- The Washington Times - Tuesday, August 11, 2009


Imagine a national health care debate in which interested parties such as the insurance companies monopolized the key data and released it only in the most self-serving ways. The chances of getting health reform right would be minimal.

America’s long-standing debate on trade policy and globalization has been overshadowed recently by the health care battle, and, generally, by the Great Recession. But its importance must not be slighted by a country choking on debt largely because it has long bought much more from the rest of the world than it sells. And inexcusably, America’s chances of getting globalization right are far too slim because interested parties — specifically, outsourcing-happy multinational corporations — have for decades monopolized the key data and released it only in the most self-serving ways.

Worse, the resulting information vacuum for the public and decision-makers is knee-capping policy-making in numerous high-profile areas, such as the auto-industry rescue programs and the Obama economic stimulus act itself. In particular, the country knows far too little about how truly American are the goods and services made by companies doing business in the United States. Thus, most Americans are just as ignorant about how these companies’ operations actually affect U.S. growth and employment, and, therefore, about what policies will strengthen or weaken the economy.

The solution? A Truth in Output law. Require all companies with U.S. operations to disclose annually such information as the U.S. content of their products; their U.S. exports and imports; their domestic and foreign spending on procurement and research-and-development; and their U.S. and overseas employment and wage levels. Data should be required going back, say, 15 years, to make clear the trends. Resources to ensure adequate verification, and major fines for fraudulent reporting, are needed, too.

The globalization knowledge gap began flummoxing policy-making in the 1980s, when large companies from all countries began greatly increasing their production of goods and services outside their home countries, as well as the foreign content of their individual products.

The companies reaped big cost savings and other efficiencies. But policy-makers and voters confronted new difficulties in gauging the domestic effects of surging global trade and investment flows. The companies themselves, of course, knew everything about their new worldwide production chains. They couldn’t make money otherwise. But although Washington gathered much of this information, the U.S. government released little.

The costs of this secrecy first appeared in the 1980s. Skyrocketing U.S. trade deficits and foreign-investment inflows raised the question of whether it mattered, and if so, how to respond. Many economists insisted that neither mattered in the emerging, allegedly borderless global economy. Others responded that knowing “Who is us” mattered crucially.

But this fascinating, important debate lacked factual moorings. The laissez-faire crowd has generally prevailed - partly because the federal government looked away as the U.S. and foreign firms taking that position published bushels of cherry-picked data.

But given the ensuing U.S. trade deficits and debts, has America really benefited?

Shortly thereafter, numerous new trade agreements with developing countries, starting with NAFTA - and ardently supported by U.S. multinational companies - magnified the data gap’s importance. The fundamental question these deals raised was whether the world’s Mexicos and Chinas would mainly be exciting new consumers for U.S.-based factories and workers, or replacement sites for U.S.-based production.

Multinationals flooded the nation with facts and figures supporting the “big emerging markets” thesis. Yet, most simply regurgitated publicly available government data that the companies must have known shed no genuine light on the final markets of their new production chains. The more conclusive evidence that they undoubtedly possessed remained closely held.

The multinationals have gotten their deals, and their “big emerging markets” claims may be right. But the enormous American trade deficits racked up with developing countries — especially China — since then, along with sluggish U.S. manufacturing growth, suggest that all the facts would show otherwise.

The Obama recovery programs offering government support for private industry have revived “Who is us” issues. Take the auto-rescue strategy. The General Motors and Chrysler bailouts presumably aim at promoting growth and employment at home. But these companies have long imported both vehicles and parts. Indeed, GM recently made clear its desire to offshore production of small cars for sale in America.

Anecdotal evidence indicates that Detroit vehicles are more American-made than foreign brands, whose corporate owners are getting some government financing for fuel-efficient-vehicle output in the United States based on their own content claims. But all that’s certain is that Washington remains willfully ignorant about any automotive-production patterns, and that U.S. taxpayers are likely subsidizing considerable production overseas.

Meanwhile, the stimulus bill has infuriated U.S. trade partners owing to its “Buy American” provisions. But it allows ample use of foreign-produced parts and components in “American-made” manufactures. Consequently, much less domestic growth than expected will be stimulated. How much less? Americans don’t know because Washington hasn’t sought the relevant information.

The companies oppose full disclosure by arguing that (a) detailed reporting would boost production costs and (b) the information has great strategic value. But with all businesses participating, none would realize cost or strategic advantages. And higher costs passed on to consumers could well be offset by better jobs saved or created by better globalization policies.

The companies are probably more worried that exposing their full economic record would create a public relations and political nightmare. But why should their sensitivities shape U.S. policy - especially when coddling them forces the rest of Americans to fly blind?

Alan Tonelson is a research fellow at the U.S. Business and Industry Council, a national business organization whose nearly 1,900 members are mainly small- and medium-sized domestic manufacturers. Author of “The Race to the Bottom,” Mr. Tonelson also is a contributor to the council’s Web site, www.AmericanEconomicAlert.org.

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