The U.S. Shouldn't Punish Companies For Shipping Jobs Overseas

Democrats in the U.S. Senate were dead wrong to try and punish U.S. companies for shipping jobs overseas.  The effort was thwarted by the Republican minority but is not going away in an election year. Democrats failed to muster the 60 votes needed to clear a Republican procedural hurdle, which  they knew full well they would not clear.

Though this may make good political theater, it’s lousy economics.

Unfortunately, the jobs that have been sent overseas over the past two decades are not coming back.  Punishing companies who — because they are private enterprises — pursue the lowest-cost workers is pointless.  They have not done anything wrong, so why are they being punished? So many American companies shift so many jobs overseas that it’s hard to know where to start meting out job.   What about slapping Thomson Reuters (NYSE:TRI) for outsourcing journalism jobs to India? Many tech companies including Microsoft Corp.  (NASDAQ: MSFT),  IBM (NYSE:IBM) and Hewlett-Packard Co.  (NYSE: HPQ) do research overseas.  Those people are among the smartest in the world .  Should these companies be punished for not finding enough American geniuses?   No, that would be insane.  Then again, so is wishing away the global economy but that’s exactly what Democrats tried to do.

“The proposed bill would have raised taxes on companies that move manufacturing jobs out of the country and provide a tax incentive for companies that decide to bring them back,” according to CBS.com.

There are many ways that American companies profit from moving their operations overseas including deducting the cost of closing American plants.  Business groups likely would file suit against the bill the moment it became law, alleging that it was discriminatory and they would be right.  How can the IRS allow one company to make the deduction and another one moving operations overseas not to?

The U.S. is not an island unto itself, not even close.  We have alliances with frenemies — an odious but nonetheless accurate word — that guide our economic existence known as free trade agreements.  Critics call them “job killers”, and they are right.  Thanks the North American Free Trade Agreement, industries such as apparel manufacturing have largely disappeared from American shores.   Factories around the world from China to Mexico to Bangladesh churn out tons of cheap goods for Americans to consume.  We are champions at it.

Free trade is a debate of the 1990s that was supposed to have been settled then.  It’s not surprising that protectionism is creeping into our political discourse in an election year. The way to get the economy growing again is to look ahead not back

–Jonathan Berr