NCPA - National Center for Policy Analysis


July 19, 2006

Members of Congress profess to dislike "outsourcing," which is said to cost American jobs. Yet some of the same members are now preparing to erect barriers against the insourcing of jobs from foreign investment into the United States, says the Wall Street Journal.

The rationale for this is "national security," says the Journal.  But in reality, over the past 25 years foreign investment has helped the American economy, without increasing security risk:

  • The United States has imported nearly $3 trillion net, which has helped to fuel rapid growth.
  • Roughly three-quarters of all foreign investment comes from Europe and Canada, so security fears have always been exaggerated.
  • About one in 20 Americans works for a foreign-owned firm, and those jobs on average pay 30 percent above the U.S. median.
  • A new study by Boston University economist Laurence Kotlikoff argues that foreign investment helps offset the low savings rate in the United States and has helped raise the average wage of American workers by increasing productivity.

Foreign investment is already politicized in too many areas, adds the Journal, with real economic costs:

  • Foreign ownership of U.S. airlines is barred, though cash-poor American companies could sure use the help.
  • Foreign investment in media is also restricted, which seems absurd in a world of 500 TV channels and the Internet.
  • Canada is moving to block the $37 billion sale of one of that nation's major copper mines to Arizona-based Phelps Dodge Corporation.

Increased U.S. restrictions would only give foreign governments one more excuse to bar American investment in their countries.  America has long been the biggest net winner from the free flow of global capital. By adding new political risk to private investment decisions, Congress is undermining the very American economic security they say they want to protect.

Source: Editorial, "Don't Invest in America Act," Wall Street Journal, July 19, 2006


Browse more articles on Economic Issues