While the dollar is down now, it will eventually come back. It would take a few years for foreign manufacturers to ramp up production in the US. By then, the costs savings might be gone.

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Also an economics major and I agree completely. Also what about the materials used in the cars? Where was the aluminum and steel mined? There are tons of factors like this, so why does it matter when a group uses arbitrary statistics to make their decision about whether its an American made car.

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You can, to a degree, use place of assembly to determine where the bulk of parts are supplied. To help just-in-time, its beneficial to have your suppliers (and their suppliers) as close as possible to get lead times down. It also helps keep costs under control

Say what you will about globalization, if you run lean manufacturing, a supplier that can get you parts quickly is probably either warehousing near you, or manufacturing near you. It doesn't behoove them to keep a lot of stock, either, so that faster they can react to your needs, the better.

Now "closer" is usually "in the same jursidiction or country" to reduce issues with cross-border commerce; we're not usually talking the same town. This is why, say, GM Canada's operations use a lot of Canadian suppliers even though the product is destined for the American market.

This study, more or less, takes this into account. It also shoots the "Buy American" argument right in the head. If you want to support your local economy, buy local goods. Buying a GM car built in another state (or another country) benefits GM's shareholders and executives, who won't return much of those dollars to your local economy. Buying a Toyota or Hyundai built in your own state benefits the people who made the car and the parts supplied locally. Yes, the profit dollars go back to rich guys in Asia but the operating costs that went into labour (wages, logistics, utilites) stay in your city/state/provice.

But if someone wants to make Rick Wagoner et al richer, rather than the hundreds of people at the Tundra plant who will spend dollars at local businesses, by all means do so.

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"But if someone wants to make Rick Wagoner et al richer, rather than the hundreds of people at the Tundra plant who will spend dollars at local businesses, by all means do so."

And if you buy a Toyota, then you make Fujio Cho et al richer. What is your point?

That leads to another debate. I understand about funding local jobs and that's good whether it's an import or a domestic manufacturer, but the key money is where the profits go (hint: they don't stay in the US for import brands!) and the other big expenses like engineering. We all know that manufacturing is on the decline in this country.

I own an import, but I disagree with people saying that "it's built in the USA, so it's practically domestic." That's only partially true. The bulk of the money likely goes overseas. I suppose that's better than all 100% of the money going overseas, but it's still not the same as buying domestic where 100% really does stay in the US (in some cases).

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"I'm an economics major, not exactly worried about losing manufacturing jobs. I care more about engineering and finance dollars."

Thanks for making the decision that engineering jobs are more important than manufacturing jobs. I guess you are concerned about finance dollars because they employ people like you.

Seems to me that all types of jobs are important because our society will always have people of different abilities, backgrounds and education levels, all of whom need jobs. There will never be enough engineering and finance jobs to replace lost manufacturing jobs.

Your attitude that engineering and finance jobs are more important than assembly jobs is typical economist elitism. Economists treat never-tested theories as law and castigate those who have different economic viewpoints. God forbid someone suggest that a measured amount of protectionism could have a positive impact on the economic, environmental and social needs of the country without an economist attacking them. Ever think that maybe the global free-market you support is failing to meet the needs of many nations?

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I am an economics teacher, and it's good to see that there are people out there with good econ sense! Where the natural resources come from, the capital (both finacial and cost of equipment) and so on and so on... The whole made in America thing is so silly in our global economy to some extent and even more so if currency is allowed to float. We buy things in dollars, dollars come back...big circle. However, I too am concerned with American engineering jobs and technical jobs being lost to gaining economies in India, Ireland, China, etc... and that in time (quite some time) we could end not being able to cause the brain-drain that we currently do by taking many of their best who come here for a better standard of living (as their areas improve) and it will be more obvious how far we've fallen behind in our own technical schooling in a new world where we now will not be able to compete on the world stage...of course this will take some time...

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"Your attitude that engineering and finance jobs are more important than assembly jobs is typical economist elitism."

No, it's not. This is typical economic advancement. Manufacturing jobs go to the poorer countries who are starting to industrialize. When you outsource the jobs that require low education and replace them with higher paying careers, you improve average quality of life. That's not elitism -- that's progress.

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This is not the right forum for an economics lesson, so go ahead and look up John Maynard Keynes and Milton Friedman. If you think with your gut like Colbert, you may be a Keynesian. If you prefer science you're probably with Friedman and the rest of the Economics society since the '50s. Funny how those who study econ are with Friedman and those who don't are with Keynes. Just because it feels right, doesn't make it so. Science and intuition are not the same.

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@Scott

I disagree with you on the important part being where the profits go. Profit dollars in a publicly held company are either paid out (to management and shareholders) or reinvested in infrastructure. Profits don't go back to the local community, excepting a pittance performance bonus and some infrastructure improvements. By and large, profits get absorbed by the mothership.

Operating dollars (wages, for example) as well as purchases of local supplied goods, employment of local logistics agencies do go right back to the community. I can't control where the profits go when I buy from a multinational, but I can ensure that the plant the employs hundreds (thousands?) of my neighbours is kept humming.

Put it this way: I'd be more directly benefitted if I bought a Toyota Corolla, Chevy Impala or Ford Edge. Most of the car is built in Cambridge (Corolla), Oshawa (Impala) or Oakville (Edge) Canada, that's where the final assembly is and it's certainly where the operating dollars go. Buying a Cobalt, Acadia or Taurus does me no good, and actually harms my local economy as that's one less Corolla, Edge or Impala that pays the wage of the people at the plant. If enough people don't buy Corollas, Impalas or Edges, then Toyota/Ford/GM pulls production and my local economy tanks as the spending power of those employed workers disappears.

You can make an argument about overall health of the company being good for the country as a whole, but with globalization that's becoming much less true than it used to be. "What's Good the the General is Good For America" is much less true than it used to be, and is getting less true every day.

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SamK:
"The whole made in America thing is so silly in our global economy to some extent and even more so if currency is allowed to float. We buy things in dollars, dollars come back...big circle."

What big circle? You are making the assumption that we don't have a trade imbalance.

Once again an economist looking at economic theory and not paying attention to economic reality.

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RE: "This study...shoots the "Buy American" argument right in the head."

No, not really. You make the common mistake of assuming people buy American for a singular reason. Supporting your local economy is good, but supporting your country as a whole is better.

RE: "The key...is where the profits go (hint: they don't stay in the US for import brands!).

No, profits really aren't terribly important and make up a small percentage of the transaction every time a car is bought or sold. Is it better to buy a Ford that's made in Mexico or a Toyota built in America? The depends on what's most important to you - sending money to Fords corporate execs and shareholders or helping providing an American a job. There's no 'right' answer but personally I have no problem with a Toyota being labeled as a domestic built car for the purposes of this study.

RE: "This is typical economic advancement. Manufacturing jobs go to the poorer countries who are starting to industrialize. When you outsource the jobs that require low education and replace them with higher paying careers, you improve average quality of life. That's not elitism -- that's progress."

Actually in terms of world history, specialization has been a mutually good thing only when each partner was obtaining something it didn't normally have access to, or when things of equal value were being traded. In modern globalization we're trading middle class jobs for cheap labor - something that your average American would not consider to be of equal value. This is great if you run a business but kinda sucks if you're a middle class worker. That's why globalization is a modern concept that had to be manufactured and sold to the public by people who gain monetarily by having access to this cheap labor.

By far the biggest real world problem is that we're outsourcing the jobs that require low education but we're not replacing them with higher paying careers. This effectively lowers the overall quality of life for your average American, something becoming more obvious each and every year.

The way you have to think about modern globalization is that it's kind of like a balance scale. When one side starts low and the other high, any increase on one side leads to a corresponding decrease on the other. Real economists knew this at the time the theory was being developed but assumed that we could build our way out of it or at least tread water until things evened out. Unfortunately that's not how it's playing out.

And what's most depressing is that so many Americans have been conditioned that globalization is good for the country and that if you don't buy into it you're some sort of protectionist crackpot who 'doesn't get it'. This makes any real debate almost impossible, although as the results of globalization become more obvious this will change in time. You can't argue with reality ;)

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The Other Bob:
Related to my other post, if you buy a car where the majority of the money goes to workers in Japan, then what are they going to do with those dollars? They either buy US made goods or invest in US companies. The problem is a Japanese car is very visable, but the fact that your taxes are lower and the interest on your house is lower because China and Japan funnel money into the US is not so visible. Most people know about the current account (goods and services), but few people care about the capital account (investments). Essentially by buying a Chinese or Japanese good, someone in China or Japan is doing the savings that you should be doing yourself, for you.

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So you say that if you buy a car where the majority of the money goes to workers in Japan, they either buy US made goods or invest in US companies? Which Japan is this? I must be thinking of the other one.

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My friend, you should care about manufacturing jobs. What are the consequences of unending $700 billion balance of payments deficits?

I would caution you not to accept as gospel everything your economics professors tell you. I'm referring to sophisms such as "Don't worry about the balance of payments issue; it's such a small percentage of the GNP". Removing the implicit spin factor: you can go broke quickly or you can go broke slowly; you end up broke in both cases.

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