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Businessweek Archives

Don't Discourage Overseas Investment



Just when it appears that the Clinton Administration has finally found the straight and narrow path down the middle, with proposals to reinvent government and reform welfare, something loopy pops out. Bubbling on low simmer is a memorandum by Labor Secretary Robert Reich to President Clinton that suggests that Washington penalize U.S. companies that invest overseas rather than at home. Reich argues that this kind of investment hurts exports and destroys well-paying jobs.

Horse hockey. The success of a new breed of U.S. manufacturer, the mini-nationals, in world markets proves just the opposite. These $200-million-to-$1-billion companies are locating engineering centers, sales and service offices, even full-fledged manufacturing in Asia, Europe, and Latin America. Instead of killing exports and jobs, the minis are doing just the opposite. By expanding their toeholds in important niches, they are generating billions of dollars' worth of exports in components and services from the U.S. while creating thousands of high-quality jobs back home (page 66).

The Clinton Administration is struggling to develop new trade strategies. That will require a more sophisticated approach than merely trying to keep each and every job within the U.S., as Reich seems to favor. Indeed, it makes no sense to hobble companies with restrictive regulations and tax penalties just for the sin of investing abroad. Such investment may well be justified, argues Council of Economic Advisors Chairman Laura D'Andrea Tyson. We agree. Just look at the success of the mini-nationals.

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