How to Save American Business

The Challenge of Foreign Competition

It's a fact of life that American business owners in general -- and manufacturers in particular -- face stiff competition from countries with dramatically lower costs than we have. In Mexico, for example, someone can remanufacture one popular type of engine in 20 hours for $2.15 an hour, including labor and all the invisible overhead costs, such as rent, electricity, accounting, and health benefits (if the company provides them). In Springfield, it costs us $40 an hour to make that engine, partly because the invisible costs are much higher. So we're spending $800 per engine, while a Mexican remanufacturer can do it for $43. That's a $757 difference. We think it's only our exceptional quality that saves us.

But with that kind of cost differential, I can't criticize any U.S. business owner for thinking about setting up shop overseas. We may eventually be forced to consider it too. If we're pushed to that point, we wouldn't shut down any of our Springfield factories, but we might start doing some business in Mexico to bring down our average cost. There are simply no cheap alternatives this side of the border. Although in theory we could reduce our invisible costs by not offering health insurance, I doubt that anybody would want to work here if we did. Besides, our goal is to improve the quality of life in our community, not to make it worse. We can continue to do that and remain competitive by manufacturing both here and abroad. It doesn't have to be all or nothing.

That's the message I think you can convey better than anyone else to company owners who are being hurt by competition from countries with much lower costs. Erecting trade barriers certainly isn't the answer. Look what happened in 2001 when you put tariffs on steel imports. It hurt a lot more people than it helped by driving up steel prices for American builders and manufacturers. Instead, you should be the teacher. Explain the issue to company owners. Encourage those who are thinking about shutting down entire factories to keep some work here and transfer a smaller portion abroad. That way, they'll reduce their costs without devastating their communities by eliminating thousands of jobs.