(Tony Dejak/AP)

“I understand my opponent has been running around Ohio claiming he’s going to roll up his sleeves and he’s going to take the fight to China. Now, here’s the thing.  His experience has been owning companies that were called ‘pioneers’ in the business of outsourcing jobs to countries like China.  He made money investing in companies that uprooted from here and went to China.  Pioneers.  Now, Ohio, you can’t stand up to China when all you’ve done is send them our jobs.”

— President Obama, at a rally in Cincinnati, Sept. 17, 2012

 “I guess he’s also not going to apologize for the investments he still holds in China or the American jobs he outsourced to China as the president, CEO, chairman and sole shareholder of Bain Capital.”

— Stephanie Cutter, deputy campaign manager for the Obama campaign, in a video released over the weekend

President Obama traveled to the battleground state of Ohio on Monday, where he responded to a tough (and misleading) ad by Mitt Romney on his record on China with barbed comments on Romney’s record as an investor. (For good measure, the White House also filed a trade complaint against Beijing.) The president’s remarks were foreshadowed by a video released by the Obama campaign over the weekend, in which Cutter asserts that the GOP presidential nominee outsourced jobs to China.

 This is a pretty serious charge. What’s the evidence for this?


The Facts

 Obama’s reference to Romney owning companies that were “pioneers” comes directly from a front-page article in The Washington Post. This was the opening sentence:


Mitt Romney’s financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India.

As we have noted before, the Obama campaign has misinterpreted this article in some of its television advertising. Note, for instance, that the article refers to Bain Capital, not Romney personally. As we said before:

 The actual article, in fact, does not say that transfers of U.S. jobs took place while Romney ran the private equity firm of Bain Capital. …Instead, the article says that Bain was prescient in identifying an emerging business trend — the movement of back-office, customer service and other functions out of companies that were willing to let third parties handle that business. Several of the companies mentioned in the article grew into major international players in the offshoring field today.

 However, the president put it bluntly: “You can’t stand up to China when all you’ve done is send them our jobs.”  In the video, embedded below, Cutter referred to “the American jobs he outsourced to China.”

In defense of a television ad that claimed Romney “shipped jobs to China and Mexico,” the Obama campaign (to support the China reference) has pointed to the case of Holson Burnes, a Rhode Island company that manufactured picture frame and photo albums. Bain Capital owned the company from 1987 and 1995, so there are none of the murky questions about whether Romney was still actively managing Bain when he ran the Winter Olympics in Salt Lake City from 1999-2001.

 But there are many murky questions about whether American jobs were actually shipped to China. The best piece of evidence is an Associated Press report that says a factory was closed and 150 workers lost their jobs: “Some jobs were sent north, where months later many of those were also eliminated. Other operations went overseas.” There is no mention of a specific country.

 But our colleagues at FactCheck.org did an extensive look at this case and discovered that in this instance, the company eliminated an entire business line (photo albums for professional photographers). So operations were not moved overseas, let alone to China. Overall, FactCheck.org found, there is no clear evidence that Romney, during Bain’s management of this company, shipped U.S. jobs to China. The company had arrangements with foreign suppliers, including in China, for 75 percent of its photo frames but manufactured 75 percent of its photo albums in the United States.

 In a telephone news conference this past weekend, Obama spokesman Ben LaBolt pointed to other companies:

 “We can go down the list whether it's Stream International, or Modus Media, or Global-Tech. Mitt Romney and Bain Capital made investments in companies that created jobs overseas instead of in the United States.

 “Let's take a look at the example of Global-Tech. Bain invests in 1998. This is a Chinese manufacturing company that depended on U.S. outsourcing for its profits and explicitly stated that outsourcing was crucial to its success. These companies were on the frontlines of shipping American jobs overseas. This was in 1998, so there's no dispute as to what Mitt Romney's involvement was with the company at that time.”


Stream International and Modus Media were mentioned in the original Washington Post article, though no reference is made of Stream having operations in China. Modus was originally a subsidiary of Stream but became an independent company in 1998. Modus had operations that included facilities in China but there is no evidence that U.S. jobs were shipped there while Romney was managing Bain. (In 2000, Modus closed a plant in California while opening one in Mexico, but that’s not China — and Romney was on leave then.)

 Finally, LaBolt mentioned Hong Kong-based Global-Tech Appliances, which manufactured household appliances for a number of consumer product companies, such as Sunbeam, Hamilton Beach and other companies. But this was an investment made by two Bain affiliates, principally Brookside Capital. This is in essence a hedge fund, meaning it makes passive stock investments. Fortune magazine looked into this fund, and here is how it describes itself on the Bain Website.

 “Brookside Capital is the public equity affiliate of Bain Capital. The principal investment objective of the Fund is to achieve capital appreciation through investing primarily in publicly traded equity securities globally. Brookside employs an experienced team of industry-oriented investment professionals to achieve its investment objective. The Brookside team evaluates investments based on in-depth strategic and financial analysis, emphasizing industry fundamentals, competitive position and management capability.”


Still, it is worth noting that in a 1999 Securities and Exchange Commission filing Romney, as with other Bain entities, was listed as “the sole shareholder, sole director, President and Chief Executive Officer of Brookside Inc. and thus is the controlling person of Brookside Inc.” Presumably he kept a close watch on Brookside’s investments, but these stock purchases still are of a different nature than Bain Capital’s private equity deals.

Global-Tech clearly was in the business of benefiting from outsourcing, though one news release issued by the company during the 1998-2000 period of Bain ownership bemoans the fact that Sunbeam had delayed closing its plants, forcing Global-Tech to delay expansion plans.

Moreover, Romney at the time was clearly interested in investments in China. In a transcript of a Feb. 11, 1998 panel discussion published in the Boston Globe, Romney spoke of visiting a factory — the company name is not mentioned — with earnest Chinese workers:

I just came back from a trip to China, and I went to a factory of 5,000 workers making bread makers and mixers and so forth. And 5,000 Chinese, all graduated from high school, 18 to 24 years old, were working, working, working, as hard as they could, at rates of roughly 50 cents an hour. They cared about their jobs; they wouldn’t even look up as we walked by. I said to the plant manager, “Why don’t they look up at us? We’re Americans, we look funny, they’ve never seen folks like us walk through this old factory.” They said, “Because work here is very important, and they concentrate on their work.”

Romney told a somewhat similar story — though he claimed it was a factory with 20,000 workers — in a video that surfaced recently of a private fundraiser. The remarks are certainly interesting, but Bain has claimed this was an investment that did not pan out.

Without evidence of a direct investment, it seems a stretch to say Romney shipped jobs to China because of a passive investment in a foreign company. This is different than investments in which Bain Capital took a direct role in helping to manage a company.

Given Romney’s apparent interest in Chinese investments, we would welcome additional evidence but did not receive more from the Obama campaign.

 Finally, one other example, which the Obama campaign did not highlight: Bain’s 1990s investment in GT Bicycles (which assembled bicycles by taking advantage of lower-cost labor in China, Taiwan and elsewhere) indeed was an harbinger of a trend that later decimated bike manufacturing in the United States. But during the period that Romney was still at Bain, GT actually added jobs in the United States.


The Pinocchio Test

 The president and his campaign have gone too far here. There is no evidence that Romney, through Bain investments in which he had an active role, was responsible for shipping American jobs to China.

 We would have considered this a Four-Pinocchio violation, except for the fact that some of the Bain investments (such as GT Bicycles) were a harbinger of broader trends in the transfer of American jobs overseas. Global-Tech also benefited from outsourcing but as far as we can tell it was a passive investment by a Bain-related hedge fund.

That means Romney likely profited from outsourcing. But that is a far cry from saying that Romney himself was responsible for outsourcing American jobs to China.

 Three Pinocchios

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