As leading candidates for their party’s presidential nominations become more stridently populist in their campaign rhetoric, U.S. outward direct investment has become a focus of pre-election campaigning.

For example, the most likely Democratic nominee, Hillary Clinton, who is also at this stage the most likely winner of the presidency, recently unveiled a policy initiative she would implement if elected that would discourage U.S. firms from relocating facilities and jobs to foreign countries. Specifically, in a recent campaign speech, she proposed that the U.S. government “claw back” previously granted tax incentives for research and development and for investments in facilities if those facilities were closed and employees were laid off. The claw back would be calibrated to the value of the particular facility that is relocated and not to a company’s entire U.S. operations.

Clinton’s proposal follows the potential Republican nominee Donald Trump’s criticism of Ford and several other U.S. companies for moving production facilities to Mexico. Trump proposes to retaliate against countries receiving U.S. outward direct investment by levying higher tariffs on exports to the United States. Even allowing for the possibility that Clinton and Trump are indulging in hyperbolic political blustering, their statements are genuine sources of worry for the economic health of the United States, as well as the economies of countries that host significant amounts of U.S. outward direct investment, including Canada.

The hostility of prominent presidential candidates to outward direct investment is, at best, naïve and at worst, cynical. Opponents of outward direct investment, such as Clinton and Trump, are seemingly ignorant of the available evidence that such investment actually stimulates the growth of expenditures on capital and labour in the home country.

The reason for this relationship is straightforward.

Investing abroad makes home-country companies more efficient, thereby enabling those companies to grow faster than they otherwise would. Faster growth, in turn, stimulates capital investments and the hiring of workers to carry out value-chain activities complementary to the activities that are relocated abroad. For example, companies that sell more of their output at home and abroad will typically hire more administrative personnel, marketing and sales employees, research scientists, product designers and the like to work at locations in the home country. Discouraging outward direct investment through punitive tax and trade policies will therefore result in slower economic growth and even fewer jobs created.

To the extent that politicians are aware of this evidence, they are cynically trolling for votes by playing on the anger of displaced workers and the fears of those who worry that their jobs are at risk of being “offshored.” Political discourse in the U.S. would be much better served if the current nomination candidates would propose and discuss retraining and education programs that would assist those hurt by outward direct investment to share in the overall net benefits of such investment.

Canada would be adversely side-swiped by U.S. policies that directly or indirectly discourage U.S. companies from investing in Canada. Just as outward direct investment has net economic benefits for the home country, it also has net benefits for the host (or receiving) country. Specifically, inward direct investment stimulates productivity improvements in host-country companies through spillovers of technology and managerial expertise, as well as from increased competition. U.S. companies are major investors in Canada, accounting for more than half of the overall amount of inward direct investment in recent years.

Hence, Canada has quite a lot at stake in whether and how this latest manifestation of populist demagoguery is implemented after a new president takes office next January.