US a Big Winner From Global Outsourcing

COMMENTARY Trade

US a Big Winner From Global Outsourcing

Aug 9th, 2016 2 min read
COMMENTARY BY
Bryan Riley

Jay Van Andel Senior Policy Analyst in Trade Policy

Bryan is a full-time advocate for free trade through his research at The Heritage Foundation.

Americans seem inordinately concerned with where their cars, clothing, and food are produced.

Approximately eight out of 10 consumers say they would purchase an American-made product over a foreign one, oftentimes even if it is more expensive. A reason for this might be their belief that buying American is the easiest way to help the domestic economy grow.

The reality, however, is that in today’s globalized world most companies outsource varying portions of their operations, whether it is U.S. companies investing abroad or foreign-owned companies investing in the United States.

This makes it difficult to determine what “Made in America” even means. And frankly, it makes no sense to try to figure it out. Instead, it is important to recognize that international investment flows and job creation are closely related—and the United States is a big beneficiary of this process.

The U.S. automobile industry is a perfect example of that. Many foreign automobile brands actually produce vehicles here in America, and vice versa. The Toyota Camry and Honda Accord top the list of the 2016 American Made Index, which rates cars assembled in America based on what percentage of their parts are domestic.

As mentioned in the 2016 “International Automakers in America” report released by Global Automakers, which represents many of the international automakers that produce vehicles in the United States, “the growth of international automakers in the U.S. is an American success story.”

International automakers have invested $73 billion in U.S.-based design, research, development, manufacturing, finance, and other operations. Their 36 manufacturing facilities operating in the United States produced nearly 5.4 million vehicles in 2015. It is also worth acknowledging the fact that 126,500 Americans were directly employed by these companies.

Domestic automobile brands, like the “Big Three,” benefit from foreign investment too. For example, Chrysler, a Michigan-based company, is now known as Fiat Chrysler Automobiles, since Italy’s Fiat became its main investor. The same argument is valid in the opposite direction. The popular Ford Fusion is assembled in Mexico, and the Chevrolet Impala is assembled in Canada.

The moral of the story is that Americans can’t and shouldn’t try to stop globalization of production and consumption. Instead, we should remember that even though the line between foreign and domestic products continues to blur, consumers benefit most when they have the freedom to buy the highest quality products at the lowest price, no matter where they are made.

This piece originally appeared in The Daily Signal