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Omaha World Herald
July 24, 2005

by Jonathan Wegner


Trade gap is American-made
Consumers' hunger for cheap, foreign goods has contributed to record trade deficits for the U.S.


Sherri Moore didn't really think about what she had in the bag under her arm as she left Crossroads Mall last week.

It was a shirt. For her husband. From the Gap.


Made in India.


"I just bought a shirt from India," she mused, putting it back in its navy bag, a little surprised. "You think that's all-American, the Gap."


What's all-American, however, is how much stuff Americans buy that isn't at all American.


Moore's friend Karen O'Dell -- also toting a Gap sack under her arm -- pointed out that she, like most Americans, doesn't really care where products are made. She just wants quality goods at the lowest prices.


"I look more at the brand names than where it was made," O'Dell said.


She's hardly alone. Millions of patriotic Americans make big displays of national loyalty on the Fourth of July, but brand loyalty trumps patriotism when Americans display their trillions of dollars' worth of buying power at the mall.


Most shoppers usually don't pay attention to whether the things they buy come from South Carolina or Sri Lanka, although consumers who take the time to look will find that the tags attached to their favorite brands read like the index of the CIA Factbook.


Countries like Bangladesh, China, Lesotho, Madagascar, Nepal and Vietnam send cheap goods to U.S. stores. About the only American things in some shops are the salespeople and the music piped in overhead.


That's part of the reason America's merchandise trade deficit swelled to $666.2 billion last year, according to the U.S. Commerce Department. The trade gap with China accounted for $162 billion of the imbalance in 2004.


Those deficits, which yawned wider last year despite the declining value of the dollar, worry Americans like Roger Simmermaker, whose Web site -- howtobuyamerican.com -- promotes U.S. goods.


Even capitalistic scion Warren Buffett agrees. The chairman of Omaha's Berkshire Hathaway Inc. warned in the company's annual report that America's trade imbalance was creating a "sharecropper society" in which Americans trade U.S. wealth for cheap goods, effectively giving away the farm.


Jim Schollaert, director of industry relations for the American Manufacturing Trade Action Coalition, agrees with Buffett's analysis. He said currency pegs by U.S. trade partners like China make foreign goods artificially cheap and facilitate the siphoning off of U.S. wealth.


"We're living off the fat of the land, and that's not going to last," he said. "They want to give us the rope to hang ourselves."


Bids by foreign buyers for trademark U.S. companies like Unocal and Maytag are a result of such trade imbalances, said Craig MacPhee, professor of economics at the University of Nebraska-Lincoln.


Yet while economists and congressmen investigate the potential economic and national security consequences of selling U.S. companies to foreigners, few American consumers worry about what they themselves buy.


Economically, that's perfectly sensible, said Bellevue University economist Judd Patton.


"People want value, and wherever it comes from -- if it's at Wal-Mart -- that's where you go," he said. "Most of us have the self-interest to get the most for our dollar."


He doesn't blame trade deficits on U.S. consumers but rather on the actions of U.S. and foreign central banks that artificially prop up the dollar, undermining the economic principles that underlie free trade.


Hank Cox, a National Association of Manufacturers spokesman, said getting Americans to spend patriotically -- to buy American for love of country alone -- would require a "sea change of attitudes."


Moreover, manufacturing has already experienced a sea change of its own.


Cox said campaigns like "Crafted with Pride in the U.S.A.," which promoted U.S.made goods in the '80s and '90s, don't make as much sense in a world united by free trade. Parts from all over the world go into common products, making it nearly impossible to say who made them.


"To figure out where (a product) is made would require the Oracle of Delphi," he said.


Cox said American manufacturers can compete with foreign producers but they need a level playing field in terms of regulation, currency valuations and other government policies.


"'Made in the U.S.A.' does matter," he said. "Manufacturing is the driving force of innovation, but this is not something where we can shut our doors to foreign competition."


In the meantime, U.S. trade and saving patterns mean the stuff Americans buy will continue to put the country in hock to foreign manufacturers, eventually forcing further depreciation of the dollar, the sale of U.S. assets or a recession in the U.S. economy, MacPhee said.


Unless those patterns change, he said, the shirt you buy from the Gap will continue to add to the U.S. trade gap.