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TONELSON: Full disclosure needed on net cost of offshoring
Question of the Day
When Congress and the public debate trade and globalization policies, the offshoring American multinational companies that they’ve enriched so handsomely have long enjoyed use of a subtle but powerful secret weapon — indulgent U.S. government data practices that let them get away with intellectual murder.
Sound policymaking on these fronts depends heavily on knowing how existing and proposed initiatives affect the domestic economy. Washington collects detailed, relevant data on the multinationals’ international operations and those of other firms. But in deference to the companies’ insistence on keeping proprietary information confidential, what’s actually published is generally too limited or vague to give the public or policymakers meaningful guidance.
Into the resulting vacuum have charged the multinationals, free to release any company-specific information as selectively and self-servingly as they wish. In congressional testimony, news releases, studies by hired academic guns and briefings for public officials, they get to use impressive-looking, cherry-picked specifics to portray today’s globalization regime as win-wins for them and the economy on net. In turn, these phony successes enable the offshorers and their lackeys to pose as experts on prosperity-building. Their critics, meanwhile, are left with the handful of contrary data crumbs that occasionally spill into the business press, and their dissents look like groundless carping.
This flagrantly tilted policy playing field was outrageous enough during the past two bubble decades, when bogus affluence masked the damage to wealth-creating industries — especially manufacturing — inflicted by offshoring-focused trade policies. Nowadays, with inflating housing and credit bubbles thankfully discredited as growth strategies (at least for public consumption), the costs of offshoring stand exposed as prohibitive.
To break the multinationals’ dangerous monopoly on vital globalization-related information, a “Truth in Offshoring Act” is urgently needed. And recent developments show that the imperative keeps growing.
Take the flurry of business deals trumpeted by the White House following January’s Sino-American summit. Normally, companies like General Electric, Honeywell and Navistar closely hold data on where components are made and on the U.S. content of their products. But suddenly, these companies were serving specifics up on a platter, and all conveniently depicted their agreements with China as bonanzas for U.S. growth and employment.
Unfortunately, because of Washington’s “Ask but Don’t Tell” data practices, this information can’t be independently verified. Nor can anyone tell whether such numbers remotely typify the flood of similar deals such companies have signed for so many years with China and other offshoring destinations. Worse, our watchdog media now so instinctively transmits the multinationals’ messages verbatim that these questions were never asked. Score a big, free pass for the offshorers.
GE’s information practices have assumed new importance lately, with Chairman and CEO Jeffrey Immelt now heading President Obama’s new private-sector job-creation commission.
A recent New York Times profile of the company cited company figures claiming that GE is America’s second-biggest exporter, behind Boeing, and that its overseas sales soared from $51 billion in 2001 to $81 billion in 2009. Who better to advise the president on employment than a champion exporter like this? Yet Times reporter Steve Lohr apparently never asked GE how much it imported during those years. That’s vital to determining whether GE is an American job creator on net — the $64,000 question.
Interestingly, GE used to report its trade-balance figures — representing both export and import totals, of course — in its annual reports. The surpluses were impressive. But in the late 1990s, these figures disappeared. A company spokesman told me that investors were no longer interested. My suspicion? All the foreign factories that trade deals with China in particular encouraged GE to send or build overseas were completed in that period and began shipping products back to the U.S. market. So the surpluses quickly became deficits.
Indeed, this is exactly what’s happened to the trade balances of U.S. multinational companies overall since the late 1990s. Maybe GE has bucked the trend, but until the facts are disclosed, Mr. Immelt’s job-creator bona fides will remain at best a mystery — something that should concern the White House. Should this new presidential adviser really be allowed to keep evading this issue?
Positively absurd is the airborne-tanker competition embroiling America’s Boeing and Europe’s EADS. Each company is bombarding the radio waves with ads claiming how many American jobs their victory would produce, and during hard economic times, this issue will loom large in the final award. But so far, the decision-makers and voters being lobbied so frenetically have only the companies’ contentions to rely on. Why not simply force Boeing and EADS to open their books — and their subcontractors’ books — and find out for sure?
The Truth in Offshoring Act would require just such disclosures. All companies above a certain size wishing to do business in America, whether U.S.-owned or not, would need to report regularly such information as their exports and their imports, their U.S. and foreign purchases, the U.S. and foreign content of their products, their domestic and overseas employment, and how these indicators have changed over time.
The multinationals would scream about the dangers of divulging their trade secrets. But mandatory disclosure for all would undercut this information’s strategic value. In fact, all automakers have been required to report North American and foreign content levels for nearly two decades, with no ill effects. More important, special interests could no longer manipulate crucial national policy debates. And policymakers and voters would no longer be forced to fly blind on issues where ignorance has become unaffordable.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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