WSJ.com - The Mistaken Attack on Outsourcing

WSJ.com - Opinion: The Mistaken Attack on Outsourcing

 

Since his presidential campaign, Mr. Obama has repeatedly said that the global operations of U.S. companies harm the country because they drain the American economy of jobs. His rhetoric about "tax breaks for companies that ship our jobs overseas" has populist resonance at a time of economic uncertainty, but it is also at odds with the available evidence about how globalizing firms affect the American economy. Moreover, it harms the popular understanding of our opportunities and challenges.

When American firms grow abroad, they also grow domestically…

The data do not support the crude, fixed-pie intuition that firms either invest abroad or at home. Ten percent growth in American firms' foreign investment is associated with 3% growth in their domestic investment. And when firms grow abroad, their domestic exports and R&D activities grow especially, contrary to Mr. Obama's rhetoric.

Vilifying or penalizing American businesses for their global operations will only lead them to consider leaving the U.S.—or consider being bought by foreign companies. Such moves would hurt America by removing valuable headquarter jobs. Instead, Mr. Obama should emphasize how Americans succeed when our firms succeed world-wide. That formulation better captures reality and offers a more sensible way to engage businesses in a new spirit of cooperation.