Worldwide American Companies Provide Many Benefits for American Workers and the American Economy

Strong worldwide operations create American jobs, boost workers’ wages, and raise America’s standard of living.

Creating Jobs in the United States
Worldwide American companies are a key generator of jobs for America’s workers

• Worldwide American companies employed 22 million Americans in 2007. When measured by industry of the establishment, rather than industry of the parent, more than 6.1 million Americans in manufacturing, or 44% of all U.S. manufacturing employees, and 15.2 million Americans in service industries (including trade and transportation) work for these companies.
• Suppliers to worldwide American companies and spending by their employees created an additional 41.2 million American jobs in 2007. Total employment generated by worldwide American companies, both directly and indirectly, is 42% of total U.S. private employment. 

Boosting Wages of American Workers
Higher productivity of worldwide American companies leads to higher wages for American workers

• U.S. companies with overseas operations pay American workers more than comparable U.S. companies without such operations, controlling for industry, size, and location. Workers for worldwide American companies are estimated to earn 10-15% more relative to workers employed by U.S. companies without overseas operations even after controlling for other factors.
• Because overseas affiliates of U.S. companies frequently rely on supplies exported by the U.S. parent, expansion abroad increases the demand for U.S. workers. As the typical worldwide American company expands operations in its foreign affiliates, it is estimated that for each dollar of additional wages paid in the foreign affiliate, U.S. wages increase by $1.84 as U.S. parent operations expand.
• A Federal Reserve Board study finds that worldwide American companies are responsible for more than three-fourths of the increase in labor productivity in the nonfinancial corporate sector over the 1977-2000 period – and all of the labor productivity growth in the nonfinancial corporate sector in the late 1990s. Higher productivity results from greater use of advanced technology, organizational efficiency, and innovation spurred by R&D. 

Raising Our Standard of Living by Boosting the U.S. Economy
Worldwide American companies lead the way in investment, R&D, and exports

• Worldwide American companies produced $2.6 trillion of U.S. GDP in 2007, or 22 percent of all U.S. business output. Total production directly and indirectly generated by U.S. parent companies in the United States (including production by suppliers and production of goods and services purchased by employees of U.S. parent companies and their suppliers) is estimated to be $6.0 trillion in 2007, or 50% of total private GDP.
• Worldwide American companies invested $477.4 billion in plant and equipment in the United States in 2007, or 32% of all private nonresidential investment.
• Harvard economist Martin Feldstein has estimated that each dollar of overseas investment by worldwide American increases U.S. income by $1.72 in present value.
• Worldwide American companies undertook $187.8 billion in R&D in the United States in 2006, accounting for 76% of all R&D expenditures by U.S. businesses. Worldwide American companies perform more than 87% of their R&D in the United States, and a 10% increase in sales by overseas affiliates is estimated to increase U.S. R&D by their U.S. parents by nearly 5%.
• Nearly 70% of the worldwide employment and more than 70% of worldwide investment and production of worldwide American companies and their majority-owned overseas affiliates are in the United States.
• Worldwide American companies are responsible for more than half of all U.S. exports – $531.7 billion in 2006. U.S. parent companies alone exported $495.1 billion in goods in 2006, 48 percent of all U.S. merchandise exports. The remaining share of company-related exports is accounted for by exports to the overseas affiliates of U.S. companies by other American companies. It is estimated that a 10% increase in sales by overseas affiliates increases exports by U.S. parents to their overseas affiliates by 6.5%.
• Gross overseas income of worldwide American companies represents 27.4% of total U.S. corporate profits in 2007. Of U.S. companies in the S&P 500 reporting foreign sales, 41% of worldwide revenue was earned outside the United States in 2007. Across all worldwide American companies, 49 percent of worldwide net income was earned by their overseas affiliates in 2006.
• An OECD study of developed countries finds that each dollar of outward foreign investment leads to $2 of additional exports and increases the country's bilateral trade surplus by $1.70.
• Another study by the National Bureau of Economic Research finds that each dollar of foreign investment by worldwide American companies leads to $3.50 in additional investment in the United States.  

For a list of source documents and additional research, please see the Business Roundtable fact sheet, “Further Reading on International Tax Issues.”

Let’s maintain the foundation for sustained economic growth. Business tax policy must promote U.S. international competitiveness. 

Foreign Operations of Worldwide American Companies Boost Foreign Sales

Global demand for American goods and services creates extraordinary opportunities for American companies and their employees, which benefits the U.S. economy and boosts American living standards. Foreign markets represent 95% of the world’s population and more than 75% of the world’s purchasing power. In many cases, in order to grow, American companies must expand in worldwide markets.

Worldwide American companies must be there to sell there

• Exports alone do not suffice. Over the past 40 years, exports by U.S. companies have doubled relative to the size of the economy, but companies cannot rely solely on exports to penetrate foreign markets.
• Local operations may be necessary to market products effectively to foreign consumers, cut transportation costs, avoid tariff barriers, and meet local content requirements.
• In 2006, sales by majority-owned foreign affiliates of worldwide American companies totaled more than $4.1 trillion.
• In 2006, 89% of the sales of U.S. foreign affiliates were to foreign markets.
• Services provided by foreign affiliates often cannot be exported and must be supplied locally. In 2006, foreign affiliates in service industries represented 61% of all U.S. foreign affiliates and 49% of employees in foreign affiliates.

Worldwide American companies primarily operate in high-wage countries

• In 2006, high-income foreign countries accounted for 79% of the worldwide production by U.S.- owned foreign affiliates. In fact, more than one-third of affiliate output is accounted for by just 3 countries: the United Kingdom (15.5%), Canada (11.5%) and Germany (8.6%).
• High-income countries continue to be the preferred location for new foreign affiliates. In 2006, 90% of the output of newly acquired or newly established foreign affiliates was from affiliates located in high-income countries.

Global operations enhance U.S. competitiveness

• Global operations are often critical to growth and achieving efficiencies in production that reduce operational costs.
• Expanded foreign markets strengthen innovation and contribute to the development of cutting edge technology by American companies. Investments in R&D and innovative new technologies are costly and are most profitably undertaken by companies that can attain a large volume of sales because of the scale economies that can be realized. If U.S. companies are unable to expand through their affiliates in foreign markets, they also become less competitive in our home market.

Worldwide American companies face increasing foreign competition in U.S. and foreign markets

• Forty years ago, 18 of the largest 20 companies in the world were headquartered in the United States. Today, only six of the largest 20 non-financial companies and three of the largest 20 financial companies are headquartered in the United States.
• As costs of communication and transportation have fallen, U.S. companies must continue to compete globally in order to be successful at home, generate good jobs for Americans, and maintain U.S. economic growth. 

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