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Monday, August 27, 2012 - Page updated at 03:30 p.m.
Op-ed: U.S. Airbus plant boon for state's aerospace suppliers
By Nancy L. McLernon
Special to The Seattle Times
THIS summer, the giant European aerospace manufacturer Airbus announced plans to build its first-ever American factory in Mobile, Ala. The France-based firm will invest $600 million into the plant. It's expected to employ 1,000 local workers and start producing high-tech A320 passenger jets by 2015.
It will also create new opportunities for aerospace suppliers in Washington state, who, until now, had one major customer: Boeing.
This announcement serves as a stirring reminder of the vital role foreign direct investment plays in the American economy. Too often, politicians and pundits paint businesses based abroad as rivals -- as if every dollar a British or Swiss company takes in is one less dollar for an American firm.
That's simply not the case. When foreign companies invest in the United States, they create new jobs and boost compensation for American workers. These firms play an absolutely essential role in keeping our economy humming.
A new study from PwC, commissioned by the Organization for International Investment, has found that every dollar paid by foreign companies to their U.S.-based operations contributes another two dollars in compensation to American workers. Spending from those firms has a positive ripple effect all the way down the supply chain.
Washington state, for instance, has a particularly vibrant aerospace sector that will benefit. It's home to some 740 qualified suppliers that create the individual components needed to make these massive planes. Gov. Chris Gregoire recently acknowledged that she's going to lobby hard for Airbus business. "We will be championing our area suppliers to Airbus, and it's a big opportunity here," Gregoire said.
Now that Airbus is opening a U.S. plant, Washington's economy will benefit from an uptick in demand for all the parts and equipment needed to build next-generation aircraft.
Already, according to that same PwC study, U.S. subsidiaries support 21 million American jobs. That represents over 12 percent of U.S. employment.
This number makes sense. Every hire at a U.S. subsidiary indirectly supports an additional three jobs elsewhere in the economy. Those new workers at Airbus will support local restaurants and retailers, who will need to hire new workers to keep up with demand. The plant will need to purchase parts and equipment from aerospace suppliers, leading to thousands of new jobs across the United States.
In the manufacturing sector, particularly, the economic impact of foreign-owned firms is huge. Combined, foreign companies directly employ 17 percent of all U.S. workers in manufacturing. These firms are especially dependent on domestic suppliers.
Unfortunately, America's status as a top choice for global capital is in jeopardy. Over the past decade, our share of global foreign investment has declined, from over 41 percent to just 17.6 percent. The pool of foreign capital is growing, but we're attracting a smaller and smaller share of it.
If the U.S. operations of foreign companies began expanding their payrolls at the clip maintained between 1987 and 2002, averaging 5.25 percent annually, our economy would add 10 million new jobs over the next 12 years.
Foreign investment alone won't be the silver bullet for America's economic woes. But it can be a major help in stoking a resurgence in manufacturing and bolstering the economy more broadly.
If lawmakers are serious about creating jobs, they must make it a priority to attract and retain foreign companies. Toward that end, politicians must eliminate the zero-sum rhetoric when it comes to the global economy.
Foreign companies that invest in the United States are allies. They put money directly into the pockets of domestic workers and help support tens of millions of jobs. Our ability to draw leading global firms here will have a direct impact on our future prosperity.
Nancy L. McLernon is president and chief executive of the Organization for International Investment (www.ofii.org), an association representing the U.S. operations of global companies.
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