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A Project of The Annenberg Public Policy Center

Montana’s Chinese Connection

Montana Senate candidates Steve Daines and John Walsh accuse each other in TV ads of helping to ship American jobs to China, but both sides fail to support their exaggerated claims.

  • Daines says Walsh “supported shipping American jobs to China,” referring to President Obama’s economic stimulus. But Walsh wasn’t in the Senate at the time and didn’t vote on the legislation. A small portion of the stimulus did go to Chinese firms, but Walsh had nothing to do with the award of stimulus contracts.
  • Walsh says Daines worked to build factories in China “at the same time Daines’ company was firing thousands of American workers here.” Daines did help Procter & Gamble expand in China in the 1990s, but the company says Daines was not involved in strategic corporate decisions. Moreover, the implication that expansion in China came at the expense of U.S. jobs is unsupported.

The Montana race is one of several that will help decide control of the Senate in 2015. In February, then Montana Lt. Gov. John Walsh, a Democrat, was appointed by Montana Gov. Steve Bullock to fill the seat of departing Democratic Sen. Max Baucus, who resigned to become United States ambassador to China. But Daines, Walsh’s leading Republican challenger, has been ahead in recent polls, and the Rothenberg Political Report rates the race a “toss up/tilt Republican.” Daines also faces two primary opponents on June 3.

The Daines Ad

The claim in the Daines ad that Walsh “supported shipping American jobs to China” hangs on an antiseptic endorsement Walsh gave the controversial economic stimulus (aka the American Recovery and Reinvestment Act) in 2009.

But the ad’s narrator begins by airing some old dirty laundry.

“Last year, John Walsh’s cronies apologized for false attacks on Steve Daines,” the narrator states. “Now, Walsh is shamefully using those same kinds of dishonest attacks.”

The first line in the ad refers to an apology issued by the Montana Democratic Party for false claims made in a political mailer in 2012 — accusing Daines’ former employer, RightNow Technologies, of using government contracts to outsource Montana jobs to India.

Walsh was not a candidate in that 2012 race and had nothing to do with the accusations in the mailer. And the attacks Walsh is now making are tied to Daines’ work at Procter & Gamble, not RightNow Technologies. So while the attacks deal with a similar subject — outsourcing — they are otherwise unrelated. We’ll get into more detail on Walsh’s claim later.

The Daines ad then goes on the offensive, claiming Walsh is the one who “has supported shipping American jobs to China.”

“Here are the facts,” the narrator states, “John Walsh supported Obama’s stimulus, sending our jobs and our tax dollars to China.”

The Investigative Reporting Project reported that nearly $2.4 billion worth of renewable energy grants included in the $831 billion stimulus package went to foreign developers. For example, they noted, a consortium of American and Chinese companies was awarded $450 million in stimulus grants to help build a $1.5 billion wind farm in Texas, using imported Chinese turbines. In 2010, we at FactCheck.org wrote that it is “correct to say that the stimulus law created jobs for Chinese workers,” even as we noted that several Republican legislators overplayed claims about the stimulus shipping jobs to China.

The question is, what does any of that have to do with Walsh?

Walsh was not in the Senate in 2009 and did not vote on the stimulus package. The thin link provided by the Daines campaign is a February 2009 press release issued by Sen. Jon Tester that includes comments from nine Montana leaders “speaking out in support of the Jobs Bill” — Tester’s term for the stimulus package then being considered by Congress.

The press release included a comment from Walsh, who was then heading up the Montana National Guard. Here’s the entirety of Walsh’s comment:

Walsh, Feb. 6, 2009: On behalf of the Soldiers and Airmen of the Montana National Guard, we appreciate the continued support our congressional delegation provides our state National Guard.

That’s hardly a full-throated endorsement of the entirety of the stimulus bill. But even if he had been more effusive in support of the stimulus plan, that wouldn’t necessarily mean he supported some of the stimulus funding being awarded to Chinese companies. In fact, in the reporting done by the Investigative Reporting Workshop, one of the most vocal critics of such awards was Democratic Sen. Chuck Schumer, a supporter of the overall stimulus plan.

When informed of the awards to Chinese firms, Schumer said, “In all due respect I remind the secretary (of Energy) there is a four-letter word associated with the stimulus — J-O-B-S. Very few jobs here, lots of jobs in China. That is not what I intended or any other legislator who voted for the stimulus intended.” In other words, support for the stimulus does not translate to support for part of the money being awarded to foreign firms.

Lauren Passalacqua, a spokeswoman for the Walsh campaign told us, “John Walsh would never have supported an economic recovery program that used American tax dollars to benefit jobs overseas, and he continues to find fault with the stimulus for that reason.”

The Walsh Ad

An ad from the Walsh campaign, meanwhile, accuses Daines of “double-speak,” boasting about job creation while helping to outsource American jobs overseas.

According to the narrator, “Daines worked for years in China, helping an American company build factories there, at the same time Daines’ company was firing thousands of American workers here.”

Independently, both of those claims are more or less accurate. But we think the clear implication is that one caused the other, and that Daines was responsible for it. On both of those scores, clear evidence is lacking.

Daines, then 29, worked for P&G in China from 1991 to 1997 to help expand the company’s reach there. In 1994, Management Review magazine called P&G a “pioneer” in bringing U.S. consumer products into China.

And in 1993, P&G announced a plan to “streamline” its operations by closing 30 plants and eliminating 13,000 jobs worldwide — including four plants and 4,000 jobs in the U.S.

But did expansion in China come at the expense of American jobs?

Walsh campaign officials claim it did. They point to a 1993 Forbes article, for example, that noted companies like P&G flooded Chinese stores with consumer goods “produced in China in joint ventures with local companies. That way the Westerners can lock into China’s still cheap labor pool and avoid duties on consumer products that usually range from 40% to 120%.” And, the Walsh campaign notes, in a 1994 filing with the Securities and Exchange Commission, P&G boasted that on a visit to one of the company’s Chinese manufacturing plants, then U.S. Secretary of Commerce Ron Brown marveled at the quality of production and said the plant could “literally be picked up and placed anywhere in the world.” (We should add that in the filing, P&G claims Brown called it “a model for other American companies doing business abroad.”)

The campaign also points to a May 9, 1993, story in Newsday about President Clinton’s attempts to target multinational companies with tax increases to discourage them from shifting manufacturing jobs overseas. The story says some companies like P&G argued they “shouldn’t be penalized for manufacturing some of their products overseas.” Specifically, the story notes that P&G officials told a Senate committee the high delivery cost of low-margin goods like disposable diapers and clothes detergents would make it “impractical” for the company to ship overseas from U.S. manufacturing plants.

All of that is evidence that P&G ramped up its manufacturing in China to serve a burgeoning Chinese market, but not necessarily that that expansion resulted in the loss of American jobs. To the contrary, former Procter & Gamble CEO Robert McDonald argued in 2010 in Business Insider that the company’s growth in China had been good for American jobs.

McDonald, Oct. 19, 2010: We began marketing our brands in China in 1988. Today, P&G is the largest consumer products company there, with about $5 billion in annual sales and a strong record of profit growth. To achieve this growth, we’ve invested well over $1 billion and employ more than 7,000 people in China.

None of this investment has come at the expense of American jobs. To the contrary, our China and other international businesses support many high-skilled P&G jobs in the U.S. — in engineering, R&D, marketing, finance and logistics. One in five of our 40,000 U.S.-based P&G employees supports our businesses outside the U.S. Forty percent of our 15,000 employees in Ohio work on international business. The simple fact is that success in fast-developing markets like China leads to secure, high-wage jobs here at home.

In any case, P&G company officials told FactCheck.org that Daines wasn’t making corporate-level decisions about the company’s strategic worldwide operations. According to Daines’ campaign, his focus there “was to open a new market in China by selling an American brand to Chinese consumers.”

“Mr. Daines was employed in China but his duties did not involve the siting or strategic operations of any manufacturing center in China or elsewhere,” Jeff LeRoy, senior manager of P&G Corporate Communications wrote to us in an email. “During his time in China, all products made in China were for that domestic market. None of the investment made in China has come at the expense of American jobs. To the contrary, China and our other international businesses support many high skilled jobs in the US in engineering, R&D, marketing, finance and logistics.”

The Walsh campaign argues that while Daines may have been a mid-level manager for P&G, his experience there helps to inform his voting record in the House — where he has served since 2013 — which includes votes in 2013 and 2014 in support of Rep. Paul Ryan’s budget plan. Both of those plans call for a “territorial” tax system in which U.S.-resident multinational corporations would pay no tax on their foreign-source income.

“Currently, US corporations are taxable on their worldwide income with a credit for foreign income taxes paid,” Eric Toder of the nonpartisan Tax Policy Center explained in an email to FactCheck.org. “But they don’t have to pay any tax on profits they accrue within their foreign subsidiaries until those profits are repatriated as a dividend to the U.S. parent corporation.”

Toder warned, however, that Ryan’s plan hasn’t been specific about how the tax would be implemented, or what types of provisions might be added to prevent income-shifting.

“It is impossible to tell what the Congressman’s support for Ryan’s budget means in terms of advocacy of any specific set of international taxation rules,” Toder said. “It is also unclear whether adopting a territorial system would cause U.S. jobs to shift to China. But that is a question of analysis, not fact.”

We’re not going to wade into an economic debate over the territorial tax. We’ll stick to the ad’s claims. Again, the ad says “Daines worked for years in China, helping an American company build factories there, at the same time Daines’ company was firing thousands of American workers here.” Again, those facts may be independently true, but the implication that expansion in China caused the loss of jobs in the U.S., or that Daines was responsible for the company’s decision to open manufacturing plants in China, is unsupported.

— Robert Farley