Shipping Jobs Overseas?

Posted: May 04, 2009 12:01 AM
Shipping Jobs Overseas?

Editors' Note: Every month, Townhall Magazine highlights some of the outstanding blogs written by users in our community. The following is an entry from Dave at Semper Libertas and appears in the April issue of Townhall Magazine.

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 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 United States.

One by one, Director of the Center for Trade Policy Studies Dan Griswold’s research punctures the myths promulgated by the anti-trade crowd. Worried about the U.S. manufacturing base moving factories to China, India and Mexico? Then consider this: “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, U.S. 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 more than 80 times as much here at home.

But what about the loss of manufacturing jobs? True, the U.S. workforce employed in manufacturing shrank by 3 million in the years 2000-2006. But as shown above, corporations were making capital investments in the United States; 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, “an 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.”

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.