Offshoring ; what is it

Where’s the Beef?


I have been writing often about the offshoring of US jobs to lower wage countries (right now that is India or China but come next year it may be an even lower wage country—sort of like the country of the month club—sic!!). I have received many notes from those who want to point out the immense number of “insourced” jobs that exist—that is, those companies which are foreign owned who have placed plants or facilities in the United States and hired American citizens as workers They point to these insourced companies and indicate that is exactly what American companies are doing when they offsource and that we can’t forget all the insourced companies.

I am very cognizant of foreign direct investment in the United States. (on the order of hundreds of billions of dollars) I am thankful of it and appreciative of the work it provides to American workers. But comparing the performance of these companies to US companies offshoring is not the same: it is an apples to oranges comparison.

Foreign companies when they come to the US (for example Toyota, Honda or Nissan to name just a few highly visible companies), set up shop here with the main objective of serving the U.S. marketplace, of providing goods to US consumers, or providing products to companies located in the United States which then produce goods for the American consumer. This is a very basic principle of trade: moving to where your markets are. It has been the predominant aspect of Foreign Direct Investment forever. U.S. Manufacturers build plants in Europe to serve the European Marketplace. Right now there are considerable foreign investment being pursued in China with the main objective being providing goods for the red-hot Chinese marketplace. I have no problems with this nor should anyone else.

Where then is my gripe? When American firms move facilities to other countries for the expressed purpose of utilizing the lower wages in that country but whose final intent or destination for those goods are the good old U.S.A. This is offshoring. Call centers are an excellent example. Their major purpose is to service the American marketplace. When they are moved, lock, stock, and barrel, to India, they are oriented not to serve the Indian marketplace but to continue to serve the American market. The same goes for Information Technology jobs, other manufacturing and service jobs which are primarily uprooted from the US and moved to another country for the sole purpose of taking advantage of lower wages and not to serve the local market. This offshoring is merely a sham on American workers.

Which brings to mind another interesting thought. The U.S. has a $500 billion trade deficit, increasing yearly. During the late 70s, we were losing auto industry share to Japanese companies. What we did then was to twist their arms and indicate forcefully that if they wanted to sell automobiles here, they need to build them here. And it worked. Today millions of cars per year are built in the U.S. by foreign auto manufacturers.

Why can’t we take a similar tact for other goods? If they want to sell it here, they must make it here? We did it before and it worked to save an entire industry. As a country with the highest standard of living in the world and the most lucrative consumer market that exists, why shouldn’t the government twist arms with other counties (not to mention American companies) over other industries to build product here. If they want to sell it in the US they must produce so much of the product (or so much a percentage of the good must be American content) or else?

We are losing entire industries in a space of a few years. We must act and act now to reverse the flow. Sell it here. Build it here. That’s my motto.