The United States as a Net Debtor Nation:
Overview of the International Investment
Position
James K. Jackson
Specialist in International Trade and Finance
February 1, 2011November 8, 2012
Congressional Research Service
7-5700
www.crs.gov
RL32964
CRS Report for Congress
Prepared for Members and Committees of Congress
The United States as a Net Debtor Nation
Summary
The international investment position of the United States is an annual measure of the assets
Americans own abroad and the assets foreigners own in the United States. The net position, or the
difference between the two, sometimes is referred to as a measure of U.S. international
indebtedness. This designation is not strictly correct, because the net international investment
position reveals the difference between the total assets Americans own abroad and the total
amount of assets foreigners own in the United States. These assets generate flows of capital into
and out of the economy that have important implications for the value of the dollar in
international exchange markets. Some membersMembers of Congress and some in the public have
expressed concerns about the U.S. net international investment position because of the role
foreign investors are playing in U.S. capital markets and the potential for large outflows of
income and services payments. Some observers also argue that the U.S. reliance on foreign
capital inflows places the economy in a vulnerable position.
Congressional Research Service
The United States as a Net Debtor Nation
Contents
Background ...................................................................................................................................... 1
Valuing Investments......................................................................................................................... 3
Investment Patterns .......................................................................................................................... 65
International Investment: Sources and Economic Impact ............................................................ 10.. 12
Congressional Response ............................................................................................................. 14... 17
Figures
Figure 1. U.S. Direct Investment Abroad:
Estimated Value of Accumulated Position, 1996-2009 1990-2011 .................................................................4 5
Figure 2. Foreign Direct Investment in the United States:
Estimated Value of Accumulated Position, 1996-2009 1990-2011 ...............................................................5.. 6
Figure 3. U.S.-Owned Assets Abroad and Foreign–Owned Assets in the United States,
1996-20091994-2011 ................................................................................................................................6..... 8
Figure 4. Foreign Official and Private Investment Positions in the United States, 19962009 19942011 .........................................................................................................................................8... 10
Figure 5. U.S. and Foreign Investment Position, By Major Component, 2009.2011 .............................9 11
Figure 6. U.S. Income Receipts and Payments on U.S.-Owned Assets Abroad and on
Foreign-Owned Assets in the United States, 20092011.................................................................... 13.. 15
Tables
Table 1. U.S. Net International Investment Position........................................................................ 1
Table 2. U.S. International Investment Status.................................................................................. 87
Table 3. Saving and Investment in Selected Countries and Areas; 2004-2008, and 20092007-2011, and 2012 ............. 1113
Table 4. Estimates of Wealth in the United States, 20082011 Current-Cost, Gross Stock Values ......... 1416
Contacts
Author Contact Information ........................................................................................................... 1618
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The United States as a Net Debtor Nation
Background
The U.S. international investment position represents the accumulated nominal value of U.S.owned assets abroad and foreign-owned assets in the United States measured on an annual basis
at the end of the calendar year. Some observers refer to the net of this investment position (or the
difference between the value of U.S.-owned assets abroad and the value of foreign-owned assets
in the United States) as a debt, or indicatethat it indicates that the United States is in a net debtor position,
because the value of foreign-owned assets in the United States is greater than the value of U.S.owned assets abroad. In fact, the nation’s international investment position is not a measure of the
nation’s indebtedness similar to the debt borrowed by some developing countries, but it is an
accounting of assets. By year-end 20092011, the latest year for which data are available, the overseas
assets of U.S. residents totaled approximately $1821 trillion, while foreigners had acquired about
$2125 trillion in assets in the United States, with direct investment measured at historical cost. As a
result, the U.S. net international investment position was about $34.2 trillion in the negative with
direct investment measured at historical cost, as indicated in Table 1.
Table 1. U.S. Net International Investment Position
(in billions of dollars)
Type of Investment
2006
2007
2008
20092008
2008
2010
2011
Net international investment position of the United States:
With direct investment at current cost
$-2,191.7
$-1,915.7
$-3,493.9
$-2,737.8
With direct investment at market value
-1,808.5
-1,380.0
-4,164.2
-2,934.0
With direct investment at historical cost
-2,378.2
-2,421.3
-3,661.4
-2,927.7
59.8
71.5
159.6
127.9
With direct investment at current cost
14,428.1
18,339.9
19,244.9
18,379.1
With direct investment at market value
15,950.3
20,062.0
18,605.7
18,630.7
With direct investment at historical cost
13,721.6
17,264.2
18,721.8
17,836.0
1,239.0
2,559.3
6,127.5
3,512.0
219.9
277.2
293.7
403.8
72.2
94.5
624.1
82.8
With direct investment at current cost
12,897.1
15,408.9
12,199.6
14,380.5
With direct investment at market value
14,419.3
17,130.9
11,560.5
14,632.2
With direct investment at historical cost
12,190.6
14,333.2
11,676.5
13,837.5
—At current cost
2,948.2
3,552.9
3,742.8
4,051.2
—At market value
4,470.3
5,275.0
3,103.7
4,302.9
—At historical cost
2,241.7
2,477.3
3,219.7
3,508.1
Foreign securities
5,604.5
6,835.1
3,985.7
5,471.0
—Bonds
1,275.5
1,587.1
1,237.3
1,493.6
Financial derivatives
U.S.-owned assets abroad:
Financial derivatives
U.S. official reserve assets
U.S. Government assets, other
U.S. private assets:
Direct investment abroad:
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The United States as a Net Debtor Nation
Type of Investment
2006
2007
2008
2009
—Corporate stocks
4,329.0
5,248.0
2,748.4
3,977.4
U.S. claims by US nonbanking concerns
1,184.1
1,173.7
794.7
794.2
U.S. claims reported by US banks
3,160.4
3,847.1
3,676.3
4,064.1
With direct investment at current cost
16,619.8
20,255.6
22,738.8
21,116.9
With direct investment at market value
17,758.8
21,441.9
22,770.0
21,564.7
With direct investment at historical cost
16,099.8
19,685.5
22,383.2
20,763.7
1,179.2
2,487.9
5,967.8
3,384.1
2,833.0
3,411.8
3,940.0
4,373.8
With direct investment at current cost
12,607.6
14,355.9
12,830.9
13,359.0
With direct investment at market value
13,746.6
15,542.2
12,862.2
13,806.8
With direct investment at historical cost
12,087.7
13,785.8
12,475.3
13,005.8
—At current cost
2,154.1
2,410.5
2,521.4
2,672.8
—At market value
3,293.1
3,596.9
2,552.6
3,120.6
—At historical cost
1,634.1
1,840.5
2,165.7
2,319.6
567.9
639.8
850.9
826.2
U.S. other securities
5,372.3
6,190.0
4,620.8
5,287.2
—Corporate and other bonds
2,824.9
3,289.1
2,770.6
2,841.2
—Corporate stocks
2,547.5
2,900.9
1,850.2
2,445.9
U.S. currency
282.6
272.0
301.1
313.8
U.S. liabilities by U.S. nonbanking concerns
799.5
864.6
731.5
665.5
3,431.3
3,979.0
3,805.2
3,593.6
3,260.2
$-2,321.8
$-2,473.6
$-4,030.3
With direct investment at market value
-3,995.3
-2,661.3
-2,813.4
-4,812.4
With direct investment at historical cost
-3,425.4
-2,503.8
-2,656.2
-4,195.3
159.6
126.3
110.4
126.3
With direct investment at current cost
19,464.7
18,511.7
20,298.4
21,132.4
With direct investment at market value
18,818.6
18,769.4
20,758.3
20,950.8
With direct investment at historical cost
18,948.7
18,000.9
19,782.5
20,606.4
6,127.5
3,489.8
3,652.3
4,704.7
U.S. official reserve assets
293.7
403.8
488.7
536.0
U.S. Government assets, other
624.1
82.8
75.2
178.9
With direct investment at current cost
12,419.4
14,535.3
16,082.2
15,712.8
With direct investment at market value
11,773.3
14,793.1
16,542.1
15,531.2
With direct investment at historical cost
11,903.4
14,024.5
15,566.3
15,186.7
—At current cost
3,748.5
4,029.5
4,306.8
4,681.6
—At market value
3,102.4
4,287.2
4,766.7
4,500.0
—At historical cost
3,232.5
3,518.7
3,790.9
4,155.6
Foreign securities
3,985.7
5,565.6
6,336.4
5,922.0
—Bonds
1,237.3
1,570.3
1,689.5
1,763.8
Financial derivatives
U.S.-owned assets abroad:
Financial derivatives
U.S. private assets:
Direct investment abroad:
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The United States as a Net Debtor Nation
Type of Investment
—Corporate stocks
2008
2008
2010
2011
2,748.4
3,995.3
4,646.9
4,158.2
930.9
930.3
874.8
796.8
3,754.3
4,009.9
4,564.2
4,312.4
With direct investment at current cost
22,724.9
20,833.5
22,772.0
25,162.6
With direct investment at market value
22,813.9
21,430.7
23,571.7
25,763.2
With direct investment at historical cost
22,374.1
20,504.7
22,438.7
24,801.7
5,967.8
3,363.4
3,541.9
4,578.4
3,943.9
4,402.8
4,912.7
5,250.8
With direct investment at current cost
12,813.2
13,067.2
14,317.4
15,333.4
With direct investment at market value
12,902.2
13,664.5
15,117.1
15,934.0
With direct investment at historical cost
12,462.5
12,738.4
13,984.0
14,972.5
—At current cost
2,397.4
2,398.2
2,597.7
2,908.8
—At market value
2,486.4
2,995.5
3,397.4
3,509.4
—At historical cost
2,046.7
2,069.4
2,264.4
2,547.8
852.5
791.0
1,101.8
1,418.1
U.S. other securities
4,620.7
5,319.9
5,934.0
5,968.2
—Corporate and other bonds
2,770.6
2,825.6
2,915.7
2,910.0
—Corporate stocks
1,850.1
2,494.3
3,018.3
3,058.2
U.S. currency
301.1
313.8
342.1
397.1
U.S. liabilities by U.S. nonbanking concerns
740.6
706.4
643.6
629.7
3,901.0
3,537.9
3,698.2
4,011.6
U.S. claims by US nonbanking concerns
U.S. claims reported by US banks
Foreign-owned assets in the United States:
Financial derivatives
Foreign official assets in the United States
Foreign private assets:
Direct investment in the United States:
U.S. Treasury securities
U.S. liabilities reported by U.S. banks
Source: Nguyen, Elena L., The International Investment Position of the United States at Yearend 20092011, Survey
of Current Business, July 20102012. p. 10-18.
Foreign investors who acquire U.S. assets do so at their own risk and accept the returns
accordingly, unlike the debt owed by developing countries where debt service payments are
guaranteed in advance. The returns on the assets in the investment position, except for bonds, are
not guaranteed, and foreign investors gain or lose in the same way as U.S. domestic investors. As
Table 1 indicates, these investments include such financial assets as corporate stocks and bonds,
government securities, and direct investment1 in businesses and real estate. The value of these
1
The United States defines foreign direct investment as the ownership or control, directly or indirectly, by one foreign
person (individual, branch, partnership, association, government, etc.) of 10% or more of the voting securities of an
incorporated U.S. business enterprise or an equivalent interest in an unincorporated U.S. business enterprise. 15 CFR §
806.15 (a)(1). Similarly, the United States defines direct investment abroad as the ownership or control, directly or
indirectly, by one person (individual, branch, partnership, association, government, etc.) of 10% or more of the voting
securities of an incorporated business enterprise or an equivalent interest in an unincorporated business enterprise. 15
(continued...)
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assets, measured on an annual basis, can change as a result of purchases and sales of new or
existing assets; changes in the financial value of the assets that arise through appreciation,
depreciation, or inflation; changes in the market values of stocks and bonds; or changes in the
value of currencies. The change in the net international investment position between 2010 and
2011 arises from a net decrease in the value of U.S. private assets owned abroad as a result of a
large revaluation downward in the values of corporate stocks owned abroad by U.S. entities and
other private investments that was larger than the value of new private investments abroad and an
increase in net foreign investment in U.S. assets coupled with a upward revaluation of assets in
the United States owned by foreigners. The Department of Commerce also uses three different
Department of Commerce also uses three different methods for valuing
direct investments that yield roughly comparable estimates for the net
position, although the three
methods do provide estimates on U.S. direct investment abroad and
foreign direct investment that
have varied considerably at times. Unless otherwise indicated, this
report uses direct investment valued as historical cost.
Valuing Investments
The Department of Commerce provides updated estimates on the nation’s international
investment position each year, typically in July, based on data for the previous year through the
end of the calendar year. Except for direct investment, all of the accounts in the international
investment position are estimated directly by the Department of Commerce’s Bureau of
Economic Analysis (BEA) relative to readily observable market prices. For example, the value of
positions in portfolio investments (securities), gold, loans, currencies, and bank deposits can be
directly estimated by the BEA based on the face values or market prices of recent transactions.
The Department of Commerce does not attempt to deflate the annual nominal amounts for direct
investment with a specific price deflator. Instead, the Department publishes alternative estimates
of direct investment based on current cost and, market value, and historical cost to provide other
measures of the value of direct
investment.
Estimating the value of direct investments, however, presents a number of challenges. According
to the Department of Commerce, these challenges arise because foreign direct investments,
“typically represent illiquid ownership interests in companies that may possess many unique
attributes—such as customer base, management, and ownership of intangible assets—whose
values in the current period are difficult to determine, because there is no widely accepted
standard for revaluing company financial statements at historical cost into prices of the current
period.”2
As a result, the Department of Commerce estimates the U.S. international investment position in
three ways, reflecting three different accounting methods for estimating the value of direct
investments: historical cost; current cost; and market value. Initially, direct investments are
valued at historical cost, or the cost at the time of the investment. This historical cost value can
become outdated because it is not updated to account for changes in the value of an investment
through appreciation, or through internal growth and expansion, or through changes in various
intangible assets. The current cost approach estimates the value of capital equipment and land at
(...continued)
CFR § 806.15 (a)(1).
2
Nguyen, Elena L., “The International Investment Position of the United States at Yearend 2011,” Survey of Current
Business, July 2012, p. 18.
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their current replacement cost using general cost indexes, and inventories, using estimates of their
replacement cost, rather than at their historical cost. The third measure, market value, uses
indexes of stock market prices to revalue the owners’ equity share of direct investment.
For the most part, the current cost and historical cost estimates have tracked closely together for
U.S. direct investment abroad and for foreign direct investment in the United States, as indicated
(...continued)
CFR § 806.15 (a)(1).
2
Nguyen, Elena L., “The International Investment Position of the United States at Yearend 2007,” Survey of Current
Business, July 2008, p. 9.
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in Figure 1 and Figure 2, respectively. These two measures of direct investment demonstrate a
steady increase in the value of the investments over the 1921-year period from 1990 to 20082011. The
market value estimate of direct investment, however, displays a markedly different pattern. These
estimates spiked during the rapid runup in stock market values in the 1990s and then dropped
sharply when market values declined at the end of the 1990s. The market value estimates rose
sharply again in 2003 through 2007, as the rebound in stock market values pushed up the
estimated market value of firms. The data for 2008, however, offer one clear indication of the
economic recession that was beginning to take holdbegan affecting the U.S. economy in 2008 and the initial stages of the financial
financial crisis that negatively affected stock market indexes in nearly all markets. The
In 2008, the market value of
U.S. direct investment abroad rose by 38% in 2009 from $3.1 trillion to$4.3 trillion. During the
same period, the market value of foreign direct investment in the United States rose by 22% from
$2.6 trillion to $3.1 trillion. Similarly, the value of foreign corporate stocks owned by U.S.
investors rose by 37% from $4.0 trillion in 2008 to $5.5 trillion in 2009. In comparison, the value
of U.S. corporate stocks owned by foreign investors rose by 14% from $4.6 trillion in 2008 to
$5.3 trillion in 2009.
Figure 1. U.S. Direct Investment Abroad:
Estimated Value of Accumulated Position, 1996-2009
$6,000
Billions of dollars
$5,000
$4,000
$3,000
$2,000
$1,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
$0
Current cost
Market value
Historical cost
Source: Department of Commerce.
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Figure 2. Foreign Direct Investment in the United States:
Estimated Value of Accumulated Position, 1996-2009
$4,000
$3,500
Billions of dollars
$3,000
$2,500
$2,000
$1,500
$1,000
$500
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
$0
Current cost
Market value
Historical cost U.S. direct investment position abroad, or the cumulative amount of
such investment, fell by 41% and the value of foreign direct investment position in the United
States fell by 30%, while direct investment valued at current cost or historical cost registered
slight positive gains in nominal terms. In contrast, the market value of U.S. direct investment
abroad rose by 38% in 2009 from $3.1 trillion to $4.3 trillion and the market value of foreign
direct investment in the United States rose by 22% from $2.5 trillion to $3.0 trillion. During the
same period, however, the value of U.S. direct investment abroad rose by 8.5% and 9.7% in terms
of current cost and historical cost, respectively. Similarly, the value of foreign corporate stocks
owned by U.S. investors rose by 37% from $4.0 trillion in 2008 to $5.5 trillion in 2009. In
comparison, the value of U.S. corporate stocks owned by foreign investors rose by 14% from
$4.6 trillion in 2008 to $5.3 trillion in 2009. In 2010, the U.S. direct investment position abroad
increased by 10% valued at historical cost, 11.8% valued in market value terms, and 8.9% in
current value terms. In addition, in 2010, the foreign direct investment position in the United
States increased by 10.8% (historical cost), 14.0% (market value), and 8.9% (current cost). In
2011, U.S. direct investment abroad valued at historical cost and current cost rose by 9.6% and
8.7%, respectively, while the value of such investments fell by 5.6% in terms of market value,
reflecting the fall in stock market values overall in Europe and elsewhere. Also, during 2011
foreign direct investment in the United States rose by 13.5% in historical cost terms, by 12% in
current cost terms, and by 3.3% in market value terms.
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Figure 1. U.S. Direct Investment Abroad:
Estimated Value of Accumulated Position, 1990-2011
Source: Department of Commerce.
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Figure 2. Foreign Direct Investment in the United States:
Estimated Value of Accumulated Position, 1990-2011
Source: Department of Commerce.
Investment Patterns
Foreign direct investment in U.S. businesses surged in the mid-1980s and has at times outpaced
the annual amount of U.S. direct investment abroad. For various reasons, U.S. direct investment
abroad and foreign direct investment in the United States have tended to track together so that the
annual flows increase or decrease somewhat in tandem, 3 except in 2005, when U.S. direct
investment abroad dropped sharply as U.S. parent firms reduced the amount of reinvested
earnings going to their foreign affiliates for distribution to the U.S. parent firms in order to take
advantage of one-time tax provisions in the American Jobs Creation Act of 2004 (P.L. 108-357).
From 2002 and 2004, and again in 2007 to 20092006 to 2011, U.S. direct investment outflows were greater
than similar inflows. As a whole, however, the total amount of foreign investment in all U.S.
assets has been greater
than U. than the total amount of U.S. investment abroad, which has tended to push
the net U.S. international investment
position further into a negative position. This is not the first
time in the nation’s history that the
U.S. net international investment position has been negative.
3
See CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign
Investment Data, by James K. Jackson.
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Early in the nation’s history,Early in the nation’s history as the United States made the transition from being a developing
economy to being a major economic superpower, foreign investment flowed into capital
development projects such as railroad and canal construction, which aided the westward
expansion and the development of heavy industries. By 1920, foreigners had withdrawn many of
3
See CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign
Investment Data, by James K. Jackson.
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their assets from the United States to finance World War I, which turned the United States into a
net creditor. This net creditor position grew unabated after World War II and into the 1980s, when
large inflows of foreign investment once again turned the nation into a net international
investment debtor’s net international investment
position into a negative.
The U.S. net debtor status continued to grow through the 1990s and into the 2000s, as indicated
by Figure 3, which shows U.S.-owned assets abroad and foreign-owned assets in the United
States with direct investment valued at historical cost. By year-end 20092011, U.S. assets abroad are
estimated to have reached $1820.6 trillion, while foreign owned assets in the United States reached
$21were
nearly $25 trillion, with direct investments valued at historical cost. As a result, the U.S. net international
international investment position was estimated to be nearly a negative $34.2 trillion, or equivalent
to about 2028% of U.S.
gross domestic product (GDP), marking a substantial increase in the relative
size of the net
investment debt position over the previous decade1990s, as indicated in Table 2. The net investment
investment position improved by over $700 billion during 2009, with direct investment measured at historical
costworsened by $1.5 trillion during 2011, from $2.7 trillion to $4.7 trillion with
direct investment measured at historical cost, due primarily to large capital inflows, a large
increase in financial derivatives, and upward price revisions in foreign-owned assets in the United
States. According to the two other measures for direct investment—current cost and market
value—
the net investment position was valued at about negative $2.74.0 trillion and negative $2.9 4.8
trillion,
respectively.
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Figure 3. U.S.-Owned Assets Abroad and Foreign–Owned Assets
in the United States, 1996-2009
$25
Trillions of dollars
$20
$15
$10
$5
U.S. Assets
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
19
94
$0
Foreign-Owned Assets
Source: Department of Commerce.
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Source: Department of Commerce.
Table 2. U.S. International Investment Status
(billions of dollars)
U.S.-Owned
Assets
Abroad
Foreign-Owned
Assets in the
United States
U.S. Net
International
Investment
Position
U.S. Gross
Domestic
Product
Relative Share of
U.S. Gross
Domestic Product
3.6%
1980
$541.7
$442.4
$99.4
$2,788.1
3.6%
1985
1,134.5
1,143.0
-8.6
4,217.5
-0.2
1990
1,944.1
2,272.9
-328.8
5,800.5
-5.7
1995
3,213.7
3,717.1
-503.4
7414.7
-6.8
1996
3,741.5
4,285.6
-544.1
7838.5
-6.9
1997
4,295.0
5,128.0
-832.9
8332.4
-10.0
1998
4,770.8
5,715.7
-944.9
8793.5
-10.7
1999
5,560.7
6,382.2
-821.4
9353.5
-8.8
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The United States as a Net Debtor Nation
U.S.Owned
Assets
Abroad
Foreign-Owned
Assets in the
United States
U.S. Net
International
Investment
Position
U.S. Gross
Domestic
Product
Relative Share of
U.S. Gross
Domestic Product
2000
5,923.1
7,110.5
-1,187.4
9951.5
-11.9
2001
5,931.8
7,922.1
-1,990.3
10,286.2
-19.3
2002
6,242.4
8,537.7
-2,295.4
10,642.3
-21.6
2003
7,200.2
9,478.1
-2,277.9
11,142.1
-20.4
2004
8,611.8
11,246.1
-2,634.4
11,867.8
-22.2
2005
11,470.7
13,508.0
-2,037.4
12,638.4
-16.1
2006
13,721.6
16,099.8
-2,378.2
13,398.9
-17.7
2007
17,284.2
19,685.5
-2,421.3
14,077.6
-17.2
2008
18,721.8
22,383.2
-3,661.4
14,441.4
-25.4
2009
17,836.0
20,763.7
-2,927.7
14,256.3
-20.5551.5
13,621.8
-2,070.4
12,623.0
-16.4%
2006
13,957.2
16,306.2
-2,349.0
13,377.2
-17.6%
2007
17,840.6
19,842.9
-2,002.4
14,028.7
-14.3%
2008
18,948.7
22,374.1
-3,425.4
14,291.5
-24.0%
2009
18,000.9
20,504.7
-2,503.8
13,939.0
-18.6%
2010
19,782.5
22,438.7
-2,656.2
14,526.5
-18.3%
2011
20,606.4
24,801.7
-4,195.3
15,087.7
-27.8%
Source: Department of Commerce.
The foreign investment position in the United States continues to increase as foreigners acquire
additional U.S. assets and as the value of existing assets appreciates. These assets are broadly
divided into official and private investments reflecting transactions by governments among
themselves and transactions among the public. At times, some observers have been concerned
about the amount of foreign official investment in the U.S. economy, particularly in U.S. Treasury
securities and, more recently, purchases of U.S. businesses by foreign governments. As Figure 4
indicates, official asset holdings were valued at about $4.45.2 trillion in 20092011, or about 21% of the
total foreign investment position. Official assets include such monetary reserve assets as gold, the
reserve position with the International Monetary Fund (IMF), and holdings of foreign currency.
An important component of foreign official holdings in the United States is the acquisitions of
U.S. Treasury securities by foreign governments. At times, such acquisitions are used by foreign
governments, either through coordinated actions or by themselves, to affect the foreign exchange
price of the dollar. Foreign currency holdings account for a relatively small share of the total
foreign investment position.
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The United States as a Net Debtor Nation
Figure 4. Foreign Official and Private Investment Positions
in the United States, 1996-2009
$16
Trillions of dollars
$14
$12
$10
$8
$6
$4
$2
Foreign official assets
09
20
08
20
07
20
05
06
20
20
04
20
03
20
02
20
01
20
00
20
99
98
19
19
97
19
96
19
95
19
19
94
$0
Private investments1994-2011
Source: Department of Commerce.
Private asset holdings are comprised primarily of direct investment in businesses and real estate,
purchases of publicly traded government securities, and corporate stocks and bonds. Foreignowned private assets were valued at $15 to $16 trillion, or about 60% of the total foreign-owned
assets in the United States. As indicated As indicated
in Figure 5, the composition of U.S. assets abroad and
foreign-owned assets in the United States
is different in a number of ways. The strength and
uniqueness of the U.S. Treasury securities
markets make these assets sought after by both official
and private foreign investors, whereas
U.S. investors hold few foreign government securities. As
a result, foreign official assets in the
United States far outweigh U.S. official assets abroad. Both
foreign private and official investors
have been drawn at times to U.S. government securities as a
safe haven investment during
troubled or unsettled economic conditions, including the currentduring the
2008-2009 financial crisis.
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The United States as a Net Debtor Nation
Figure 5. U.S. and Foreign Investment Position, By Major Component, 2009
US Assets Total: $17.8 trillion
Foreign Assets Total $20.8 trillion
US banks
Nonbanks
Stocks
Bonds
Govt. securities
Direct invest.
Derivatives
Official assets
$0
$1
$2
$3
$4
$5
$6
Trillions of dollars
US assets
Foreign assets2011
Source: Department of Commerce.
Of all the accounts, inward and outward direct investments are the most closely matched,
demonstrating the appeal of such investments to both U.S. and foreign investors. In fact, the
United States is unique in that it not only is the largest foreign direct investor in the world, but it
is also the largest recipient of direct investment in the world. Foreign investors also have been
attracted to U.S. corporate stocks and bonds for the same reasons domestic U.S. investors have
invested in them. 4 The decline in the overall value of U.S. corporate stocks after 2000, however,
curbed the rate of growth of foreign purchases of these assets. A similar decline in the value of
foreign stocks and the depreciation in the value of the U.S. dollar relative to a broad range of
currencies reduced the dollar value of American-owned stock holdings abroad. Claims by private
banks are also included in the international investment accounts and represent a broad range of
international financial transactions, including financing for short-term trade credits associated
with exports and imports of merchandise goods.
4
For additional information, see CRS Report RL32462, Foreign Investment in U.S. Securities, by James K. Jackson.
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The United States as a Net Debtor Nation
International Investment: Sources and
Economic Impact
International investment not only has an impact on the U.S. economy, but it is affected by the
economy. For U.S. investors, foreign markets provide them with opportunities to seek out the
greatest returns for their investments, returns which often are repatriated back to the United
States. In
addition, U.S. direct investment abroad, for the most part, tends to stimulate U.S.
exports, rather than act as a substitute for exports, which
in turn stimulates the most productive
sectors of the economy. 5 U.S. direct investment abroad is
highly sought after by developing countries which
countries, which not only want the capital not only to supplement their
own limited domestic sources, but they
also want American technology and expertise.
Foreign capital inflows augment domestic U.S. sources of capital, which, in turn, keep U.S.
interest rates lower than they would be without the foreign capital. Indeed economists generally
argue that it is this interplay between the demand for and the supply of credit in the economy that
drives the broad inflows and outflows of capital. As U.S. demands for capital outstrip domestic
sources of funds, domestic interest rates rise relative to those abroad, which tends to draw capital
away from other countries to the United States.
The United States also has benefitted from a surplus of saving over investment in many areas of
the world that has provided a supply of funds at low rates of interest. This surplus of saving has
been available to the
United States because foreigners have remained willing to loanlend that saving
to the United States in
the form of acquiring U.S. assets, which have accommodated the growing
current account
deficits. Until the recentPrior to the 2008-2009 financial crisis, the United States has experienced a
decline in its rate of
savings and an increase in the rate of domestic investment, as indicated in Table 3. The large
increase in the Nation. The large increase
in the nation’s current account deficit would not have been possible without the
accommodating inflows of foreign capital.
As Table 3 indicates, compared with the 2004-2008 period, U.S. saving in 2009 declined by 3.8%
of gross domestic product (GDP), while investment fell by an even larger 4.6% of GDP, so that
saving increased as a share of GDP. These changes in the share of saving and investment relative
to GDP were accompanied by a decrease worldwide in saving relative to investment, which
means there was a smaller amount of excess saving world-wide compared with the 2004-2008
period. Among other advanced economies, saving in 2009 declined relative to the 2002-2007
period, while investment during the same period increased slightly as a share of GDP. Among the
newly industrialized economies in Asia, both saving and investment increased in 2009 relative to
the 2002-2007 period, but investment increased more as a share of GDP than did saving, so in
relative terms saving decreased as a share of GDP. In the emerging developing economies, the
developing economies of Asia (which includes China), and the Middle East, saving as a share of
GDP increased faster, and in some cases much faster, than did investment, which also increased in
most of these areas.
accommodating
inflows of foreign capital. Since then, however, the U.S. saving rate increased relative to the prior
period and the rate of business investment declined, as indicated in Table 3.
As Table 3 indicates, U.S. saving as a percent of gross domestic product (GDP) is estimated to
have increased in 2012 by 0.4% compared with the 2007-2011 period, while investment fell by a
slightly larger 0.5% of GDP, so that saving increased as a share of GDP. These changes in the
share of saving and investment relative to GDP were accompanied by an increase worldwide in
both saving and investment with saving slightly greater than investment, which means there was
estimated to be a slight amount of excess saving world-wide in 2012 compared with the 20072011 period. Among other advanced economies, both saving and investment in 2012 are
estimated to have declined relative to the 2007-2011 period, as a share of GDP, reflecting the
slowdown in economic activity in 2011 and 2012. Although saving and investment in the
Eurozone and in Japan are estimated to have declined in 2012 relative to the 2007-2011 period,
saving continued to be a greater share of GDP, providing additional funds for investment outside
those areas. Among the newly industrialized economies in Asia, both saving and investment fell
in 2012 relative to the 2007-2011 period, but saving continued to outpace investment as a share of
GDP. In the emerging developing economies, the developing economies of Asia (which includes
China) experienced a decrease in saving and an increase in investment as a share of GDP, which
5
For additional information, see CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy:
Evidence Based on Foreign Investment Data, by James K. Jackson.
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The United States as a Net Debtor Nation
12
The United States as a Net Debtor Nation
reduced the amount of excess saving provided by the countries in this area. In the Middle East,
investment as a share of GDP decreased in 2012 compared with 2007-2011, while saving
remained the same, resulting in an increase in the amount of excess saving available for investing
elsewhere.
Table 3. Saving and Investment in Selected Countries and Areas;
2004-2008, and 20092007-2011, and 2012
(Percentage of Gross Domestic Product)
Area/Country
Average, 2004-2008
20092007-2011
2012
Change
World
Saving
23.5
21.4
-2.1
Investment
23.1
21.5
-1.6
Saving
14.6
10.8
-3.8
Investment
19.6
15.0
-4.6
Saving
20.3
17.1
-3.2
Investment
21.2
18.0
-3.2
Saving
21.8
18.7
-3.1
Investment
21.4
19.1
-2.3
Saving
27.4
23.0
-4.4
Investment
23.5
20.3
-3.2
Saving
32.3
32.4
0.1
Investment
26.6
23.6
-3.0
Saving
32.4
31.1
-1.3
Investment
28.5
29.2
0.7
Saving
42.6
43.6
1.0
Investment
37.4
39.5
2.1
Saving
40.7
29.6
-11.1
Investment
25.2
27.8
2.624.0
0.5
Investment
23.1
23.9
0.8
Saving
12.7
13.1
0.4
Investment
16.7
16.2
-0.5
Saving
18.8
18.3
-0.5
Investment
19.5
18.8
-0.7
Saving
20.6
19.9
-0.7
Investment
20.5
18.7
-1.8
Saving
24.4
21.9
-2.5
Investment
21.1
20.3
-0.8
Saving
32.7
31.5
-1.2
Investment
25.9
25.8
-0.1
Saving
33.0
33.3
0.3
Investment
30.5
32.1
1.6
Saving
44.0
43.0
-1.0
Investment
40.0
42.1
2.1
Saving
38.3
38.3
0.0
Investment
27.5
26.1
-1.4
United States
Other Advanced Economies
Eurozone
Japan
Newly Industrialized Asian Economies
Emerging Developing Economies
Developing Asia
Middle East
Source: World Economic Outlook, International Monetary Fund, April 2010. p. 268-271October 2012. p. 213-214.
Capital inflows also allow the United States to finance its trade deficit, because foreigners are
willing to lend to the United States in the form of exchanging the sale of goods, represented by
Congressional Research Service
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The United States as a Net Debtor Nation
U.S. imports, for such U.S. assets as stocks, bonds, and U.S. Treasury securities. Such inflows,
however, generally put upward pressure on the dollar, which tends to push up the price of U.S. exports
exports relative to its imports and reduce the overall level of exports. Furthermore, foreign
investment in
the U.S. economy drains off some of the income earned on the foreign-owned
assets that
otherwise would accrue to the U.S. economy as foreign investors repatriate their
earnings back
home.
Congressional Research Service
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The United States as a Net Debtor Nation
home.
Some observers are particularly concerned about the long-term impact of the U.S. position as a
net international investment debtor on the pattern of U.S. international income receipts and
payments. In 20092011, the United States received $623854 billion in income receipts (including receipts
on royalties) on its investments abroad and paid out $508407 billion in income payments (including
payments on royalties) on foreign-owned assets in the United States for a net surplus of $113314
billion in income receipts.6 This surplus has varied over time as changes in interest rates affect
payments to foreign investors on such assets as Treasury securities and corporate bonds.7 As the
annual amount of foreign investment in the U.S. economy continues to exceed the amount of U.S.
investment abroad, it seems inevitable that U.S. payments on foreign-owned assets will exceed
U.S. receipts. A net outflow of income payments would act as a drag on the national economy as
U.S. national income is reduced by the net amount of funds that are channeled abroad to foreign
investors.
One of the positive areas of the income accounts is the income receipts the United States receives
on U.S. direct investments abroad. Although the historical cost valuevalues of U.S. direct investment
abroad and foreign direct investment in the U.S.United States are roughly equal, the United States
earned $250
320 billion more on its direct investment assets abroad in 20092011 than foreigners earned on
their direct
investments in this country, as indicated in Figure 6. As indicated previously, in 2005
U.S. parent
firms reduced the amount of reinvested earnings going to their foreign affiliates for
distribution to
the U.S. parent firms in order to take advantage of one-time tax provisions in the
American Jobs
Creation Act of 2004 (P.L. 108-357). The Department of Commerce has analyzed data on direct
investment to determine the source of the low rate of return of foreign direct investment relative
to U.S. direct investment abroad.8 This analysis concluded that the gap in the rate of return
between U.S.-owned enterprises abroad and foreign-owned enterprises in the United States is
narrowing over time and seems to be related to the age of the investment, or that as foreigners’
investments mature, the rate of return of the assets approaches that of U.S. direct investment
abroad.
The performance of foreign-owned establishments, on average, compared with their U.S.-owned
counterparts presents a mixed picture. Historically, foreign-owned firms operating in the United
States have had lower rates of return, as measured by return on assets, than U.S.-owned firms,
although the gap between the two groups appears to have narrowed over time. According to the
Bureau of Economic Analysis, this narrowing of the gap in the rate of return appears to be related
to age effects, or the costs associated with acquiring or establishing a new business that can entail
startup costs that disappear over time and market share.8 By other measures, foreign-owned
manufacturing firms appear to be outperforming their U.S. counterparts.9
The U.S. net surplus of income receipts arising from direct investments was offset to a large
extent by large net income payments to foreign holders of U.S. government securities, which fell
slightly from the $167$140 billion paid in 2008 to $144in 2009 to $134 billion in 2009. The overall U.S. income
surplus was increased further by the income payments made to U.S. holders of foreign corporate
stocks and bonds. The United States received $234 billion in income from the corporate stocks
and bonds Americans owned abroad and paid out over $218 billion to foreign holders of U.S.
corporate securities, for a net inflow of $16 billion in income receipts on such assets. In addition,
the United States received $90 billion in royalties in 2009 on various products and on U.S.licensed production technology, patents, and copyrighted material. This was nearly four times the
$25 billion the United States paid foreigners in royalties on their investments in the United States.
6
Sauers, Renee M., and Kristy L. Howell, U.S. International Transactions: First Quarter of 2008. Survey of Current
Business, July 2008, p. 58.
7
Whitehouse, Mark, U.S. Foreign Debt Shows Its Teeth As Rates Climb. The Wall Street Journal, September 25, 2006,
p. A1.
8
Mataloni, Raymond, Jr., “An Examination of the Low Rates of Return of Foreign-Owned U.S. Companies,” Survey of
Current Business, March 2000, p. 55-73; and Landefeld, J. Steven, Ann M. Lawson, and Douglas B. Weinberg, “Rates
of Return on Direct Investment,” Survey of Current Business, August 1992, p. 79-86.
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The United States as a Net Debtor Nation
Figure 6. U.S. Income Receipts and Payments on U.S.-Owned Assets Abroad and on
Foreign-Owned Assets in the United States, 2009
US Receipts Total: $677.9 million
US Payments Total: $492.0 million
Royalties and
license fees
U.S. government
receipts
Other private
receipts
Direct investment
receipts
$0
$50
$100
$150
$200
$250
$300
$350
$400
Millions of dollars
US Receipts
US Payments2011, likely reflecting the low interest rates
6
Scott, Sarah P., U.S. International Transactions: First Quarter of 2012. Survey of Current Business, July 2012, p. 59.
Whitehouse, Mark, U.S. Foreign Debt Shows Its Teeth As Rates Climb. The Wall Street Journal, September 25, 2006,
p. A1.
8
Mataloni, Raymond J. Jr., An Examination of the Low Rates of Return of Foreign-Owned U.S. Companies, Survey of
Current Business, March 2000, p. 55.
9
Foreign Direct Investment in the United States, Establishment Data for 2002, Bureau of Economic Analysis, June
2007.
7
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The United States as a Net Debtor Nation
on U.S. treasury securities. The overall U.S. income surplus was increased further by the income
payments made to U.S. holders of foreign corporate stocks and bonds. The United States received
$254 billion in income from the corporate stocks and bonds Americans owned abroad and paid
out $207 billion to foreign holders of U.S. corporate securities, for a net inflow of $47 billion in
income receipts on such assets. In addition, the United States received $121 billion in royalties in
2011 on various products and on U.S.-licensed production technology, patents, and copyrighted
material. This was over three times the $37 billion the United States paid foreigners in royalties
on their investments in the United States.
Figure 6. U.S. Income Receipts and Payments on U.S.-Owned Assets Abroad and on
Foreign-Owned Assets in the United States, 2011
Source: Department of Commerce.
Some observers also are concerned about the extensive amount of foreign investment overall in
the U.S. economy and in U.S. financial assets. According to the estimates provided in Table 4,
foreigners ownowned approximately 1526% of total U.S. wealth in 2011. Although foreign investors
own a little
less more than 7% of total U.S. fixed private capital stock, they own substantially larger shares of U.S.
Congressional Research Service
15
The United States as a Net Debtor Nation
shares of U.S. financial assets. For instance, foreign investors now own 5550% of total U.S. Federal
debt and more
thanabout half of the outstanding publicly traded U.S. Treasury securities.910 Some observers
argue that
such investments could spur an economic crisis in this country should foreign investors
decide to
pull their money out of the investments, whether for economic or political reasons. This
possibility seems remote, however, given the negative impact such an action might have on the
foreign investors themselves, but the concerns remain. 10
9
For additional information, see CRS Report RL32462, Foreign Investment in U.S. Securities, by James K. Jackson.
For a longer presentation of this topic, see CRS Report RL34319, Foreign Ownership of U.S. Financial Assets:
Implications of a Withdrawal, by James K. Jackson.
10
Congressional Research Service
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The United States as a Net Debtor Nation
11
Table 4. Estimates of Wealth in the United States,
20082011 Current-Cost, Gross Stock Values
(billions of dollars, percent)
Item
Total
Foreign
Owned
Foreign
Share
Fixed Private Capital
$34,260.80
$2,278.89
6.735,193.20
$2,547.83
7.2%
Nonresidential
$17,181.80
$2,278.89
13.3%
$499.00
$3.33
0.7%
$1,428.40
$110.83
7.8%
—Construction
$295.40
$10.26
3.5%
—Manufacturing
$2,312.90
$795.34
34.4%
—Transportation
$1,133.80
$64.51
5.7%
$526.10
$312.58
59.4%
—Retail Trade
$1,102.20
$44.06
4.0%
—Finance, Insurance, Real Estate
$1,353.40
$248.89
18.4%
—Services
$4,020.90
$124.90
3.1%
Residential
$17,412.60
$32,744.69
$9,423.37
28.8%
$5,837.34
$3,210.64
55.0%
—Corporate Stocks
$15,777.35
$1,837.63
11.6%
—Corporate Bonds
$11,130.00
$2,865.90
25.7%
—Agriculture, Forestry, and Fisheries
—Mining
—Wholesale Trade
—Farms
—Real Estate
Fixed Government Capital
$102.80
$17,079.00
$9,320.20
—Equipment
$958.40
—Structures
$8,360.70
Consumer Durable Goods
$4,588.50
Financial Assets
—Federal Debt, Publicly Held
—Other
Total
$1,509.20
$80,914.19
$11,702.26
14.5632.00
$2,547.83
14.5%
$515.40
$3.52
0.7%
$1,579.20
$136.85
8.7%
—Construction
$273.70
$11.86
4.3%
—Manufacturing
$2,280.30
$838.34
36.8%
—Transportation
$1,131.50
$39.92
3.5%
$523.20
$309.96
59.2%
—Retail Trade
$1,177.10
$50.55
4.3%
—Finance, Insurance, Real Estate
$1,364.60
$376.77
27.6%
—Services
$3,925.70
$161.14
4.1%
Residential
$17,561.20
Fixed Government Capital
$11,192.00
—Agriculture, Forestry, and Fisheries
—Mining
—Wholesale Trade
—Equipment
$1,088.80
—Structures
$9,769.90
Consumer Durable Goods
$4,732.20
Financial Assets
$44,818.04
$11,039.40
24.6%
—Federal Debt, Publicly Held
$10,132.04
$5,071.20
50.1%
—Corporate Stocks
$22,824.90
$3,058.20
13.4%
—Corporate Bonds
$11,861.10
$2,910.00
24.5%
—Other
Total
$11,575.39
$95,935.44
$25,162.62
26.2%
Sources: Nguyen, Elena L., The International Investment Position of the United States at Yearend 20082010, Survey
of Current Business, July 2009. p. 17-19; Wasshausen, David B.2012. p. 18; Rodriguez, Marilyn, Fixed Assets and Consumer Durable Goods for
1999-2008 20082011, Survey of Current Business, September 20092012. p. 28121; Foreign Direct Investment in the United States,
Tables. Survey of Current Business, September 2009. Table 16 Tables.
10
For additional information, see CRS Report RL32462, Foreign Investment in U.S. Securities, by James K. Jackson.
For a longer presentation of this topic, see CRS Report RL34319, Foreign Ownership of U.S. Financial Assets:
Implications of a Withdrawal, by James K. Jackson.
11
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The United States as a Net Debtor Nation
Survey of Current Business, September 2012. Table 15; Flow of Funds Accounts of the United States Flows and
Outstandings, ThirdSecond Quarter 2009, December, 20092012, Federal Reserve, September, 2012. Tables L212 and L213; Treasury Bulletin,
Department of the
Treasury, December 2009September 2012. Table FD-1.
Congressional Response
Despite expressing concerns at times about the U.S. net international investment position,
membersMembers of Congress generally have been reluctant to intervene in the investment process,
whether inward or outward. Indeed, successive Congresses and Administrations have led
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The United States as a Net Debtor Nation
international efforts to eliminate or reduce restraints on the international flow of capital. If the
U.S. net investment position continues to turn more negative, prospects increase that the positive
U.S. net income receipts will turn negative as U.S. income payments overwhelm U.S. income
receipts. In such a case, the U.S. economy will experience a net economic drain as income that
could be used to finance new U.S. businesses and investments will be sent abroad to satisfy
foreign creditors. Such a drain likely will be small at first relative to the overall size of the
economy, but it could grow rapidly if the economy continues to import large amounts of foreign
capital.
Some observers are also concerned about the growing role foreign investment is playing in the
economy by bridging the gap between domestic sources and demands for credit. One chief
consideration is how the capital is being used. Investment funds that are flowing into direct
investment and into corporate stocks and bonds presumably are being used to bolster investments
in plant and equipment and other investments that aid in corporate productivity over the long run.
As such, those investments may well provide a boost to U.S. economic growth well into the
future. Foreign investment in U.S. Treasury securities directly aidaids in financing the Federalfederal
government’s budget deficits and indirectly ease the Federaleases the federal government’s demands on domestic
credit markets, which assists U.S. firms and consumer consumption by freeing up capital in the
economy and by relieving some of the pressure on domestic interest rates.
One growing concern among some policymakers is the rising amount of investment by foreign
governments in U.S. businesses, real estate, and portfolio assets (corporate stocks and bonds, and
U.S. Governmentgovernment securities). Such investments by foreign governments are bolstered by the
growing holdings of U.S. currency by foreign governments, known as sovereign wealth funds,
which are estimated to amount to more than $2.5 trillion.1112 U.S. policy toward foreign investment
generally has been one of acceptance and openness. Investments by foreign governments,
however, are viewed by some as a new and different kind of investment that bears greater
scrutiny. Such investments by foreign governments are viewed by some as contrary to longstanding U.S. policies which have encouraged foreign governments to shift away from owning
businesses enterprises and to support private ownership. For some observers, investments by
foreign governments also raise the potential for official interference into a broad range of market
activities. There is no evidence to date that ownership of various U.S. assets by foreign
governments, by itself, has affected the management of those assets or the markets in which they
exist in ways that differ from ownership by private foreign entities. Nevertheless, such concerns
likely helped motivate Congress to pass, and President Bush to sign on July 26, 2007, P.L. 110-49,
11049, the Foreign Investment and National Security Act of 2007, which increased congressional
oversight over acquisitions of U.S. businesses by foreign governments.
12
Weisman, Steven R., A Fear of Foreign Investments. The New York Times, August 21, 2007.
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The United States as a Net Debtor Nation
Some observers contend that a sharp decline in capital inflows or a sudden withdrawal of foreign
capital from the economy could spark a financial crisis. Congress likely would find itself
embroiled in any such financial crisis through its direct role in conducting fiscal policy and in its
indirect role in the conduct of monetary policy through its supervisory responsibility over the
Federal Reserve. Such a coordinated withdrawal seems highly unlikely, particularly since the vast
majority of the investors are private entities that presumably would find it difficult to coordinate a
withdrawal. Short of a financial crisis, events that cause foreign investors to curtail or limit their
purchases of U.S. securities likely would complicate efforts to finance budget deficits in the
11
Weisman, Steven R., A Fear of Foreign Investments. The New York Times, August 21, 2007.
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The United States as a Net Debtor Nation
current environment without such foreign actions having an impact on U.S. interest rates,
domestic investment, and long-term rate of growth.
Author Contact Information
James K. Jackson
Specialist in International Trade and Finance
jjackson@crs.loc.gov, 7-7751
Congressional Research Service
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