Report claims global expansion a positive for U.S. growth

A January report from the Manufacturers Alliance/MAPI put forth an argument that for some in the manufacturing sector amounts to calling the sky green and the sun purple. The report contends foreign expansion by U.S. companies is good for the domestic economy. “The most frequently expressed fear of globalization – that multinational corporations will shift production from the relat...
By Staff February 1, 2007

A January report from the Manufacturers Alliance/MAPI put forth an argument that for some in the manufacturing sector amounts to calling the sky green and the sun purple. The report contends foreign expansion by U.S. companies is good for the domestic economy.

“The most frequently expressed fear of globalization %%MDASSML%% that multinational corporations will shift production from the relatively high-wage United States to low-wage foreign countries for the purpose of reducing labor costs %%MDASSML%% is misplaced,” said Daniel J. Meckstroth, Ph.D., the chief economist for MAPI and author of the report “Globalization Complements Business Activity in the United States.”

Meckstroth said the primary motive for multinationals to invest in businesses abroad is to gain access to larger markets for their products and services. He noted that the foreign affiliates of U.S. manufacturing sold only 10% of their products back to U.S. consumers in 2004. The rest of the sales were to local and regional markets near the manufacturing site.

The Bureau of Labor Statistics reported in 2005 that 4.78 million people were hired at non-farm jobs each month while an average of 4.54 million people left from non-farm jobs. BLS figures also show that 5% of wormers were ‘displaced,’ losing jobs because of plant relocations, plant closings or other similar factors. Meckstroth said manufacturing job loss is due more to productivity gains than any other factor.

“The labor market in the United States is at what many economists consider non-inflationary full employment; capacity utilization in the manufacturing industry is above its long-term average; and corporate profits are the highest share of GDP in more than 40 years,” he said. “Furthermore, U.S. productivity has increased dramatically since the mid-1990s thanks to increased competition, greater innovation and advances in information technology. Globalization creates the competitive pressure on firms that leads to a higher standard of living in the United States.”