Trade and U.S. Competitiveness are Joined at the Hip

Did you know much of Intel's R&D and capital investment occurs in the U.S., but close to 80% of our revenue is generated overseas?

Everyone agrees that the U.S. needs to become more competitive.  Other nations are catching up and some already are surpassing us in terms of basic R&D funding, advanced college degrees, technology infrastructure investment, etc.  These developments concern U.S. policy makers and the private sector alike. 

In contrast, there is no general consensus on the value of international trade to the U.S. economy.   Given the widely varying opinions on trade, one might apply Greek philosophy to the subject and determine that “beauty is in the eye of the beholder.”

Yet what does one make of the conclusion by Federal Reserve economists that, but for international trade, our GDP would have actually declined during 2008?  The Bureau of Economic Analysis reached a similar conclusion.

Ninety-five percent of the world’s consumers live outside the U.S.  Many American companies need to effectively service consumers in overseas markets to remain strong financially, create jobs for Americans, and renew economic growth.   Indeed, more than 20 million Americans work for U.S. multinationals (MNCs), and those MNCs are supplied and serviced by millions of additional Americans employed by thousands of smaller U.S. enterprises.  See Mathew J. Slaughter, “How U.S. Multinational Companies Strengthen the U.S. Economy,” Business Round Table & United States Council Foundation (Spring 2009).

For the high tech industry, the value of trade is clear.  Consider just a few points:

• TechAmerica’s forthcoming report, High-Tech in the International Economy, indicates that the U.S. operations of numerous large and mid-sized high tech companies would not be viable without the revenues they generate overseas, which for those entities, range from 50% to as high as 96% of their total revenue.   
• Intel is a classic example.  We manufacture about 75% of our products in the US, employ around 45,000 Americans, but generate close to 80% of our revenue offshore.  What does this mean?

o Access to overseas markets through robust trade agreements is critical to the health of our company – including our ability to maintain technology leadership and continue paying high salaries to our U.S. employees. 
o We recently announced $7B investment to upgrade U.S. plants.   Our ability to continue making sizable investments in the U.S. is facilitated by revenue generated overseas, and that revenue is dependent on trade liberalization. 

We cannot look at trade and competitiveness separately.  American competitiveness depends on opening new markets to trade and expanding existing ones.   And open markets means U.S. companies will face more competition and need to become more innovative and competitive.

Some may ask, which one should we favor more, trade or U.S. competitiveness?  Taking C.S. Lewis out of context, that’s “like asking which blade in a pair of scissors is most necessary.”   We need both.  More discussion on the value of trade to come. . .