Made in China? Why Can’t Americans Manufacture Their Own Goods?

tradebrains.com

It’s impossible to boycott Chinese products and brandsOutside the Eco-Chamber—-

Vivek Kaul, Image for representation


One of the non-medical impacts of Covid-19 has been the race among politicians all over the world to produce goods within their country rather than import them from China. In India, a narrative of self-reliance is being propagated. The logic is simple. If people buy products made fully in India, Indian businesses will benefit, and the economy will do well. QED.

This logic is all wrong. India saw more than four decades of import substitution between 1947 and 1991, when imports were discouraged, and Indian businesses were encouraged to produce for Indian markets. ‘Atmanirbharta’ is nothing but import substitution with a new name, which can be sold well over WhatsApp and other social media.

The quality of most products during the import substitution days was quite bad. As the economy opened up after 1991, the choice of products on offer in the open market went up dramatically. This is primarily because there is competition among firms.

When import substitution is the norm and companies need to produce just for the internal market, almost anything goes, simply because there is very limited competition internally, and companies know they can’t compete in the international market anyway. If you are wondering why many Indian companies still can’t compete on the international front, herein lies the reason. Indian firms aren’t productive enough.

This explains why imported products from China have become so popular over the years. Imports from China peaked at 16.4% of overall imports in 2017-18. They fell to 13.7%, after we started making imports from China an ego issue. Between April 2019 and February 2020 (the first 11 months of 2019-20), imports from China rose again to 14.1% of all imports.

It is worth remembering here that no one is forcing Indians to buy Chinese products. But they still do so, simply because they offer more value for money than a locally produced one.

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