NYSE: Deutsch Not Required

The merger between Germany’s Deutsche Börse and the New York Stock Exchange announced last week has met with an all too familiar knee-jerk reaction in Washington.

It’s unfortunate that whenever an iconic U.S. institution receives a capital infusion from abroad, a policy debate ensues questioning whether American economic power is on the wane. Anti-foreign jabs about this deal, however, are likely to make other global companies worry about pumping much-needed capital into the United States.

Historically, foreign direct investment has been a reliable source of U.S. economic growth. Think back a decade ago. Ice-cream lovers across the U.S. bemoaned the British-Dutch multinational Unilever’s purchase of Ben & Jerry’s. Yet, today, one can still find a pint of Cherry Garcia® in almost any U.S. grocery freezer section, and Ben & Jerry’s maintains its socially conscious operating style. Under Unilever, Ben & Jerry’s has streamlined production and expanded internationally — for increased sales and better margins. Without the investment, we might be remembering Ben & Jerry’s wistfully rather than trying to resist just one more scoop.

Many companies as ingrained in the American cultural landscape as apple pie have traveled the same path. InBev of Belgium purchased Anheuser-Busch in 2008, but that has not dampened our enthusiasm for the King of Beer’s Super Bowl commercials. Race cars at the Indianapolis 500 still run on Firestone Tires, bought by Bridgestone of Japan in 1998, after years of financial struggles. Slurpees are available at 38,000 locations worldwide since Japanese investors purchased 7-Eleven in the 1990s, and fueled its rise to the largest chain franchise on the planet.

All told, the U.S. subsidiaries of global companies have insourced 5.6 million jobs for Americans. Annually, these companies write $408.5 billion in U.S. paychecks, spend $40.5 billion on U.S. research and development and manufacture close to 20 percent of total U.S. exports.

New jobs include those in Tennessee, where Sweden-based Electrolux just announced it plans to hire more than 1,000 workers at a new manufacturing plant; and the close to 3,000 positions in Alabama, where Germany-based ThyssenKrupp opened a new carbon steel plant late last year.

The idea that the location of a company’s headquarters determines its interests does not compute in today’s world. In this case, the shareholders of the merged NYSE-Deutsche Börse will not have a “German” point of view. U.S. investors will own 60 percent of the merged company, and the interest of the shareholders, regardless of nationality, will be in running exchanges that compete as effectively as possible in a rapidly changing global landscape.

The growing evidence of foreign direct investment’s benefits to the U.S. economy should be enough to ease concerns — even when it involves a high-profile company. Nonetheless, former House Speaker Newt Gingrich called the NYSE deal a blow to U.S. leadership, and an influential senator wants Congress to quash it.

Truth is, given the direction of the financial trading system, the proposed deal probably offers the best hope for keeping the NYSE relevant in the fast-moving world capital market. A global merger is a logical response to a financial trading system increasingly unbound from the physical infrastructure of trading floors and unhindered by international boundaries.

Maintaining the NYSE’s place as a leading financial exchange requires the continued technological innovation in trading and the financial depth that the merged companies can bring.

This is in the NYSE’s – and America’s – interest. While decrying the merger as the end of Wall Street may seem politically expedient, the fact is the deal makes it all the more likely that, in 10 years, we’ll still be able to celebrate a good day on the NYSE with an extra bowl of Ben & Jerry’s Chunky Monkey®.

Nancy McLernon is the president and chief executive officer of the Organization for International Investment, which represents the U.S. subsidiaries of global companies.

Copyright POLIT - Politico
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