Overseas Investment Is a Good Thing

Alex Adrianson / May 14, 2009

“Overseas investments,” writes Steven Malanga, “rarely cost jobs in a corporation’s home country,” but instead bring substantial benefits for the home country.

President Obama has proposed eliminating what he sees as an unfair incentive in the tax code for U.S. companies to move jobs overseas. In fact, as explained in an earlier post, the provision he is targeting—which allows U.S. firms to defer tax liability on the profits they earn abroad—was designed to mitigate the disadvantages of the U.S. tax code for U.S. companies competing globally.

But what about this idea that corporations invest abroad in order to take advantage of low-cost labor? Malanga, senior fellow at the Manhattan Institute, points to research showing that multinational corporations in rich countries are five times more likely to invest in other rich countries than in poor countries. In other words, they’re not getting a bargain on labor costs. So why are they investing in overseas operations? Malanga writes: (more…)