D. Dowd Muska

 

The Foreigners Who Still Believe in America

September 29, 2011

Stubbornly high unemployment, a Dow Jones Industrial Average thousands of points below its October 2007 peak, and a housing market that refuses to recover. It’s ugly. Scary ugly.

Imagine how much worse it would be if not for globalization.

Free trade has bolstered the economy during the Great Recession. Affordable clothes, toys, and appliances help stretch struggling families’ budgets. But saving money on stuff made -- or assembled -- elsewhere is just one benefit. While unions and populist pols continue to bellyache about foreigners “stealing American jobs,” the overlooked phenomenon of “insourcing” grows. Here are a few examples:

• In May, Volkswagen opened a $1 billion, 2,000-worker Passat factory in Chattanooga. “VW,” reported the Los Angeles Times, “the world’s third-largest automaker, is looking to triple U.S. sales over the next seven years.”

• In August, Indiana-based Steel Warehouse expressed interest in creating 60 jobs at an industrial park near a massive steel mill being developed by Germany’s ThyssenKrupp. According to the (Mobile) Press-Register, it’s “at least the fourth steel processor to announce plans to locate in southwest Alabama since ThyssenKrupp chose Calvert for its $5 billion complex in 2007.”

• September saw Seung Chang Airtech (SCA), a Korean auto-parts manufacturer, add 95,000 square feet to its facility in Auburn, Alabama. Increased demand from nearby Kia and Hyundai plants, CEO Daniel Yu said, spurred the expansion. SCA, averred Auburn’s mayor, “became a corporate citizen … in 2004, creating 40 jobs. In the near future, the company will employ 400 workers.”

• About 2,000 employees will be hired at Toyota’s new factory in Mississippi, set to be churning out Carollas by the end of the year. The Associated Press noted that “40,000 people have applied for jobs.”

• In the first quarter of 2012, Innovative Composite International, headquartered in Toronto, plans to commence production of its “EcoScape” affordable-housing system in South Carolina. Three hundred jobs will be created. ICI’s chief executive officer is optimistic: “Plant set-up is progressing well and we are very pleased with the availability of qualified personnel in the area.”

• Sasol, a South African chemical conglomerate, has authorized a feasibility study of a billion-dollar, Louisiana-based facility to convert natural gas to diesel. “The initial numbers look positive,” said the firm’s managing director of new-business development.

Statoil is active in both Texas’s Eagle Ford shale formation and the Gulf of Mexico, and could soon start drilling in Alaska’s chilly Chukchi Sea. The Houston Chronicle reports that it “will give $5 million over five years to the University of Texas at Austin to fund research in geology, petroleum engineering and other areas of interest for the Norwegian oil company as it grows its foothold in North America.”

The U.S. Department of Commerce’s most recent assessment of foreign direct investment (FDI) found that between 5 and 6 million jobs -- 2 million in manufacturing -- are at “majority-owned U.S. affiliates of foreign companies.” Overall, “Workers at majority-owned U.S. affiliates of foreign companies receive 30 percent higher pay than non-FDI supported jobs.”

Curious thing about FDI -- it offers a steady stream of evidence that exposes the hollowness of “race to the bottom” arguments. If slave-wage labor, inadequate workplace-safety regulations, and nonexistent environmental protections are prized by multinationals, why would any foreign firm consider investing in the United States? Aren’t Cambodia, Tajikistan, Nigeria, and Bolivia better bets?

Obviously not, at least in most cases, and that’s why corporations from developed countries in Europe and East Asia come to the U.S. It’s also why China’s on its way. A May analysis by the Asia Society and Woodrow Wilson International Center for Scholars revealed that “China is now taking a lead role in seeking to invest in ventures around the world, including the United States, through mergers, acquisitions, and greenfield investments. As a result, the United States is finding itself increasingly on the receiving end of foreign direct investment from China.”

The study’s authors predict that over the next decade, China may invest as much as $2 trillion abroad. Much of that lucre will land here, if Sinophobes, be they Democrats or Republicans, don’t scare it off. (Japanese companies employed 76,200 Americans in the late 1970s. Three decades later, the number had risen nearly tenfold.)

The protectionism lobby skillfully crafts headline-grabbing stats -- e.g., the Economic Policy Institute’s claim that between 2001 and 2010, 2.8 million jobs were “eliminated or displaced due to trade with China.”

The millions of workers who owe, or will soon owe, their livelihoods to insourcing see globalization differently.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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