August 2008 Edition

THE LAST WORD

Foreigners Aren’t Buying-up America, They’re Investing in Our Future

Foreign direct investment – FDI – is a critical component of the economy and the U.S. welcomes FDI, and foreign investment in all forms.

Foreign capital is a key driver of economic growth and creates jobs for American workers. Also, we know that in order for U.S. capital to be welcome overseas, we must ensure that international capital is welcome in the U.S.

We continue to be a leading recipient of FDI, and in 2007, foreign investment reached $204 billion. By comparison, the United Kingdom attracted $171 billion and China – including Hong Kong – received $121 billion.

Investors seek a good return. Over the long run, the countries with the highest FDI tend to be those with the highest rate of growth. This correlation is no accident: FDI contributes directly to the economic wellbeing of a nation’s citizens and economy.

FDI benefits to the U.S. include more than five million Americans working for companies headquartered overseas. These companies had U.S. payrolls of $335 billion in 2005, with wages and salaries paying on average 25 percent higher than the domestic U.S. private sector average. Almost a third of these jobs are in the manufacturing sector, despite that sector representing less than 10 percent of the overall American workforce.

These companies aren’t just taking their earnings back home. U.S. affiliates of foreign firms reinvested $80 billion into the U.S. economy in 2006 and spent $31 billion on research and development – that’s 15 percent of total annual U.S. industrial R&D expenditures. They also account for 20 percent of U.S. exports and source 75 percent of their inputs from U.S. businesses, supporting millions of additional jobs and economic growth.

FDI in the U.S. tools, dies, and industrial molds – TDM – industry primarily serves foreign-transplant customers. The automotive industry is a primary customer base for the TDM industry, and as foreign automotive companies from Japan, Germany, Canada, and elsewhere relocate to the United States, their suppliers – Japanese, German, and Canadian TDM producers, molders, and stampers – follow them.

Better Competitive Advantage

Our culture of innovation and entrepreneurship not only will help homegrown companies to compete, but also help to attract inward investment furthering U.S. economic growth.

We can’t take America’s leadership position for granted. Competition for international investment is increasing and many countries are improving their attractiveness for inward investment. Traditionally, FDI in the U.S. has been sought and promoted at the state level. However, if we do not play a more active role nationally, we risk having international perceptions of our investment climate shaped only by the occasional difficulty.

Recognizing that there is a role for the federal government to play in both attracting investment and creating a more attractive climate for foreign investors, the U.S. Department of Commerce launched Invest in America in 2007. The program supports U.S. state-level investment promotion efforts and provides a single point of contact at the federal level to help foreign investors work through difficulties they encounter with federal bureaucratic or regulatory matters.

A Bad Example Shouldn’t Spoil the Idea

Given the sizeable amount of FDI in the U.S., occasionally there will be a controversial case, but we must remind our investment partners that the overwhelming majority of investment activity in the U.S. takes place on a normal commercial basis.

Our response to domestic critics of foreign investment must be thoughtful and we must remind all participants of the success driven by foreign investment.

In sum, the U.S. benefits from being an economy open to products, ideas, and investment. FDI is a sign of strength, a strength that leaves both the investor and those in whom the investment was made, better off. The more we can encourage foreign participation in our economy the better off both America and the foreign investor will be.

Charles Skuba serves as chief of staff for Market Access and Compliance in the Commerce Department’s International Trade Administration, which is charged with improving the environment for U.S. firms to trade, invest, and compete in international markets

What do you think?
Let us know by e-mail from our website at www.ModernApplicationsNews.com
or e-mail the editor at pnofel@nelsonpub.com.