have become so cheap. One, of course, is that they're no longer made in America, or even in Mexico. Most now come from ultralow-cost manufacturing havens like South Korea and China.
Why did American consumers allow those companies and jobs to move overseas? Why didn't workers and their unions succeed in setting up some sort of government protection, like a tariff on imported consumer electronics?
It's as simple as this: Consumers like paying less.
It's the same reason Wal-Mart Stores Inc. is happy to sell products labeled “Made in the USA,” but is just as happy to sell lower-priced imported goods. It's a brutal environment, but Wal-Mart's success depends on finding products that people want to buy and selling them at huge volumes — at a profit.
If that makes perfect sense, then why is there a debate about protectionism vs. free trade? If companies can't compete on the global stage, then why should they expect consumers to prop them up by paying artificially higher prices, which would be the result of tariffs or other trade barriers? The result is the same whether the customer is a mega-retailer, an original equipment manufacturer or a family of four trying to get by on one income.
But the issue is more complicated than that.
The government does have a duty to protect domestic companies and the jobs they provide. That's one of the two strongest arguments in favor of protectionism. (The other, the fact that free trade can help corrupt and undemocratic governments prosper, was covered last week in this space.)
The good news is that government can do a lot to encourage local manufacturing short of setting up tariff walls. Rep. Phil English, R-Pa., a leader of the effort to address a slump in the tooling industry, acknowledged the situation in a recent Plastics News interview.
English downplayed the idea of winning a tariff to protect U.S. toolmakers, but argued instead for changes in the tax code that would encourage capital-intensive companies, like manufacturers and toolmakers, to stay onshore.
Supporters of protectionism point to the lack of regulations in countries that compete with the United States and Canada, including laws covering minimum wages, worker safety and pollution.
But clearly the answer is not to roll back those laws. Instead, North America needs to make the right choices when it comes to tax laws, investment credits, education and worker training to help level the playing field.
In short, we acknowledge the need to protect domestic companies and jobs. But, over the long term, we feel the solution isn't to enact a plan that will raise prices for consumers. That's inefficient and not viable, either politically or economically.