Tuesday, October 16, 2012

What's in the cost of a tire?

I have no issue with trade policies that protect American jobs, unless the policies protect American jobs by protecting "gougism" (and thus hurting the consumer).

Take tires, for instance.  Trade policies that impact Chinese import tires that were "flooding the market with cheap, Chinese tires" and saving thousands of American jobs.

What makes the tires cost so much?  Consider this: a tire (a single tire) typically costs about as much as, say, a Nook Color.  Which is more complex?  Which cost more to design?  Which is more complicated to manufacture?

Tires are a bunch of rubber and steel (and perhaps polyester), while the Nook Color is glass & metal & plastic & motherboards & CPUs and ... yes, the tires cost more to ship, while the Nook Color costs less to ship.  But the tires are manufactured on assembly lines (that are probably paid for long ago).

Now, consider... the Chinese tires, they have to be shipped to the US.  That's not cheap.  And, yet, the Chinese tires are still cheaper.  Yes, there are employment differences, and wage differences, but really, how many people are involved in the tire manufacturing process?  Isn't a lot of it automated?  And yet a set of tires costs more than a laptop computer you can buy from the same place you buy your tires (Sam's Club, WalMart, etc.).

If the Chinese tires are cheaper, instead of blanket "trade sanctions" to protect the potential American Gougism, shouldn't we let the market make the sanctions?  If American tires have to be sold at a lower profit point to compete, isn't that good for the consumer?  And doesn't that leave more money in the consumer's pocket to stimulate the economy by buying other goods, perhaps that other Americans have made (like my wife, who is starting a business to make and sell bags of various types, such as purses and tote bags)?

If it's an "unfair trade balance" that is truly unfair (due to employment practices in the trade nations), sure, sanctions.  If it's "unfair" simply because the competition is selling at a lower profit point, should the gov't interfere to keep excess profits in the pockets of top executives (profits which the consumer ends up paying)?

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