The U.S. Manufacturing Council, created in 2004 by President George W. Bush, serves as the principal private sector advisory committee to the secretary of Commerce on the U.S. manufacturing sector. It provides a critical forum for finding solutions to industry-related problems, and it’s intended to keep America as the premier destination for investment in manufacturing throughout the world.
Ironically, “insourcing companies” — or companies that are headquartered in other countries and invest in the United States and employ millions of U.S. workers — have been excluded from serving on the council. That means nearly 1 in 5 American manufacturing workers have no voice on vital issues that affect their livelihoods because their employer has been barred from participating. That is despite the fact that foreign direct investment flows more into manufacturing than any other industry sector in the United States — a staggering $900 billion — and supports about 2 million hardworking Americans with high-paying jobs and excellent benefits.
The Organization for International Investment just released an economic report, “Insourcing Companies: How They Raise Our Game,” which provided a first-ever analysis of the role foreign companies have played in the U.S. economy over a 10-year period. The findings were striking: It found that insourcing companies, as a group, outperformed the economy-wide average in nearly every relevant economic indicator over the past decade. For example, the report showed that insourcing companies increased their contribution to U.S. gross domestic product by 25.2 percent over the past decade, nearly double the private sector’s 14.3 percent increase.
As the report cites, the vast majority — about 84 percent — of insourcing companies entered the United States over the past two decades through mergers and acquisitions of U.S. companies. When a foreign company acquires a U.S. company, they raise their industries’ economic performance, invest heavily in research and development, buy material locally, establish innovative workforce training programs, increase compensation and benefits for hardworking American, and pay a disproportionate amount of U.S. taxes.
For example, the Volvo Group acquired Mack Trucks in 2001 and has been investing in the brand’s success ever since. The Volvo Group invested more than $425 million in a new North American engine program, resulting in EPA-certified Selective Catalytic Reduction emissions control technology in 2010 — allowing its commercial vehicles to meet the world’s most stringent diesel engine emissions standards. Just last month, the Volvo Group announced a $30 million expansion of its plant in Hagerstown, Md., which includes adding 100 to 140 jobs. Since 2001, the Volvo Group has invested more than $350 million in that plant alone, which currently employs more than 1,300 people.
Beyond providing high-quality jobs, insourcing companies invest in local towns and cities they are a part of, and those investments have spillover effects that spur economic development in those communities and support downstream jobs. For example, insourcing manufacturers are increasing their purchases of locally produced supply material by 48 percent, compared to just 13 percent for U.S. manufacturers overall. Their investments in local infrastructure bring their goods to market, and training programs prepare the next generation of high-skilled manufacturing workers help attract other businesses to these local communities. They also pay more than 17 percent of the taxes paid by all U.S. manufacturers, while they make up less than 12 percent of the manufacturing sector’s taxable income.
Insourcing companies have played a critical part in keeping our economy running and in recognition of their positive impact on the overall economy — especially the manufacturing sector — the Obama administration announced last week that it would allow U.S. executives of insourcing companies to participate as members of the Manufacturing Council.
The announcement came during the administration’s SelectUSA Investment Summit, a two-day conference intended to help make up for lost ground in attracting more foreign investment in America. Allowing insourcing companies to join the Manufacturing Council is a clear signal that the Obama administration recognizes the value insourcing companies have brought to the U.S. economy and want to capitalize on their knowledge and expertise.
The OFII has advocated for fairer treatment of these companies and applauds the Commerce Department for making this change. Insourcing companies in the manufacturing sector have a vested interest in promoting a strong, vibrant and innovative industry in America. While this announcement is great news for hardworking Americans who earn their living in the manufacturing sector, other agencies could benefit from allowing insourcing companies to join the conversation.
Nancy McLernon is president and CEO of the Organization for International Investment.