Magazine article Management Review

Has Globalization Hurt America?

Magazine article Management Review

Has Globalization Hurt America?

Article excerpt

Has Globalization Hurt America?

The simple concept that a company should put the needs of its customers above all other concerns should soon set off a radical re-evaluation and re-definition of the whole concept of United Sttes competitiveness and trade policy.

With globalization becoming the corporate buzzword of the 1990s, more companies are operating without regard to borders. Instead of exporting goods and services from their "home" country, many firms are going where their customers are, assuming the local color and establishing manufacturing facilities to serve those customers directly from overseas bases.

As a result, the concept of defining large multinational companies as American companies or Japanese companies, as opposed to corporations that simply happen to be headquartered in either the U.S. or Japan, is quickly becoming passe. In fact, the term "multinational" is even undergoing a change, with "transnational" becoming the description of choice.

"The very idea of 'American' products made by 'American' firms is becoming obsolete," argues Robert Reich of Harvard's Kennedy School of Government. For instance, Honda's top-of-the-line cars now contain more American-made parts than comparable models produced by the U.S.'s big Three automakrs, contends Reich. Moreover, "IBM-Japan is Japan's biggest exporter of computers, while Sony makes audiotapes and videotapes in an alabama factory to be sold in Europe."

The percentage of total U.S. corporate assets located overseas has jumped from 14.4 percent in 1984 to nearly 17 percent today, according to the National Bureau of Economic Research. As American firms invest more in overseas plants and equipment as well as in joint overseas manufacturing ventures with foreign corporations, executives are more likely to view America as a mailing address rather than as a home base. "The United States does not have an automatic call on our resources. There is no mindset that puts this country first," Cyrill Siewert, chief financial officer of Colgate-Palmolive--which receives at least 30 percent of its total revenues from overseas sales--told the New York Times recently.



These emerging corporate trends seem to run in direct conflict with government policies aimed at promoting "U.S." trade and improving the competitiveness of American companies. "This has touched a raw nerve," says Washington Post Economics Columnist Hobart Rowen. "If national borders are disappearing as far as profit-oriented companies are concerned, the question about whether American companies can remain competitive is not even the right one to be asking."

Further, companies that produce, sell and service their wares from foreign facilites, rather than export these products from this country, would seem to go against the White House's "national" goal of increasing exports and, hopefully, lowering the trade deficit.

Part of this problem is that "our laws are still geared to regulate a domestic marketplace when markets are now global," notes Calman J. Cohen, vice-president of the Emergency Committee for American Trade, a group of multinational companies that follows trade issues.

"There is a basic conflict between current world marketplace realities and government policy," adds Bill Galston of the University of Maryland's School of Public Affairs. "I don't feel Congress or the Administration has officially recognized the conflict and focused on it yet. But they will have to."

This conflict makes it especially difficult for Washington policy-makers to devise effective programs to increase U.S. exports. "You might say that large multinationals have become too global in that they are no longer tied exclusively to the American market," Galston says. At the same time, "most medium and smaller firms are not global enough," since many are hesitant to explore overseas market opportunities, he explains. …

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