During the House Armed Services Committee’s mark-up of the fiscal year 2023 National Defense Authorization Act, or NDAA, in June, an amendment was adopted by voice vote that would prohibit in the military commissaries and exchanges the sale of products that were produced, assembled or imported from China.
The proponent of the amendment, Rep. Mark Green, R-Tenn., issued a press release upon its passage, stating, “Removing Chinese products from our military exchanges is just one step we can take to tighten the bottleneck of American dollars ending up in the pockets of CCP officials.”
This amendment will fail to achieve its purpose while resulting in hurtful, unintended consequences for military families.
China is the world’s largest manufacturer due to the “most favored nation” status granted by the U.S. in 2001. It is responsible for nearly 29% of the world’s manufacturing, far exceeding U.S. output of almost 17%, the world’s second largest manufacturer. Military resale makes up less than 1% of overall retail sales in the U.S. — less than a rounding error to China’s $3.5 trillion in exports.
The attempt to punish China through on base retailers will only result in burdening our military families. The prohibition of products will restrict their freedom to purchase merchandise on base that is readily available and commonly offered by commercial retailers. If the products they need or desire can’t be purchased on base, they will shop online or at off base retailers. There will be little impact on sales of Chinese-made goods and no bottleneck will be created to stymie the flow of dollars to China.
However, as military families are forced to shop off base, they lose tax-free shopping privileges — as well as an average 20% and 25% savings on the products they purchase in the exchanges and commissaries, respectively. This will effectively erode military families’ earned benefits.
According to an analysis by the Federal Reserve of San Francisco, 56% of what is paid for a product made in China actually goes to U.S. workers and companies, on average. While the manufacturing was in China, the product’s parts, design, marketing and distribution most likely came from the United States. The effort to punish China would mostly hurt American companies and workers whose U.S. operations and jobs are interwoven into the fabric of a globalized economy.
There is an assumption that there are American-made products that can replace those being prohibited. Due to globalization, that is untrue for many categories of products. It is unimaginable that an American manufacturer will relocate its China-based operations for less than 1% of its business.
What will result, however, is a loss in nearly 50% of sales in the self-funded military exchanges. With the loss of sales comes the significant loss of the nearly $300 million in dividends that exchanges generate each year to support military morale, welfare and recreation programs, including child, youth and school services, Armed Forces Recreation Centers, and more.
Additionally, the exchanges will have to eliminate thousands of jobs that are filled predominantly by veterans, military spouses and dependents. These good paying jobs are essential to the financial readiness of many military families and offer economic stability as these jobs transfer when permanent change of station orders are received.
Restricting products sold to the less than 1 percent of Americans serving in the military will only send a message that America is not serious about addressing China’s behaviors. It is mere symbolism over substance. However, the message sent to military families is that Congress is willing to unfairly place on them an economic burden that it is unwilling to impose on the broader population or even themselves.
If Congress seriously desires to send a message to China’s leaders, it should take concrete steps to evaluate China’s trading status and adopt policies that will have a meaningful impact on the economic relationship between our two nations. It should incentivize on-shoring of manufacturing and ensure that any steps taken are shared by all Americans, not just military families.
Congress should remove Mr. Green’s amendment from the FY2023 NDAA and trust the commissary and exchange systems as they routinely search for alternatives to Chinese-made products for their stock assortment, including products made by veteran-owned businesses. This less draconian, free-market approach preserves the benefits earned by our service members, protects the jobs of spouses, dependents and veterans, and respects the service and sacrifice of our military families. It preserves the economic freedom of military families to purchase the products they desire from the on base retailers that give back to the programs that support their quality of life.
Tom Gordy is the President of the Armed Forces Marketing Council, a nonprofit trade association established to protect and enhance the value of the military resale benefit for military families. He is also a commander in the United States Navy Reserve.
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