Improving the trade deficit with a label

Departments - From the Flight Deck

March 7, 2013

Tom Grasson
Associate Publisher
Editorial Director

No doubt, we’ve all read some dumb labels such as the one appearing on a popular chainsaw, which reads, “Do not attempt to stop chain with your hands.” However, not all labels are intended for the individual that lacks common sense.

Some labels help us make intelligent decisions. For example, the label on a bottle of vitamins provides supplemental facts and ingredients. This particular type of label becomes a source of information to help us make an informed decision on the selection of vitamins that are best for us.

Labels are commonplace in today’s world. Perhaps this is why the average person reads them halfheartedly. However, some labels are of a serious nature and should not be taken lightly. I’m talking about labels that have the potential to alter our viewpoint and perhaps change our day-to-day behavior.

While there is a Country of Origin label that was passed into law for the agriculture industry, developing such a label for all imported products would give consumers needed information to make educated, conscientious decisions about their buying habits. In his new book, “Buying America Back,” Alan Uke gives food for thought on the importance of creating such a label to build a stronger America. Uke makes the case that a Country of Origin label covering all imports would provide information to the consumer to help make buying decisions that could have a positive effect on the economy and reverse the stagnant U.S. job market.

At first glimpse, something this simple seems too good to be true. However, Uke’s points make sense. Our current economic situation is due to a lack of understanding as to why manufacturing matters and the consequences of a massive trade imbalance with several countries. For example, buying a $100 product from Chinese manufacturers means that, because they try not to buy anything from the United States, only $25 of that amount returns to the U.S. On the other hand, when we buy the same product made in Canada, $90 out of the $100 comes back; from Taiwan, $73; and South Korea $79.

The Country of Origin label will show where the product’s components costs originated, as well as show the trade balance of each country with America for the prior year. In addition, the label will show where the company’s headquarters are located, which is an indication of which country receives the profits as well as the tax revenues.

Product labels showing all the countries of origin and their percentages of content would provide accurate information to make informed buying decisions. The labels do not compel businesses to do anything other than make disclosure. Furthermore, they do not restrict or change the cost of trade. No doubt, for free markets to work effectively, this type of information is necessary.

Personally, I think the American consumer would take the Country of Origin label seriously. More importantly, I believe this label would encourage people to make a purchase from a fair-trade country or, better yet, buy American in an effort to improve our export trade deficit.

As always, I welcome your thoughts and opinions on this matter.

 


tgrasson@gie.net