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America’s Economic Strength Built on Global Connections

U.S. trade policy should not be viewed as an “us vs. them” proposition.

Q1 2018
Editor's Note:The views and opinions expressed in OFII’s article belong solely to the author and do not necessarily reflect the opinions of the publisher or editors of Area Development magazine.

In today’s on-demand, delivered-to-your-door economy, successful companies can no longer afford to operate in just one location. They spread out operations across time zones and throughout countries to ensure they can provide the best products and services to their customers.

In the case of America’s economy, that means millions of U.S. workers have a job because an international company decided to invest and set up operations here — paying wages and benefits that are about 25 percent higher than the economy-wide average. However, those high-quality jobs may be at risk if Washington approaches future trade policy with an obsolete “us versus them” mentality.

Both domestic and foreign-based companies are essential to the U.S. economy and workforce. Global investment from foreign-based companies supports 6.8 million American jobs, writing paychecks totaling nearly $640 billion annually. More than 35 percent of these jobs are in the manufacturing sector, producing nearly a quarter of U.S. exports. Also, when an international company invests in the United States, it also builds local supply chains, creating new economic opportunity for area businesses.

International Company “Imports”
International companies also “import” cultural traditions and often grow their connections to the communities in which they operate. For example, in 2014, there was a spike in hospital borne central-line-associated blood-stream infections among infants in the Neonatal Intensive Care Units (NICU) across the country, with no apparent reason as to the cause of infections. Four hospitals among the Children's Hospitals' Solutions for Patient Safety, a network of more than 100 children's hospitals in the United States and Canada, turned to Toyota’s Production System Support Center (TSSC) to help address the increased infection rates. Putting America first does not mean just tipping the trade scales in favor of domestic firms. It involves careful consideration of what new tariffs will mean for U.S. workers and their global competitiveness.

By sharing principles of Toyota's Production System, Toyota helped Children's Hospitals develop new standards, decreasing infection rates by approximately 80 percent. Hospital officials plan to share the standards with their entire network, improving the standard of care across the United States.

Here is another example: Keenly aware of the inevitable food waste that comes with doing business as a grocery retailer, Ahold USA, a subsidiary of Netherlands-based Ahold Delhaize, built a facility that transforms that inedible waste into clean biogas energy. This biogas fuels its adjacent distribution center by up to 40 percent, while greatly reducing the amount of food waste going into surrounding landfills.

Other Contributions
International companies are contributing to the U.S. economy in numerous ways, often importing world-class training programs that benefit America’s workforce. In 2015, Switzerland-based Nestlé created a career acceleration program called “Project Opportunity.” This initiative was designed to help people of all ages develop skills through hands-on work experience, transforming them into valuable assets of the U.S. workforce. Through Project Opportunity, Nestlé set out to expand its apprenticeship program to 31 factories across the United States and fill the “skills gap” that contributes to nearly six million U.S. jobs going unfilled.

That skilled workforce also drives innovation. Global employers spend more than $57 billion on U.S. R&D activities, investing in state-of-the-art facilities that spur the development of new products and inspire industry advancements.

About a year ago, British pharmaceutical company GlaxoSmithKline opened a $50 million research and development center in Rockville, Maryland. The facility is GSK’s first R&D center to be fully dedicated to the development of new vaccines, housing approximately 450 American scientists and support staff and providing 200 new jobs to the surrounding area. The vaccines developed in Rockville will help improve the health of millions of people worldwide.

Cross-Border Connections Help the U.S. Economy
Unfortunately, Washington is not doing everything it can to attract more of these job-creating employers to our shores. While other countries are quickly expanding their trade networks, the Trump administration has focused its efforts on adjusting bilateral trade deficits, a narrow metric for measuring the value of trade.

Take for instance Korea, a strategic U.S. ally with a combined population of California and Ohio — or less than one-sixth of the U.S. population. Not surprisingly, U.S. consumers buy more Korean-made products than Korean consumers buy American-made goods. Yet, Korean firms operating in America now employ 52,000 U.S. workers, an increase of nearly 30 percent since the trade agreement came into effect.

That is why governments should not hastily decide cases involving cross-border disputes that pit one company against another within the same industry. The most recent example is the Commerce Department’s September decision to impose a jumbo-jet–sized total tariff of nearly 300 percent on Canada-headquartered aircraft manufacturer Bombardier.

The case was brought by Boeing, and the casual observer may have seen this announcement as the Commerce Department acting in favor of a U.S. company over a foreign competitor. A patriotic part of them may have even smiled as they turned the page. In reality, that decision could have delivered a detrimental blow to thousands of U.S. workers in West Virginia, Kansas, and Arizona.

For example, companies based in the United States provide more than half of the components in each of Bombardier’s C Series aircraft, including engines, avionics, braking systems, fuel systems, and more. As a result, the C Series is projected to generate more than $30 billion in business for U.S. suppliers across 19 states, supporting more than 22,700 domestic jobs.

Bombardier and France-based Airbus also announced a broad partnership on the C Series that includes manufacturing airplanes at Airbus’s plant in Mobile, Alabama. Airbus and Bombardier have a similar approach to the United States. Both companies are investing in manufacturing and creating U.S. jobs, supporting U.S. exports, and buying billions worth of components from U.S. aerospace suppliers.

Bombardier has been operating and investing in the United States for more than 40 years. It builds and services planes, trains, and related equipment in America for both domestic and export markets. It directly employs more than 7,000 U.S. workers across 17 states and generated more than $15 billion in business for its U.S. suppliers (and their employees) over the past five years.

The U.S. International Trade Commission voted unanimously in January to reject the Commerce Department’s recommendations, preventing those tariffs from taking effect. That was a significant decision, which rejected the antiquated “us versus them” approach to trade policy.

Positive Signals from President Trump
The day before the ITC’s ruling, President Trump joined 15 CEOs of European-headquartered companies for dinner at the World Economic Forum in Davos, Switzerland. During the dinner meeting, he urged these top executives to invest more in the United States.
“I want to thank everybody,” President Trump said in remarks to the CEOs. “Really, you have done incredible work, incredible jobs. These are some of the great companies of the world, many of the great companies of the world.”
Also, before leaving for Davos, the President’s press secretary issued a statement that mentioned the importance of “preserving the longstanding United States open investment policy.”

While the administration’s views on international trade and global investment continue to reveal themselves, these recent actions build on the positive message Secretary Ross delivered at last year’s SelectUSA Investment Summit: “President Trump is committed to creating a business-friendly environment across our nation... the administration welcomes global investment to strengthen local economies and to ensure job creation.”

However, that global investment attraction effort cannot be pursued in isolation. Given the realities of our 21st century economy, it is difficult to plant a flag on any single company. That is why governments, including our own, need to remember that an international company doing business on their soil is not a rival. Putting America first does not mean just tipping the trade scales in favor of domestic firms. It involves careful consideration of what new tariffs will mean for U.S. workers and their global competitiveness.

While time will tell, there is reason to be optimistic that the Trump Administration will continue America’s commitment to remaining an open economy. Trade policy can no longer be viewed as an “us vs. them” proposition — America’s economic strength is built on its global connections.
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