U.S. companies linked to the global marketplace perform better than those that only operate domestically. And the employees and communities of globally-engaged firms prosper more. But surprising to many, the benefits do not just apply to exporters.

Companies that import, invest abroad or are recipients of foreign direct investment (FDI) also prosper more than their domestically focused counterparts. And the reasons are not always obvious.

Growth Is Faster and Wages Are Higher

According to the report, Why Global Commitment Really Matters!, U.S. companies that export have faster growth rates and fail less often than companies that do not. They also offer better opportunities for advancement. Lewis and Richardson, authors of the report, say blue-collar earnings in exporting firms are 13 percent higher than those in non-exporting plants. White-collar employees obtain better wages too—18 percent more than their non-exporting counterparts. Benefits also include improved medical insurance and paid leave.

Productivity Is Stronger and Technology More Advanced

The report contends that U.S. plants which are recipients of FDI employ workers with 19 percent higher productivity, provide them with more machinery and equipment and use more cutting-edge technology than their counterparts that are not globally-engaged. Similarly, U.S. companies that have investments abroad use more advanced manufacturing technology than U.S. non-multinationals. The result: worker productivity is 11 percent higher in large U.S. multinationals and 33 percent higher in small ones, as compared to their U.S. counterparts not invested abroad.

Importers Prosper and Communities Are More Stable

Importers benefit from access to the best value the world has to offer. In 2004, for example, more than half the $1.5 trillion in U.S. imports were capital goods, and industrial supplies and materials—imports often used in the production of finished products. In turn, this helps U.S. producers to be more globally competitive and increase sales.

U.S. communities that host globally-engaged companies also experience positive spillovers in terms of wages, technology and skills. Furthermore, revenue generated from global integration flows throughout local communities and spreads risk should the United States enter a period of slow or negative economic growth. This often translates into a more stable workforce and tax base.

Expanding Internationally Is Key

In 1950, U.S. trade accounted for less than 5.5 percent of U.S. economic growth. Today, it has become an integral part of everyday life, accounting for 25 percent. And the benefits are far reaching. In 2005, Gary Clyde Hufbauer of the Institute for International Economics, said trade and globalization have generated an increase in U.S. income of approximately $1 trillion annually, measured in 2003 dollars. This translates into an income gain of about $10,000 for the average American household per year.

Although the pursuit of international trade and investment carries risks, the dangers of solely operating domestically could be greater for many firms. Global engagement, which generates many benefits, is an important key to success in our competitive business environment.

This article appeared in September 2005. (CM)
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author of several books, and a nationally syndicated columnist on global business, emerging risks and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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