Yankee ingenuity

March 13, 2006
Our whole country’s for sale and we gladly hand over the dollars to buy it, says Editor in Chief Paul Studebaker in his monthly column.

As this issue goes to press, Congress and the administration are teeth-and-nails over the planned acquisition of seaport management by a United Arab Emirates-owned company. That issue has little to do with industrial maintenance and asset management, but it is drawing national attention to the role of foreign investment in the United States, and how the deals go down even when they might involve putting strategic assets in the hands of offshore owners with uncertain attitudes toward the American people.

The situation reminds me of the sale of one of my former employers, the Magnequench magnet manufacturing plant in Valparaiso, Ind., to a Chinese company.

The principals involved in the purchase had links to the Chinese government’s National High Technology Research and Development Program, which calls for continued acquisition and development of technology in areas described by U.S. government reports as being of military concern.

These include machine tools, electronics, petrochemicals, electronic information, bioengineering, nuclear research and aerospace.

Valparaiso’s U.S. senator and House representative appealed numerous times to President Bush, the Department of Defense and the now-famous Committee on Foreign Investment to recognize a problem, but to no avail. In 2003, the facility closed and its equipment was moved to China.

With it went 80% of the country’s supply of exotic rare-earth magnets used in “smart bomb” and missile guidance systems. Now there remains only one U.S. plant that can produce the magnets or reasonable substitutes (and it’s owned by a Japanese company).

Several fine American product, process and plant engineers are still spending a high percentage of their time in China, helping the owners improve production quality and make the kinds of magnets that will sell best in the U.S. and around the world. You can’t blame them – there’s essentially no market for their specialized skills in the country that houses their families and educates their children.

It would be tidy if the efforts to stop the deal had been inspired by security concerns, or even simply foreign ownership phobia, but Indiana’s politicians paid no attention to the Chinese investment until they heard the announcement of the plant closing and consequent loss of 225 Hoosier jobs. They seem to have jumped on the security angle as the best chance to keep the plant open – if the Chinese would have settled for duplicating and improving on it in China (which they were already doing), there would have been no federal-level fuss.

Now it’s 2006, and it’s clear from reading letters to editors and commentary on the Dubai Ports World deal that only a fraction of the popular resistance is based on security concerns – a significant amount is good old-fashioned general outrage at foreign investment in the U.S.

Some foreign companies are eager to buy into U.S. firms, learn all there is to know, take the knowledge and tools back to their native countries, and shut down the U.S. facility so it won’t be there to compete with them.

Many others are content to simply take their share of the profits out of the country. On the average, foreign-owned firms pay U.S. taxes on a much smaller percentage of their sales than equivalent U.S.-owned companies.

We apparently want these things to happen. Our federal government officially encourages foreign investment as a way of financing our increasing budget deficits and whopping trade imbalance. Our citizens actively underwrite repressive regimes, pollution and substandard working conditions by soaking up goods whose combination of low cost and high profit margins depend on them (see “Big Box Mart” at www.jibjab.com).

It doesn’t help that we speak and write the world’s most common language of technology and business, and we (Plant Services included) put pretty much everything we know up on the Worldwide Web for all to see.

So we live in an open society, the details are available to anyone, our whole country’s for sale and, thanks to our addictions to trinkets and oil, we gladly hand over the dollars to buy it from beneath us.
Many citizens of foreign countries consider Americans self-indulgent, lazy and stupid. Are we doing our best to not prove them right?

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