Putting the ‘Heat’ on US Manufacturing

Today WMT officials are hosting a “US Manufacturing Summit,” cast as an effort to jump start domestic sourcing, but this is not the first such effort. WMT’s first “Buy American” campaign was launched in the late 1980s, and also promised to boost US manufacturing jobs. While the overall effect on jobs was unclear (WMT shifted production some items such as shirts to US manufacturers while simultaneously increasing imports from China and other low wage export platforms) the program was widely considered a PR success. But WMT’s “Buy American” campaign had another goal as well. As one then Wal-Mart board member told Wall Street Journal reporter Bob Ortega, one of the main objectives of the campaign “was to put the heat on American manufacturers to lower their prices.”
One consequence of this “heat,” according to one WMT vendor who spoke with Discount Store News, was that companies like his were “no longer manufacturers,” and had merely become sources who “produce only the products that Wal-Mart has decided it wants to sell, which in turn makes R&D and introduction of new products redundant and unprofitable.”
When even those prices weren’t low enough, some suppliers, now completely dependent on WMT for their markets, were told to move offshore. As Professor Gary Gereffi at Duke University observed in 2004: “Wal-Mart is able to transfer whole U.S. industries to overseas economies.”
How many jobs were affected? According to a report by the Economic Policy Institute, Wal-Mart’s imports from China had reached $27 billion by 2006, and Wal-Mart’s imports alone accounted for 11% of the growth of the US trade deficit with China between 2001 and 2006. EPI estimates WMT was responsible for the loss of an estimated 200,000 US manufacturing jobs.
What about Wal-Mart’s 2014 “Made in the USA” campaign? If WMT’s earlier foray into US manufacturing resulted in tragedy for thousands of US workers, the current edition resembles something closer to farce.
To illustrate its “commitment to American renewal” Wal-Mart has identified a handful of suppliers it says are part of an effort to grow US manufacturing jobs. One of the examples most often profiled in recent press accounts is that of Element Electronics Corp., a producer of flat screen TVs in Michigan and South Carolina. One report called Element “the campaign’s biggest surprise to date,” touting the supplier’s “six assembly lines making 32- and 40-inch TVs that are now available in all of Walmart’s more than 4,000 U.S. stores.”
But, as a subsequent Wall Street Journal report noted, the real surprise may be the one that awaits unsuspecting US consumers:
“WINNSBORO, S.C.—Every flat-screen television set that rolls off conveyor belts here goes in to a box marked “Assembled in the USA” before it ships to Wal-Mart customers. What might surprise buyers is how little those TVs change after arriving from China in the same boxes.”
The Journal describes how Element’s US workers merely unbox the TVs, insert Chinese-made memory boards, then test them before replacing them in their patriotic cardboard cubes. Element would like to do more assembly in the US, but, as Professor Gereffi noted ten years ago, the necessary supply chains were moved offshore years ago, often at the behest of a large Arkansas based buyer.
It’s not surprising then that WMT’s actual “commitment” amounts to zero: the company’s press releases announce an additional $250 billion in domestic purchases over the next ten years, but that is actually slightly less than what WMT was already on track to purchase, assuming WMT US and Sam’s Club’s sales and cost of goods sold simply continue to grow at the rate they have over the past three years (2.9%).
Meanwhile, as it has in the past, WMT continues to lobby in favor of “free trade” legislation including the secretive Trans-Pacific Partnership and “fast track” authority for trade bills. We eagerly await any indication the company is considering reversing these positions as part of its commitment to US jobs.

What do you think?