FACTS SHOW THAT CORPORATIONS NOT ABANDONING U.S.

Byline: Robert Krol

AMERICANS view multinational corporations with great suspicion.

The general perception is that they are responsible for a massive outflow of jobs to low-wage countries.

In a recent Wall Street Journal/NBC News poll, 41 percent of those polled said that preventing jobs from moving abroad should be one of Congress' top priorities.

Ross Perot and Pat Buchanan played on this popular fear in their attempts to capture the White House. But this perception conflicts with reality.

U.S. Department of Commerce data show that almost 75 percent of investment by American corporations abroad is in high wage countries. Firms are not moving en masse to low-wage developing economies.

Here are the facts. U.S. corporate direct investment abroad has reached $1.3 trillion by the end of 1995. Over the past 10 years, more than half of this foreign investment by U.S. corporations has been in Europe.

At a country level, 17 percent of the total was invested in the United Kingdom and 6 percent in Germany. Canada has the second largest country share, 11 percent. Developing countries with the largest shares of U.S. direct foreign investment are Brazil and Mexico, with 3 percent and 2 percent shares, respectively. Furthermore, only 13 percent of overseas production of American companies is aimed at the U.S. market.

Clearly, the perception that American multinational corporations have expanded abroad to take advantage of cheap labor is incorrect.

Instead, the average firm locating production abroad employs highly educated, high wage professional and technical workers, makes large investments in research and development, and produces technologically sophisticated goods and services.

The reasons for foreign investment vary by industry. Some firms that invest abroad are trying to avoid actual or potential trade barriers and reduce transportation costs.

For example, Japanese automobile manufacturers' made significant investment in the United States during the 1980s. For companies like these, access to high income consumer markets is far more important than access to low-wage labor. Where customer service is important, to be competitive, businesses must locate where sales are made.

A good example of moving to be near customers is the recent expansion abroad by the U.S. financial services industry. Obviously some foreign investment is made to take advantage of lower wages outside the U.S., but the data suggest it is a relatively small component of total overseas investment by U.S. corporations.

To put the magnitude of investment abroad in perspective, it is dwarfed by annual investment within the United States. Total investment in plants and equipment in the U.S. averaged more than $588 billion per year over the past 10 years. It exceeded $700 billion in 1995 alone.

This compares to $242.2 billion worth of investment abroad in 1995.

The strong domestic investment record of U.S. companies represents a steady expansion in our productive capacity at home.

Many blame international trade and foreign investment as the primary source of job and wage insecurity, especially for low-wage workers.

While the least-skilled American workers have experienced a relative wage decline and increased periods of unemployment, research shows that it is more the result of technological change than factors related to international trade and foreign investment.

The perception that corporate America has sold out the American worker by exporting jobs to low wage countries is wrong.

The danger for the United States is that its politicians may listen to protectionist calls for restricting or controlling international investment.

If these restrictions are enacted, they will impose costs on America corporations by forcing them to operate less efficiently. U.S. companies will be placed at a competitive disadvantage in world markets. As a result, U.S. corporate profitability and performance will decline, lowering economic growth and putting far more American jobs at risk.