US and the importance of offshore
From a firm point of view, the transactions highlight a) the increased mobility of activity in today's economy, b) the growing "decentering" of firms whereby headquarter locations have been split up and reallocated across the world, and c) the growing importance of non-US markets for US firms. Rather than questioning the loyalties of executives, it is critical to understand these underlying structural and secular forces.
“REFORMS SHOULD BE FOCUSED EXCLUSIVELY ON ADVANCING US WELFARE WITH PARTICULAR ATTENTION ON REFORMS THAT WILL IMPROVE AMERICAN WAGES” While these transactions naturally attract growing attention, inversions are Chinese Overseas America Number Data merely the most visible manifestation of these developments. In addition to inversions, these forces are giving rise to a) incorporation decisions by entrepreneurs that anticipate the burdens of being a US corporation, b) merger patterns that reflect the penalties of being domiciled in the cash for US corporations, c) investment patterns by US and foreign companies, d) profit-shifting activities that are not value-creating and e) the consequent, negative impact of all of these distortions on the US labor force.
While it is tempting to limit attention to the more sensational effects and characterize them as tax-avoiding paper-shuffling, this would effectively be missing the forest for the trees. Reforms should be focused exclusively on advancing on reforms that will improve American wages. These goals are mistakenly thought to be achieved by limiting the foreign activities of US firms as foreign activities can be viewed as diverting economic activity away from the US. In fact, the evidence suggests the opposite as firms expand globally, they also expand domestically. |
