More Time, Now...
trade, even out-sourcing, is good for Virginia's
economy. The losers from open markets may be highly
visible but the winners are far more numerous.
Lou Dobbs has a great
shtick on Cable News Network. In a regular feature he
calls “Exporting America,” the avuncular anchorman chronicles the loss of American jobs to
cheap overseas labor markets. As United
companies move manufacturing and service operations
abroad, he argues, American consumers run up record
imports. With the U.S.
balance of payments deficit reaching a record half
trillion dollars a year, Americans are selling their
assets to pay for unsustainable consumption.
the kind of storyline that’s guaranteed to pump up
ratings. Heroic Lou stands up for the little guy while
greedy corporate executives hollow out the country’s
economic base in pursuit of short-term profit. The
economy-is-going-to-hell narrative also appeals to those
who would like to see a change in presidential
administrations in Washington, D.C.
Given the drumbeat of downbeat stories in the face of
bounding productivity, rising profits and rapid job
creation, there’s little wonder that Americans are
still wary about the economy.
true that U.S.
exporting jobs and capital overseas and that government
and consumers are running up worrisome indebtedness. But
there’s encouraging news, too. What Dobbs neglects to
mention is that foreigners are exporting capital – and
jobs -- to the United
They’re not all buying U.S. Treasury bills and trophy
real estate properties. Asian, European and even Mexican
companies are investing in productive assets and putting
Americans to work. Meanwhile, American companies are
making money overseas selling products and services
never imaginable a decade ago.
Lou Dobbs would descend from his studio perch and
descend into the trenches of the American economy like I
do, he’d get a very different picture. Every week, I
Newswire, a wrap-up of top business stories around
the Commonwealth. I am continually amazed at the extent
to which Virginians conduct business with foreign
enterprises and sell to foreign markets. Consider this
list of deals and transactions that VA Newswire reported
in just the past two weeks. (You'll never see
them on Lou Dobbs Tonight!)
ANP, a Lynchburg-based unit of the French-based
Arreva Group, is investing $20 million in a
70,000-square-foot service center to
increase the company’s capacity to refurbish
nuclear power plant equipment.
Enterprises, a Richmond home décor and garden
accessory company, is acquiring the assets of a New
Jersey manufacturing facility and relocating work to
Richmond. Started by two Chinese graduates of Old
Dominion University, Evergreen out-sources some of
its manufacturing to China,
but employs American artists to design products that
will appeal to American consumers.
International Group, of Sterling,
has won a five-year, $156 million contract to supply
advanced binocular laser range-finder systems to the
U.S. Army. The equipment will be manufactured by
Vectoronix AG of Switzerland.
developer of document-imaging and text-retrieval
software, will help the Italian Justice Ministry
sort through some 500,000 documents to assist in the
prosecution the massive Parmalat fraud case.
provider of mobile messaging services, will supply
the technology that allows Verizon Wireless
subscribers to send text messages to subscribers of
other wireless companies in more than 28 countries
in Europe, Latin
and the Asian Rim.
Corporation of America,
a unit of a Japanese trading company, has acquired Oxford
Finance Corporation of Alexandria,
for $77 million. The transaction will enable Oxford
to provide American clients and venture capitalists
with “a direct link to the Japanese life science
market for collaborative partnerships, distribution
agreements and equity investments.”
Therapeutics, a Herndon company licensing a Belgian
technology and financed by a European investor, is
winding up Phase II clinical trials of TamoGel, a
system for delivering through the skin a drug for
treatment of severe breast pain. The 10-person company
expects to double employment by the end of the year
and to grow another 50 percent in 2005.
Foods, the Smithfield-based pork processing giant,
has purchased Jean Caby, a French producer of hams,
sausages and hot dogs, which it will merge with its
other French units to create a $466 million-a-year
Telecommunications, Inc., a McLean
company founded by an Indian immigrant, has
introduced a Voice over Internet (VoIP) telephone
service that reaches 150 companies and offers free,
unlimited calling to Western
that's just the past two weeks. Go back a couple of more
weeks and you'll read about a Roanoke software company
signing a deal with a Qatari liquid natural gas company,
an Arlington company designing warships for the
Australian navy, a Falls Church company negotiating
waste-to-energy deals in Bulgaria, and a Sterling
designer of high-end tableware selling equity to a
German company in a strategic investment.
Show me the downside of any of these deals! I
suppose you could complain about the Ashbury contract in
which an American company served as an intermediary for
the $156 million sale of laser range-finder systems to
military. That could run up
the U.S. balance-of-trade
deficit. But who could argue the desirability of
equipping our soldiers with range-finding equipment that
will increase the accuracy of their weapons systems?
We’re getting something we really need out of the
Or, I suppose, Sumitomo’s purchase of Oxford
Finance could be construed as the “buying of America.”
But who could dispute the desirability of a deal that
helps Americans forge closer relationships with players
in the Japanese life sciences sector? Should we prefer
that the Japanese build those relationships with the
Europeans and not us? We want
to be connected to the sources of innovation and
No question, large swaths of Virginia’s economy
have been hammered by an open trading system that forces
workers in old industries like furniture and textiles to
compete against Mexicans and Chinese earning one fifth,
even one tenth, of their wages. Tens of thousands of Virginia
factory workers have lost their jobs in the current
recession, most of which will never return.
But the opportunities are tremendous for those
willing and able to learn skills demanded by
leading-edge businesses and, when necessary, relocate to regions where
the new jobs are being created. Look what’s happening in
Companies are reaping revenues by supplying
text-retrieval software, providing technology that
interconnects different wireless phone systems, and
delivering VoIP telephone service to American and
No one had even conceived of such things 10 years ago.
a French company is investing money into a nuclear
power service facility in Lynchburg,
while a Belgian company is investing in an American
biotech start-up. Anti-globalists in Europe
bitterly, no doubt, of the “export” of capital and
jobs to the United
– while criticizing
Smithfield Foods’ investment and job creation in the
French food industry. Look what McDonalds has done to
French cuisine? Zut alors! Can ze porc
packers in Smithfield
can assure you that the new jobs being created by
Framatome, Evergreen, Zylab, Ascend and the rest require
much higher level cognitive skills and education -- and
offer compensation to match -- than the jobs that are
being "exported" abroad.
Virginians benefit by free-and-open trade and
investment in a number of other ways.
First, even the most economically illiterate person
can see that global trade brings lower cost goods. Just
go to Wal-Mart! Foreign competition and the ability to
out-source overseas have played a key role in keeping
inflation in check. It’s no accident that the most
inflation-prone sectors of the U.S.
economy – government, education and healthcare – are
sectors immune to foreign competition and out-sourcing.
Restrained prices have enabled the Federal Reserve Board
to pursue a more stimulative economic policy, with the
lowest interest rates in decades, than would have been
Second, globalization creates wealth in previously
poor countries, expanding the market for U.S.
goods and services. As China,
and other developing countries sprout large middle
classes, millions of people will begin buying American products
and services: sipping Coca-Colas, lighting up with
Marlboro cigarettes, opening up check accounts with Citibank
and running Microsoft operating systems on their
Third, accessing lower-cost manufacturing and
services makes U.S.
enterprises more competitive. Think of it this way: What
if European and Japanese firms enjoyed the cost
advantages of out-sourcing to China/India and Americans
didn’t? How long could U.S. companies stay competitive?
How long would U.S. companies be able to support the
upper-echelon jobs in in R&D,
product development, brand building, deal making and
global supply-chain management?
firms are quicker to
out-source to India,
and other developing countries,
they can better compete against their peers in other advanced
economies. Higher profitability allows them to
create more opportunities for Americans performing tasks
requiring critical thinking, problem solving and
specialized bodies of knowledge, all of which are very
difficult to out-source.
The path to prosperity is not for
firms to hunker down behind protectionist walls. It’s
to focus on high value-added economic activities. And
the challenge for Virginia
communities is not to protect old-and-dying industries
but to stimulate the creation of new ones.
As Virginians, we must create a culture of
innovation, creativity, productivity and entrepreneurial
risk taking – and embrace the challenges and
opportunities that come with participation in global
June 21, 2004