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Foreign operations boost US earnings

April 25, 2005 10:52 IST
While many Americans view growing Chinese and Indian economies as a threat to their jobs, major US firms have reported a sharp rise in earnings, mainly due to their foreign operations.

Surging profits from overseas operations pushed General Electric's overall earnings up 25 per cent, while Caterpillar Inc., Intel Corp., and EBay Inc. have reported higher earnings because of global growth.

According to the Federal Bureau of Economic Analysis, a quarter of all the US corporate profits, or about $225 billion, were earned outside the United States last year, a figure that is expected to rise as countries like India and China continue to make economic strides, providing tremendous opportunities for American companies.

Many Americans, however, still look at the emerging economies as job threats, whether it's computer programming in India or manufacturing in China.

"But the alarms get globalisation all wrong," Los Angeles Times said in a report. "We've been through this before. In the 1960s, the anxiety was over computers idling millions of workers. In the 1980s, the rise of Japanese industry was supposed to turn Americans into hamburger flippers. The nightmare visions didn't come true then, and they certainly won't come true today," it said.

Arguing that globalisation is an asset for the US, it cites the example of the opportunities for a company like GE.

The developing countries need GE's turbines for electric power plants, locomotives, jet airplane engines and water treatment and desalination plants, he said.

GE recently opened a technology research centre in Bangalore, Munich, and Shanghai and is likely to make discoveries from abroad because the US certainly has no monopoly on brains, it said. At least 1,800 researchers presently work in GE's Bangalore facility.

"As companies make more profits overseas, those earnings form the basis of higher stock prices in markets. And that expands the wealth of Americans through their pension or mutual fund or individual investment accounts," it said.

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