Foreign vs. Domestic, Pt III - The "Made In America" Myth

OffHisMeds has gone on at length about the mythology that foreign car manufacturers produce better vehicles than domestic manufacturers, or that purchasing them is as "good for America" as the purchase of domestically produced vehicles. I clearly diverge with mainstream conservatism on the latter point, wherein unlimited free and open trade is unambiguously good for America, and trumps all other considerations. What bothers me about Free Traders is that they are purposefully blind to the fact that practically nobody else practices "free" trade. The rest of the world - to one degree or another - is openly mercantilist in their trade practices, and exploits American markets accordingly.

Like me, a good deal of our citizenry is unpersuaded on the Free Trade argument, and like me, view unabashed Free Traders as dupes to the likes of Japan, Inc., China, Inc. and Europe, Inc. The fact that "made in America" still resonates with so many Americans has not been lost on our trading partners, who in response have been hyping for the past two decades the extent to which their products are manufactured here and thus provide "good American jobs".

The problem is that when foreign car manufacturers boast that their cars are "made in America", they are perpetuating a fabrication and a smoke-screen. There's as least seven different ways that reality is gamed by our "trading partners". Let's take the worst offender of our so-called friends - Japan, Inc. - as a case in point:

- The first deals with the number of cars "made" in America. Forget about content for the moment; the question here is: are the cars assembled here or not? Japan, Inc. brags about "made in America" without ever telling you that they assemble less than half of the cars they sell to Americans IN America, with the other half mostly manufactured in Japan and southeast Asia. This is but one of the phony arguments advanced by them or their proponents. Per the Wall Street Journal, 55% of all automobiles worldwide are imported, and America imports more cars than the rest of the world combined.

- Domestic Content is the next big fraud, which is the effort of the NHTSA (National Highway Transportation and Safety Administration) to measure the number of components that are domestically produced. The NHTSA's numbers are all based on "Domestic Fleet" content. For one glaring example of how Domestic Content is misrepresented, check out this statement on the NHTSA website: "Mitsubishi achieved 75 percent domestic content for its United States built passenger cars to become the fourth foreign-based manufacturer with a domestic fleet.": This is a bald-faced lie. Mitsubishi has far less domestic content than either Toyota or Honda, who can at least demonstrate that they have parts plants in the USA, but according to a recent USA Today article neither of them is even close to 75% content. This claim also is in direct conflict with the Wall Street Journal and USA Today reports.

- The measure of whether a "part" was produced domestically is based solely on the final product. For example, an engine is judged to be a "part", so Toyota can proudly proclaim that all engines manufactured in the US are 100% American. Except of course that an engine is comprised of many parts: block, heads, cams, pistons, electronics, pumps, alternator, computers, fuel injection system, wiring, etc., most of which is NOT manufactured in the US. Toyota basically assembles them here. Same with transmissions; same with body parts; and the list goes on.

- Japan, Inc., Korea, Inc. and Europe, Inc. all dump their health care costs on their governments. That's a $1,000 per vehicle profit advantage, enough to break the back of any domestic automobile company. Keep that in mind the next time you're inclined to trash the UAW as the source of all of our problems. I'm not saying they're not a problem, but at this stage, they're a relatively minor part in the battle vs. foreign Predators.

- None of the Domestic Content numbers, by the way, include Overhead. Suffice to say, the vast majority of Japan, Inc's executives, department heads, engineers, middle managers, office grunts, coffee fetchers, Salary Men and other White Collar workers are safely ensconced back in Japan.

- Virtually all of the foreign countries I cite have blocked the importation of American cars and parts with tariffs, so-called "safety" regulations, and their cultural disinclination to purchase anything that isn't home grown. Korea is the worst of the offenders. Since the 50s, they have outright blocked virtually all efforts by US parts manufacturers to sell product into their domestic market, even as we open our markets to them and spend $50 billion per year defending them militarily. Great for them, not so good for us.

If you want to understand the reason the Japanese and increasingly the Koreans dominate our domestic auto market, it's because: a) they dominate their domestic markets, b) they have access to close to 100% of the world market, and, c) they can export mostly home-grown vehicles all over the world, particularly to the United States. The US and Canada have access to around 40% of the world market (our own), and are shut out from exporting our vehicles. Whether you're a businessman or a first-year college student, if you understand economies of scale, you understand that Toyota gets to spread their R&D and overhead against a world market. GM gets to spread theirs against essentially a domestic market.

America loses.

Finally, whether you buy my argument that the content of foreign cars sold in this country is as skewed as I claim it is, what is indisputable is that the purchase of a foreign car - regardless of where it's made or the percentage of American content - puts money in the pocket of foreign corporations. What is indisputable is that, in spending $25,000 on a foreign car, that $25,000 less dollars are available to American car companies, who unambiguously create American jobs.

So to my fellow citizen-consumers who blab on about the virtue of purchasing foreign cars, I have two questions: 1) If it's such a good idea, why don't the beneficiaries of your world-view - the Japanese, Koreans and Europeans - feel the same way?; and 2) When your $25,000 comes back to America - and it's not coming back to buy our products - how long can this go on before foreigners own everything?