President Obama and Vice President Biden are hosting a forum today in an effort to promote "insourcing" American jobs. Business leaders will meet with the President to talk about why insourcing is needed to help create jobs and attract investing dollars from companies looking to establish or grow U.S. subsidiaries. One of those attending who will have the President and Vice President’s ear is Nancy McLernon, President & CEO of the Organization for International Investment (OFII), a Washington business organization representing the U.S. operations of global companies.
LL: You will be participating in the forum with the President. What are you going to stress in that meeting?
NM: While there are new stories every day about global companies investing in the U.S. and insourcing jobs for Americans, there is an urgent need to turn around a declining trend in foreign direct investment (FDI) in the U.S. Over the last decade, the U.S.’ share of worldwide FDI has fallen off dramatically, from more than 40 percent to about 17 percent today. Along with a number of macro policies that need to be addressed to make the U.S. a more competitive location for investment and job creation – including lowering the corporate tax rate, maintaining a skilled manufacturing workforce and modernizing America’s infrastructure - global companies need to know their investments are welcome here and they will not be disadvantaged because they are headquartered abroad.
LL: Insourcing is a great opportunity to generate jobs. Over five million jobs have been insourced from global companies already. How many more potential jobs are out there?
NM: Given that U.S. subsidiaries of foreign companies are heavily concentrated in the manufacturing sector – currently providing13 percent of total American manufacturing jobs (approximately 2 million) – increasing cross border investment in the U.S. could have a particularly positive impact on the manufacturing sector. Specifically, companies from emerging markets are just now looking to invest abroad, providing a real opportunity for the U.S. manufacturing workforce to benefit from insourcing.
LL: What grade would you give the U.S. insourcing efforts in Washington?
NM: As of now, I would give policymakers an “Incomplete”. The Administration has taken a welcome step in making global investment a greater priority by establishing SelectUSA and issuing an open investment statement, but still has a long way to go in actualizing a structured policy to move the needle and reverse the declining trend in foreign direct investment. In Congress, there is a serious effort underway to enact comprehensive corporate tax reform that is being closely watched by the international business community– but that’s still a few years away from fruition.
One immediate and important step the Administration could take is to establish a National Investment Initiative (NII) – which would be similar to the National Export Initiative announced in 2010. It would make attracting global investment and related job creation a national imperative. In fact, the President’s Council on Jobs and Competitiveness recommended to President Obama late last year to establish an NII – with the goal of attracting $1 trillion in new foreign direct investment over the next 4 to 5 years (about a 20% increase from the current trend).
LL: What advice will you give in this forum to encourage the U.S. Government to create a better insourcing environment?
NM: We can start by scrubbing current policies, regulations and government practice for areas where global companies may not have a level playing field - which would include promoting their U.S. exports alongside those of U.S.-headquartered companies, government contracting, and existing ownership restrictions - e.g., telecommunications & airlines.
LL: What is the multiplier effect with the reinvestment money from U.S. Subsidiaries?
NM: U.S. subsidiaries of global companies reinvest an annual $93.7 billion of their profits back in their U.S. operations. In addition, these companies buy more than 1.8 trillion in intermediate inputs from domestic suppliers and small businesses. That amounts to about 80 cents on every dollar spent on buying American products.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."