The myth of 'insourcing'
By Lou Dobbs
The issue of whether U.S. multinationals will continue to export American jobs to cheap overseas labor markets is critical to the well-being of millions of working Americans and, I believe, the future health of our economy and society. Advocates of unbridled free trade first defended the practice of shipping American jobs offshore by saying the practice wasn't widespread and few jobs were lost to outsourcing abroad. Then the University of California-Berkeley last fall revealed that as many as 14 million American jobs are potentially at risk over the next decade. Then the advocates of exporting America claimed that outsourced jobs would be replaced by high-value jobs. Instead, the economy has lost millions of jobs.
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The Bush administration, corporate America, business groups, and their surrogate think tanks contend America must be able to kill U.S. jobs and move them to cheap foreign labor markets in order to be more productive, more competitive, and even more innovative. How competitive are our great American multinationals in the global marketplace? We now have a half-trillion-dollar trade deficit, and our surplus in services is falling like an anvil (one most likely not manufactured in the United States). We're exporting jobs senselessly and importing debt held by foreigners that amounts to $3 trillion--and is rising fast.
Smoke and mirrors. Outsourcing advocates, including many in the Bush administration, are now trying to change the language of the debate, and they've introduced a new term: "insourcing." They claim that the jobs created here by foreign companies counterbalance those outsourced to cheap foreign labor markets by U.S. corporations.
The White House cites the 6.4 million Americans employed by foreign firms in the United States as evidence that jobs lost to outsourcing are offset by such insourcing. But even by this seriously flawed standard, outsourced American jobs outnumber those "insourced" by nearly 4 million. And this is only a small part of the whole outsourcing-versus-insourcing issue.
Former Assistant Treasury Secretary Paul Craig Roberts says, "This notion of insourcing is a propaganda device." And, Roberts says, "What they're calling insourcing is nothing but just standard foreign investment." Outsourcing, on the other hand, is the practice of utilizing cheap foreign labor to manufacture goods or provide services only to sell them back into the domestic marketplace.
Foreign automakers are among the largest so-called insourcers. Many non-U.S. auto manufacturers have plants employing workers here in America. These plants, however, were simply a way around import quotas set up by the Reagan administration. Rather than accept restrictions on the number of vehicles that they could import into the U.S. market, automakers like Toyota and Honda opened plants in America to ensure access to American consumers. The investment was certainly worthwhile. The United States has an enormous $11 trillion economy. And Toyota now makes a third of its profits from U.S. car sales.
Insourcing also consists of foreign companies purchasing previously established U.S. assets. According to the Economic Policy Institute, most U.S. investment by foreign companies is the acquisition of existing American companies. As a result, just 6.2 percent of the job growth by foreign firms in America is newly created jobs. Roberts says, "It concerns me that we receive so little direct foreign investment in the form of new plant and equipment."
Foreign investment into all aspects of the U.S. economy is on the rise. Nearly half of U.S. treasury bonds are now owned in Asia. We are quite simply, as never before, dependent on foreign capital to sustain our appetite for imports and our exploding private national and trade debt.
Outsourcing definitely robs Americans of jobs, but it also compounds this already out-of-control imbalance of trade. Foreign companies with operations in America generally sell products manufactured here to American consumers. But U.S. companies, which outsource jobs to cheap overseas labor markets, then re-enter the goods they produce into the U.S. market. As a result of these disturbing trends, the U.S. current account deficit hit a new record of more than half a trillion dollars.
The debate over outsourcing American jobs to cheap overseas labor markets is sure to become more pointed, and I hope more honest, as the November presidential election approaches.
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