Foreign Investment in U.S. Industry

Although the total amount of foreign direct investment (FDI) in the U.S. is small relative to U.S. direct investment abroad, it is growing rapidly and may have a large effect on some industries and geographic areas of the U.S. The two main issues raised by FDI in the U.S. are first, shall Congress require more extensive data collection efforts than are already underway, and second, should laws be enacted to limit foreign direct investment in the U.S. These two issues turn in substantial measure on whether the benefits of additional data collection and/or restrictions on FDI in the U.S. exceed the costs. This report discusses the legislative history of the issue, the magnitude and distribution of FDI in the U.S., the existing data collection efforts, the potential implications for the U.S., the motivations for FDI in the U.S., and U.S. policy regarding FDI.

F O R E I G N I N V E S T M Z N T IN U.S. ISSUE BRIEF NUMBER INDUSTRY IB78091 AUTHOR: Arlene Wilson Economics Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM D A T E O R I G I N A T E D 12/13/78 D A T E UPDATED 10/18/82 FOR ADDITIONAL I N F O R M A T I O N CALL 287-5700 1026 CRS- 1 I S S U E DEFINITICh' Although the tocai amount of foreign direct investment (hereinafter called FDI) in the U.S. is small relative to U.S. direct investment abroad, it is growing rapidly and may have a large effect on some industries and geographic areas of the U.S. The two main issues raised by FDI in the U.S. are first, shall Congress require more extensive data collection efforts than a r e already underway, and second, Should laws be enacted to limit foreign direct investment in the U.S. These two issues turn in substantial measure on whether the benefits of additional data collection and/or restrictions on FDI in the U.S. exceed the costs. The purpose of this issue brief is to inform Congress of the legislative history of the issue, the magnitude and distribution of FDI in the U.S., the existing data collection efforts, the potential implications for the U.S., the motivations for FDI in the U.S., and U.S. policy regarding FDI. The data in this issue brief refer to all foreign direct investment in the U.S.; to however, the isc cuss ion excludes for the most part those issues related FDI in U.S. farmland, which is the topic of IB78064. BACKGROUND AND POLICY ANALYSIS Foreign investment is often divided into two categories, namely, (1) direct investment where the investor exercises considerable control over the enterprise in which the investment has been made, and (2) portfolio, or indirect, investment where the investor has little or no such control. The International Investment Survey Act of 1976 defines direct investment a s (defined a s an ownership or control, directly or indirectly, by one person individual, association, corporation, governmental body, etc.) of 10% or more of the voting securities of a corporation or an equivalent interest in an unicorporated enterprise, and portfolio investment a s any investment other than direct investment, including ownership of debt obligations. Except where data are not separated in the Historical Perspective section below, this issue brief is concerned only with direct investment and not with portfolio investment, since direct investment is currently of most concern. HISTORICAL PERSPECTIVE U.S. economic development was stimulated by foreign capital, primarily British, French, Dutch, and Spanish. In the early 1800s, U.S. railroads and canals were financed largely by federal and state securities sold abroad and by 1854 foreign investors held about one-half of the existing federal and state securities. Foreign investment in U.S. real estate and private industry (especially communications, utilities, and industrial corporations) became substantial by large foreign investment in toward the end of the 1800s, followed petroleum around 1900-1905. By 1914 total foreign investment in the U.S. (including portfolio'and direct investment as well a s loans) was estimated to be about $7 billion, compared with U.S. investment abroad of about $3.5 billion. However, because loans to foreigners increased and total foreign CRS- 2 IB78091 ~PDA~~-10/18/ investment in the U.S. declined during World War I to about $4 biilion by 1919, the U.S. became a net creditcr (in international investment) -a pcsition it stil; naintains. LEGISLATIVE EISTORY Foreign direct investment i n the U.S. increased very gradually until it was about $7.6 billion in 1 9 6 2 , but then almost doubled in the next d e c a d e , reaching $14.9 billion a t the end of 1972. By t h e early P 9 7 0 s , the increase i n Japanese f o r e i g n direct investment and the potentially high l e v e l of OPEC's investable f u n d s led to Congressional a n d public concern a b o u t the extent and effect of present and future FDI in the U.S. The previous survey of FDI was conducted in 1 9 5 9 and although the d a t a were annually updated and published in the Survey of Current Business, they were thought to be insufficient. In the 93rd a n d 9 4 t h Congresses, 70 bills and resolutions were introduced ranging from those restricting or prohibiting certain foreign direct investment a t one extreme to those authorizing studies to obtain more information. F o r example: o n e g r o u p of bills established a national f o r e i g n investment control commission to prohibit or restrict foreign persons from acquiring domestic securities deemed vital to the economic security and national d e f e n s e of the U.S. Extensive policy review by t h e Administration i n 1 9 7 4 a n d 1 9 7 5 and Congressional hearings were undertaken. In g e n e r a l , the Administration's position was that the existing restrictions o n f o r e i g n direct investment were sufficient. However, both the Administration a n d C o n g r e s s agreed that m o r e extensive, timely data were necessary t o make informed analyses of t h e issue. While n o restrictive l a w s were passed, the F o r e i g n Investment Survey Act of 1 9 7 4 (P.L. 93-479) became l a w on Oct. 2 6 , 1974. Under this A c t , the Secretary of Commerce w a s directed to conduct a comprehensive, overall study o f foreign direct investment i n t h e U.S. while t h e Secretary of T r e a s u r y was authorized to d o the same f o r foreign portfolio investment i n the U.S. Civil penalties were included f o r failure t o provide information, a n d the Secretaries o f Commerce and Treasury were required t o submit a n interim April 1976. Three million report by October 1 9 7 5 a n d a f u l l report by dollars was authorized t o be appropriated to carry o u t the Act. S i n c e under t h e Foreign Investment Survey Act of 1 9 7 4 the C o m m e r c e and Treasury Secretaries' authority t o collect information expired when t h e study w a s completed, the International Investment Survey Act o f 1 9 7 6 (P.L. 94-472) w a s enacted o n Oct. 1 1 , 1976. Under this a c t , t h e P r e s i d e n t i s directed to set up a regular a n d comprehensive data collection program and to conduct periodic benchmark surveys o n direct and portfolio investment, both by foreigners i n the U.S. and by U.S. investors abroad. T h e President is a l s o to directed t o conduct a study of the feasibility of establishing a system monitor foreign direct investment in agricultural, r u r a l , and urban real property i n the U.S. and to submit the findings to Congress by October 1978. The President delegated the responsibility' for the d i r e c t investment studies t o the Bureau of Economic Analysis of the U.S. D e p a r t m e n t of Commerce, Civil penalties a r e included for f a i l u r e to provide information and authorizations for appropriations of $1 million for fiscal year 1 9 7 8 and $ 1 million for fiscal year 1 9 7 9 were made. Of the 3 4 bills and resolutions introduced i n the 9 5 t h Congress regarding 1 7 focused o n foreign investment in U.S. farmland. O n e of these bills, S. 3 3 8 4 , became P.L. 95-460 o n Oct. 14, 1978 (discussed more FDI in the U.S., CRS- 3 IB78091 ~ ~ ~ ~ ~ E - 1 0 / 1 17 bllls elther restricted fully in Issue Brlef 78064). The remalnlng fCreig3 0WnersP.ip of some types o r amounts of secur;:les or resources, 0 r amended the required ~ m p r o v e d disclosure of beneflclal owners, Ir.~ernat;orial Scrvey A c t of 1976. The Domestic and Foreign Investment Improved Disclosure Act (Title I 1 of S. 305), which became P.L. 95-213 on Dec. 1 9 , 1 9 7 7 , requires expanded disclosure to the SEC of beneficial owners (both foreign and domestic) of securities. On Sept. 2 2 , 1 9 7 8 , the more than 5% of specified kinds of Amendments to the International Investment Survey Act of 1976 (P.L. 95-381) were approved. These amendments increased the appropriation authorization from $1 million to $ 4 million for the fiscal year ending Sept. 30, 1979, extended the date for submission of the findings of the feasibility study regarding the monitoring of agricultural, rural, and urban real property to October 1979, established a requirement for an interim report on the feasibility study to be submitted by October 1 9 7 8 , and nade other minor changes. In the 96th Congress, 25 bills relating to FDI in U.S. industry were introduced. Of these, 1 1 pertained to equalizing tax treatment (especially the capital gains tax) between foreign and domestic investors, 7 were concerned with improved data reporting and/or restrictions on FDI, authorized appropriations to carry out the International Investment Survey Act of 1976, and 2 were aimed a t stimulating FDI in U.S. industry. T w o ~ l a w swere passed relating to FDI in the 96th Congress. Section 23 of Public Law 96-72 (the Export Administration Act of 1979), which became law on Sept. 2 9 , 1979, authorized appropriations of $4.4. million for the fiscal year ending Sept. 30, 1980 and $4.5 million for the fiscal year ending Sept. The 3 0 , 1981 to carry out the International Investment Survey Act of 1976. Foreign .Investment in Real Property Tax Act of 1 9 8 0 , Subtitle C of Public Law 96-499 (H.R. 7765) was passed on Dec. 5 , 1980. Subtitle C amended the Internal Revenue Code of 1954 so that the gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a U.S. real property interest is treated a s if the foreign investor were engaged in a trade or business within the U.S. and a s if such gain or loss were connected with such trade or business. Reporting requirements and penalties for failure to comply were established. A series of hearings on the operations of Federal agencies in monitoring, reporting, and analyzing foreign investments in the United States were held by the Commerce, Consumer and Monetary Affairs Subcommittee of the House Committee on Government Operations i n 1 9 7 8 and 1979. In a subsequent report, published in 1 9 8 0 , "The Adequacy of the Federal Response to Foreign Investment in the United States," it i s argued that the current data collection efforts are inaccurate and incomplete, present policies and foreign investment restrictions are inappropriate, and the Committee on Foreign Investment in the U.S. does not adequately perform the functions assigned to it. THE DATA Although data on FDI in the U.S. are collected by many government agencies, they are compiled, analyzed, and made public only by the Bureau of Economic Analysis (BEA) and the Office of Foreign Investment in the U.S. (OFIUS), both of which are units of the Department of Commerce. CRS- 4 IB78091 U P D A T E - ~ O / ~ Pour studies b y BE.& are the main scurces for comprehensive data. The f i r s t , a r.:ne-volume study "Foreign Cirect Investment in the United S t a t e s , " the Foreign conducted b y :he Department of Commerce i n compliance w i t h Investment Study Act of 1 9 7 4 (P.L. 9 3 - 4 7 9 1 , contains the most comprehensive data. This s t u d y , hereinafter calied the 1 9 7 4 Benchmark Survey, was based on firms as of 1 9 7 4 , a n C a c o m p l e t e s u r v e y of foreign ownership of U.S. indicated chat foreign companies do not hold a large share of any of the major sectors of the U.S. economy and that PDI is generally beneficial to t h e U.S. S e c o n d l y , BEA publishes a n annual article in the Survey of Current Business which, based on a sample of f i r m s , updates the latest Benchmark d a t a o n F D P ; the most r e c e n t article was published in the August 1 9 8 2 issue of the Survey of Current Business. Third, selected data on the operations of U.S. affiliates of f o r e i g n companies are given in an annual sample s u r v e y , beginning in the J u l y 1 9 8 0 issue of the Survey of Current Business with the most recent data i n the May 1 9 8 1 issue. F o u r t h , data from a new BEA survey on U.S. Business Enterprises Acquired or Established by Foreign Direct Investors were published in the January 1 9 8 1 , August 1 9 8 1 , and J u n e 1 9 8 2 issues of the Survey of Current Business. D a t e in the third and fourth sources are not directly comparable with each other or- with data in the f i r s t t w o sources. Almost a l l of the numerical data in this issue brief are from the BEA's 1 9 7 4 Benchmark Survey o r from various issues of the Survey of Current Business, since these a r e the only comprehensive sources for data. As mentioned earlier, however, the accuracy a n d completeness of some of these d a t a have been severely questioned by the House Government Operations Committee in i t s r e p o r t entitled "The Adequacy of the Federal Response to Foreign Investment i n the United States." T h e OFIUS h a s published several studies o n foreign investment w h i ~ h , in addition to providing lists o f FDI in t h e U.S., a l s o give breakdowns by country source, i n d u s t r y , S t a t e , and t y p e of investment. H o w e v e r , - the d a t a a r e based on r e p o r t s of Federal agencies (often i n connection with regulatory procedures), n e w s p a p e r s , standard business r e p o r t s , etc., and the coverage i s not a s complete a s i n the 1 9 7 4 Benchmark Survey or the Survey of Current Business articles. Another source of data i s a quarterly report entitled "Announcements of Foreign Investment i n U.S. Manufacturing Industries," published by the Conference Board i n New York City. T h e l i s t of announcements (which i s based o n published s o u r c e s and consequently n o t complete), includes the domicile o f t h e foreign company, the firm undertaking t h e investment, and a description of the investment, although n o totals f o r foreign investment i n the U.S. are given. Overall magnitude a n d recent growth As of Dec. 3 1 , 1 9 8 1 , the FDI position in the U.S. (book value of .foreign direct investors' equity i n , and net outstanding loans t o , their U.S. affiliates) was $89.8 billion, up from $68.4 billion at the end of 1 9 8 0 and $54.5 billion a t the end of 1 9 7 9 -- a n n u a l growth rates of 26% in 1 9 8 0 and 31% in 1981. By comparison, the U.S. direct investment position a b r o a d , which increased 1 5 % in 1 9 8 0 and 5% i n 1 9 8 1 , w a s $227.3 billion a t the end of 1981. T h u s , w h i l e FDI in the U.S. i s small relative to U.S. direct investment a b r o a d , i t is growing at a higher rate. N w \ 0) \ kJ 0 t-' I M a x' 'd 0 c 6 CRS- TABLE l FOREIGN S I R E ? T I I N V E S T M E l i T (Billions of (FCI) I N THE U. dollars) S. Jan. March 1976 1977 1978 1979 2.7 2 1 5.3 7.9 1-6 1.6 2-6 -1.2 0.1 3.1 3.8 1980 1981 1982 7.5 17.2 0.3 4.0 6.2 4.1 0.7 0.0 0.1 0.2 0.1 N.A. 7.9 12.0 13.9 21.4 N.A, FDI position o n Dec. 3 1 Annual P e r c e n t increase in FDI p o s i t i o n Annual change i n FDI p o s i t i o n due t o Net c a p i t a l inflows Reinvested earnings Valuation adjustment -- T o t a l Annual Change N.A. Not A v a i l a b l e Source: N e d G. M o w e n s t i n e a n d G r e g o r y G . F o u c h . Foreign Direct Investment i n the United States i n 1981. Zurvey of Current Business, v. 62, August 1982, p. 31. Russell C. Krueger. U-S. International Transactions, First Quarter 1981. Survey of Current Business, v. 62, June 1982, P 45. CRS- '7 T h e unusually large negat-ve calkatlor. aC:ustment of $-1.2 Sllllon :n 1 9 7 6 was prirnar~ly Cue to the r e c l a s s ~ f ~ c a t i o rof . a large investment from U.K. to U.S. 0wnersh:p. E x c l u d ~ n g che valuaclon adjustmect glves a better laea of foreigners. Net capltal lnflows increased the ~ n v e s c m e n t declslons of substantially ~n 1 9 8 1 and were the maln cause of the lncrease ~n the FDI posltlon ln 1981. Which foreign countries a r e investing the most? At the end of 1 9 8 1 , the t o t a l FDI position was $89.8 billion: parent f i r m s in the Netherlands held the l a r g e s t amount ($20.2 billion), followed by the LI. K. ($15.2 billion) , Canada (12.2 billion) , Germany ($7.1 billion) , Japan To Switzerland ($4.4 billion) ($6.9 billion) , F r a n c e ($5.8 billion) and discern which countries were leading when measured by new investment, the c o u n t r i e s were ranked a l s o by t h e total of their net capital inflows and reinvested earnings during 1980. Total n e t capital i n f l o w s and reinvested earnings in 1 9 8 1 were $21.3 billion: of t h i s , the Netherlands accounted for t h e l a r g e s t share ($3.7 billion) , followed by the U .K. ($3.3 billion) , F r a n c e ($2.9 billion) , J a p a n ($2.7 billion) and C a n a d a ($1.7 billion) . . The direct investment of members of the Organization of Petroleum Exporting Countries (OPEC) i s q u i t e small. At the end of 1 9 8 1 , the P D I position i n the U.S. by OPEC countries was $3.5 billion, a n increase of $2.9 billion from 1980. In t h e d a t a given i n the a b o v e two paragraphs, investments were classified by t h e country of the f i r s t company outside t h e U.S. In some cases, the country of the f i r s t company outside the U.S. differs from t h e country of the ultimate beneficial owner. T h e r e s u l t s of a r e c e n t survey by B E A , published i n the J u n e 1 9 8 2 i s s u e of t h e S u r v e y of Current Business, indicate that when investment outlays a r e Classified by the country of ultimate beneficial o w n e r , a somewhat different d i s t r i b u t i o n emerges. By far t h e most i m p o r t a n t difference is that, when the Classified by ultimate beneficial o w n e r , 1981 investment outlays by Netherlands and t h e Netherlands Antilles were far smallerrthan when classified by the. country of f i r s t foreign parent. Also, classification by u l t i m a t e beneficial owner resulted i n substantially greater investment 0u.tlays by Canada a n d the U.K. In which industries a r e foreigners investing? Of total FDI i n t h e U.S. of $89.8 billion a t the end of 1 9 8 1 , by f a r the largest industrial category w a s manufacturing ($29.5 billion), followed by petroleum ($17.8 billion), and trade ($17.7 billion). When measured by new i n v e s t m e n t during 1 9 8 0 , the ranking of industries remained t h e same; investment in manufacturing was $4.3 b i l l i o n , investment i n petroleum $3.1 billion and investment in trade $2.4 billion. Of the manufacturing category in 1 9 8 1 , the chemical and allied products industry is by far the l a r g e s t s u b g r o u p when ranked by the a m o u n t of F D I , but machinery is first when ranked by n e w investment. CRS- 8 W h e r e , geographically, in the U.S. d o foreigners prefer to invest? The most recent data available cn the geograp?,ical dis+'ibut' ,. ilon cf foreign direct investment are glven in an article by Jane Snedden Little entitled "Foreign Direct Investment in the United States: Recent Locational Choices of Foreign Manufacturers," in the November/December 1 9 8 0 issue of the New England Economic Review. Regions were ranked by several different criteria for 1 9 7 8 - 7 9 , such a s number of foreign constructions and acquisitions per thousand manufacturing employees. By this criteria, a n d a l s o when ranked by the number of foreign constructions per thousand manufacturing employees, the New England region ranked f i r s t , followed by the Southeast region. This represents a change from the 1975-77 p e r i o d , when the Mid-Atlantic region was f i r s t , the Southeast second, and New England third, when ranked by the number of foreign constructions and acquisitions per thousand manufacturing employees. L T h e New England and Southeast regions a r e attractive to foreign investors mainly because of their proximity to U.S. markets and to the home country, the availability, cost, quality and attitude of l a b o r , and their pleasant environments. It appears that degree of unionization, financial a i d a n d tax incentives a r e not important factors i n choice of location. Another finding o f this study i s that in making locational decisions, foreign investors put more emphasis on certain characteristics, such as relatively l o w wage rates and proximity to the home country, than d o domestic investors. T o some extent, foreign investors tend to invest where o t h e r s of their nationality have either migrated o r invested earlier. Sources of Funds for FDI in U.S. in 1979 A s reported by BEA in the August 1981 issue of the Survey of Current Business, U.S. f u n d s financed $3.7 billion, or 3 7 % , of total investment outlays of $9.9 billion by foreign investors i n 1980. This compares with acquisition U.S. financing o f 48% in 1 9 7 9 , which included a large petroleum by a U.S. affiliate with U.S.-source funds. O f U.S.-source funds of $3.7 billion, the largest amount ($2.3 billion) w a s borrowed from unaffiliated U.S. persons. Second in importance was internally generated funds of U.S. affiliates making investments of $0.7 billion. billion were obtained mostly from the F o r e i g n source funds of $6.2 following: $1.9 billion from internally generated funds of foreign direct investors making investments, $3.3 billion from funds supplied by foreign direct investors to U.S. affiliates making investments and $0.8 billion from f u n d s borrowed from unaffiliated foreigners. I t should be noted that all funds were classified by the i m m e d i a t e . source and not the ultimate source. D a t a on U.S. Affiliates of Foreign Companies S i n c e data on U.S. affiliates of foreign companies include transactions CRS- 9 IB78091 UPDATE-10/18/82 and positions between the U.S. affiliates and both the forelgn parent thaz ~ n c l u d e s zompany a c e o t 3 e r s , zhey are nor comparaSle tc data f o r FDI t r a n s a c t ~ o n sand posit2or.s Setween the U.S. a n e forelgr residents. As of Dec. 3 1 , 1 9 7 9 , assers of U.S. affiliates of foreign companies were $241.2 billion. T h e s e affiliates accounted for a relatively l a r g e share of the total U.S. economy when U.S. merchandise t r a d e , but a small share of employment and landownership were the criteria. T h e distribution of assets of U.S. affiliates by foreign countries of parent f i r m s and by industries is Of the 1.6 million persons employed by U.S. very similar to that f o r FDI. a f f i l i t a t e s n a t i o n a l l y , California, New York and New Jersey had the largest number. Liabilities Of U.S. affiliates were $152.7 billion a t the end of 1979. of $49.3 billion i n long-term debt, $38.4 billion, o r 7 8 % , was to U.S. firms and banks. Why d o foreigners i n v e s t in the United States? According to the 1 9 7 4 Benchmark S u r v e y , the large market size and the economic stability of the United States a r e two of the most important reasons why f o r e i g n e r s invest'in the U.S. T h e large U.S. m a r k e t , unified by a common l a n g u a g e and t a s t e s , i s perceived a s offering better o p p o r t u n i t i e s for future growth and profits than the European market, where the l a r g e growth rates of the post-war era a r e slowing down. Also, the trend toward government participation i n the economy i s thought t o be progressing slower in the U.S. than a b r o a d , and o v e r a l l , the private enterprise system preferred by foreign investors i s regarded a s healthier here. T w o other important reasons mentioned i n the 1 9 7 4 Benchmark Survey a r e the growth i n corporate capacity t o f i n a n c e FDI in the U.S. through retained e a r n i n g s , borrowing, o r issuing equities and the d e s i r e t o d i v e r s i f y , both by product l i n e a n d geographically. R e c e n t l y , u n i t l a b o r cost developments, adjusted f o r c h a n g e s i n exchange. r a t e s , h a v e become more favorable i n the U.S. than in many c o u n t r i e s abroad. A l s o , l a b o r unions i n the United States a r e considered more f l e x i b l e and l e s s interested in participating i n management decisions than they a r e abroad. Another important factor i s t h e desire t o gain access to U.S. technological developments, managerial skills, a n d marketing techniques. The proximity to l a r g e U.S. capital markets for future financing needs, relatively l o w prices for shares of U.S. c o m p a n i e s , the elimination of transportation c o s t s (particularly important i n the chemical and heavy machinery industries), the possibility of vertical integration to secure raw material s u p p l i e s , a n d relatively l o w U.S. tax rates a r e a l l of varying significance to different in8ustries. Although avoiding tariff and non-tariff barriers has a l w a y s b.een a n important motivation, the more r e c e n t trend toward increasing protectionism within the United States may be encouraging more foreign investment. For was probably a e x a m p l e , U.S. restraints on Japanese TV exports to the U.S. f a c t o r i n the J a p a n e s e TV-manufacturing investment in the United States. T h e non-discriminatory attitude of the U.S. government regarding foreign investment as well as the incentives offered by many s t a t e governments may be rmportant. A l s o , t h e U.S. 1s c o n s i d e r e d p o l i t i c a l l y more stable, and f f z r o f t e r r o r ; s m , a c o r n m o ~ f a c z o r a S r o a 5 , 2 s L a r g e l y a S s e n t i n t h e U.S. the The 1977-79 d e p r e c i a z i o r . of rhe U.S. doliar i n the forei.gn exchange investment in the U.S. m a r k e t s p r o v i d e d a n a d d e d s t i m u l u s to f o r e i g n BY making i n v e s t m e n t i n t h e U . S . c h e a p e r in terms of foreign currencies, a d o l l a r d e p r e c i a t i o n i n c r e a s e s t h e p u r c h a s i n g power of f o r e i g n f i r m s t h a t want t o invest here. Also, i f the d o l l a r appreciates i n t h e future, the future units i n c o m e e a r n e d o n FDI i n t h e U.S. a n d s e n t a b r o a d w i l l b e w o r t h m o r e i n sf f o r e i g n currencies; thusi if foreigners, perceive the dollar as u n d e r v a l u e d , t h e y s e e t h i s a s a n a d d e d i n c e n t i v e t o i n v e s t i n t h e U.S. I S FDL BENEFICIAL O R HARMFUL T O THE UNITED STATES? I t i s v i r t u a l l y i m p o s s i b l e t o e s t i m a t e t h e n e t e f f e c t o f FDI o n t h e U.S. For example, t h e e f f e c t depends on e c o n o m y , s i n c e many f a c t o r s a r e i n v o l v e d . (1) w h e t h e r t h e f o r e i g n i n v e s t m e n t r e s u l t s i n a n e t a d d i t i o n t o U . S . domestic whether or not investment o r s u b s t i t u t e s f o r U.S. domestic investment; (2) investment t h e U.S. i s o p e r a t i n g a t o r n e a r f u l l e m p l o y m e n t when t h e f o r e i g n i s undertaken: (3) whether t h e funds f o r t h e investment are obtained from a b r o a d o r i n U.S. f i n a n c i a l m a r k e t s : a n d ( 4 ) w h e t h e r the short-run effects a r e being considered. I n t h e f o l l o w i n g d i s c u s s i o n , a f o r e i g n i n v e s t m e n t i s d e f i n e d as t h e amount o f m o n e y i n v o l v e d i n t h e a c q u i s i t i o n o f U.S. productive f a c i l i t i e s o r the by foreign c o n s t r u c t i o n o r expansion of p r o d u c t i v e f a c i l i t i e s i n the U-S. U.S. domestic investment is defined as t h e construction or entities. e x p a n s i o n o f p r o d u c t i v e f a c i l i t i e s i n t h e U.S. by both U.S. and f o r e i g n entities. E f f e c t o n i n v e s t m e n t , GNP, j o b s a n d p r i c e s Probably t h e most important e f f e c t of f o r e i g n d i r e c t investment on GNP, U.S. e c o n o m y i s i t s i m p a c t o n U.S. d o m e s t i c i n v e s t m e n t , j o b s , r e a l prices. the and resources in the economy, an I n g e n e r a l , a s l o n g as t h e r e a r e u n u s e d foreign sources) i n c r e a s e i n U.S. d o m e s t i c i n v e s t m e n t ( w h e t h e r f r o m U . S . o r r e s u l t s i n a n i n c r e a s e i n U.S. p r o d u c t i v e c a p a c i t y , new j o b s , h i g h e r local, S t a t e , a n d F e d e r a l t a x r e v e n u e s , a n d a n i n c r e a s e i n r e a l GNP b y m o r e t h a n t h e to the "ripple" e f f e c t s on the increase i n U.S. domestic investment due domestic economy. I f t h e e c o n o m y i s a t f u l l e m p l o y m e n t , a n i n c r e a s e i n U.S. i n v e s t m e n t w i l l t e n d t o i n c r e a s e p r i c e s m o r e t h a n j o b s a n d r e a l GNP, a t l e a s t i n t h e short run. Whether o r n o t a f o r e i g n i n v e s t m e n t ultimately increases U.S. domestic in the absence of the foreign i n v e s t m e n t beyond what i t would have been investment (i-e., r e s u l t s i n a net addition t o U.S. domestic investment) of a depends p a r t i a l l y on whether t h e f o r e i g n investment i s an a c q u i s i t i o n U.S. f i r m , or represents new construction or expansion of facilities. F o r e i g n i n v e s t m e n t s t h a t i n v o l v e new c o n s t r u c t i o n o r e x p a n s i o n o f facilities a l w a y s r e s u l t i n a n e t a d d i t i o n t o U.S. d o m e s t i c i n v e s t m e n t ; h o w e v e r , i n some firm to c a s e s , c o n s t r u c t i o n o r e x p a n s i o n b y a f o r e i g n f i r m may c a u s e a U . S . reduce its planned investment expenditures and consequently the i n f l o w of f o r e i g n i n v e s t m e n t i s u l t i m a t e l y o f f s e t by a d e c l i n e i n p l a n n e d i n v e s t m e n t by On t h e o t h e r h a n d , a f o r a U.S. f i r m a d e .- t:~?? t~ C.S. domesti i t s e l f a ne Is e ; l i n g company U. r e r e i v eC E y +L,ie =he U.S., a n e t adCitioc e l s e w h e r e I. o c c u r s . On b a i a n c e , i t i s l i k e l y t h a t U . S . d o m e s t c i n v' e s t m e n t b e y o n d w h a t i f o r e i g n i n v s t m e n. t , w i t h a b e n e f i c i a l not gn a c q u l s i t i o n 0 f a U.S. f i r m i s f u nds how e v e r , i f t h e investmect; i p m eRt n t a n 9 e q u e reinvestea i n pla m a t eiy uiti U.S. d o m e s zit i n v e s t m e n t r e a s es investment inc oreign d i re c t o f t h e wouid have been i n t h e a b s e n c e d t a x an r ea l GNP, fect on jobs, . t o is beneficial I n g e n e r a l , a f o r e i g n d i r e c t i n v e s t m e n t i n t h e U.S b a l a n c e o f PaYm e n t s a n d t h e i n t e r n a t i o n a l V a l u e o f t h e d o l l a r i f t h e in increase e f f e c t of a l l t r a n s ac t i o n s conne c t e d w i t h it r e s u l t s i n an causing the d o liar d e m a n d f o r d o 1l a r s o n t h e f o r e i g n e x c h a n g e m a r k e t , a foreign d i i f However, l e ss rap i d l y . depre c i a t e appreciate, or i n v e s t m e n t l e a d s t o a n e t o u t f l ow o f U . S . d o l l a r s , i t i s h a r m f u l t o t h e b a l a n c e o f p a y m e n t s a n d t h e d o 1 l a r , s i n c e i t a d d s t o t h e s u p p l y o f d o liar the d o 1. l a r t o d e p r e c i a t e , and causes t h e f o r e i g n exchang e market appreciate less rapidly. U.S. . the net the to ect .S. on or In t h e s h o r t r u n , a f o r e i g n d i r e c t i n v e s t m e n t i s b e n e f i c i a l t o t h e U.S. to the balance of payments i f t h e funds f o r t h e investment a r e t r a n s f e r r e d United S t a t e s from abroad. However, if t h e f u n d s a r e borrowed i n t h e U.S. f i n a n c i a l m a r k e t s , o r r e p r e s e n t r e i n v e s t m e n t of e a r n i n g s , t h e r e i s n o e f f e c t on t h e U.S. b a l a n c e of payments o r t h e d o l l a r . to the I n t h e l o n g r u n , t h e f o r e i g n d i r e c t i n v e s t m e n t w i l l be b e n e f i c i a l imports U . S . b a l a n c e o f p a y m e n t s a n d t h e d o l l a r t o t h e e x t e n t t h a t (1) U . S . a r e d i s p l a c e d b y g o o d s p r o d u c e d i n t h e U.S. b y f o r e i g n i n v e s t o r s o r ( 2 ) U.S. e x p o r t s i n c r e a s e d u e t o t h e p r o d u c t i o n i n t h e U.S. and shipment abroad of On t h e o t h e r h a n d , g o o d s t h a t were f o r m e r l y p r o d u c e d i n t h e f o r e i g n c o u n t r y . t h e l o n g - r u n e f f e c t o n t h e b a l a n c e o f p a y m e n t s a n d t h e d o l l a r w i l l be h a r m f u l dividends, interest, t o t h e e x t e n t t h a t (1) p a y m e n t s a r e m a d e a b r o a d o f sales o u t l e t for a r o y a l t i e s , and f e e s o r (2) t h e foreign investment i s a f o r e i g n f i r m ( w h i c h r e s u l t s i n h i g h e r U.S. i m p o r t s ) . U.S. imports increase if c a p i t a l e q u i p m e n t f o r u s e i n t h e new p l a n t i s imported into t h e United for by the S t a t e s from abroad. However, if t h e c a p i t a l e q u i p m e n t i s p a i d f o r e i g n p a r e n t c o m p a n y ( i n s t e a d o f t h e U.S. subsidiary) the import increase i s o f f s e t b y a n i n v e s t m e n t i n f l o w a n d t h e r e i s n o n e t e f f e c t o n t h e U.S. balance of payments. Technology T r a n s f e r s Foreign d i r e c t investment leads t o both technology inflows and technology o u t f l o w s ; some f o r e i g n i ' n v e s t m e n t may introduce superior technology or invigorate an old firm, while i n other cases foreign firms acquire U.S. companies p r i m a r i l y t o o b t a i n t h e b e n e f i t of t h e i r technology. According t o t h e 1974 Benchmark S u r v e y , t h e n e t e f f e c t of t e c h n o l o g y t r a n s f e r s h a s been a n of inflow i n t h e a r e a of product and process technology, while i n t h e realm management and marketing techniques, technology outflows have exceeded technology inflows. Other f a c t o r s O t h e r p o s s i b i e imp1:ca:lons o f P P I i n c l u d e i t s e f f e c t o n competition a m o n g oc U.S. capltal markets, the natlonal f l r m s w i t h i n t h e U.S., ~ t esf f e c t s e c u r i t y , t h e c o n c e r n r e g a r d i n g foreigners' g a a n l n g c o n t r o l o i r a w materials o r o t h e r strategic s u p p l i e s , a n d ~ t esf f e e z o n s o m e l o c a l l t l e s ~n t h e U . S . In general, foreign d i r e c t investment i s l i k e l y t o enhance competition by This is especially true i f t h e U.S. b r i n g i n g new f i r m s i n t o a n i n d u s t r y . is both i n d u s t r y i s d o m i n a t e d b y a f e w l a r g e f i r m s a n d t h e new f o r e i g n f i r m industry l a r g e and dynamic. H o w e v e r , a s m a l l f o r e i g n f i r m e n t e r i n g a U.S. i n d u s t r y which already has a large d o m i n a t e d by a f e w l a r g e f i r m s o r a n number of f i r m s would have a negligible i n f l u e n c e on the degree of competition. D o m e s t i c b o r r o w i n g by f o r e i g n - o w n e d f i r m s h a s the same e f f e c t o n U.S. c r e d i t m a r k e t s a s d o e s d o m e s t i c b o r r o w i n g b y U.S. f i r m s ; t h e d e m a n d f o r f u n d s markets become tighter, interest increases and, t o the extent t h a t money A t p r e s e n t and i n t h e f o r e s e e a b l e f u t u r e , t h e amount of rates tend t o rise. the size of d o m e s t i c b o r r o w i n g by f o r e i g n - o w n e d f i r m s i s small r e l a t i v e t o And, i f domestic borrowing U.S. c a p i t a l m a r k e t s a n d i t s i m p a c t i s m i n i m a l . S y f o r e i g n - o w n e d f i r m s i n c r e a s e s s u b s t a n t i a l l y , i t may n o t c r e a t e a d d i t i o n a l problems s i n c e presumably t h e F e d e r a l R e s e r v e System c o u l d t a k e t h i s as w e l l a s o t h e r f a c t o r s i n t o a c c o u n t when determining its policy regarding the s u p p l y of money. Concern i s sometimes expressed t h a t FDI threatens the U.S. national strategic supplies. s e c u r i t y and might i m p e d e U.S. access t o i t s own H o w e v e r , f o r e i g n - o w n e d f i r m s h a v e t o o b e y t h e same U.S. laws a s domestic assets i n firms. S t r i c t f e d u r a l c o n t r o l s o v e r management of foreign-owned and i n an extreme c a s e e x p r o p r i a t i o n of foreign-owned assets, is the U.S., always possible. PDI o f t e n a t t r a c t s a t t e n t i o n , a n d s o m e t i m e s h o s t i l i t y , p a r t i c u l a r l y i f it i s an a c q u i s i t i o n of an e x i s t i n g firm (most people f e e l more hospitable toward foreign d i r e c t investment i f it involves t h e c o n s t r u c t i o n o r expansion of f a c i l i t i e s , e s p e c i a l l y by former f o r e i g n c o m p e t i t o r s ) . This might r e f l e c t a f e a r of f o r e i g n e r s t h e m s e l v e s , a f e a r t h a t f o r e i g n e r s a r e b u y i n g d o m e s t i c making i t h a r d for local f i r m s a t uneconomic p r i c e s (perhaps overpaying) firms t o compete, o r a f e a r t h a t f o r e i g n firms w i l l not understand local l a b o r o r community n e e d s . U.S. P O L I C Y R E G A R D I N G FDI is t o accord it equal W i t h a f e w e x c e p t i o n s , t h e U.S. p o l i c y o n FDI domestic investment, i.e., neither to encourage nor to treatment with F o r e x a m p l e , P r e s i d e n t F o r d made t h e f o l l o w i n g statement a t discourage it. t h e s i g n i n g of t h e F o r e i g n I n v e s t m e n t S t u d y Act of 1 9 7 4 : I sign t h i s act, I reaffirm that it i s intended t o I t i s n o t i n any s e n s e a s i g n of gather information only. a change i n America's t r a d i t i o n a l open door p o l i c y towards foreign investment. We c o n t i n u e t o b e l i e v e t h a t t h e o p e r a t i o n of f r e e market f o r c e s w i l l d i r e c t w o r l d w i d e i n v e s t m e n t f l o w s i n t h e m o s t p r o d u c t i v e way. Therefore A s my Administration will oppose any new restriction on foreign investment in t h e United States except where 2Ssolutely necessary on national security grcunds cr to protect a n essential national i n ~ e r e s t . This policy was reaffirmed in extensive administrative reviews of FDI in 1975 and 1 9 7 7 that resulted i n the establishment of a n int eragency C ommittee the on Foreign Investment i n the U.S. (CFIUS), under the ch airmanship of foreign Treasury Department. The CFIUS was created to cons ult with foreign governments Concerning potential investments i n the U.S. , monitor investment trends a n d make recommendations to the National Security Council a n d the Economic P o l i c y Group. Another administrativ'e action w a s the i n the c o m m e r c e creation of the O f f i c e of Foreign Investment i n the U.S. Department to collect a n d analyze data on FDI in the U.S. The "open-door" policy is consistent with the bilateral treaties of f r i e n d s h i p , commerce and navigation between the U.S. any many of its trading partners, and with U.S. obligations under t h e Code of Liberalization of Capital Movements of the Organization f o r Economic Cooperation and D e v e l o p m e n t , adopted in June 1976. O n e reason for U.S. pclicy toward FDI i s t h e traditional belief that only i n a f r e e market environment (with a f r e e f l o w of investment funds) can maximum economic efficiency be achieved. Related to this is the recognition economy. Also, s i n c e U.S. residents a r e Of the benefits of FDI f o r the U.S. large direct investors a b r o a d , t h e principle of equitable treatment f o r a l l investors i s i n the interest of t h e U.S. L a s t l y , restrictions o n FDI i n the U.S. might have a d v e r s e foreign policy implications. T h e exceptions t o the "open-door1' policy a r e federal l a w s t h a t restrict foreign ownsrship of f i r m s in national defense i n d u s t r i e s , certain natural resource sectors of the economy, coastwise a n d freshwater shipping, domestic radio communications, domestic a i r t r a n s p o r t , acquisition of federal mineral l a n d s , a n d hydroelectric power. I t should a g a i n be noted t h a t f o r e i g n f i r m s have to obey t h e s a m e laws and regulations a s domestic f i r m s (such a s anti-trust l a w s a n d S E C regulations). Although there a r e some state laws restricting foreign ownership i n r e a l estate, banking, a n d insurance, most states a r e eager to a t t r a c t foreign investors. T h e wide range of incentives to f o r e i g n (as well a s domestic) i n v e s t o r s by many s t a t e s includes initial financing a s s i s t a n c e , working capital l o a n s , t a x exemptions o r holidays, technical h e l p , and the availability of industrial development bond issues. At l e a s t 24 states maintain offices in Europe and seven states maintain offices in J a p a n to persuade manufacturers to locate plants i n their state. In the spring of 1 9 8 0 , the Carter Administration announced a new policy of encouraging foreign investment i n distressed U.S. areas. T h i s policy, which i s administered by the International T r a d e Administration and Economic Development Administration of the Department of Commerce and by the Department of Housing and Urban Affairs, d o e s not reflect any change fzom the previous policy of neutrality toward foreign investment generally in the U.S., b u t , instead s e e k s to encourage foreign i n v e s t o r s , once they have decided to invest in the U.S., t o consider lecating in distressed U.S. areas. Among other t h i n g s , under this policy the F e d e r a l Government, in cooperation with State and l o c a l governments, provides information to foreigners regarding existing incentives to invest in distressed areas. U.S. pollcles toward lnternational Investment a r e currently belng revlewed tke Reagar. Adml~rs:razlon. An ~nter-aqer.cy study headed by tne Treascry t9e Unlted S t a t e s , whlch l~cludes a 3epart~e1-1:or. forelgn lrvestmect ; n r e v ~ e wof the role of C F I U S , 2 s underway. ky LEGISLATION Amends the International Investment Survey Act of 1 9 7 6 t o require States benchmark s u r v e y s of (1) f o r e i g n direct investment i n the United covering 1 9 8 0 and 1 9 8 7 and every fifth year thereafter; and (2) U.S. direct investment abroad covering 1 9 8 2 and 1 9 8 9 and every fifth year thereafter. Requires a n a n n u a l compilation of current data on U.S. portfolio investment abroad. Requires a report o n the cost of compiling data on legislation enacted by certain foreign nations which regulates f o r e i g n inward investment in such nations. Authorizes appropriations to carry out such Act. Introduced on May 4 , 1981; referred to S e n a t e Committee on C o m m e r c e , Science and Transportation, which reported f a v o r a b l y , with a n amendment, to S e n a t e , Report No. 97-68, o n May 1 5 , 1 9 8 1 ; passed S e n a t e with amendment o n J u n e 6 , 1981; passed H o u s e o n July 2 7 , 1 9 8 1 , became P u b l i c L a w 97-33 on Aug. 7 , 1981. P.L. 97-3-45, H.R. 3567 Section 6 o f H.R. 3567 amends section 9 of the International S u r v e y Act of 1 9 7 6 to a u t h o r i z e appropriations o f $ 3 , 8 4 2 , 0 0 0 f o r each of the f i s c a l years 1 9 8 2 a n d 1983 to carry out the provisions t o this Act. Introduced on May 1 3 , 1 9 8 1 a s clean bill i n lieu of H.R. 3134. Referred to House C o m m i t t e e on Foreign Affairs, which held mark-up on May 1 3 , 1981; a n d reported to H o u s e , Report No. 97-57, o n May 1 9 , 1981; passed House o n J u n e 8 , 1 9 8 1 ; passed Senate i n l i e u of S. 1 1 1 2 with amendment by voice v o t e o n Nov. 1 2 , 1981; House unanimously disagreed with Senate a m e n d m e n t s a n d requested a conference Conference Report no. 97-401 issued Dec. 11, 1981. Became on Nov. 2 0 , 1981. P.E. 97-145 o n Bec. 2 9 , 1 9 8 1 with Section 6 omitted. H. Con. Res. 49 (Brown, C.)/H. Con. Res. 5 9 (Brown, C., et.al.) Requests t h e Securities and Exchange Commission a n d t h e S e c r e t a r y sf Commerce each t o report to the Congress on t h e impact o n the U.S. economy of H.Con.Res. 49 was the acquisition o f U.S. companies by foreign nationals. 1981. introduced on Feb. 3 , 1 9 8 1 a n d H.Con.Res. 5 9 w a s introduced o n Feb. 5 , Both bills w e r e referred t o the House Committee o n F o r e i g n Affairs a n d the Subcommittee o n International Economic Policy a n d Trade which held hearings on H.Con.Res. 49 on Feb. 2 3 , 1 9 8 2 , and t h e House Committee on Energy and Commerce a n d t h e Subcommittee o n Telecommunication, Consumer Protection and Finance, which held hearings on H.Con.Res. 5 9 o n Feb. 26, 1981 and April 2 , 1981. H.Con.Res. 1 7 7 (Fithian) Urges the President to negotiate with Japan concerning the establishment of Japanese a u t o production facilities i n the United States and the use of U.S. parts in Japanese cars. Introduced on Sept. 1 0 , 1 9 8 1 ; referred to the House Committee o n Ways and Means and the Subcommittee on Trade. H.R. 1 2 9 4 (Brooks, et.al.)/S. 289 ( T o w e r , et-al.) Amends the Security Exchange Act of 1 9 3 4 to provide uniform margin requirements in traccactlccs involving = h e acquisition of securities of or non-U.S. persons where such cerzain U.S. corporations >y either U.S. lenders. E.R. 1 2 9 4 was a c q u i s i t i o ~ is financed S y eicher U.S. or non-U.S. introduced on Jan. 2 7 , 1981and referred to the House Committee on Energy and Commerce and the Subcommittee on Telecommunication, Consumer protection and F i n a n c e , which held hearings on Feb. 2 6 , 1 9 8 1 and April 2 , 1981. S. 289 was introduced on Jan. 2 7 , 1 9 8 1 and referred to the Senate Committee on B a n k i n g , and the Subcommittee o n S e c u r i t i e s , which held hearings on March 3 1 , 1981. F o r further a c t i o n , see H.R. 4145. H.R. 2826 (Emerson, et al.) Mineral L a n d s Leasing Amendment of 1981. Amends the Mineral Lands Leasing Act to prohibit any foreign person from acquiring more than 25% of the voting securities i n a U.S. mineral resource corporation and directs the Secretary Of the Interior to undertake a study of indirect foreign investment in land. Introduced o n Mar. 2 5 , 1981; referred to mineral resources o n U.S. Committee o n Interior and Insular Affairs and Subcommittee on Mines a n d Mining, which held hearings on May 7 , 1 9 8 1 and markup on July 1 6 , 1981. Clean bill H.R. 4 1 8 6 reported i n lieu. H.R. 2879 (Collins)/S. 1 4 3 6 ( D q A m a t o et al.) Amends the Securities Exchange Act of 1 9 3 4 to provide uniform margin requirements in transactions involving the acquisition of securities of certain U.S. corporations by foreign persons where such acquisition is H.R. 2879 was introduced on Mar. 26, 1981; financed by a foreign lender. referred to Committee on Energy and Commerce and Subcommittee on Telecommunications, Consumer Protection a n d F i n a n c e , which held hearings on April 2 , 1981. S. 1 4 3 6 was introduced on J u n e 2 5 , 1 9 8 1 ; referred to the Senate Committee o n Banking Housing and Urban Affairs and the Subcommittee on Securities, which held hearings o n July 8, 1981. S. 1 4 3 6 with amendments w a s F o r further a c t i o n , s e e referred t o t h e f u l l committee on July 3 0 , 1981. H.R. 4145. H.R. 3 1 3 4 (Bingham) Section 4 a m e n d s the International Investment Survey Act o f 1 9 7 6 to authorize appropriations to carry o u t such Act. Introduced on Apr. 8, 1 9 8 1 ; referred t o House Committee o n Foreign Affairs and Subcommittee on International Economic Policy and T r a d e , which held hearings on Apr. 1 4 , 1 9 8 1 a n d mark-up o n Apr. 2 8 , 1981. (For further a c t i o n , s e e H.R. 3567.) H.R. 3310 (Roe) Foreign Investment Control Act of 1981. Establishes a National Foreign Investment Control Commission to prohibit o r restrict foreign ownership control or management c o n t r o l , through direct purchase, in whole o r part; from acquiring securities of certain domestic issuers of securities; from acquiring certain domestic issuers of securities, by merger, tender of.fer, or any other means; control of certain domestic corporations or industries, real estate, or other natural resourced deemed to be vital to the economic security and national defense o f the United States. Introduced on Apr. 29, 1981; referred to the House Committee on Energy and Commerce and the Subcommittee on Telecommunications, Cons6mer Protection and Finance. H.R. 3311 (Roe) C r e a t e s a Joint Congressional C c m m ~ t t e eor F o r e ~ g n I n v e s t m e n t C O R t r o i ~i-1 z 5 e U n ~ t e d S t a z e s u p z n e n a c z m e n t of t n e Pore:gn Investmenz Concrol Act of 1961. D ~ r e c t st n e c o m m i t t e e c o study the manner ~n whlch the National F o r e l g n investment C o n t r o i C o m m l s s l o n , e s t a b l l s h e c by s u c h A c t , f u l f l l i s l t s Introduced on Apr. 29, 1 9 8 1 ; r e f e r r e d to t h e House Committee on purposes. Rules. H.R. 4033 (Whittaker et al.)/S. 1 4 2 9 (Kassebaum et ab.) T i t l e I , the Margin Requirements Fairness Act of 1981. Amends the Securities Exchange Act of 1 9 3 4 t o make the margin requirements f o r domestic purchasers of securities applicable to foreign purchasers of securities in certain significant transactions involving the United S t a t e s securities markets Title 1 1 , the Foreign Energy Investment Act of 1981, establishes a moratorium from J u l y 1 , 1 9 8 1 through March 3 1 , 1 9 8 2 o n certain Canadian investments in U.S. energy resource corporations, and directs that a U.S. energy resource comprehensive study on foriegn investment in corporations be undertaken and compieted by March 1 , 1982. Introduced J u n e 25, 1 9 8 1 ; referred to the House Committee on Energy a n d Commerce; the Subcommittee o n Telecommunications, Consumer Protection a n d F i n a n c e , the Senate Committee on Banking, Housing and Urban Affairs, a n d the Subcommittee on Securities, which held hearings o n J u l y 8 , 1989. H.R. 4 1 4 5 ( W i r t h , et al.) Amends the Securities Exchange Act of 1 9 3 4 to provide uniform margin requirements i n transactions involving the acquisition of securities of certain U.S. corporations by non-U.S. lenders. Introduced July 1 5 , 1 9 8 1 ; referred t o the Committee o n Energy and Commerce; reported t o House with a m e n d m e n t , R e p o r t no. 97-258 o n Sept. 3 0 , 1 9 8 1 ; passed H o u s e , amended O c t . 1 3 , 1 9 8 1 ; referred t o Senate Committee o n B a n k i n g , Housing a n d Urban Affairs o n Oct. 1 4 , 1981. H.R. 4 1 7 7 (English) Amends t h e Communications Act of 1 9 3 4 t o authorize the Federal Communications Commission to r e g u l a t e t h e entry of foreign telecommunications services and carriers into U.S. markets. Introduced on J u l y 1 6 , 1981; referred t o H o u s e Committee o n Energy a n d Commerce. H.R. 4186 (Santini, et al.) Mineral L a n d s Leasing Amendment of 1981. Amends the Mineral L a n d s Leasing Act o f 1 9 2 0 t o prohibit foreign acquisitions o f more than f i v e percent of the voting securities i n a U.S. mineral resource corporation (except for agreements prior t o July 1 5 , 1981) beginning o n July 1 5 , 1 9 8 1 and ending April 1 5 , 1 9 8 2 a n d directs the Secretary of t h e Interior to undertake a study of indirect f o r e i g n investment i n mineral resources on lands owned by the U.S. Introduced July 1 6 , 1 9 8 1 in lieu of H.R. 2826; referred to the House Committee o n Energy and C o m m e r c e , the Subcommittee on Telecommunications, Consumer Protection and Finance and the House Committee on Interior and Insular Affairs. H.R. 4 2 2 5 (Walgreen) Amends the Communications Act of 1 9 3 4 to establish certain limitations certain foreign relating to the ownership of c a b l e television franchises by entities. Introduced July 21, 1981; Enerqy and Commerce. H.R. referred to the House Committee on 4407 (Schulze) Amends the Trade Act of 1974 to restrict direct investment within the U.S. by foreign countries that discriminate against U.S. investment abroad. Introduced Aug. 4 , 1981; referred to the House Committee on Ways and Means and the Subcommittee on Trade. H.R. 4 9 3 0 (Brown) Amends the Energy Policy a n d Conservation Act to provide f o r a n evaluation o f the effects of acquisitions of domestic petroleum companies by major international energy concerns on the exploration, d e v e l o p m e n t , production, r e f i n i n g , transportation, distribution, a n d marketing of d o m e s t i c petroleum supplies and to impose a moratorium on such acquisitions until completion a n d consideration of the evaluation. Introduced Nov. 1 0 , 1 9 8 1 ; referred to House Committee o n Energy and Commerce and Subcommittee 0.n F o s s i l and Synthetic F u e l s which held hearings o n Dec. 1 0 , 1981. Subcommittee markup held o n Dec. 1 5 , 1 9 8 1 and bill was forwarded t o Full Committee (Amended). For further a c t i o n , see H.R. 5274. M.R. 5 2 7 4 (Brown, C.) Provides f o r congressional evaluation of energy policy by imposing a moratorium o n certain acquisitions involving major energy c o n c e r n s a n d domestic petroleum companies until June 3 0 , 1982. Introduced Dec. 1 6 , 1981; referred to the House Committee on Energy and C o m m e r c e and the House C o m m i t t e e on t h e Judiciary a n d Subcommittee o n Monopolies and Commercial Law. Passed House Dec. 1 6 , 1981; received in S e n a t e and referred to t h e C o m m i t t e e o n t h e Judiciary Dec. 2 2 , 1981. H.Res. 4 3 3 (Rosenthal) Declares that the House of Representatives concurs in t h e public r e l e a s e of certain classified documents dealing with foreign i n v e s t m e n t s and country surpluses of members of the Organization of Petroleum Exporting C o u n t r i e s (OPEC). Introduced Apr. 2 1 , 1982; referred to Committee o n Government Operations and Subcommittee o n Commerce, Consumer a n d Monetary Affairs, which held mark-up sessions Apr. 2 9 a n d May 6, 1982. Amended r e s o l u t i o n forwarded to f u l l committee May 6, 1982. S. 1 6 8 7 (Pressler) Makes a technical a-mendment to the International Investment Survey Act o f 1 9 7 6 (deletes the word "calendarw). Introduced on Sept. 3 0 , 1 9 8 1 ; referred t o House Committee on Foreign Affairs; passed House on Oct. 1 4 , 1 9 8 1 ; passed S e n a t e on Oct. 1 6 , 1981; became Public Law 97-70 on Oct. 2 6 , 1981. S. 1 9 2 6 (Metzenbaum et al.) Amends the Clayton Act t o direct the Secretary of Energy t o undertake a comprehensive study of the effects of acquisitions of domestic petroleum companies by major international energy concerns and to r e p o r t the f i n d i n g s to Congress. Prohibits, between Jan. 1 , 1 9 8 2 , and Sept. 3 0 , 1 9 8 2 , any major international energy concern from acquiring more than 5 % of a domestic petroleum company. Introduced Dec. 9 , 1 9 8 1 ; referred to S e n a t e Committee o n the Judiciary. Amends t h e T r a d e Act of 1 3 7 4 to authorize the P r e s i d e n ~ to restrict direct investment within the U.S. by a foreign cocntry that unfaily discriminates against U.S. investment or by c i t i z e n s , nationals, or persons who a r e organized o r existing under the l a w s of such country. Changes the definitian of "commerce" t o include investment. Introduced Feb. 4, 1 9 8 2 ; referred t o Committee o n Finance. S. 2469 (Goldwater et a l e ) International Telecommunications Deregulation Act of 1982. Amends t h e Communications Act of 1934 (with a n e w T i t l e VI) to provide for improved international telecommunications, and f o r other purposes. Section 6 0 6 f o f Title V I a u t h o r i z e s the Secretary o f Commerce to collect information o n , among other things, foreign direct investment in the domestic telecommunications industry. Introduced May 3 , 1982; referred to Committee o n Commerce a n d Subcommittee o n C o m m u n i c a t i o n s , which held hearings J u n e 15 a n d 1 7 , 1982. Ordered to b e reported with a n amendment in the nature of a substitute favorably Oct. 1 , 1982. S.Res. 3 1 7 (Cannon et al.) Declares it the sense o f the Senate that the Interstate C o m m e r c e Commission should temporarily refrain from granting applications for motor carrier operating authority filed by foreign companies o r by companies controlled by foreign nationals. Introduced o n Feb. 1 0 , 1 9 8 2 ; referred t o Senate C o m m i t t e e o n Commerce, S c i e n c e , a n d Transportation. HEARINGS U.S. ----- Congress. House. Committee o n Agriculture. S u b c o m m i t t e e on Family F a r m s , Rural Development, a n d S p e c i a l Studies. Impact o n foreign investment in farmland. H e a r i n g s , 9 5 t h Congress, 2nd s e s s i o n , on H.R. 1 3 1 2 8 a n d r e l a t e d bills. J u n e 2 0 , July 1 9 a n d July 2 8 , 1978. 4 3 3 p. C o m m i t t e e o n Energy and Commerce. Subcommittee o n Telecommunication, Consumer Protection and Finance. Acquisition of U.S. Companies by Foreign Nationals. 9 7 t h Congress o n H. Con. Res. 5 9 a n d H.R. 1294. 1 s t s e s s i o n , Feb. 2 6 , a n d April 2 , 1981. 277 p. ----- --------- Hearings C o m m i t t e e on Foreign Affairs. Subcommittee on International Economic Policy and Trade. International Investment Survey Act Authorization for Fiscal Years 1 9 8 0 and 1981. Hearing and markup on H.R. 3 6 5 3 , 96th Congress, 1st s e s s i o n , Apr. 2 6 , 1979. 46 p. C o m m i t t e e on Foreign Affairs. Subcommittee on International E c o n o m i c Policy and Trade. Hearing on H.R. 3134. 9 7 t h C o n g r e s s , 1 s t session, Apr. 1 4 , 1981. Unpublished. S u b c o m m i t t e e on International Economic Policy and Trade. Hearing on foreign investment in the United States: current issues, 97th Congress, 2d s e s s i o n , Feb. 2 3 , 1962. Unpublished. ----- Cornrn~~tee on Governmert Operat~0r.s. S u b c o m m ; = ~ e e oz C o m m e r = e , Consumer and Monecary hifalrs. Federal response tc O P E C lnvestrnents ln the Unlted Stares. Hearings, 97ch Congress, Ist a n e 2nd sessions. Part 1 - Overview, hearlngs on Sept. 22 and 2 3 , 1981. 1165 p. Part 2 - Investment i n S e n s ~ t l v e Sectors of the U.S. Economy: Kuwalt Petroleum Corp. Takeover of Santa F e International Corp., hearings on Oct. 2 0 and 2 2 , Nov. 2 4 and Dec. 9 , 1981. 693 p. P a r t 3 - Saudl Arabian Influence in Wnlttaker Corp., hearlngs o n Apr. 6 , 1982. 293 p. ----- The operations of federal agencies in monitoring, reporting o n , and analyzing foreign investments in the United States Hearings, 95th Congress, 2nd session, 531 p. Part 1 - Hearing on Sept. 1 9 , 20 and 2 1 , 1978. Part 2 - O P E C investment in the United S t a t e s , hearings on J u l y 1 6 , 1 7 , 1 8 and 2 6 , 1979. 4 7 6 p. Part 3 - Examination of the committee o n foreign investment in United States, federal policy toward foreign investment, and federal data collection efforts, hearing on July 30, 1979. 1 0 6 2 p. Part 4 - Foreign investments in U.S. banks, hearings on July 31 and Aug. 1 , 1979. 3 3 6 p. 253 p. Part 5 - Appendixes. ----- Subcommittee on C o m m e r c e , Consumer and Monetary Affairs. Hearing o n Saudi Arabia influence i n Whittaker Corporation. 97th Congress, 2 6 s e s s i o n , Apr. 1 , 1982. Unpublished. ----- --------- Committee o n Interior a n d Insular Affairs. Subcommittee o n Mines and Mining. Hearing on H.R. 2 8 2 6 , to provide f o r a r e v i e w of the policy relating t o mineral leases o n public lands (alien ownership). 97th Congress, 1st session, May 7 , 1981. Unpublished. Committee o n International Relations. Subcommittee on International Economic Policy and Trade. Hearing a n d Markup on H.R. 1 2 5 8 9 , 9 5 t h Congress, 2nd s e s s i o n , Apr. 33 p. 2 5 , May 4 and 1 0 , 1978. Committee o n Interstate and Foreign Commerce. Subcommittee on Consumer Protection a n d Finance. Reciprocity i n investment. Hearings, 9 6 t h Congress, 2d s e s s i o n , o n H.R. 7791 and H.R. 7750. Aug. 1 9 and Sept. 9 , 1980. 2 2 5 p. ----- Committee on Post Office and Civil Service. Subcommittee on Census and Population. Data o n foreign ownership of property within the U.S. Hearing, 95th Congress, 1 s t session on H.R. 7411. July 1 5 , 1977. 4 8 p. ----- Committee on Ways and Means. Taxation of foreign investor direct and indirect ownership of property in the United States. Hearing, 96th Congress, 1 s t session, Oct. 2 5 , 1979. 84 p. U.S. Congress. Senate. Committee on E a n k l n g , H c u s ~ n g ,and Urban hffzlrs. Su3cor~m;ttee on S e c u r ~ t ~ e s .H e a r ~ n g on S. 289, a blli to amenc tne S e c u r l x ~ e sExchange Act of 1934 to p r o v ~ a e the margln requirements ~n t r a c s a c t ~ o n s lnvo1v:ng acqulslclon of securlcles of certaln U.S. c o r p o r a t ~ o n s by non-U.S. persons where such acqulsltlons are f ~ n a n c e dby non-U.S. leaders. 9 7 t h Congress, 1st s e s s ~ o n . March 3 1 , 1981. Unpublished. ----- Committee o n Banking, Mousing a n d Urban Affairs. Subcommittee on Securities. Hearing o n S. 1 4 2 9 and S. 1 4 3 6 , bills imposing uniform margin requirements o n loans obtained for the purchase of U.S. securities by foreign persons or corporations. 97th Congress, 1 s t s e s s i o n , J u l y 8 , 1981. Unpublished. ----- ----- Committee o n Commerce, Science and Transportation. Authorization for the International Investment Survey Act. Hearing on S. 2928, 95th Congress, 2nd session, Apr, 1 9 , 1978. 1 1 4 p. Committee o n Commerce, Science and Transportation. Authorize appropriations under the International Investment Survey Act of 1976. Hearing on S. 7 5 8 , 9 6 t h C o n g r e s s , 1 s t s e s s i o n , Apr, 1 9 , 1979. 48 p. - - e m - --------- ----- Subcommittee on Business, Trade a n d Tourism. International Investment Survey Act Reauthorization. 97th Congress, 1st session, April 9 , 1981. 1 7 p. Hearing, Committee o n Finance. Subcommittee o n Taxation and Debt Management. Taxation o f Foreign Investment in the United States Hearing in S.192 a n d S.268. J u n e 25, 1979. 2 6 0 p. Committee o n Foreign Relations. Subcommittee on International Economic Policy. U.S. policy toward international investment. Hearings, 9 7 t h C o n g r e s s , 1 s t s e s s i o n , July 3 0 , Sept. 2 8 , a n 8 Oct. 2 8 , 1981. 600 p. Committee o n Foreign Relations. Subcommittee on International Economic Policy. U.S. policy towards international investment. H e a r i n g , 9 7 t h Congress, 1 s t session, J u l y 3 0 , 1981. Unpublished. A l i s t of hearings on foreign direct investment i n the United S t a t e s in t h e 9 3 r d a n d 9 4 t h Congresses can be obtained by calling the author (287-7752). REPORTS AND CONGRESSIONAL DOCUMENTS U.S. ----- Congress. House. Committee on Energy and Commerce. Uniform Margin Requirements; Report to accompany H.R. 4 1 4 5 (97th C o n g r e s s , 1st session, Report no. 97-258) Washington, U.S. Govt. Print. Off., 1981. 3 1 p. Committee on Foreign Affairs. Export Administration AmendmeRts Act of 1981 (97th Congress, 1st session, rep or^ nc. 97-57) Washlngtcc, U.S. Govt. Trint. Off., 1911. 15 p . - - - - - Committee on Foreign Affairs. SuScommittee on Foreign Economic Policy. Direct foreign investments i n the U.S. July 7 , 1974. Washington, U.S. Govt. Print. Off., 1974. i 4 p. At head of title: 93rd Congress, 2nd session. Committee print. ----- Committee on Government Operations. The adequacy of the federal response to foreign investment in the United States (96th Congress, 2nd session, Report No. 96-1216) Washington, U.S. Govt. Print. Off., 1980. 217 p. ----- Committee on International Relations. Amendments to International Survey Act of 1976; report to accompany H.R. 12589 including cost estimate of the Congressional Budget Office (95th Congress, 2nd session, Report no. 95-1154) Washington, U.S. Govt. Print. Off., 1978. 6 p. U.S. Congress. Joint Committee on Taxation. Description of S. 192 and S. 208 relating to tax treatment of foreign investment i n the United States, scheduled for a hearing before the Subcommittee on Taxation and Debt Management Generally of the Committee on Finance on June 2 5 , 1979; prepared for the use of the Committee on Finance. Washington, U.S. Govt. Print. Off., 1979. 1 0 p. U.S. Congress. Conference Committees. Export Administration Act of 1979; conference report to accompany S. 737 (96th Congress, 1st session, House Report no. 96-482) Washington, U.S. Govt. Print. Off., 1979. 5 9 p. Committee on Commerce, Science and Transportation. Authorization for the International Investment Survey Act of 1970 (97th Congress, 1st session, Report no. 97-68) Washington, U.S. Govt. Print. Off , 1981. 8 p. . ----- ----- U.S. Committee on Commerce, Science and Transportation. Authorizing appropriations for the International Investment Survey Act for fiscal years 1980 and 1981; report t o accompany S. 7 5 8 (96th Congress, 1st session, Report no. 96-129) Washington, U.S. Govt. Print. Off., 1979. 5 p. Committee on Commerce, Science and Transportation. International Survey Act of 1976 authorization report to accompany S. 2928 (95th Congress, 2nd session, Report no. 95-863) Washington, U.S. Govt. Print. Off., 1978. 9 p. General Accounting Office. Office of the Comptroller General of the United States. Are OPEC financial holdings a danger to U.S. banks or the economy? June 1 1 , 1979. EMD-79-45. 51 p . U.S. General Accounting Office. Office of the Comptroller General of the United States. Controlling foreign investment in national interest sectors of the U.S. economy. U.S. Oct. 7 , 1977. . ID-77-18. 8 2 p. General Bccountinq Ofilce. Office zi tne Comptroller Ger-era1 of the Unlted States. Fcrelgn dlrec: ~ n v e s t m e n c i n the UnlteC Staces - zne federai role. June 3 , 1980. ID-80-24. 8 3 p. CHRONOLOGY OF EVENTS -- 10/26/81 A Technical Amendment to the International Investment Survey Act of 1 9 7 6 (P.L. 97-70) became law. 08/07/81 -- 12/05/80 -- 09/29/79 -- %0/b4/78 --- 09/22/78 . 12/19/77 -- 10/11/76 -- 10/26/74 -- T h e Amendments to the International Investment Survey Act of 1 9 7 6 (P.L. 97-33) became law. The Foreign Investment i n Real Property Tax Act of 1 9 8 0 , Subtitle C of P.L. 96-499, became law. Section 23 of (P.L. 96-72), F Y 8 0 a n d FYS1 Survey Act of the Export Administration Act of 1 9 7 9 which authorized appropriations for t o carry o u t the International Investment 1 9 7 6 , became law. The Agricultural Foreign Investment Disclosure Act (P.L. 95-460) became law. T h e Amendments to the International Investment Survey Act of 1 9 7 6 (P.L. 95-381) became law. T i t l e I1 of P.L. 95-213 (The Dcmestic and F o r e i g n Investment Improved Disclosure Act) became law. T h e International Investment Survey Act of 1 9 7 6 (P.L. 94-472) became law. T h e Foreign Investment Study Act of 1 9 7 4 (P.L. 93-479) became law. ADDITIONAL REFERENCE SOURCES Announcements of foreign investment i n U.S. manufacturing industires. T h e Conference Board, Inc., New York, published quarterly. K r u e g e r , Russell C. U.S. international transactions, f i r s t quarter 1982. Survey of Current Business, v. 6 2 , J u n e 1 9 8 2 , p. 36-72. U.S. business enterprises acquired or established B e l l i , R. David. by foreign direct investors in 1981. Survey of Current Business, v. 6 2 , August 1 9 8 2 , p. 27-31. H o w e n s t i n e , Ned G. and Gregory Fouch. Foreign direct investment in the United States i n 1981. Survey of Current B u s i n e s s , v , 6 2 , August 1 9 8 2 , p. 30-41. H o w e n s t i n e , Ned G. Selected data on the operations of U.S. affiliates of foreign companies, 1977. Survey of Current Business, vol. 60, July 1 9 8 0 , p . 3 2 - 4 4 , 5 5 . ----- Selected data on the o p e r a ~ i o n s of U.S. affliiares cf foreign cornpanles, 1978 and 1979. Survey of Current Business, vol. 6 1 , May 1 9 6 1 , p. 35-52. The Impact of incentives on foreign investors' site selections. Federal Reserve Bank of Atlanta. Economic Review, December 1981. p. 36-42. Little, Jane Sneddon. Foreign Direct Investment in the United States: Recent Locational Choices of Foreign Manufacturers. Federal Reserve Bank of Boston. New England Economic Review. Nov./Dec. 1980. p. 5-22. ----- The Impact of Acquisition by Foriegners on the Financial Health of U.S. Firms. Federal Reserve Bank of Boston. New England Economic Review, July/August 1982. p. 40-53. United States. Department of Commerce. Foreign direct investment in the United States: report of the Secretary of Commerce to the Congress in compliance with the Foreign Investment Study Act of 1974, Public law 93-479. Washington, U.S. Department of Commerce: for sale by the Supt. of Docs., U.S. Govt. Print. Off., 1977. 9 volumes. ----- ----- International Trade Administration. Foreign direct investment in the United States; 1979 transactions. Sept. 1980. 4 0 p. Office of Foreign Investment i n the United States. Foreign direct investment in the United States; all forms; 1974-76 acquisitions, 1976 transactions mergers and equity increases. Washington, for sale by the Supt. of Docs., U.S. Govt. Print. Off., 1977. 43 p. -- U.S. --------- Library of Congress. Congressional Research Service. Foreign investment in U.S. farmland [by] Karla Perri. (Archived -- 12/22/80) Issue Brief 78064 Foreign ownership of property in the United States: federal and state restrictions [ b y ] Howard Zaritsky. Washington, July 1 1 , 1978 (Updated June 23, 1980). 42p. Report No. 80-105A Reciprocity in foreign trade [ b y ] Alfred Reifman and Raymond 20 p. Ahearn. Washington, Mar. 23, 1 9 8 2 (Updated periodically). Issue Brief 82043