Setting the Record Straight on Manufacturing Investment Overseas

By May 6, 2011Trade

A commonly held misperception that U.S. manufacturing companies investment abroad necessarily means the loss of jobs here in the United States.  This misperception fails to understand the nature of U.S. foreign direct investment (FDI) abroad, which is mostly to serve the local market.  Why else would nearly half of multinational manufacturers’ workers be located in high-wage Europe and Canada?  In 2008, over 70 percent of U.S. manufacturing foreign direct investment by value was in developed countries, and only 4 percent of total FDI was in China.

Fewer than 10 percent of these overseas workers are in China. Even during the relatively high growth years from 2000-2008 manufacturing jobs at U.S. manufacturing multinationals’ foreign affiliates increased by only 314,000 – and more than a third of those were located in Europe.

Roughly 90 percent of these foreign manufacturing affiliates’ sales were to local markets, not to export back to the United States. Foreign affiliates are key export targets for U.S. manufacturing multinational companies. In 2008 alone these affiliates received nearly half ($240 billion) of their total U.S. parent’s exports.

In 2008 the U.S. exported 22 percent of U.S. manufactured products.  U.S. manufacturing investments overseas are simply not the cause of the trade deficit.  Taking a close look at the figures shows that, excluding petroleum and coal products, manufacturing multinational corporations actually produced a trade surplus in 2008 of over $100 billion! These are the facts about U.S. manufacturing investment abroad.

Stephen Jacobs is director of international business policy for the National Association of Manufacturers.

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