Insourcing roundup

While we’re talking about offshore outsourcing, here are a few stories about the benefits that accrue to the United States from insourcing. The Cleveland Plain Dealer‘s Stephen Koff reports on Honda’s Ohio operations as an example of this phenomenon:

Honda, celebrating its 25th year here this summer, has provided a multibillion-dollar boon for central Ohio, with five large factories plus research and engineering facilities and a test track. Last year, it spent more than $7 billion just on parts from 175 suppliers in the state. Bush cited its success in March when he said that global trade flows two ways, and without it Ohio would not have Honda and its jobs. In pure dollar terms, insourcing — whether from Japan-based Honda, or Switzerland-based Nestle, or Dutch-owned Tops markets, to name three firms in Ohio — has had a significant impact on the American economy. Even counting the steep dropoff that followed the terrorist attacks and recession in 2001, Commerce Department figures show that over the last 10 years, foreign-based companies poured more money into U.S. operations than U.S. companies sent abroad. Furthermore, most of the foreign investment in the United States came directly from abroad – whereas Commerce Department data show that nearly half the American money sent abroad was actually reinvested earnings.

The Associated Press’ Charles Sheehan makes a similar point in analyzing the effect of outsourcing and insourcing in Pennsylvania:

economists note that globalization is a two-way street: States like Pennsylvania also benefit greatly from foreign companies sending jobs to their American subsidiaries, offshoring in reverse. Dozens of jobs at C&D Technologies, a Lancaster County company that produces electrical power storage and conversion products, are being shipped to Mexico this summer because C&D was losing money. Yet Nissin, a Japanese company also operating in Lancaster County, has 248 employees making dried noodle soups. In neighboring Berks County, Agere Systems Inc. sent 3,000 jobs to Mexico and Spain after it announced a plant closing in January 2001. On the flip side, about 190 miles west, Sony’s Technology Center-Pittsburgh in Westmoreland County employs 2,400 people, about 20 percent from neighboring Fayette County, where unemployment is consistently above state levels. And they may have to hire more with digital television orders booming.

To be fair, some of the numbers on insourcing are contested. The Economic Policy Institute’s Robert Scott and Adam Hersh argue that the number of jobs created due to insourcing isvastly overstated, because those figures include cases of acquisition rather than greenfield investment — i.e., Daimler’s takeover of Chrysler. Unanswered is whether foreign acquisition prevents those firms and jobs from disappearing entirely. For a counter, read the U.S. Chamber of Commerce’s April report, “Jobs, Trade, Sourcing, and the Future of the American Workforce.”