updated 9/26/2006 6:19:02 PM ET 2006-09-26T22:19:02

Though outsourcing of jobs to other nations has stirred a political uproar, a slide in the number of U.S. workers on foreign companies’ payrolls has gotten little notice.

The latest total, 5.12 million, is down 9.6 percent from 2000. That drop raises concerns that the United States could be losing its edge in the global competition to generate jobs.

In a new report looking at all 50 states, the number of workers in the United States employed by foreign companies dropped by 2.4 percent in 2004 to 5.12 million, marking the fourth consecutive annual decline.

Since hitting an all-time high of 5.66 million workers in 2000, foreign company hiring of Americans has fallen by 9.6 percent. That four-year performance contrasts with a 43.1 percent surge in the six years from 1994 to 2000.

For just 2004, California led the declines in terms of the number of workers, a drop of 11,000, while South Dakota had the biggest percentage decline, a fall of 15.4 percent.

The new report, which the Associated Press obtained before its Wednesday release, was prepared by the Organization for International Investment, a Washington lobbying group for U.S. subsidiaries of foreign companies.

The drop in employment since 2000 was attributed to a number of causes, including an extended period of weak job growth following the 2001 recession and increased productivity in manufacturing, which means more output can be produced with fewer workers.

But Todd Malan, president of the international investment organization, said the decline also pointed up the need to ensure the United States remains an attractive place for foreign companies to put their operations, something he said can’t be guaranteed.

“Look at the Dubai Ports debacle. There is a perception, rightly or wrongly, that the United States is hostile to foreign investment at a time when there are lots of other options,” Malan said in an interview.

There was an intense backlash fueled by worries about security that forced a Dubai company earlier this year to reverse plans to take over the operations at five U.S. ports.

Malan said that if Congress responds by making the federal review process for foreign takeovers more cumbersome, that will further harm the investment climate in the United States.

“The United States can’t assume global companies will always continue to invest and employ people here,” he said. “The challenge for policymakers is to ensure our nation remains a competitive location for investment.”

Even with the declines in recent years, foreign companies still employ 4.5 percent of the private industry workforce in this country and in manufacturing it is an even higher 11.8 percent. That represents jobs that paid $63,428 in average compensation in 2004, one-third higher than all U.S. companies paid, the report said.

Supporters of changes in the Sarbanes-Oxley corporate governance law passed in the wake of Enron and other accounting scandals are arguing that some of the new restrictions must be loosened for the U.S. to compete globally.

In a separate report Tuesday, the United States lost its top ranking in a survey of the most economically competitive countries, falling to sixth place. The top spot in the index by the World Economic Forum was taken by Switzerland.

The group listed as reasons for last year’s decline the disappointing government response to Hurricane Katrina and a smaller talent pool due to restrictions on immigration.

In the survey of employment by U.S. subsidiaries, California retained its ranking as the state with the most jobs supported by foreign companies, a total of 547,000 in 2004, down by 11,000 from the previous year.

The No. 2 spot was held by New York with 377,000 jobs, down 7,200 from 2003, followed by Texas with 341,200 jobs, down 900 from 2003. The survey tracked employment in U.S. nonbank affiliates of foreign companies.

After South Dakota, the other states with the biggest percentage declines in 2004 were North Dakota, down 12.8 percent; West Virginia, down 11.2 percent, and Hawaii, down 10.2 percent.

States that bucked the downward trend were Mississippi, where employment by foreign companies, rose by 17.5 percent in 2004, followed by Montana, up 16.4 percent, and Idaho, up 11.2 percent.

Analysts said it was unclear whether the string of declines in employment would continue in when the Commerce Department releases data for 2005 and 2006. But they said there was some hopeful anecdotal evidence.

EADS North America, a subsidiary of the European Aeronatic and Space Co., has opened a regional office in Alabama while Honda is constructing its sixth auto plant in the United States, this one in Indiana.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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