Admit it, I am an Offshorer and Uncle Sam Made Me Do It

electronics assembly line

In this overheated political season there is no worse thing to be accused of than an offshorer: someone who moves jobs out of America. With unemployment stubbornly stuck north of 8 percent, offshoring is seen as a convenient culprit for what ails us. The Obama campaign accuses Romney of offshoring jobs when he ran Bain capital. The Romney campaign has pushed back dubbing Obama the “outsourcer in chief” and charging that public green energy investments created jobs overseas instead of the United States. In this environment, the last thing you want to be known for is moving jobs offshore.

This is not new of course. During his 2004 presidential campaign, John Kerry called U.S. CEOs who moved jobs offshore “Benedict Arnolds.” Lou Dobbs made a good living accusing U.S. corporations of fighting a “War on the Middle Class.” Russell Shaw, a technology writer and Huffington Post blogger, even went so far as to call CEOs who move jobs offshore, “evil.” Not callous. Not greedy. Evil. More recently, Apple has been pilloried by the New York Times and others for making iPhones in China.

It is no wonder that almost no U.S. multinational openly admits that they move jobs offshore and that sometimes that hurts the U.S. economy. It is no wonder that so many multinationals and defenders of the Washington Consensus on trade that populate think tanks and universities so vigorously deny that there could be any harm to the U.S. economy from offshoring. Or at least not very much harm, as Robert J. Samuelson noted in his July 11 column, “Does Offshoring Cost Jobs.” Offshoring creates jobs in the United States they tell us. When a plant closes in the U.S. it’s actually good for America because it enables the U.S. company to be competitive and while it might lose production jobs, it gains other kinds of jobs. It’s why Tom Donahue, the President of the U.S. Chamber of Commerce, declared in 2008 that for every dollar of work U.S. companies offshored, the U.S. economy received $42 of benefit! It’s why companies so vigorously deny that they move jobs because of labor costs. “We don’t engage in labor arbitrage,” so goes the defense. Its why so many defenders of the Washington Consensus refuse to acknowledge that the unprecedented loss of one-third of U.S. manufacturing jobs in the last decade were the result of anything other than superior productivity (in fact, over half these jobs were lost due to trade).

To be sure in a global economy it would be naïve and self-destructive to expect corporations based in America to not be global and to not invest overseas. And in some cases those investments complement, rather than supplement, American jobs and activity. But let’s be real: in some cases they don’t. When you have had an environment where from 2000 to the end of last year, 66,000 U.S. factories closed (17 a day), it’s hard to make the case that all offshoring has been beneficial.

But the problem is that companies fear, and rightly so, that if they acknowledge the truth – that there is a fierce race for global innovation advantage, that countries around the world are putting in place policies to attract those jobs from America, and that in this new global economy companies have very little choice other than to take the best offers on the table – they get called Benedict Arnolds or evil.

No CEO wants to be known as evil. But even worse, if companies are seen as actually moving jobs offshore – to heaven forbid, better compete and make profits – and if that sometimes does hurt the U.S. economy then for many on the left the answer is to stop them by forcing them to pay U.S. tax rates on foreign profits, instituting strict Buy American provisions, and even requiring that unions and other “public interest” representatives be on corporate boards. Of course, the last thing U.S. corporations want is to be told what they can and cannot do. So they pretend they are not offshoring or that they you are that it actually produces $42 of value for the U.S. economy for every dollar of work offshored.

So, the left bashes corporations and corporations and their defenders deny there is a problem. The result keeps Washington from being able to understand what is really happening and how to fix it. The defensive reaction from the Washington establishment and multinationals makes it difficult for elected officials and the public to rationally discuss America’s challenges. Without this acknowledgement, mobilization of the necessary political forces to achieve decisive action is much more difficult.

So companies need to stand up to the Lou Dobbses of the world and say yes, my company does move jobs to other nations and we will continue to do this until the federal government puts in place a real national competitiveness strategy based on a more competitive corporate tax code with much lower effective rates, a more robust national industrial technology strategy modeled after world leading nations like Germany, a better system for improving talent,  streamlined and smart regulations that don’t unduly hamper firms in globally traded sectors, and finally, aggressive enforcement against foreign mercantilist and protectionist trade policies that all too often present us with little choice but to open up a factory or laboratory in a nation like China if we want market access.

In short, if the United States is going to move ahead in the race for global advantage, the left will need to abandon its reflexive, anti-corporate stance and acknowledge that policies that help, not hurt, corporations are needed.  But for their part, multinationals need to step up and say, yes, we will continue to move jobs out of the United States until the U.S. does what virtually every other aspiring nation does: put in real, sustained and serious steps to win the race for global innovation advantage. That’s what this presidential campaign should be about, not about who offshored what.

Image credit: Flickr User jurvetson.

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About the author

Dr. Robert D. Atkinson is one of the country’s foremost thinkers on innovation economics. With has an extensive background in technology policy, he has conducted ground-breaking research projects on technology and innovation, is a valued adviser to state and national policy makers, and a popular speaker on innovation policy nationally and internationally. He is the author of "Innovation Economics: The Race for Global Advantage" (Yale, forthcoming) and "The Past and Future of America’s Economy: Long Waves of Innovation That Power Cycles of Growth" (Edward Elgar, 2005). Before coming to ITIF, Atkinson was Vice President of the Progressive Policy Institute and Director of PPI’s Technology & New Economy Project. Ars Technica listed Atkinson as one of 2009’s Tech Policy People to Watch. He has testified before a number of committees in Congress and has appeared in various media outlets including CNN, Fox News, MSNBC, NPR, and NBC Nightly News. He received his Ph.D. in City and Regional Planning from the University of North Carolina at Chapel Hill in 1989.
  • txpatriot

    How do US labor rates compare with labor rates overseas? Even if the US makes all the changes you propose, do you think companies will bring jobs back as long as US labor rates are so high?