How U.S. should deal with the increasing irrelevance of corporate nationality.
‘You shouldn’t get to call yourself an American company only when you want a handout from the American taxpayers,” President Obama said last week.
He was referring to American corporations now busily acquiring foreign companies in order to become non-American, thereby reducing their U.S. tax bills.
But the president might as well have been talking about all large American multinationals.
Only about a fifth of IBM’s worldwide employees are American, for example, and only 40 percent of GE’s. Most of Caterpillar’s recent hires and investments have been made outside the U.S.
In fact, since 2000, almost every big American multinational corporation has created more jobs outside the United States than inside. If you add their foreign subcontractors, the foreign total is even higher.
At the same time, though, many foreign-based companies have been creating jobs in the United States. They now employ around 6 million Americans and account for almost 20 percent of U.S. exports. Even a household brand like Anheuser-Busch, the nation’s bestselling beer maker, employing thousands of Americans, is foreign (part of Belgian-based beer giant InBev).
Meanwhile, foreign investors are buying an increasing number of shares in American corporations, and American investors are buying up foreign stocks.
Who’s us? Who’s them?
Increasingly, corporate nationality is whatever a corporation decides it is.
So instead of worrying about who’s American and who’s not, here’s a better idea: Create incentives for any global company to do what we’d like it to do in the United States.
For example, “American” corporations get generous tax credits and subsidies for research and development, courtesy of American taxpayers. But in reducing these corporations’ costs of research and development in the United States, those tax credits and subsidies can end up providing extra money for them to do more R&D abroad.
Minnesota-based 3M is building research centers overseas at a faster clip than it’s expanding them in America. Its CEO explained a few years ago that this was “in preparation for a world where the West is no longer the dominant manufacturing power.”
3M is hardly alone. Since the early 2000s, most of the growth in the number of R&D workers employed by U.S.-based multinational companies has been in their foreign operations, according to the National Science Board, the policymaking arm of the National Science Foundation.
It would make more sense to limit R&D tax credits and subsidies to additional R&D done in the U.S. over and above current levels — and give them to any global corporation increasing its R&D in America, regardless of the company’s nationality.
Or consider Export-Import Bank subsidies — a topic of hot debate in Washington these days. These subsidies are intended to boost exports of American corporations from the United States.
Tea Party Republicans call them “corporate welfare”; Chamber-of-Commerce Republicans call them sensible investments. Regardless, they’re going to “American” multinationals that are making things all over the world. That means any subsidy that boosts their export earnings in the United States indirectly subsidizes their investments abroad — including, very possibly, their exports from foreign nations.
GE, a major Export-Import Bank beneficiary, has been teaming up with China to produce a new jetliner there that will compete with Boeing for global business. (Boeing, not incidentally, is another Export-Import beneficiary.) In fact, GE is giving its Chinese partner the same leading-edge avionics technologies operating Boeing’s 787 Dreamliner.
Caterpillar, another beneficiary, is providing engine funnels and hydraulics to Chinese firms that eventually will be exporting large moving equipment from China. Presumably, they’ll be competing in global markets with Caterpillar itself.
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