Another reality lost in the outsourcing debate is the amount of work the rest of the world outsources to the United States. We are far and away the world’s top “provider” of outsourcing in the form of information technology, financial, communications, and other business services. In 2003, Americans sold $131 billion in private business services to the rest of the world. Those services include such outsourcing tasks as legal work, computer programming, management consulting, telecommunications, banking, and engineering. At the same time, Americans were buying, or importing, $77 billion worth of business services from the rest of the world, including call center and data entry services from developing countries such as India and the Philippines. In other words, when it comes to outsourcing of business services, the United States ran a $54 billion surplus with the rest of the world last year. As a Wall Street Journal report concluded, “The numbers suggest that congressional efforts to restrict outsourcing by U.S. companies may backfire, if they provoke retaliation by U.S. trading partners. Economist also say that U.S. service exporters — insurers, for instance — might lose some competitive edge if they can’t use foreign suppliers for call centers or other back-office operations.”
In the more specialized area of IT services, America’s edge is even more pronounced. In 2002, according to the most recent figures, U.S. companies exported $14.8 billion worth of computer, data processing, research, development, construction, architectural, engineering and other IT services. During that same year, Americans imported $3.9 billion of those same kinds of services. So for every dollar Americans sent abroad for IT outsourcing in 2002, the world sent more than three dollars to the United States for “insourcing.”
The same general story applies to foreign direct investment. The United States remains a magnet for direct investment from foreign multinational companies. In 2003, the rest of the world invested $82 billion in directly owned U.S. assets, including foreign-owned affiliates. According to the Commerce Department, more than 6 million Americans work for foreign-owned affiliates in the United States. It is fundamentally misleading to complain about U.S. companies investing abroad with-out considering foreign investment in the United States. Indeed, if Congress and state legislatures declare war against foreign outsourcing, American companies and workers will be among the first casualties.
Many of those casualties could come specifically in Michigan. The state has gained just as the nation has from direct foreign investment, particularly — and not surprisingly — that clustered around the auto industry. In the Eighties, for example, Mazda Motor Corp. built a brand new automotive assembly plant in Flat Rock, Michigan, which still employs several hundred people in well-paid, UAW-represented jobs. Dozens of foreign-owned automotive manufacturers and suppliers have opened technical, sales, marketing and distribution centers as well in metropolitan area, helping to a significant extent Detroit’s continuing efforts to remain the world automotive capital.
Japanese auto makers alone employ thousands of Michiganders in their technical centers. Nissan Motor Co., for example, employs about 800 people at its technical center in Farmington Hills, Michigan. South Korean auto maker Hyundai is to employ nearly 100 people at its new tech center near Ann Arbor, Michigan. Suzuki Motor Corp. has opened a development nexus in Wixom, Michigan, and Mitsubishi Heavy Industries located one in Sterling Heights, Michigan. Toyota Motor Co. earlier this year opened its new Toyota Technical Center USA in Ann Arbor Township, where it now employs more than 500 people, about 80% of them Americans – a ratio that has flipped from 80% Japanese about a decade ago. And the company has added a new styling center in Ann Arbor as well.