By Karl Ege
For Northwest Asian Weekly
Recently, the political issue du jour was the revelation that the uniforms of the U.S. Olympic team were made in China. I have three words for our political leaders, the media, and the pundits: GET OVER IT!
It is helpful to have the facts at hand.
1.) Ninety-eight percent of all clothing and 99 percent of all footwear sold in the United States is manufactured abroad.
2.) The United States does not support its Olympic team with taxpayer funds.
3.) The U.S. Olympic team receives all of its funding from corporate sponsorships and contributions from private individuals and organizations.
4.) Ralph Lauren is a long-time sponsor of the USOC as are other major corporations, including domestic companies such as United Airlines, Nike (also an Olympic supplier), Citibank and Deloitte, and non-U.S. companies such as Samsung and Panasonic.
5.) The U.S. Olympic uniforms were designed in the United States and were outsourced by Ralph Lauren through competitive bidding to a company in China. They were sewn there and transported back to the U.S. on United Airlines (flying Boeing aircraft).
6.) Bottom line, more than half of the value of the uniforms was produced in and remained in the United States.
I mention this latest controversy because it is a clear example of the global economic environment in which we currently live in and on which we rely for literally everything we eat, wear, and use. Goods are designed where the intellectual capital resides — generally in the United States and other developed countries. The assembly of goods is done where skilled labor is the least expensive. In the past, this was done close to local markets because maintaining an extended supply chain was impractical. In today’s technology-based design, manufacturing and efficient transportation environment, the cost of production drives the decision where to manufacture.
Globalization has enabled Wal-Mart to offer quality goods to the price-conscious consumers. Would a Wal-Mart customer pay 50 percent to 100 percent more for an item if it were manufactured in the United States from materials sourced wholly from within the United States? The answer is clearly “no.” There are signs of forthcoming changes in the global manufacturing dynamic. In 2000, the average worker in China earned $.58 per hour. Today, that worker earns $4.00 per hour.
We in Washington state rely more on international trade and globalization than any other state. Traditionally, we have spoken of one in three jobs in our state as dependent on international trade. A new study commissioned by the Washington Council on International Trade will be published in September. It will show that currently more than 40 percent of the jobs in our state depend on international trade. The greatest danger to our economic security is an overreaction by policy makers that places artificial barriers to the free flow of goods and services around the world.
It is generally acknowledged that the passage of the Smoot-Hawley Tariff Act in 1930 (which raised tariffs on more than 20,000 imported goods “to protect American industry”) exacerbated the economic downturn that followed the 1929 Wall Street crash, as nation after nation retaliated by closing their borders to goods manufactured in the United States. Within two years, imports and exports to and from the United States declined precipitously and the world was mired in the Great Depression. Today, we hear a call for trade barriers to “protect American workers.”
Nothing could be more damaging to the American workforce than barriers erected to protect one segment of the workforce (say textile workers) that through tariff retaliation devastates other critical segments of our economy, such as technology, aerospace, and services. (end)
Karl Ege was the president of Seattle Rotary in 2004–2005 and has been asked on occasion to speak on topics related to investments, the financial crisis, and the global economy.