Local author calls for a "Countries of Origin" label on products using material from multiple countries.
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March 6, 2012 12:25 p.m.
Dan Seiver, Finance Professor, SDSU
CAVANAUGH: This is KPBS Midday Edition. I'm Maureen Cavanaugh. America's balance of trade deficit has been a cause of concern for economist for years now. As of December, 2011, we were running a deficit of about $48 billion. That means America is buying $48 billion more products from other countries than we are exporting to other countries. One San Diego businessman is trying to do his part to counter this trend by improving country of origin labeling on products. Alan NAN sprains his objective in a few book called buying America back. He's the author of that book, founder of the company underwater kinetics, and one of the founders of the San Diego Aircraft Carrier Museum, the US Midway Museum. Welcome to the show.
NAN: Thank you for having me.
CAVANAUGH: Dan Seiver is also here, professor in the finance department at San Diego state university. Welcome back.
CAVANAUGH: Alan, why do you think people should scare about where a product comes from?
NAN: Two reasons. First of all, it affects your own well being, because if our government does well, then there'll be a more secure future for us, and you'll get things like -- employed.
[ LAUGHTER ]
NAN: Social Security, the value of your house. The second thing is that there's actually a difference in quality from different parts of the world from what they produce, and if you knew that certain parts came from certain places, it may make you want to buy this one because you're maybe going to get something that lasts longer. Certain people havide logical preferences like they wouldn't buy from a certain country because of things they do, or they'd rather help this little country because they're all starving to death and they need some kind of trade. You as a consumer can take a great deal of power with you from where you buy things from. I want to provide people with the ability to make decisions to your own conscience that are maybe different right now if you didn't have the information.
CAVANAUGH: Now, Alan, we've been told for years that globalization is the future, getting products manufactured around the world is a good thing. Do you disagree with that?
NAN: No, I absolutely agree. I have a business, and half of the stuff we build is for export. And actually, it doesn't really matter if you make something in the USA or if you deal with a country that has pretty much equal trade with us because they're buying our staff, we're buying their stuff. The problem is companies that have very bad trade ratios where they buy almost nothing from the United States. Then basically our technology, our jobs, our businesses end up migrating over there, and sometimes that's not because of fair trade, it's because of government planning on their side, and as a business, you can't compete against that.
CAVANAUGH: What about all the American companies that are going to other countries? Is that the country of origin's fault or is that the American company's fault?
NAN: Well, there's two things. First of all, if -- what I want to do have a breakdown on labels like you have on food, where it's not just made in China hidden somewhere, there's actually a percentage of don tent of where it's coming from, and the nationality of the manufacturer. And some information about a trade ratio with those countries. So if you have this product, nothing is made just in one country anymore. It's a spread of countries. And this one's got 40% American content, the rest is coming from China, chin is a 25% trade ratio, which is very bad. This other 1's got 40% American content, but it's coming from Korea. Korea has a 78% trade ratio with us. So it makes a huge difference if you buy from Korea or Taiwan, because they buy a lot with us. The Chinese buy very little.
CAVANAUGH: I see your point. Dan, I wonder if you could tell us more about the trade ratio, and how it affects our economy
SEIVER: Well, I have a fundamental disagreement with Alan. And I think most economist agree with me that more trade is a good thing. And trying to judge a country by the ratio of its exports to its imports with any other country is misleading. And I don't think it's particularly helpful. I have nothing against better labeling. I think providing consumers with more information about anything is good. But I think the underlying agenda is to get consumers to change their behavior, and I don't as most economist, I don't agree with that. My feeling is that if you pick a product because you think it's the best for you, then you go ahead and buy it. I don't think you should feel that you have to pay more, say, for another product because it comes from a country that has higher environmental standards.
CAVANAUGH: Before we get into the nitty-gritty of this disagreement, I would like you, Alan, to just explain a little bit more about the -- what separates balanced trade from unbalanced trade as far as you're concerned. Just so we have a ground-level understanding what you're talking about.
NAN: Well, what the economist are talking about here is basically what you get as an individual for the product. And there's a different aspect to something, and that is that where you buy things actually affects the environments, not just you directly with the product, but where that money goes affects what employment will be, what environmental standards will be kept, what human rights are kept because if you're empowering a country that's got bad human rights you're giving this country the ability to hire more military forces and prevail. If you are buying something from a bad environmental -- you're encouraging pollution there because you will have more of it, building bigger factories doing more of it. And in the case of employment, if you're buying from countries that buy from us, you're basically directly creating more jobs because it increases our exports, in addition to if you want to buy more American content. So there's a big macro-effect on the world, and you may want to make that decision, and you should have the right to have the information. So if you decide I'm going to do this instead, that's your right. And I want to digress a second in that most people's decisions are based on their preference. I'm wearing clothes right now, which is not efficient, it's not a jumpsuit, I'm wearing a tie and a coat, and the tie doesn't do anything, actually. And if I went out to the audience, none of your clothes are the most efficient thing. You made a personal preference based on what your values are. And a lot of things you buy are like that. A piece of clothing, you can buy this or that, it's whether you like the color and the fit, and it could be you like where it came from. You want to help Haiti because these people need the work. And so it is a personal choice, and if you had the information, it gives you the ability to make those choices if you want to.
CAVANAUGH: Doesn't this sound a little bit Dan, like the social consciousness investing that people do sometimes? They decide not to invest in certain companies that are doing they feel harm to the environment or whatever, or certain countries? I believe that there was a great idea of divesting from South Africa years ago because of apartheid. So I'm wondering if you see any connection between that being concerned about exactly where the products are being manufactured.
SEIVER: I have no problem with somebody being concerned and say I'm not going to buy this product because it comes from this country. But as long as what you do is give people those choices, that's fine. I don't think you'll see any significant changes in behavior because of that. And I would hate to see consumers who would -- could end up injuring themselves, and not actually helping a particular country. Suppose you buy stuff from Haiti, but it goes to corrupt companies or the government takes a big share and use it to further impoverish their people? What about a country that -- we don't want to buy anything from North Korea, but the people there are starving. Nothing is as simple as this sounds. And what about countries that have better environmental standards than we do? We don't lead the world in environmental standards by any means. And they would -- if they wanted to adopt the same approach, they would say we're not going to buy American stuff because their human rights record isn't as good as ours. Norway, their pollution record isn't as good as ours, then anything record isn't as good as ours. So we wouldn't be able to sell stuff to Norway. And lots of countries could adopt their own ideas and say let's enforce this, and buy from our own country because we don't like American politics or we don't like American anything else. And what happens is you create the environment for a trade war, and more trade restrictions, reduces the amount of trade in the world. And that tends to make almost everybody worse off. So I speak for most economist when I say that we are very leery of any government-led decisions like this. We're perfectly fine with giving people more information. And and the reason you wear the clothes you wear has nothing to do with efficiency. I'm not wearing a jumpsuit either. These are the clothes I like. If you want to indulge yourself, that's fine. If I don't want to buy cigarette companies, I may be giving up some return, but I still feel better about it because I don't want to help them out. But that's not the same as saying what we need to do is get lots of people to buy more American stuff because somehow it's going to make us better off. That idea that buying American somehow makes the country better off has been for two hundred years-plus, economist have said that's not a good idea, that's not the way it works. And we tried to do that at the beginning of the great depression. It didn't work then, and it wouldn't work now.
CAVANAUGH: Let me get your response to this, Alan.
NAN: Well, two things. I'm a manufacturer that exports to 60 countries. And I would argue another fact is that I -- the 60 countries I sell to are pretty much everywhere in the world except the countries like for example China. They don't want to buy any American things. It's a government edict, the people are very nationalistic. So what happens is that no matter what I make it's not going to sell in China. In fact, it doesn't. I sell to Hong Kong, I sell to Japan. And basically, it isn't free trade because if the other people are using this value is system where they're not going to buy it because it's American, how do we compete against that by playing -- it's like a football game where they can tackle you but you can't tackle them. That's whiure our trade ratios with them are like that. If we did the same things, and the same rules -- we're very good manufacturers in the United States. What happens is you do have countries like that and what I'm hoping is that if we start seeing these customer preferences, where they want to see more content, it would hopefully change the behavior of these other countries where they realize, well, hell, they're not buying our stuff! So we better play differently so we're more popular with the Americans.
CAVANAUGH: I think one of the points Dan is making is that you can if you want to, if you have the information you could make the choice of not buying something that comes from a certain country. But it really wouldn't make much of a difference in the overall economy in the world economy or the national economy.
UKE: Ironically, it's the opposite. The US meis $15 trillion be. If you have a 1% shift in spending by the consumers, it's $100 billion, which creates over a million jobs. If there's a 10% shift like in germ many, there's really no unemployment. The German factory worker makes $12 an hour more. If we had that same kind of environment here, things would cost more, but you're making $2,000 more a month, which means you can have more to pay for and have more left over. And that's the model countries like Germany have taken. If you study their economy, they're a wig exporting country, they have a positive trade balance. And it's not an accident, the whole country's program is to help the businesses and consumers to buy their own stuff, to build an exporting economy.
CAVANAUGH: I'm wondering, if indeed this wouldn't have much of an impact, it just makes me think about, again, going back to the apartheid, it did put pressure on South Africa to change its apartheid rules when people began divesting their investments from that country. And indeed, again, if China is not buying our products, and that's sort of a national policy, isn't that like hay de facto trade war to begin with?
SEIVER: Well, the Chinese are in the world trade organization. And when they violate the rules, they can be brought to the equivalent of court for that, and I think they should. And the Chinese often don't play fair. And I think we need to pursue them on that. But the United States doesn't play fair in a lot of stuff. If you ask sugar producers around the world, why can't they sell more in the United States, there's a good reason. Because we have quotas that limit strictly what can be sold in this country. And they're a clear violation of world trade organization standards. They make all Americans pay more for sugar, including poor people, and that's no justification other than a small number of corporate-owned firms get to make big profits at the expense of the rest of us. And we should be taken to the world trade organization and that should be wiped out. And so it's in the like we play by all the rules either. And we had that when we passed stimulus bill a few years ago, we had a buy-American provision. It's the same thing. The idea is if we spend the money locally, we're better off, ever since Ricardo in 1,800, economist have been convinced that more trade is good. That doesn't mean everybody benefits, but nations are better off with more trade. And anything we do to try and restrict trade wholesale with many other countries I think will end up hurting us in the long run.
CAVANAUGH: Alan, where is your push to get this country of origin labeling put on American products?
UKE: All products.
CAVANAUGH: I'm sorry, yes. On all -- all products sold in the United States. Has that been introduced in Congress?
UKE: Congressman Bilbray is helping us produce a bill, and I'm helping with the language of it, and we're looking for cosponsors, and we're going to run it through this year. And these things you should take more in a year, what happens is there'll be all these hearings, and people will bring up good points but at the end of the day, it'll be like food. Right now, you can look on a package, and it tells how how many calories it has, and how much percentage of fat and carb hydrates. And I don't think the world is worse off. I've made decisions where I picked up something I normally bought and looked on the side, and wept, my lord! This is 800†calories. And once you have that or the fact that they now tell you what all the ingredients are, like it may have had palm oil or something that's very bad for you, and that was a cheaper thing to throw in there, and no one knew about it until it was labeled, when that happened, the manufacturers stopped putting that stuff in because they realized that consumers were getting kicked back once they knew. What I'm for is letting everyone have full visibility of where all this stuff is coming from and then see what happens. And very often right now, they really hide the fact it's made in the orient, for example. You have an American brand, and you won't know till you get it that it was made in China now, it used to be an American product. On the Internet, there's no requirement for labeling or catalogs. So you have no way of knowing till you get it what country it came from. And I think it does very often make a difference on what the quality of because the thing you associated that brand with is not -- not the company anymore. And I can tell you 100 examples of things I've thought I bought the old brand, and now it's different, and it wasn't good.
CAVANAUGH: Okay. We have to wrap it up there because we're just out of time. I have been speaking with Alan NAN, author of buying back America. And SDSU professor Dan Seiver. Thank you both very much for speaking with us.
SEIVER: Thank you.
NAN: Thank you.