D. Dowd Muska


The Year in Insourcing

December 27, 2012

Protectionists, stop reading now. You can’t handle this much truth.

One of globalization’s great myths holds that free trade fosters a “race to the bottom” that sends “real” work fleeing to low-wage countries as America descends into an irreversible “deindustrialization.”

It’s a shibboleth that ignores billions of dollars worth of foreign direct investment (FDI) that flows into the U.S. each year -- and the jobs created by all that revenue. It’s called “insourcing,” and while it is  impossible for many to accept, we do it about as well as the Chinese.

Despite its manifold problems, corporations abroad recognize that America is still an attractive place to do business. Whatever the reasons -- lower transportation costs, skilled local workforces, currency advantages, cheap and available raw materials, excessive government meddling at home -- foreign firms continue to flock to The Land of the Free.

In 2012, hydrocarbon reservoirs lured investment like never before. Just 11 days into the year, CNNMoney.com found that nondomestic energy companies put “nearly $6 billion in U.S. gas and oil drilling in the last few weeks.” The fracking revolution, which has brought cheap natural gas and soaring oil production, is too sweet an opportunity to miss. Europe’s on board. So is China, which is tentatively returning to America’s energy market several years after neocon nuttiness scuttled CNOOC’s attempt to acquire Unocal.

South Africa’s Sasol is drafting blueprints for a $14 billion facility to convert natural gas into clean-burning diesel. In December, Governor Bobby Jindal said that if approved, the complex “will be the largest single manufacturing investment in the history of Louisiana and … one of the largest foreign direct investment manufacturing projects in the history of the entire United States.” In April, The Wall Street Journal reported that Shell (based in the Netherlands) is considering a similar refinery in the Pelican State.

Don’t panic, moonbats. It’s hopelessly diffuse and intermittent -- and propped up by an obscene amount of taxpayer dollars -- but politically correct power wasn’t overlooked: China Ming Yang Wind Power Group established a research and development center in North Carolina and France-based Soitec commenced production at its $150 million solar factory in San Diego.

Autos are an FDI specialty, and this year did not disappoint. BMW disclosed that exports from its South Carolina plant have jumped 80 percent since 2009. November saw Honda celebrate its 30th anniversary of U.S.-based manufacturing -- throughout 2012, the Japanese multinational made hundreds of millions of dollars in new investments and created hundreds of new jobs at its operations in Alabama and Ohio. Toyota broke ground on a 300,000-square-foot expansion of its Alabama facility, which assembles V6 engines for Highlanders built in Indiana. Volkswagen announced the hiring of another 800 workers in Tennessee. Kia (Georgia) and Nissan (Tennessee) posted help-wanted ads, too.

FDI also supports vehicles for the skies. In July, Airbus announced its intention to build a $600 million factory in Mobile, Alabama. “The town is right, the talent is right and the time is right,” said the company’s president and CEO. The plant’s A320 assembly line is estimated to need 1,000 employees, with more hiring to come from Airbus’s parts suppliers, who are clamoring to secure beachheads in the region.

Florida is another beneficiary of aircraft-driven investment. In late November, Brazilian jetmaker Embraer started work a 67,000-square-foot engineering and technology center in Melbourne. Several days later, the Sunshine State welcomed Italico Aviation, which will manufacture its “light sport aircraft” in Kissimmee.

As the clock ticked down to the arrival of the “fiscal cliff,” the FDI community didn’t appear all that worried. In December alone:

• A subsidiary of Austria’s Klausner Group announced the construction of a $110 million, 350-worker sawmill in North Carolina.

• India-based Sarla Performance Fibers established a U.S. presence -- its $13.8 million operations center in South Carolina will have 100 staffers.

• Ceramica Del Conca, an Italian tile company, unveiled plans for a $70 million, 178-worker factory in Tennessee.

• Purac Biomaterials, a Dutch manufacturer of “resorbable polymers and monomers,” declared a $20 million investment in Georgia that will create “more than 30 new jobs.”

• Printer-ink supplier Siegwerk EIC, headquartered near Cologne, announced that it will expand its North Carolina facility and hire 18 more employees.

It’s the untold story of free trade: More than 5 million of our countrymen earn their paychecks from U.S. affiliates of “foreign” corporations. But rest assured, the protectionist lobby will go right on ignoring insourcing -- while insisting that globalization is “bad for the American worker.”

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

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