Foreign Direct Investment in the United
States: An Economic Analysis
James K. Jackson
Specialist in International Trade and Finance
February 1, 2011May 10, 2012
Congressional Research Service
7-5700
www.crs.gov
RS21857
CRS Report for Congress
Prepared for Members and Committees of Congress
Foreign Direct Investment in the United States: An Economic Analysis
Summary
Foreign direct investment in the United States declined sharply after 2000, when a record $300
billion was invested in U.S. businesses and real estate. [(Note: 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).] In 2008[a][1].) In 2010, according to U.S.
Department of Commerce data, foreigners invested $325 billion236 billion in U.S. businesses and real
estate. Foreign direct investments are
highly sought after by many state and local governments
that are struggling to create additional
jobs in their localities. While some in Congress encourage
such investment to offset the perceived
negative economic effects of U.S. firms investing abroad,
others are concerned about foreign
acquisitions of U.S. firms that are considered essential to U.S.
national and economic security.
Congressional Research Service
Foreign Direct Investment in the United States: An Economic Analysis
Contents
Recent Investments .......................................................................................................................... 1
Acquisitions and Establishments ..................................................................................................... 6
Economic Performance.....4
Economic Performance ...............................................................................................................4
Conclusions 6
Conclusions......................................................................................................................................6 8
Figures
Figure 1. Foreign Direct Investment in the United States and U.S. Direct Investment
Abroad, Annual Flows, 1990-2009 (in billions of dollars)2010............................................................................................... 1
Tables
Table 1. Foreign Direct Investment Position in the United States on a Historical-Cost
Basis at Year-End 2009 2010.................................................................................................................3 4
Contacts
Author Contact Information .............................................................................................................6 8
Congressional Research Service
Foreign Direct Investment in the United States: An Economic Analysis
Recent Investments
Foreigners invested $269236 billion in nominal terms in U.S. businesses and real estate in 20092010,
according to data published by the Department of Commerce.1 As Figure 1 shows, this represents
a sharp decrease from the $35150% increase over the $155 billion invested in 20082010. Investments abroad by U.S. parent firms
fell sharply in 2009 to $269 billion, down from the $351increased by 15% in 2010 to $351 billion, up from the down from the $303 billion they invested
abroad in 2008.
The decrease2009. The increase in foreign direct investment flows mirrors a slowdown in global flows. According to
the United rebound in global flows
following the sharp drop in direct investment flows in 2009 and 2010. According to the United
Nations’ World Investment Report, global foreign direct investment inflows decreased
by 16% in 2008 and 37% in 2009. The data indicate that global foreign direct investment flows
increased slightly in early 2010, marking the bottom of the global slump in direct investment
spending by 38% in
2009 compared with the amount invested in 2008 and rose by 13% in 2010.
Figure 1. Foreign Direct Investment in the United States and U.S. Direct Investment
Abroad, Annual Flows, 1990-2009 2010
(in billions of dollars)
$500
$400
$300
$200
$100450
$400
$350
$300
$250
$200
$150
$100
$50
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
U.S. Direct Investment Abroad
Foreign Direct Investment in the U.S.
20
10
$0
US direct investment abroad
Foreign direct investment in the US
Source: U.S. Department of Commerce.
The cumulative amount, or stock, of foreign direct investment in the United States on a historical
cost basis2 rose from $2.21 trillion in 20082009 to about $2.3 trillion in 20092010. This marked an increase
1
Thomas, Sarah Scott, Erin M. Whitaker, and Daniel R. Yorgason
Scott, Sarah P., U.S. International Transactions: First Quarter 2010.
2011. Survey of Current Business, July 20102011, p. 54. 71.
Direct investment data reported in the balance of payments differ from
capital flow data reported elsewhere, because
the balance of payments data have not been adjusted for current cost
adjustments to earnings.
2
The position, or stock, is the net book value of foreign direct investors’ equity in, and outstanding loans to, their
affiliates in the United States. A change in the position in a given year consists of three components: equity and
intercompany inflows, reinvested earnings of incorporated affiliates, and valuation adjustments to account for changes
(continued...)
Congressional Research Service
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Foreign Direct Investment in the United States: An Economic Analysis
of 7.0%, below the 14.6% percent increase experienced in 200811.0%.3 The Department of Commerce
does not attempt to deflate the annual nominal amounts
for direct investment with a specific price
deflator. Instead, the Departmentdepartment publishes alternative
estimates based on current cost and market
value to provide other measures of the value of direct
investment.
The rise in the value of foreign direct investment includes a large increase in equity capital that
was partially offset by a large downward valuation adjustment. The downward adjustment reflects
the decline in the value of equities as a result of the decline in stock values. Tightened credit
conditions and the slowdown in the rate of growth in the U.S. economy, however, tended to push
downincreases in equity capital and
reinvested earnings and a smaller increase in intercompany debt. Equity values increased,
although not as much as in 2009, but equity values also experienced smaller increases in values in
2010. Better credit conditions and a slight rise in the rate of growth in the U.S. economy tended to
push up such mainstays of foreign direct investment activity as mergers and acquisitions. Foreign
direct investments in the U.S. manufacturing sector generally were higher, while investments in
banks, finance, andthe real estate sector were down in 2010 compared with the value in 2009were down. Data for the first two
quarters of 20092011 indicate that
foreign direct investment in the United States is about one-third11% lower
than the amount recorded in the
comparable period in 20082010. Such investments may well pick upcontinue
to lag behind similar investment in 2009 in the second half of the year as
the rate of economic
growth improvesfalls.
As a share of the total amount of nonresidential investment spending in the U.S. economy,
investment spending by foreign firms was equivalent to 1617% in 20082010, far belowabove the 2711% reached
in 20012009. Foreign firms’ spending was sustained by a large increase in intercompany debt flows as
U.S. affiliates turned to net borrowingreinvested earnings as U.S.
affiliates relied more on their own earnings than on funds borrowed from their foreign parent companies. Direct investment
was also financed through reinvested earnings and an increase in equity capital, although the
increase in the amount of equity capital was the lowest amount since 1995. The lower amount of
equity capital represents the relatively slower rate of economic growth in Europe that reduced the
amount of funds European parent firms had available to invest and the higher rate of economic
growth among the U.S. affiliates, which improved their profit position. 4
With over $454
companies. The U.S. affiliates also improved their investment position by increasing the amount
of intercompany debt from their foreign parent company in 2010 compared with 2009. Direct
investment was also financed through an increase in equity capital, although the increase in the
amount of equity capital was the lowest amount since 2002.
With over $432 billion invested in the United States, the United Kingdom is the largest foreign
direct investor, as is indicated in Table 1. Japan is the second-largest foreign direct investor in the
U.S. economy with about $259.6257.3 billion in investments. Following the Japanese are the Dutch
($259.4217 billion), the Canadians ($222Germans ($213 billion), the Germans ($211Canadians ($206 billion), and the French ($163185
billion).
In some cases, investments by one or two countries dominate certain industrial sectors,
suggesting that there is a rough form of international specialization present in the investment
patterns of foreign multinational firms. At year end 20092010, the Netherlands and the United
Kingdom accounted for the bulk of foreign investments in the U.S. petroleum sector, reflecting
investments by two giant companies: Royal Dutch Shell and British Petroleum. Japanese
investments in the U.S. wholesale trade sector are also substantial, followed by British
(...continued)
intercompany inflows, reinvested earnings of incorporated affiliates, and valuation adjustments to account for changes
in the value of financial assets. The Commerce Departmentinvestments, and European investors account for the bulk of foreign investments in the retail trade
sector. German investors are the largest investors in the information sector as a result of a number
of large media company acquisitions. French, German, and British investments dominate other
foreign investments in the banking sector, while Dutch, Canadian, British, and French
(...continued)
in the value of financial assets. The Department of Commerce also publishes data on the foreign direct investment
position valued on a current-cost and market value bases. These estimates indicate that foreign direct investment
in 2010 foreign direct
investment increased by $151217 billion measured at current cost to a cumulative value of $2.7 trillion, while the market value rose by
$568
value measure rose by $424 billion in to reach a cumulative value of $3.14 trillion in 2009.
3
Ibarra-Caton, Marilyn.
3
Barefoot, Kevin B., and Marilyn Ibarra-Caton, Direct Investment Positions for 20092010: Country and Industry Detail,
Survey of Current
Business, July, 2010. p. 20.
4
At the same time, U.S. direct investment abroad plummeted in 2005 as U.S. parent firms reduced the amount of
reinvested earnings in their foreign affiliates for distribution to the U.S. parent firms to take advantage of one-time tax
provisions. U.S. direct investment abroad in 2005 totaled $21 billion (in nominal terms).
Congressional Research Service
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Foreign Direct Investment in the United States: An Economic Analysis
investments, and European investors account for the bulk of foreign investments in the retail trade
sector. German investors are the largest investors in the information sector as a result of a number
of large media company acquisitions. French, German, and British investments dominate other
foreign investments in the banking sector, while Dutch, Canadian, British, and French
2011. p. 125.
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Foreign Direct Investment in the United States: An Economic Analysis
investments account for over half of the investments in the finance sector. Canada’s $8690 billion
investment in the U.S. banking and finance sectors surpasses the more than $5374 billion invested
in the finance sector alone by British firms (data for banking have been suppressed by the
Department of Commerce), followed by Germany ($4952 billion) and France ($4229.8 billion). Foreign
Foreign direct investment in the U.S. manufacturing sector is dominated by a number of
countries, each
with substantial investments: investments by the United Kingdom ($10693.7 billion), Switzerland
($97
Switzerland ($85 billion), the Netherlands ($8278 billion), France ($8171 billion), Germany ($79 69
billion), and
Japan ($7681 billion) account for nearly three-fourths of the total amount of foreign direct
direct investment in this sector.
Investment spending by developed economies accounts for 95% of all foreign direct investment
in the United States. These investments are predominately in the manufacturing sector, which
accounts for about 3432% of foreign direct investment in the United States, a decline from periods
when such investment accounted for a majority share of the total. Another 17% 20% of foreign direct
investment is in the banking
and finance sectors, and 16% is in the retail and wholesale trade
sectors, reflecting purchases of
department stores and other investments to assist foreign firms in
marketing and distributing their
products. The fast-growing information sector accounts for 6.3%, 7%,
while real estate and services
account for modest shares of 2.41% and 2.03.4%, respectively. All other
industries account for the
remaining 22%.
20%.
Congressional Research Service
3
Table 1. Foreign Direct Investment Position in the United States on a HistoricalCostHistorical-Cost Basis at Year-End 20092010
(in billions of U.S. dollars)
All
All
industries
Manufacturing
Wholesale
trade
Retail
trade
Information
Banking
Finance
Real
estate
Services
Othe
indust
$2,319.6
$790.6
$328.4
$44.3
$146.1
$111.9
$293.2
$54.5
$46.1
$50
225.8
60.9
3.9
4.9
-0.1
31.8
54.8
3.9
2.6
6
1,685.3
609.4
171.1
32.1
142.3
56.7
243.5
25.8
30.9
37
tria
2.9
1.4
0.7
(D)
0.0
(D)
0.0
ium
38.5
19.2
6.8
(D)
0.0
(D)
1.4
0.0
0.3
ce
189.3
81.8
12.1
0.4
20.9
9.9
32.4
0.5
4.9
many
218.2
79.3
13.3
4.6
50.4
7.9
41.1
6.9
0.8
32.6
18.6
-0.1
0.0
0.1
2.1
10.1
9.7
1.1
2.0
1.8
(D)
0.5
(D)
0.1
(D)
embourg
127.8
50.4
3.4
(D)
(D)
0.0
8.1
(D)
2.1
5
herlands
238.0
82.8
27.1
(D)
14.0
50.6
7.5
11.6
4
38.9
28.9
7.3
(D)
0.7
-0.4
0.3
(D)
0.1
189.4
97.4
9.3
(D)
39.4
0.9
0.5
453.9
106.2
82.1
53.1
5.2
9.3
ntries
ada
ope
nd
den
zerland
Congressional Research Service
3.1
(D)
(D)
25.2
(D)
(D)
(D)
(D)
(D)
2
(D)
3
14
Foreign Direct Investment in the United States: An Economic Analysis
All
merica
All
industries
Manufacturing
Wholesale
trade
Retail
trade
Information
Banking
Finance
Real
estate
Services
Othe
indust
27.9
9.5
13.9
2.2
1.4
4.6
-32.9
8.7
2.4
1.7
0.1
0.4
0.0
0.0
(D)
0.0
(D)
0.0
17.6
4.2
6.1
(D)
0.8
(D)
0.4
(D)
0.2
361.3
106.5
133.0
(D)
1.8
(D)
27.4
15.8
10.0
4
45.7
7.0
0.2
0.0
2.7
3.0
6.1
0.3
2
n
264.2
76.6
118.2
5.0
13.4
22.4
6.9
7.2
ea
12.0
9.7
(D)
EC
15.5
9.5
(D)
ca
. East
a
tralia
1.8
0.0
0.4
1.2
(D)
0.0
0.1
1.0
(D)
(D)
(D)
0.0
(D)
(D)
Source: Ibarra-Caton, Marilyn, Direct Investment Positions for 2009: Country and Industry Detail. Survey of Current
Business, July, 2010. p. 30.
Note: The position is the stock, or cumulative, book value of foreign direct investors’ equity in, and net outstanding
loans to, their U.S. affiliates. A negative position may result as U.S. affiliates repay debts to their foreign parents, and
as foreign parents borrow funds from their U.S. affiliates. D indicates that data have been suppressed by the
Department of Commerce to avoid the disclosure of data of individual companies.
Other
industries
All countries
$2,342.8
$748.3
$330.9
$40.0
$156.5
$111.3
$356.8
$49.1
$79.3
$470.8
Canada
206.1
35.7
5.5
3.9
0.9
24.7
65.2
4.1
2.9
63.2
Europe
1,697.2
585.0
189.3
29.2
144.7
62.7
284.3
22.5
51.6
327.8
Austria
4.4
2.2
0.4
(D)
(D)
(D)
0.0
0.1
0.0
0.1
Belgium
43.2
20.7
7.2
(D)
(D)
(D)
(D)
(D)
(D)
5.4
France
184.8
71.3
18.8
0.9
19.3
7.3
22.5
0.5
4.6
39.7
Germany
212.9
69.2
16.6
3.3
49.3
10.4
41.6
8.5
0.3
13.7
Ireland
30.6
18.4
(D)
-0.0
(D)
0.4
5.4
0.2
0.0
1.0
Italy
15.7
6.8
1.3
2.0
0.2
(D)
(D)
0.1
0.0
(D)
Luxembourg
181.2
66.0
4.6
(D)
13.9
0.0
42.3
4.1
0.0
43.6
Netherlands
217.1
78.0
24.6
1.8
8.3
(D)
47.8
2.8
0.0
16.4
Sweden
40.8
25.4
10.6
0.0
(D)
0.1
0.1
0.0
(D)
1.0
Switzerland
192.2
85.1
11.8
(D)
11.4
(D)
45.3
0.8
0.3
43.4
UK
432.5
93.7
82.2
(D)
31.6
(D)
73.7
3.5
7.0
114.9
L. America
60.1
15.5
6.6
1.9
1.0
4.6
-17.9
8.8
14.6
25.0
Africa
2.0
0.1
0.5
(D)
-0.0
0.0
-0.0
0.1
(D)
1.3
Mid. East
15.4
3.5
6.0
(D)
0.8
0.0
(D)
0.5
(D)
3.8
Asia
362.0
108.4
122.9
(D)
9.2
19.2
(D)
13.1
10.0
49.6
Australia
49.5
5.3
0.1
(D)
(D)
2.3
4.3
5.1
0.0
31.7
Japan
257.3
80.7
104.0
4.3
9.0
13.5
19.3
5.6
7.5
13.3
Korea
15.2
2.5
12.3
0.0
0.0
0.1
0.2
0.1
0.0
0.1
OPEC
11.4
2.0
(D)
(D)
0.0
0.9
(D)
0.0
-0.0
2.9
Source: Barefoot, Kevin B. and Marilyn Ibarra-Caton, Direct Investment Positions for 2010: Country and Industry Detail. Survey of Current Business, July 2011. p. 141.
CRS-4
Notes: The position is the stock, or cumulative, book value of foreign direct investors’ equity in, and net outstanding loans to, their U.S. affiliates. A negative position may result
as U.S. affiliates repay debts to their foreign parents, and as foreign parents borrow funds from their U.S. affiliates. “D” indicates that data have been suppressed by the
Department of Commerce to avoid the disclosure of data of individual companies.
CRS-5
Foreign Direct Investment in the United States: An Economic Analysis
Acquisitions and Establishments
Another way of looking at foreign direct investment is by distinguishing between transactions in
which foreigners acquire existing U.S. firms and those in which foreigners establish new firms—
termed “greenfield” investments. New investments are often preferred at the local level because
they are thought to add to local employment, whereas a foreign acquisition itself may add little, if
any, new employment. In 2008, outlays for new investments, which include investments made
directly by foreign investors and those made by existing U.S. affiliates, were $260 billion, a 3.0%
increase over the $252 billion invested in 2007. According to the Department of Commerce, the
increase in new investments reflected several large transactions.54 These transactions include the
acquisition of Anheuser-Busch Cos. Inc., by Stichting Interbrew SA for $52 billion,; the
acquisition of Alcon Inc., by Novartis AG for $10.8 billion; and large investments in Commerce
Bancorp, New Jersey, Morgan Stanley, and Citigroup. Acquisitions of existing U.S. firms
accounted for 93% of the new investments by value. Investments by the existing U.S. affiliates of
foreign firms accounted for 82% of the total transactions by investor, while other foreign direct
investors accounted for the remaining 18% of transactions. Investment outlays by foreign firms
increased from 2007 to 2008 in all major sectors, except wholesale trade, retail trade, and real
estate. Investment in information, manufacturing, and services all posted increases. The
Department of Commerce halted publication of the annual report on foreign acquisitions after the
June 2008 edition. Instead, it is developing a separate report that it expects will better capture the
construction of new plants by foreign-owned firms that are operating in the United States.
Economic Performance
By year-end 2009
Economic Performance
By year-end 2007, the latest year for which detailed data are available, foreign firms employed
almost 6 6
million Americans, less than 4% of the U.S. civilian labor force, and owned over 36,000
5
Anderson, Thomas, Foreign Direct Investment in the United States: New Investment in 2008. Survey of Current
Business, June 2009. p. 34.
Congressional Research Service
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Foreign Direct Investment in the United States: An Economic Analysis
32,000
individual business establishments.65 Foreign firms have a direct investment presence in every
state. Employment of these firms ranges from over 661636,000 in California, to about 7,000700 in South
Dakota. Following California, New York (477473,000), Texas (450446,000), Illinois (290268,000),
Pennsylvania (279290,000), Florida (279268,000), and New Jersey (237264,000) have the largest numbers
of residents employed by foreign firms. In 2007, 372009, 36% of the foreign firms’ employment was in
the manufacturing sector, more than twice the share of manufacturing employment in the U.S.
economy as a whole, with average annual compensation (wages and benefits) per worker of about
$63,000.
Retail and wholesale trade accounted for another 2221% of total affiliate employment. Dutchaffiliated firms are the largest single employers in the retail trade sector and account for nearly
one-third of total affiliate employment in this sector, while Japanese and BritishGerman firms account for
for over half of the employment in the wholesale trade sector. Canadian, French, and Japanese
firms account for the largest share of affiliate employment in the services sector, which accounted
for about 18% of total affiliate employment. Employment in the information, finance, and real
4
Anderson, Thomas, Foreign Direct Investment in the United States: New Investment in 2008. Survey of Current
Business, June 2009. p. 34.
5
Foreign Direct Investment in the United States: Operations of U.S. Affiliates of Foreign Companies, Preliminary
2009 Estimates. Bureau of Economic Analysis, September 2011, Table 1A-1.
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Foreign Direct Investment in the United States: An Economic Analysis
estateEmployment in the information,
finance, real estate and technical services sectors accounts for another 13% of total affiliate
employment. Average employee
compensation is highest in the finance sector—$229,000—
where Swiss, Canadian, Japanese, and
British firms account for three-fourths of the employment.
The rest of the affiliate employment is
spread among a large number of other industries.
The affiliates of foreign firms spent $187173 billion in the United States in 20072009 on new plants and
equipment, imported $494507 billion in goods and services and exported $205232 billion in goods and
services. Since 1980, the
total amount of foreign direct investment in the economy has increased
eight-fold and nearly
doubled as a share of U.S. gross domestic product (GDP) from 3.4% to
6.4%. It is important to
note, however, that these data do not imply anything in particular about
the role foreign direct
investment has played in the rate of growth of U.S. GDP.
ForeignThe performance of foreign-owned establishments, on average, are far outperforming their U.S.-owned counterparts.
Although foreign-owned firms account for less than 4% of all U.S. manufacturing establishments,
they have 14% more value added on average and 15% higher value of shipments than other
manufacturers. The average plant size for foreign-owned firms is much larger—five times—than
for U.S. firms, on average, in similar industries. This difference in plant size apparently rises from
an absence of small plants among those that are foreign-owned. As a result of the larger plant
scale and newer plant age, foreign-owned firms paid wages on average that were 14% higher than
all U.S. manufacturing firms, had 40% higher productivity per worker, and 50% greater output
per worker than the average of comparable U.S.-owned manufacturing plants. Foreign-owned
firms also display higher capital intensity in a larger number of industries than all U.S.
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.6 By other measures, foreign-owned
manufacturing firms appear to be outperforming their U.S. counterparts. 7Although foreignowned firms account for less than 3% of all U.S. manufacturing establishments, they have had six
times more value added on average and seven times higher value of shipments than other
manufacturing establishments. The average plant size for foreign-owned firms is much larger—
six times—than for other U.S. firms, on average, in similar industries. This difference in plant
size apparently rises from an absence of small plants among those that are foreign-owned. As a
result of the larger plant scale and newer plant age, foreign-owned firms paid wages on average
that were 60% higher than other U.S. manufacturing firms, had 40% higher productivity per
worker, and 58% greater output per worker than the average of comparable U.S.-owned
manufacturing plants. Foreign-owned firms also display higher capital intensity in a larger
number of industries than all U.S. establishments.
These differences between foreign-owned firms and all U.S. firms should be viewed with some
caution. First, the two groups of firms are not strictly comparable: the group of foreign-owned
firms comprises a subset of all foreign firms, which includes primarily very large firms; the group
of U.S. firms includes all firms, spanning a broader range of sizes. Secondly, the differences
reflect a range of additional factors, including the prospect that foreign firms that invest in the
United States likely are large firms with proven technologies or techniques they have successfully
transferred to the United States. Small foreign ventures, experimenting with unproven
technologies, are unlikely to want the added risk of investing overseas. Foreign investors also
tend to opt for larger scale and higher capital-intensity plants than the average U.S. firm to offset
6
Foreign Direct Investment in the United States: Operations of U.S. Affiliates of Foreign Companies, Preliminary
2007 Estimates. Bureau of Economic Analysis, 2009, Table 1A-1.
Congressional Research Service
5the risks inherent in investing abroad and to generate higher profits to make it economical to
manage an operation far removed from the parent firm.
6
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.
7
Foreign Direct Investment in the United States, Establishment Data for 2002, Bureau of Economic Analysis, June
2007.
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Foreign Direct Investment in the United States: An Economic Analysis
the risks inherent in investing abroad and to generate higher profits to make it economical to
manage an operation far removed from the parent firm.
Conclusions
Foreign direct investment in the United States in 20082009 rose slightly over the amount invested in
20072008, but set a record in nominal terms for the most amount of foreign direct investment in the
economy in a year. Other countries have experienced a similar turnaround in foreign direct
investment inflows, especially some of the less developed economies where there is a great
potential for investment. As the rate of growth of the U.S. economy risesimproves relative to other
advanced economies, interest rates stay low,
and the rate of price inflation stays in check, foreign
direct investment in the United States likely
will continue to increase. Of particular importance
will be public concerns over foreign direct
investment in the economy as a whole and on the
overall phenomenon referred to as
“globalization,” with its impact on jobs in the economy.
Concerns over foreign direct investment,
where they exist, stem not so much from the perceived
potential losses of international
competitiveness that characterized similar concerns in the 1980s,
but from potential job losses
that could result from mergers and acquisitions, although such losses
could occur whether the
acquiring company is foreign- or U.S.-owned. Such concerns are offset,
at least in part, by the
benefits that are perceived to be derived from the inflow of capital and the
potential for new jobs
being created in local areas.
Although job security is an important public issue, opposition to some types of foreign direct
investment stems from concerns about the impact of such investment on U.S. economic and
security interests, particularly in light of the terrorist attacks of September 11, 2001. The U.S.
economy, however, remains a prime destination for foreign direct investment. As the pace of
economic growth in the nation increases relative to that of foreign economies, foreign direct
investment likely will increase as new investments are attracted to the United States and existing
firms are encouraged to reinvest profits in their U.S. operations.
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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