A common refrain among protectionists, economic nationalists, and other
advocates of strong government intervention in the economy is that
so-called "big corporations" are "shipping jobs overseas". This charge
is used particularly often with regards to manufacturing jobs, where
the specter of jobs fleeing
en masse to China, India, and Mexico is described in breathless terms.
Whether
the goal is "renegotiating" (or ending altogether) free trade
agreements like NAFTA, bailouts of domestic industries, or some sort of
tax code manipulation to "reward" companies who "create American jobs",
the bogeyman of choice is what Ross Perot dubbed the "giant sucking
sound" in the 1990s -- particularly when a politician is campaigning in
former manufacturing centers in "Rust Belt" areas of Pennsylvania,
Ohio, and Michigan. Along with the loss of jobs themselves, the
so-called "trade deficit" is often mentioned, noting that it is at
record highs and that it somehow signifies loss of American jobs and a
manufacturing base; foreign capital investment is often also a target
of political derision. The tactic is familiar to politicians on the
left, like President Barack Obama and Ohio Senator Sherrod Brown, and
on the right, like commentators Pat Buchanan and Phyllis Schafly.
The facts, however, continue to show otherwise. As documented by the pro-trade
Center for Trade Policy Studies,
foreign investment by multi-national companies tends to be focused on
opening up new markets to goods and services -- to making these
companies more profitable by reaching new customers -- rather than a
method for shipping out American jobs and moving capital out of the
US. As Dan Griswold, Director of the Center, points out, "[a]
successful company operating in a favorable business climate will tend
to expand employment at both its domestic and overseas operations. More
activity and sales abroad often require the hiring of more managers,
accountants, lawyers, engineers, and production workers at the parent
company."
One by one, Griswold's research (meticulously
referenced to easily obtainable data) punctures the myths promulgated
by the anti-trade crowd. Worried about the US manufacturing base
moving factories to China, India, and Mexico? Then consider this:
"[b]between 2003 and 2007, U.S. manufacturing companies sent an average
of
$2 billion a year in direct investment to China and $1.9 billion to
Mexico"; meanwhile, US corporations were investing
$165 billion per year in the USA.
An additional $15 billion per year was being invested in manufacturing
in the United States by foreign corporations during this time. These
data show that while, yes, American companies were spreading their
manufacturing wings overseas, they were investing over
80 times as much here at home.
But
what about the loss of manufacturing jobs? True, the US workforce
employed in manufacturing shrank by 3 million in the years 2000-2006.
But, as shown above, corporations were making capital investments in
the US; those investments, rather than workers, were in technology and
automation. Those jobs weren't being shipped overseas, they were being
replaced with more efficient technology, creating other high-tech jobs
elsewhere in the labor market. Meanwhile, "[a]n increase in 172,000
jobs at U.S.-owned affiliates in China was
partially offset by an actual decline of almost 100,000 jobs at
affiliates in Mexico". The "giant sucking sound" is a fabrication, a
myth.
One
by one, the justifications for increased government intrusion in the
marketplace fall by the wayside when examined more closely, when facts
are employed rather than innuendo. A free market and free trade,
unencumbered by government interference, management, or directives is
still the best way to promote prosperity.