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Among Donald Trump’s most talked-about immigration policies is his proposal to make Mexico pay for a border wall.
Trump laid out the rationale for why Mexico would agree in an interview with CNN’s Chris Cuomo.
"You know what, because they make a fortune with us," Trump explained on Aug. 19. "Our companies are moving into Mexico more than almost any other place right now. We are losing our industry. We're losing our business to Mexico."
We were curious about Trump’s claim that more U.S. companies are relocating south than almost any other place in the world. (China, anyone?)
His campaign didn’t get back to us, but given the context of Trump’s claims, we’ll assume he’s talking about outsourcing production overseas, rather than companies packing up their headquarters and moving abroad for good (a practice known as corporate inversion, which often takes place in the Bahamas).
Experts told us there’s no official tally of the number of companies closing plants in the United States and moving production abroad.
"Outsourcing is hard to measure," explained Gene Grossman, a professor of international economics at Princeton University. "Only rarely can we see a firm close a plant in one place and open a new one someplace else doing the same thing. So, we use proxies."
We’ll look at three different proxies: the amount of imports from other countries, the number of U.S. companies operating in different countries, and the amount of money U.S. companies are investing in firms abroad (known as foreign direct investment).
Our southern neighbor doesn’t top the list by any of these metrics, but Trump has a point when he says Mexico is near the top. It’s No. 3 in import value, No. 7 in number of U.S. firms (out of 189 countries), and No. 15 (out of 171 countries) in foreign direct investment.
If Trump really wanted to name a country as the top outsourcing destination, experts agreed that it would be China, not Mexico. It’s No. 1 in import value and No. 6 in number of U.S. companies. (Europe dominates foreign direct investment.)
"He’s mistaken. More companies are moving to China than Mexico," said Robert Scott, who studies trade at the liberal Economic Policy Institute.
"China, in particular, has been a favorite location for many U.S. businesses, often due to the lure of the vast and growing Chinese market," added James Jackson, an international trade analyst for the Congressional Research Service.
Much of outsourcing to China is indirect, according to Scott. He pointed to Apple Inc. as a prime example of a U.S. company letting someone else do the manufacturing (their most notable contractor is the controversial company Foxconn).
Mexico, however, is certainly competitive and will remain an important outsourcing destination -- thanks to its proximity to the United States and particularly when it comes to making cars and car parts, experts said. While there’s no official tracking, there are plenty of anecdotes of automakers moving south, cited by Trump himself.
Yet some experts contend that while his claim has some truth to it, these relocations and outsourcing are not signs of the U.S. "losing" businesses or jobs to Mexico. Rather, these developments are typical of a dynamic economy.
"Moving jobs to Mexico has not been the major reason for the decline in manufacturing jobs in the U.S.," said Martin Baily, a senior economics fellow at the Brookings Institution. "Manufacturing jobs as a share of total jobs have been declining in the U.S. for over 50 years, same is true in all other advanced economies."
Trump said, "Our companies are moving into Mexico more than almost any other place right now."
There’s no direct measure of how many companies are moving plants from the United States to Mexico. When we look at outsourcing through official metrics (imports, foreign direct investment, and the number of U.S. business housed in a certain country), Mexico places near the top but not at the top. Experts said China was the top outsourcing destination.
Trump used the qualifier "almost," which makes his statement partially accurate, but it still needs additional context and information. We rate it Half True.
Email and phone interviews with Robert Scott, director of trade and manufacturing policy research at the Economic Policy Institute, Aug. 24-26, 2015
Email interview with Gene Grossman, professor of international economics at Princeton University, Aug. 26, 2015
Email interview with James Jackson, specialist in international trade and finance at the Congressional Research Service, Aug. 25-26, 2015
Email interview with Martin Baily, a senior economics fellow at the Brookings Institution, Aug. 24, 2015
CNN, ‘Special Report: Interview with Donald Trump,’ Aug. 19, 2015
Census Bureau, Foreign Commerce & Aid, accessed Aug. 26, 2015
Bureau of Economic Analysis, U.S. Direct Investment Abroad: Balance of Payments and Direct Investment Position Data, accessed Aug. 26, 2015
Organization for Economic Development and Cooperation, Outward activity of multinationals by country of location - ISIC Rev 4, accessed Aug. 27, 2015
PolitiFact, ‘MSNBC's Ed Schultz: Trade deals closed 50,000 factories,’ April 23, 2015
The Economist, ‘What’s driving American firms overseas,’ Aug. 16, 2015
Economic Policy Institute, ‘Heading South: U.S.-Mexico trade and job displacement after NAFTA,’ May 3, 2011
Congressional Research Service, ‘Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data,’ June 21, 2013
Congressional Research Service, Foreign Direct Investment in the United States: An Economic Analysis, Dec. 11, 2013
New York Times, ‘As Ties With China Unravel, U.S. Companies Head to Mexico,’ May 31, 2014
Financial TImes, ‘Mexico: location and young workforce attract US companies,’ March 3, 2015
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