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American Protectionism - 30 years too late

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Boeing, for example, as part of its “$4.4 billion contract in 2002 with South Korea for 40 F-15s “committed not only to hiring South Korean workers for the current purchase but for future F-15 work as well, that if it sells F-15s to other countries, South Korean workers will build the same parts and do the sub-assembly for those new Boeing customers.” News accounts reported at the time that it would “create more than 30,000 jobs in South Korea, jobs performing work that once was done by St. Louis workers” The agreement also stipulated “Boeing will transfer jobs and skills to South Korea that will enable it to produce its own fighter jet by 2015.” (See Offsets Report)

The framework for these relationships between U.S MNC and their affiliates, subsidiaries, and other associations may vary in structure from how I have described here but the point is that this is where globalization becomes extremely complex and quite a labyrinth of integrated dependency between companies and nations transforming the traditional relationships of the 17th century.

U.S MNCs make up almost half of the worlds top 100 companies. Forbes reports in 2004 that of the world’s top 100 leading firms, 47 are U.S companies, all of whom are MNC with affiliations around the world.

 The following excerpts are from a report “U.S. Multinational Companies Operations,” that illustrate these complex relationships. Although the report details the development and expansion of foreign affiliates by U.S MNCs in 2005-2006, it is important to recognize that foreign multinational companies (F.MNC) have established similar foreign investments and foreign affiliates as well.

Some of the terminology utilized in the report is explained as follows; “foreign affiliate refers to those “foreign business enterprises in which there is U.S. MNC direct investment and where the combined ownership exceeds 50 percent.” U.S. MNC parent refers to a U.S. based multinational company. Value added refers to the foreign affiliates “contribution to the gross domestic product in its country of residence, which is the value of goods and services produced by labor and property located in that country.”(See, pg 11)      

 “In 2006, U.S. MNCs acquired or established 786 new foreign affiliates, which had a combined value added of $15.6 billion and a combined employment of 160,700 workers. For affiliates by industry and by area see; Table 11, pg 9. In 2006 these affiliates accounted for 87 percent of the employment of all foreign affiliates of U.S. MNCs, up from 84 percent in 1999.” (See, Table 1, pg 2).

 “By industry, manufacturing continued to be among the leading industries for new investments in 2005. New manufacturing affiliates accounted for 30.4 percent of all new affiliates, for 29.0 percent of their value added, and for 58.7 percent of their employment.”(See, pg 10)

 “New affiliates in China and Mexico accounted for over half of the employment of new affiliates in low-to-middle-income countries. Roughly half of the production by new affiliates in these countries was directed toward customers in the host country and the other half was directed toward customers in other foreign countries or in the United States; sales to the United States accounted for 29.0 percent of their total sales in 2006. For new affiliates and ongoing affiliate operations combined in these two countries, sales to the United States accounted for 17.2 percent of their total sales.”(See, pg 10)

 “In 2006, U.S. MNC exports of goods and services to their majority-owned or minority-owned foreign affiliates and to other foreign affiliates owned by F.MNC was $531.7 billion.” (See, Table 3, pg 5) The U.S Census Bureau, Foreign Trade Division reported total U.S. exports in goods and services in 2006 was $1.4 trillion.

 “Products (imports) manufactured by the U.S MNC foreign affiliates and shipped to the parent company was $678.2 billion in 2006. U.S. MNC and F.MNC companies combined were responsible for 62.4 percent of all U.S. imports, with the U.S. MNC leading the way with $678 billion, 36.4 percent and F MNC owned affiliates pulling in $482.4 billion, 25.6 percent.” (See, Table 3, pg 5).

The $678 billion shipped to U.S. MNC represents the products outsourced to their foreign affiliates and provides a snapshot of the amount of American brands manufactured aboard. This figure may not capture all of the activity as some industry sectors were not reported.

A U.S. MNC would obviously be the first in line customer when placing orders with their affiliates for these products destined for distribution in the U.S market. U.S. retail customers would be the second in line when purchasing, for example, an HP laptop from a retail outlet such as Best Buy. The “U.S Census Bureau, Foreign Trade Division” reported total imports in goods and services to the U.S in 2006 was $2.2 trillion with a U.S trade imbalance of $753 billion. The $678 billion in imports shipped from foreign sources to U.S MNCs is nearly 90 percent of the trade imbalance. If we were to adjust the trade deficit by the U.S. imports from their affiliates and for energy imports from U.S. integrated oil companies with capacity worldwide, the actual U.S. trade imbalance would much less and perhaps no more than 2% of GDP or less. 

According to the “U.S Bureau of Economic Analysis” report released February 2009, “the goods and services trade deficit was $677.1 billion in 2008. As a percentage of U.S. gross domestic product the goods and services deficit was 4.7 percent in 2008. The U.S. Trade in Goods and Services historical trend reflects a continuous imbalance going back to 1977.

Typically when speaking about “imports” we generalize by simply referring to them as foreign “imports” without distinguishing foreign proprietary products (i.e. Sony) versus our American brands (i.e. Apple – made in China) manufactured aboard. The general consensus holds that the Chinese for example need Americans to continue to buy “their” products. Although true in form the statement falls short on the details. Even without these import figures visual verification is easy if we look at what we already own plus conduct store surveys and observe where products are made and the name of the company. We are talking about lots of products covering many sectors typically high volume consumable products; electronics, clothing, toys, light bulbs, food, and lots of American companies; Apple, Intel, Cisco, HP, IBM, Microsoft, Weber, Pfizer, Proctor & Gamble, and Hershey, to name but a few. If you have an iPod or iPhone, you own a China made import. American MADE brands in the U.S. marketplace are sparse. It could prove extremely difficult at the consumer level if Americans were to pursue protectionist measures to “Buy only American MADE” products.   

Outsourcing and offshoring is not just about displacing jobs, it’s also about transferring manufacturing. It seems we have been in a 30 year long X-Files episode with workers disappearing from the workforce while more and more American branded products are “imported” with most of us hardly even noticing.

A recent report from the Congressional Budget Office (CBO) in December 2008 lightly covers the competitive challenges of foreign manufacturing and consequences of outsourcing without referencing the specific activities of U.S. MNCs transferring manufacturing as a contributing factor on job loses but notes:

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Mitch Gurney Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

I am a political activist living in Northern California. Over the years I have become increasingly concerned at how misinformed the general public has become and by the "Bread and Circus" style conditions existing in America today. If there is a (more...)
 
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