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Noah Smith

America Needs More Foreign Investment

It would be bad news for workers if the U.S. did anything to slow the flow of capital from overseas.
As homegrown as they come.

As homegrown as they come.

Photographer: Charles Bertram/Lexington Herald-Leader/Getty Images

In the minds of some American trade restrictionists, the vision of a perfect world economy seems to go something like this: U.S. companies produce things in the U.S. Foreign companies produce things in foreign countries. Goods made in the U.S. by U.S.-owned companies then outcompete foreign-made goods in international markets, thereby winning the competition. Restrictionists worry not just about U.S. companies shipping jobs overseas, but about overseas companies owning assets in the U.S.

In reality, things work very differently. U.S. companies invest and hire overseas, as everyone knows. But foreign companies also invest a great deal in the U.S. and hire American workers. Take Toyota Motor Corp., for example. During the next five years, the Japanese carmaker intends to invest $10 billion in the U.S. That money will be used to hire American workers at American factories. But even if some of that $10 billion doesn’t materialize, Toyota already employs huge numbers of Americans -- more than 100,000, by its own count. The company recently added more than 700 employees at its plant in Georgetown, Kentucky, which produces the Toyota Camry.