Buy American: From Cars to Wireless to Apps

            It’s hard for me to equate patriotism with the international trade concept of comparative advantage.  Somehow consumers should abandon the best value and quality proposition in a commercial transaction if the creator lacks U.S. citizenry.  I understand the view that domestic employment matters, but should U.S. consumers bear the possibly severe financial consequences of their government’s efforts to handicap foreign competitors? 

             Is every Walmart customer an economic traitor?

            Years ago, domestic car unions, manufacturers and politicians wanted consumers to think twice about buying foreign made vehicles.  See https://www.npr.org/2017/02/23/516787778/auto-workers-union-to-launch-buy-american-campaign  Now the patriotism litmus test applies to wireless networks, https://www.nytimes.com/2020/06/30/technology/fcc-huawei-zte-national-security.html

and new this week, the Tik-Tok social networking app: https://www.nytimes.com/reuters/2020/07/07/business/07reuters-usa-tiktok-china-pompeo.html.

            I cannot understand where to draw the line between legitimate national security and foreign espionage concerns versus thinly veiled market protectionism.  The FCC hasn’t helped with its recent determination that Chinese telecommunications equipment manufacturers Huawei and ZTE pose acute national security threats:   https://www.fcc.gov/document/fcc-designates-huawei-and-zte-national-security-threats.  The FCC relies heavy on conjecture, circumstantial evidence and anecdotes.  That may suffice, but a strategy of handicapping foreign market leaders also constitutes a factor in light of the Commission’s multifaceted campaign to reclaim 5G market “leadership.”  See https://www.fcc.gov/5G.

            I suggest our government officials slow down and consider the consequences of their existing and prospective actions.  A downward spiraling trade war appears possible and rarely does anyone benefit from a “beggar thy neighbor strategy”.  See https://www.investopedia.com/terms/b/beggarthyneighbor.asp.

            Similarly, I suggest we take a deep dive on the concept of punishing Chinese government data mining and analytics made possible by U.S. consumer subscriptions to Tik-Tok.  How is this form of governmental surveillance substantially worse than similar tactics of private ventures?  Why do the governments of Russia and other adversaries get a pass if the risk to elections, civil society and trust is arguably equivalent?

            Closing the U.S. market to ventures offering a better mousetrap seems misguided, because it insulates domestic ventures from having to compete robustly and strive to enhance the value proposition of their goods and services.  I don’t support spying by foreign commercial ventures serving as agents for their governments, but I don’t want our nation to further disengage at great expense to its citizens.

Lessons From Milk Price Supports

            On a trip to see the In-Laws in Ohio, I noticed milk prices at half ($1.99 for a gallon) the rate available at home. Pennsylvania law establishes a price floor ostensibly to promote family farms and a “fair” price.  In application, so-called price supports prevent grocery stores from using milk prices as a lost leader.  Additionally, a $4 price point suppresses demand as the same time oversupply has pushed wholesale prices to record lows.  Meanwhile, intermediaries in Pa. make out like bandits exploiting the wide gap between the wholesale market price and the floor price paid by retail consumers.

            Price supports probably never made sense, but they hurt family farms now.  Of course, sponsored researchers and p.r. firms tout the non-existent benefits to the small farmer. What’s $2 a gallon if it helps sustain small farms?

            The better question: Why pay $2 more when not one dime flows downstream to the small farmer?

            The lesson here lies in the manipulation of emotions and good intentions, by stakeholders able to capture all the financial benefits.  This kind of “rent seeking” occurs all the time at the FCC.  Just now, the prospect of Huawei rigging its 5G wireless equipment for espionage warrants an absolute bar on the use of $8.5 billion in annual universal service funds available to subsidize rural access to wired and wireless telecommunication technology.  No one has offered clear evidence that Huawei equipment provides China a spying opportunity.

            Forcing Huawei out of the marketplace will raise the cost of 5G and other telecommunications equipment, particularly for price sensitive rural carriers. U.S. telecommunications consumers end up subsidizing “national heroes” even if these manufacturers sell more expensive and inferior equipment.

            Clever.