It's Not "Competition," Stupid - It's the Difference In Wages/Standards

by: David Sirota

Tue Jan 25, 2011 at 13:26

In my newspaper column last week, I noted the problem with our government refusing to systematically incentivize domestic purchasing - and, thus, production. That said, there are corners of our government that are pursuing "Buy American" policies, and the initial results show us how those policies - not cheap State-of-the-Union platitudes about better "competitiveness" - can be the real game changers.

Check out this piece in the New York Times about a little-noticed "Buy American" provision slipped into the Defense Authorization bill, mandating that the Pentagon buy more of its renewable energy equipment right here at home:

Ocean Yuan, the chief executive and president of Grape Solar, a company based in Eugene, Ore., that distributes mostly mainland Chinese solar panels but also American, Japanese and Taiwanese panels, said that imported panels typically cost 20 percent less than American-made panels.

Mr. Yuan predicted that the new legislation would have a big effect on the American solar panel market, by encouraging Chinese solar panel manufacturers to establish factories in the United States. "This policy will certainly have a negative impact on the imported solar panels from China, which have lower cost over all due to lower labor and overhead costs," he said.

The comment from Yuan is telling on two levels. First and foremost, he admits that the Buy American provisions will push solar manufacturers to build their products here in America, thus employing more Americans. He also is quite explicit about why Chinese products cost less than similar American products. It's not because they are made any better or because the Chinese are out-competing us  - it's simply because China has lower wages and a government that doesn't enforce the kind of minimum wage/labor standards/environmental standards we have at home.

Those lower wages/standards create an artificial economic incentive for companies to move production facilities to China. President Obama tonight in his State of the Union may claim that we can fix things by just becoming better "competitors," but the only way to reverse this inequity in standards is to put in place policies (like, say, Buy American or reformed trade laws) that directly counter the real problem.

David Sirota :: It's Not "Competition," Stupid - It's the Difference In Wages/Standards

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I'd rather just save the 20% higher cost and buy Chinese.

don't forget to put up the American flag sticker (0.00 / 0)

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