established these rights are in countries, the more likely that globalized supply networks will consider locating in those countries—including in the United States.
How successful is the United States in attracting segments of global supply chains? Data on investments by U.S. and foreign multinational corporations indicate that the United States has been an attractive market for foreign direct investments (FDI, investments in a controlling interest [at least 10% of equity] in productive assets by a foreign corporation). In 2007, FDI in the United States was $232.8 billion of which $144.9 billion (62%) came from Europe. Of the total, $108.1 billion (46%) was in manufacturing.38 On balance, however, U.S. corporations invest more abroad in productive assets than foreigners invest in the United States. In 2007, U.S. direct investment abroad was $313.8 billion with $55.2 billion (18%) invested in foreign manufacturing. 39
Labor costs are one of the most controversial aspects of globalized manufacturing chains.40 The argument is that U.S. companies are “shipping jobs overseas” or “outsourcing jobs” in search of cheap labor to reduce costs of production.41 In 2006, for example, hourly compensation costs for production workers were $23.82 in the United States, $25.74 in Canada, $3.72 in Mexico, $14.72 in Korea, $34.21 in Germany, and an estimated $0.67 in China. 42
One of the major drivers of globalized manufacturing networks has been to internalize differences in labor costs within the supply chain. Companies match wages, productivity, and skills with the variety of tasks required in the production process. Tasks requiring skilled workers, such as design, engineering, research and development, and marketing, tend to be located in high wage areas (such as the United States, Europe, Japan, and Singapore), while those requiring low skilled workers, such as assembly and packaging, tend to be located in low wage areas. Companies that produce in the United States also must do such skill and wage matching (such as Caterpillar or Boeing) by locating assembly or supplying plants in lower cost regions and by establishing global supply chains to import certain parts or materials from lower cost countries in Asia, Latin America, and elsewhere. In most cases, companies with assembly plants in the United States buy some manufacturing inputs from abroad.
38 U.S. Bureau of Economic Analysis, Foreign direct Investment in the U.S.: Country and Industry Detail for Capital Inflows, 2007, accessed January 27, 2009.
39 U.S. Bureau of Economic Analysis, U.S. Direct Investment Abroad: Country and Industry Detail for Capital, accessed January 27, 2009.
See CRS Report RL34091, Globalization, Worker Insecurity, and Policy Approaches, by Raymond J. Ahearn.
41 CRS Report RS21883, Outsourcing and Insourcing Jobs in the U.S. Economy: An Overview of Evidence Based on Foreign Investment Data, by James K. Jackson; CRS Report RL32292, Offshoring (a.k.a. Offshore Outsourcing) and Job Insecurity Among U.S. Workers, by Linda Levine.
42 U.S. Bureau of Labor Statistics, “International Comparisons of Hourly Compensation Costs in Manufacturing, 2006,” Economic News Release USDL: 08-0093, January 25, 2008.