Government Regulation Handicaps U.S. Global Business

American industry constantly fights a two-front war in the global marketplace. The obvious opponent is the foreign competitor. Of course, economists--and business executives--believe in the benefits of widespread competition in the marketplace. However, the second front in the business wars is less benign--and it is our own government.

Consider the pervasive regulatory obstacles placed in the way of U.S. business, especially high-tech companies, by a host of federal, state, and local governments. These are often egged on by a bewildering array of self-styled public-interest groups.

The most difficult problem faced by some of our key high-tech industries--biotechnology, pharmaceuticals, and nuclear power--is dealing with the thicket of government reviews and approvals. No one agency can give an OK to go ahead. But the failure to receive the necessary authorization from any one of them can literally halt production. Not too surprisingly, many high-powered American firms are increasingly turning to foreign markets--not only for selling U.S. production, but for investment in overseas research, production, and distribution facilities. I must confess to very mixed emotions on this account.

From almost every business viewpoint, the metamorphosis of our domestic companies into global enterprises makes good economic sense. Rapid advances in transportation and communication have broadened the markets for numerous products and services. Likewise, capital, information, labor, and other key production inputs are increasingly transnational.

Surveys of American manufacturing companies show that becoming an internationally oriented company usually pays off. Sales by firms with foreign activities grow at twice the rate of those with no foreign operations.

Under these circumstances, there is a powerful attraction from areas such as Southeast Asia, which has become the most dynamic part of the global economy. U.S. business planners cannot be oblivious to markets that register 8 to 10 percent growth rates year after year and whose governments are encouraging such rapid expansion of the private sector.

This contrast in public policy toward business is ironic. Current and former communist and totalitarian nations are moving toward the decentralization of power characteristic of the private marketplace. In many ways, they are taking positive steps to encourage and attract new industry, including reductions in tax burdens and regulatory barriers. Meanwhile, the United States has adopted high and often rising levels of business taxation, employer mandates, and other costly evidences of government imposition on and discouragement of private economic activity.

U.S. companies are responding to that situation in the most obvious way. American-headquartered companies of every shape, size, and variety are increasingly present in the different parts of the world that welcome capitalistic enterprises. Many of our companies make more of their new investments overseas than here at home. Some of the best known American companies already have deployed a majority of their assets overseas--Manpower Inc. (74 percent), Gillette (67 percent), Mobil (59 percent), Bankers Trust (59 percent), Exxon (58 percent), Digital Equipment (57 percent), IBM (57 percent), Avon Products (56 percent), Citicorp (54 percent), and McDonald's (51 percent).

But the growing internationalization of production is regretful--to the extent that it is caused by increasingly coercive government in the United States. Take the energy company that is forced to explore in faraway Kazakhstan, or the mining enterprise that has to move to Bolivia, or the medical devices firm that finds it expedient to set up its new lab in the Netherlands, or the manufacturing corporation that is encouraged to build a new factory in China. Those companies are not the problem. Our government policy is. Government officials in the United States lock up much of the nation's natural and labor resources for fear that somebody somewhere may make a profit.

A more benign public policy environment here at home surely will enhance America's economic position in the twenty-first century. This is not a plea for subsidy of American business--or of any other sector of the nation. On the contrary, the domestic economy will fare much better from fewer government efforts to do something for, but more often to, private industry.

Murray Weidenbaum is chairman of the Center for the Study of American Business.