Federal Trade Commission Received Documents Dec. 15, 1995 P894219 B18354900014 MADE IN USA POLICY COMMENT FTC FILE NO. P894219 Submitted Contact: Doreen L. Brown 12/14/95 President COMMENTS REGARDING "MADE IN USA" ADVERTISING CLAIMS by CONSUMERS FOR WORLD TRADE Consumers for World Trade (CWT) is a national, non-profit, non-partisan organization, established in 1978, and concerned with the interests of consumers in international trade. CWT is involved in both lobbying and educational activities. Consumers for World Trade has for many years actively opposed domestic content measurements, country of origin rules and Buy American laws. These are trade distorting as well as misleading and costly to consumers. Consumer Perception and Motivations In the Federal Trade Commission's Federal Register notice (10/18/95), the Commission cites that comments received in 1994, in connection with the Hyde case, stressed the fact that consumers were aware of increased globalization and increased foreign sourcing. The Commission asks how this knowledge affects consumers' perceptions of "Made in America" labels. An understanding of globalization varies, of course, with the sophistication of the consumer. Low and fixed income consumers who are the most affected by the price of goods and by the artificial inflation resulting from trade barriers are also the segment of our population least aware of the intricacies of trade. Nonetheless, these consumers are quite conscious of and concerned about cost and quality, and, for the most part, consider themselves "good citizens" as well. To them "Made in America" labels definitely send the wrong message. A study conducted by the Gallup organization for the International Mass Retailing Association ("Consumer Attitudes Toward Product Sourcing", May 1994) makes some very revealing points as shown by the following excerpts: "Despite their preference for buying American, most people generally express positive attitudes about the affect that imports have on the market in the U.S." "At the philosophical level, Americans indicate a preference for American products but, in practice, they do not pay much attention to where the product was produced. When asked to rate the importance of five factors that influence their purchasing decisions, the least important factor was the country in which the products are produced." 82% rated quality first, 53% warranty and price, and 52% rated product features at the top. When asked how often they would try and determine a product's country of origin before purchase, 34% of the respondents said "always", 44% "sometimes", and 22% "rarely or never." Most of those concerned with where the product is made were over 60 years of age. The percentage of consumers willing to buy American if a product costs 10% more than it foreign counterpart, dropped by 20%. The Difficulties of Meaningful Labeling Although the Gallup study did not address itself directly to a consumer's perception of what a "Made in America" label meant, it clearly demonstrates that many consumers are confused about trade and that labeling would have to contain a lot more specific information in order to be accurate and to allow consumers to make informed decisions about the products they wish to buy. However, a label that attempted to provide consumers with all this necessary information would be costly, impractical, most likely ignored by consumers and would prove to be a burdensome task for manufacturers. The fact that U.S. trade and customs officials have had to adopt about 10 different country of origin determinations because of the complexities of our preferential treatment schemes testifies to the difficulties of following any type of national standard for labeling. Can labeling be fair and useful to consumers? "Made in America" labeling affects trade and consumers in the same way as domestic content, rules of origin and Buy America laws. We oppose it for the following reasons: 1. As the Federal Trade Commission indicates, it is virtually impossible for such labels to inform consumers accurately as to in what country and to what degree a product is manufactured. We agree with senior correspondent Richard Lawrence who pointed out in a Journal of Commerce editorial ("Made in the USA? Who Knows?" 6/29/95); "Who's more American - Smith Corona, which manufactures its typewriters abroad but employs close to 400 workers in U.S. based research and design, engineering and administrative services, or Brother Industries, a Japanese firm that makes its typewriters in Tennessee, employing 450 Americans? How about a label that says "Made on Planet Earth?" 2. Labeling encourages a "Buy American" mind set in consumers that places imports in a negative light. This contradicts our nation's commitment to trade expansion and trade liberalization, and is in direct opposition to, and can invalidate, U.S. efforts, at the multilateral level, to achieve greater market access by foreign countries for American exports. How can we convince our trading partners to purchase our goods if we ourselves encourage Buy America practices at home? 3. The Federal Register Notice (10/18/95) mentioned above acknowledges that labeling is intended as "a manufacturer's selling tool that could help preserve American jobs." This intent, in itself, is misleading for those consumers who believe they are being good citizens by selecting American goods over imports regardless of quality or cost. For consumers are not being told the complete story. They should be advised that some domestic jobs might be preserved, but others, related to exporting and importing, may be lost. (The latter often in larger quantity.) The Federal Register notice also states that the "primary mission of the Commission's consumer protection is to enhance consumer choice." We doubt that consumers will be helped by attempting to improve "Made in America" labeling. On the other hand, Consumers for World Trade believes that, given the choice, most Americans will purchase goods which are of the best quality at the most affordable price. In many cases, these products could be mostly American made. Trusting in the American consumer may serve the interests of our manufacturers and labor force more efficiently than incomplete and confusing labels.