Rarely is federal legislation something other than a vehicle for government overreach and aggrandizement. Despite its populist-sounding title, the Global Investment in American Jobs Act – introduced in the Senate last week – is one of those rarities. The bill calls for an assessment of U.S. policies that influence decisions by foreigners about investing in the United States.

Properly modest in scope, the legislation simply authorizes to Commerce Department to produce a report that documents the importance of foreign investment, identifies home-grown impediments to such investment, and recommends policy changes that would make the United States a more attractive investment destination.

What is so refreshing about the bill is that its premise is not that the practices of foreign governments or the greed of U.S. corporations that allegedly “ship jobs overseas” are to blame for U.S. economic stagnation – themes so prominent in the past couple of Congresses and the current White House. Rather, the premise is that U.S. policy and its accumulated residue have created a web of impediments that discourage foreign investment in the United States, and that changes to those policies could serve to attract new investment. This kind of thinking is long overdue.

One of the themes of my 2009 Cato paper, “Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete,” is that it is no longer apt to consider global commerce a competition between “Us” and “Them.” Trans-national production/​supply chains and cross-border investment have blurred the distinctions between “our” producers and “their” producers. Many products and services are created along supply chains that travel from idea conception to final consumption and that include value-added activities of varying degrees of labor‑, physical capital‑, and intellectual capital-intensity. Furthermore, the largest U.S. steel producer, Mittal, is a majority Indian-owned company with corporate headquarters in Luxembourg. The largest “German” steel producer, Thyssen-Krupp, recently completed construction of a $4 billion production facility near Mobile, Alabama for the purpose of serving U.S. demand for finished steel, particularly from the mostly foreign nameplate auto producers dotting the landscape of the American South. And, as of 2010, our beloved General Motors produces more vehicles in China than it does in the United States. So, really, who are “we” and who are “they”?

Accordingly, instead of pursuing a 20th century trade policy model that seeks to secure market-access advantages for certain producers, policy should be recalibrated to reflect the 21st century reality that governments around the world are competing for business investment and talent, which both tend to flow to jurisdictions where the rule of law is clear and abided; where there is greater certainty to the business and political climate; where the specter of asset expropriation is negligible; where physical and administrative infrastructure is in good shape; where the local work force is productive; where there are limited physical, political, and regulatory barriers, etc. This global competition in policy is a positive development because — among other reasons — its serves to discipline bad government policy.

We are kidding ourselves if we think that the United States is somehow immune from this dynamic and does not have to compete and earn its share with good policies. The decisions made now with respect to our policies on immigration, education, energy, trade, entitlements, taxes, regulations, industrial management, and the proper role of government in the economic sphere will determine the health, competitiveness, and relative significance of the U.S. economy in the decades ahead.

Governments with the smartest policies will be the ones that secure the most investment, the strongest talent, and the best economic opportunities for their people. The legislation is step in the right direction.