International Investment Is a Two-Way Street
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Today, the White House held a forum on “Insourcing American Jobs” to gauge how companies are choosing to “insource” jobs and invest in the United States. It’s a timely event: With more than 23 million Americans either unemployed, working part time, or who have given up looking for work, it’s vital that we ask how we can foster a business climate that will encourage companies to invest and hire here at home.
But international investment is a two-way street. We should applaud companies that show America is still very much the “land of opportunity.” We need to identify the policies that help draw job-creating investments to the United States. But we also need to recognize the broader benefits generated by international investment — including foreign investment in the United States as well as U.S. investment abroad.
In fact, foreign companies employ more than 5.3 million Americans and support an annual payroll of more than $400 billion, according to the U.S. Department of Commerce. These foreign-headquartered companies purchase more than $1.8 trillion in inputs from local suppliers and small businesses and account for more than one-fifth of all U.S. merchandise exports.
While one country’s inbound investment is another country’s outbound investment, this is more than a zero-sum game. In the view of the Chamber, job creation is supported on both sides of the investment equation.
U.S. firms’ investments abroad bring real benefits to Americans, including on the jobs front. Studies have found that U.S. companies that invest abroad tend to create more jobs in the United States and pay higher wages than companies focused solely on the domestic market. Indeed, the U.S. Department of Commerce reports that U.S. multinational corporations added 675,000 U.S. jobs during the five years ending in 2009 — a period in which the U.S. economy lost more than three million jobs.
U.S. multinationals have continued to concentrate their high-wage, high-skill jobs in the United States, according to the same report. The roughly $5 trillion in annual revenue U.S. multinationals earn through their foreign operations help fund their research and development activities, 84% of which continue to be performed in the United States, according to the U.S. Department of Commerce.
Polls show many Americans believe “offshoring” is a major driver of job loss, but the facts show the movement of jobs to foreign locations accounts for a tiny fraction of layoffs. For example, the Bureau of Labor Statistics reported the separation of 184,493 workers from their jobs in the third quarter of 2011 in so-called “mass layoffs,” but only 110 of these layoffs resulted from movement of work to an overseas location.
Some charge that international investment is really about substituting foreign production for domestic production and thus replacing U.S. workers with low-wage foreign labor. In fact, just 8.9% of the production of foreign affiliates of U.S. multinationals is sold in the U.S. market, according to data compiled by the U.S. Department of Commerce. In other words, more than 90% of their production is sold abroad.
Given America’s need to create jobs, rebuild our infrastructure, and remain the world’s pre-eminent innovation hub, we must do everything we can to make the United States the most attractive place to do business. We must foster a business climate that will attract job-creating investments while guaranteeing U.S. firms the freedom to invest abroad when it makes sense.
To remain a leader in the global economy, the United States must lead on both sides of the investment equation. American companies must be a global player, which in turn requires them to invest abroad, just as leading foreign companies have recognized the need to invest in the United States. Only by recognizing that international investment is a two-way street can we seize its full benefits.