Buying Domestic Products Only is a Curse, Not Blessing

Introduction

Globalization changes the nature of consumer and trade relationships. With the whole world going flat, more businesses have a chance to present their products in foreign markets. Still, even in the world so heavily affected by globalization and diversity, many consumers choose to stick to the domestic products only. For many of them, buying products manufactured solely in their own country has become a life mission and the only possible way to protect their economy from crisis. Buying products from one’s own country is associated with a number of benefits and has  a potential to stimulate domestic economies’ growth. However, the decision to buy only domestic products can have devastating impacts even on the strongest economy. No country has enough resources and capabilities to manufacture all products and do it in an effective manner; therefore, it is not the country of origin, but quality and price, which should remain the primary criteria of the consumers’ choice.

Buying domestic products only: Consumer ethnocentrism

Globalization opens new economic venues and makes new products available to the consumers worldwide. For many years, economies operated in the atmosphere of limited product diffusion. Communism and totalitarianism have profoundly altered consumer attitudes towards native and foreign products. Many of them are still reluctant to buy foreign-made products, even when they are of better quality than their domestic analogues. Reasons why consumers refuse to buy foreign-made products are numerous, from the mere reluctance to spend their money on something foreign, to the strong belief that by purchasing domestic products only, they will support their economy and stimulate job growth. Such consumer behaviors are usually defined as “consumer ethnocentrism”, and they have profound impacts on the quality and efficiency of countries’ macroeconomic relations.

The term “consumer ethnocentrism” was borrowed from sociology, which defines ethnocentrism as:

The view of things in which one’s own group is the center of everything, and all others are scaled and rated with reference to it… Each group nourishes its pride and vanity, boasts itself superior, exalts its own divinities and looks with contempt on outsiders. (Sharma, Shimp & Shin 27)

Consumer ethnocentrism is an economic expression of cultural ethnocentrism, when consumers make product appropriateness decisions based solely on the country of origin (Sharma, Shimp & Shin 27). Simply stated, ethnocentric consumers prefer only products manufactured in their own country, and do not buy foreign-made alternatives even if they are better. More often than not, such attitudes grow from consumers’ genuine concern for the future of their country and the desire to protect the country’s economic interests.

It is by purchasing only domestic products that consumers develop a strong cultural identity and reinforce the sense of cultural belonging. For ethnocentric consumers, country of origin is the main criterion of what constitutes acceptable and unacceptable consumer behaviors (Egger 16). Such consumers will tend to exaggerate the positive qualifies of domestic products and underrate the best features of their foreign-made alternatives. In any case, the decision to buy only domestic products is more emotional than rational. Ethnocentric consumers often exhibit strong nationalistic and patriotic moods (Egger 18). They are willing to sacrifice their interests and focus solely on domestic products just to show their loyalty to their homeland (Egger 18). Unfortunately, coupled with the overt hostility to foreign-made products, consumer ethnocentrism can have devastating impacts on any country’s economy.

Why buying domestic products only is a curse, not blessing

No access to cheap products.Globalization removes geographic frontiers, and domestic consumers acquire better access to foreign-made goods. Domestic economies benefit from imports. It is foreign-made goods and services that diversify consumer decisions and choices, and empower them to become more rational in their tastes, preferences, and market decisions. To a large extent, buying domestic products only is the same as killing the national economy, because consumer ethnocentrism can put a complete end to imports (Lewis). Without imports, consumers and domestic manufacturers will no longer be able to purchase cheap quality goods (Lewis). The range of goods and services available to consumers will shrink. Consumers and their homes will be stripped almost bare of televisions and telephones, home electronics and exotic food products that are not manufactured locally (Lewis). Statistically, the elimination of imports and the decision to buy solely domestic products will result in huge financial losses: the national economy will have to pay $2 for every $1 in additional profits earned by domestic manufacturers (Lewis).

It is not difficult to imagine that customers, who choose to buy only domestic products, will often have to pay more, simply because they refuse to accept cheaper foreign-made alternatives. It is not uncommon for the ethnocentric consumers to pay $10 for the salad tongs made in America, instead of 99 cents for the identical foreign-made product (Lewis). In a similar fashion, the consumers, who buy products only from their own country, could spend as much as $650 for a barbecue grill made domestically, rather than save $200 and purchase an imported product for $450 (Lewis). With time and under the influence of increased product costs, the national standards of living will start to deteriorate. Consumers will have to pay a high price for their patriotism and rejection of foreign-made products.   

Hurting the national market. Purchasing only domestic products hurts the national economy, because when ethnocentric consumers choose not to purchase foreign-made products, they actually refuse to purchase domestic goods. The example of the United States is very demonstrative: according to Chen, the country is importing its Dell computers, Apple iPhones, Hasbro toys, and Nike shoes directly from China. Apparently, all these companies are American, so the consumers, who do not buy these products, damage their companies’ image and reduce their profits. Many ethnocentric customers do not know how imports and foreign manufacturing benefit their own economy. 55% of imports value goes to American workers and companies (Chen). Outsourcing decisions and free trade relations result in a considerable economic surplus. In 2009 alone, America earned $70 billion on importing goods or their parts from the countries like China (Chen). Thus, the consumers, who want to buy only domestic goods and services, should think twice before they making the final decision.

The consumers, who prefer domestic products to foreign-made alternatives and solutions, will hardly have a single chance to survive. They will hardly be able to limit their choices to the domestic products only. Americans will still keep using Apple iPhones and Dell computers, wearing Gap shirts and Nike shoes (Chen). They will also have to develop a broader look of how their ethnocentric decisions impact the domestic economy. By refusing to purchase China-manufactured American iPhones, ethnocentric consumers will cause considerable job and economic losses at the domestic level. At present, American companies import more than they manufacture within the country, mainly due to the cost-effectiveness of the imported parts, products, and innovative ideas (Glassman; Shapiro). This, however, does not make these goods non-American, as the place of manufacturing does not change the origin of the idea. As such, the consumers, who are willing to reject iPhones and Nike shoes on the basis that they were manufactured in China, will undermine the very foundations of their country’s economic prosperity. The same thing will happen to the customers, who choose to buy only domestic products in any other country of the world.

Competition and quality. Buying products solely from one’s own country undermines the very basics of fair competition. As a result, with time, the most patriotic consumers may face difficulties finding quality products. The absence of competition will never stimulate national manufacturers to improve their products and to innovate. Competition does not necessarily mean that the country loses its advantageous position in the international market. What it means is that, under the influence of tough competition, local producers will have to work harder, better, more efficiently, and be more consumer-oriented to win and to preserve their market share. This is why Shapiro writes that the United States should not delay its decisions to sign free trade agreements, as it puts more citizens to work and motivates the national economy to stay competitive.

Due to consumer ethnocentrism, manufacturers and service providers will have no incentive to improve the quality of their products and to reduce their prices. Consumers will be willing to buy their products regardless of their quality and price, simply because they were produced in their own country. Local companies will have little motivation to invest additional costs in innovative technologies and increased efficiencies. Despite low quality and high price, they will still be able to achieve economies of scale. Eventually, ethnocentric consumers will harm themselves by limiting their product choices and reducing their quality. The damage caused by such products to their health and wellbeing can hardly be underscored. Even if competition makes it difficult for the local companies to achieve and preserve high profitability levels, the only consequence of buying goods solely from one’s own country will be the total absence of positive growth, development, and innovation in all product markets.

Free trade. The consumers, who choose to buy products made solely in their own country, close the doors to import and, consequently, deprive their country of the opportunity to trade its goods and services internationally. The world will never welcome a country, whose customers reject imports and do not buy imported products. Buying only native-made products erodes free trade, leading to oversaturation of the local markets. The result of these actions is more than evident – stagnation and the absence of any growth prospects in the economy and social life.

Any country benefits from participating in free trade relations. Consumers can buy many things that are not manufactured in their country at a very low price (Shapiro). Local producers can sell their goods in the foreign markets without having to overcome trade barriers and tariffs (Shapiro). Companies that face market oversaturation can expand their market opportunities abroad, and use additional profits to improve the quality of their local-made products (Shapiro). In the United States alone, participation in free trade has created more than 25 million jobs over the past 15 years (Shapiro). Workers’ wages have also increased (Shapiro). Openness to imported goods and foreign markets expands the existing trade frontiers. On the contrary, not pursuing openness, imports, and free trade due to consumer ethnocentrism could cost the country at least 300,000 jobs (Shapiro). Again, and as mentioned previously, ethnocentric consumers, who choose to buy products manufactured solely in their own country, hurt themselves and damage their growth prospects and wellbeing. They have to buy low-quality products due to the lack of fair competition. They reduce their country’s prospects to become a full member of the free trade agreements. Ethnocentric consumers may end up having no job, simply because the national economy cannot provide enough employment opportunities to its citizens. Such protectionist moods will have devastating consequences for any country that chooses to sell only native-made products.

Technologies, innovation, and consumer ethnocentrism.The consumers,who buy products solely from their own country, close the doors to innovations and technologies. On the contrary, countries that favor free trade and motivate their consumers to choose the best products from other countries have all chances to become innovative and technologically advanced. “Free trade encourages innovation. If you can obtain the best products quickly, easily and at a reasonable price from anywhere in the world you can innovate in design, marketing, and distribution” (Shapiro). Under the pressure of competition, local firms have no choice but to innovate. Simultaneously, open borders facilitate the transition of the new technologies to the consumers’ native countries.

In a country, where consumers buy only locally produced products, firms can neither become a unit of innovation, nor benefit from such innovations. Ethnocentric consumers will never contribute to their economy’s stability and growth, because innovativeness and technologies are at the heart of all major economic revolutions. Today, when international markets are becoming more open and integrated, only those countries that participate in free trade and import technologies can become more economically advanced (Wakelin 6). Those countries, which do not use or do not have access to the latest technologies, will have to lag behind. A policy of protectionism based on the “Buy American” philosophy will never foster real domestic innovation (Shapiro). Ethnocentric consumers will never encourage other countries and foreign trade partners to share their discoveries and technological innovations with them. They will also fail to keep the most prospective minds within the country, as any country, whose consumers are ethnocentric, will have nothing to offer to such individuals. Consumers should not buy only products that have been manufactured in their own country. On the contrary, they should welcome the best and most affordable products from abroad. This is the only way to stimulate an effective exchange of goods, services, knowledge and innovations, while also encouraging the best minds to come and work for their own country (Shapiro).

Consumer ethnocentrism and resource allocation.No country has enough resources and manufacturing capabilities to produce all possible goods and products within its territory. Consequently, the consumers, who choose to buy only locally manufactured products, will either face the lack of the most essential goods or buy expensive native-made products of poor quality. Simultaneously, countries, whose consumers are open to imports, will benefit their economy in the long run. If a foreign country can supply local customers with a commodity cheaper, than they can make it by themselves, it is certainly better to buy it from foreigners (Glassman). American electronic companies will never be able to satisfy the growing demand for communication technologies and innovations: as mentioned earlier, the most outstanding American companies successfully import their products and parts from abroad; thus, making their products to be more affordable, and increasing their diversity in the market (Chen). American families will never grow their own wheat and product their own flour (Glassman). They will have to eat bananas imported from Central America, purchase Italian shoes, and use Japanese TV sets to watch the most interesting programs (Glassman). Suffice it to say, the U.S. has few sources of oil and gas. Thus, will ethnocentric consumers give up their traditional product choices and stop driving their cars because they are German, and the gasoline they use has been imported from a Middle Eastern country?

This question does not need any answer. The consumers, who buy only products manufactured in their own country, will never give their economy a strong competitive advantage in the international market. Every country should focus on manufacturing and selling the products it can produce better and cheaper (Glassman). This is the essence of any country’s successful economic advancement. America will never grow its bananas, since its weather and climate are not suitable for that. At the same time, the economy can save a lot of money by purchasing cheap imported products and using the rest to invest in the local businesses. Given the devastating impacts of protectionism and consumer ethnocentrism on any economy, not the country of origin but price and quality should become the primary criteria of all consumers’ choices.

Conclusion

After a series of global economic shakes, many consumers have decided that it is better to buy only products manufactured in their own country. This phenomenon is defined as “consumer ethnocentrism” and implies that the country of origin is the chief factor of consumer choices. Ethnocentric consumers tend to exaggerate the positive qualities of domestic products, while also underrating the benefits of imported alternatives. Unfortunately, any decision to buy local products only can have devastating impacts on the country’s economy. The consumers, who choose to buy the products manufactured solely in their country, face poorer product choices and increase their expenses: it is no secret that many domestically manufactured goods are much more expensive than their foreign-made alternatives. Consumer ethnocentrism damages competition and does not motivate the local businesses to improve the quality of their products and services: consumers will keep purchasing their products, as long as they are manufactured in their own country, even if their quality is below the accepted standards. By purchasing solely the products manufactured in their own country, consumers close the doors to import and, automatically, reduce the country’s chances to benefit from free international trade. Such countries lack access to foreign innovations and technologies. Eventually, ethnocentric consumers hurt their economic and social wellbeing, as imports and free trade greatly contribute to job growth and economic advancement. Suffice it to say, no country has enough resources to produce all possible goods and services within its territory. Every country should sell the products it can make better and cheaper. Thus, not country of origin but quality and price should become the chief criterion of consumer choices.