Consumer Beware: With Less Trade Comes Less Choice

Imports take blame for demise of U.S. car brands, but overall variety expands economy

By Greg Ip. Excerpt:

"Trade data doesn’t fully capture the benefit of variety. For example, if only red wine is made domestically, access to imported white is quite desirable—but tough to value. Between 1972 and 2001, the range of products imported by the U.S. grew fourfold, according to a 2004 paper by David Weinstein of Columbia University and Christian Broda, then at the Federal Reserve Bank of New York. They put the unmeasured value of this increased variety at 2.8% of gross domestic product.

Last year a team of economists at the New York Fed found that 85% of the increase in imports from China between 2000 and 2006 came from products that had never been imported before, delivering a substantial unmeasured benefit through greater variety.

The U.S. car market is a prime example of the benefits of imported variety. Kristin Dziczek, an economist at the industry-backed Center for Automotive Research, says it’s “unbelievably hard” for American manufacturers to make cars profitably, no matter how much they automate or what concessions their unions offer. A growing share of cars is thus made by foreign companies, imported, or both. According to Edmunds.com, 19 of 20 subcompact and 17 of 27 compact cars offered in the U.S. are imported.

Early last year Ford scrapped plans to move production of the Focus from Michigan to Mexico after criticism from then-President-elect Trump. Ford then sought to import it from an underutilized plant in China, but dropped that plan after Mr. Trump imposed a 25% tariff on Chinese imports. It now plans to discontinue offering the car in the U.S."