It's election season again, so some politicians in both major parties are pushing even more stridently than usual to "buy American," or buying U.S.-made goods instead of products that come from abroad. Doing so will strengthen our economy and help American companies and workers, the politicos claim.
Sounds smart, right? If you care about our country and fellow citizens, you'll put the exhortation into practice, right? Not so fast. Though buying American has benefits, it also can have enormous downsides for consumers and workers. It can be especially damaging for U.S. agriculture.
Buying American appeals to some people with strong connections to small communities. Whether you live in a small town, grew up in one or have friends or relatives living in one, you understand the value of buying local. Doing your part to keep your local barber, hardware dealer and grocery store in business (if you're lucky enough to still have them) makes both pragmatic and moral sense, at least to me.
Buying American can seem like a logical extension of buying local. I'm a loyal resident of (insert the name of your hometown), so I buy local. And I'm a loyal American, so I buy American, too.
It's not that simple.
For starters, "buy American" ignores what economists call the principle of comparative advantage. At the risk of oversimplifying, the principal encourages countries to specialize in production rather than try to produce everything they consume.
A hypothetical example: Country A is better at producing both wheat and bikes than Country B, but Country B is a little better (a comparative advantage) at producing bikes than wheat. So, Country A specializes in producing wheat and Country B focuses on producing bikes, with Country A buying bikes from Country B and Country B buying wheat from Country A. The arrangement benefits wheat growers in Country A, bike manufacturers in Country B and consumers, especially ones of modest means, in both countries.
Yes, bike makers in Country A and wheat farmers in Country B are hurt. But the gains to others more than offset their losses. (Scant consolation, of course, if you lost your job at a bike factory in Country A or went out of business raising wheat in County B.)
Good for ag
All this may seem abstract, but it's directly relevant to U.S. agriculture. Exports are essential to most U.S. farmers — roughly half of U.S. wheat and soybeans are exported, to give just two examples — and healthy, thriving foreign trade is good for farm country in general.
As a Texas A&M Extension report put it: "Agricultural exports help support rural communities across the United States, with each dollar of exports stimulating another $1.27 in business activity."
When U.S. farmers enjoy stronger crop prices because of ag exports, they have more money with which to patronize their local agronomists, grain elevators and equipment dealers, as well as their local barbers, hardware dealers and grocery stores. Foreign ag trade overall doesn't hurt local economies, it helps them.
If you have a friend, relative or acquaintance who holds a leadership position in a commodity group, ask them about the importance of ag exports. You'll almost certainly get a strong response, especially if that ag leader has been involved on trade missions to promote the sale and consumption of U.S. food abroad.
It's easy to focus so much on the economic pain caused by foreign trade that its benefits are shortchanged or even ignored. When we buy stuff from other countries, we provide their residents with more money to buy our stuff. When we consider the big picture — the real-world gains from comparative advantage and global trade — "buying American" doesn't seem so smart after all.