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How Trade Spreads Holiday Cheer

December 20, 2017 5 minute Read by Laura Collins
It is projected that the average American household will spend more than $900 this year during the holidays. So, it is only fitting to discuss what truly makes the holidays so special: Global trade.

The holidays are upon us, when families gather to exchange presents and watch little ones joyfully tear wrapping paper to get to the gift inside. Whether you prefer to give Barbies®, LEGOs®, smart phones, or automobiles, American gift givers have a dizzying array of choices at every price point.

It is projected that the average American household will spend more than $900 this year during the holidays. So, it is only fitting to discuss what truly makes the holidays so special: Global trade.

Most presents under the tree this year will be manufactured outside of the United States, including gifts made in the U.S. which likely have components from foreign countries.

Even Santa Claus benefits from global trade. Despite having the world’s most skilled toy manufacturers, elves, Santa surely imports raw materials. After all, the North Pole is not rich in natural resources and toy components do not appear by magic.

Free trade agreements like the North American Free Trade Agreement (NAFTA) and the Korea-U.S. free trade agreement (KORUS) make manufacturing more cost-effective by lowering or eliminating tariffs. NAFTA is an excellent illustration of the role trade agreements play in creating global supply chains and enhancing economic competitiveness.

According to our North America Competitiveness Scorecard, North America continues to be the world’s most competitive economic region. This is due to NAFTA’s regional supply chains and manufacturing platforms. Here is a snapshot of Christmas gifts, both classic and modern, that reach your tree with the help of global trade.

Dolls

Whether you prefer Mattel’s Barbie, Hasbro’s Baby Alive, or the now ubiquitous American Girl and her 18 inch doll counterparts, dolls are a staple of Santa’s toy bag. Barbie and Baby Alive start around $10 for basic models without accessories. By contrast, the typical American Girl doll is $115. Her discount store counterparts are a more modest $20 to $30 each. What do they have in common?

Each of these companies manufacture their products overseas. American Girl dolls are made in China. Hasbro has facilities in China and around the globe. Mattel has facilities in China, Indonesia, Malaysia, Thailand, and NAFTA-member Mexico. Mattel was even ahead of the global trade curve, making the original Barbie in Japan in the late 1950s.

LEGO

LEGO, the much-beloved and iconic brand of plastic building bricks, is a family-owned Danish company that manufactures and distributes its products globally. LEGO manufactures in China, Hungary, the Czech Republic, and NAFTA-member Mexico.

Its manufacturing plants are strategically located around the world to help it meet the demand at a cost that is accessible for consumers.   LEGO building sets have a wide price range and cover many age groups. A classic box of bricks can be bought for less than $5, while the elaborate building sets can cost hundreds of dollars.

Smart phones

Whether you prefer Samsung, Apple, or another brand of smartphone, chances are high that its processor and other component parts come from many places and is assembled in Asia.

In 2015, Korea-based Samsung had manufacturing plants in six countries—Vietnam, Korea, China, India, Brazil, and Indonesia. Apple uses suppliers from around the globe, with a heavy emphasis on China, to create components for its products, including the iPhone.

Automobiles

If the commercials touting cars with giant red bows on them are any indication, automobiles make great Christmas gifts. For American gift-givers, this is the gift category most profoundly impacted by global trade, particularly by NAFTA.

The automobile market in the U.S., for both U.S. and foreign car companies, is dependent on a North American supply chain to stay competitive. NAFTA reduced or eliminated tariffs across the continent and automobile sector, allowing vehicles to be manufactured at the most cost-effective locations, lowering consumer prices and keeping the U.S. auto industry competitive in the global economy.

Foreign brands such as Volkswagen, Toyota, Audi, and Honda make the vehicles they sell to Americans in North America. American consumers benefit from the variety increase and cost reduction that NAFTA provides in this sector.

Without NAFTA, Americans could still give cars to their loved ones, but the vehicles would more than likely be made in Europe or Asia rather than in North America.

So, as you sip eggnog and open gifts on Christmas Day, remember the vital role global trade plays in filling Santa’s toy bag and spreading holiday cheer.


Author

Laura Collins
Laura Collins

Laura Collins is the Deputy Director, Economic Growth at the George W. Bush Institute. Laura previously served as the Director of Immigration Policy at the American Action Forum. Laura has experience in politics, working as a Senior Research Analyst at the Republican National Committee for the 2012 election cycle and in the Texas House of Representatives for the 82nd Legislature. A former practicing attorney, Laura earned a JD from The University of Texas School of Law and a BBA from the University of Oklahoma.

Full Bio