Trade Partnership Meeting Highlights Importance of Foreign Direct Investment

(December 10, 2008) The positive impact of foreign direct investment on the nation’s economy was emphasized by a federal official yesterday at a CalTrade Partnership meeting led by Secretary Dale Bonner of the State Business, Transportation and Housing Agency and hosted by the California Chamber of Commerce.

Charles Schott

“Foreign direct investment plays a major role in the U.S. economy, both as a key driver of the economy and an important source of innovation, exports and jobs,” said Charles Schott, senior advisor for Invest in America, a part of the International Trade Administration, a department within the U.S. Department of Commerce.

Foreign direct investment in the United States is the ownership or control, directly or indirectly, by one foreign person of 10 percent or more of the voting securities of an incorporated U.S. business enterprise or an equivalent interest in an unincorporated U.S. business enterprise, as defined by the U.S. Department of Commerce Bureau of Economic Analysis.

Impacts of Foreign Direct Investment

The United States is the world’s largest recipient of foreign direct investment. In 2007 alone, the U.S. received $237 billion in FDI. The many positive impacts of foreign direct investment on the U.S. economy include:

Creates New Jobs: U.S. affiliates of foreign companies (majority-owned) employ approximately 5.3 million U.S. workers, or 4.6 percent of private industry employment. Between 2003 and 2007, foreign companies announced more than 3,300 new projects, yielding $184 billion in investment and about 447,000 new jobs.
Boosts Wages: U.S. affiliates of foreign companies tend to pay higher wages than other U.S. companies. Internationally owned companies support an annual U.S. payroll of $364 billion, with average annual compensation per employee of more than $68,000. On average, U.S. subsidiaries of foreign firms pay 25 percent higher wages and salaries than that of all U.S. establishments.
Increases U.S. Exports: U.S. companies use multinationals’ distribution networks and knowledge about foreign tastes to export into new markets. Approximately 19 percent of all U.S. exports ($195 billion) come from U.S. subsidiaries of foreign companies.
Strengthens U.S. Manufacturing and Services: Of the jobs supported by U.S. affiliates of foreign companies, 30 percent are in the manufacturing sector, accounting for 12 percent of all manufacturing jobs in the United States. Approximately 60 percent of all foreign investment in the United States is in the service sector, improving the global competitiveness of this critical segment of the U.S. economy.
Brings in New Research, Technology, and Skills: Affiliates of foreign companies (majority-owned) spent more than $34 billion on research and development in 2006 and $160 billion on plants and equipment.
Contributes to Rising U.S. Productivity: Inward investment leads to higher productivity growth through an increased availability of capital and resulting competition. Productivity is a key factor that increases U.S. competitiveness abroad and raises living standards at home.

Invest in America

Invest in America was launched in March 2007 and is the primary U.S. government mechanism to manage foreign direct investment promotion. Efforts are focused on outreach to foreign governments and investors, support for state governments’ investment promotion efforts, and addressing business climate concerns by serving as ombudsman in Washington for the international investment community.

The program’s mission is to promote and support foreign direct investment in the United States, contributing to U.S. job creation, innovation, and competitiveness.

Efforts are focused on outreach to foreign governments and investors, support for state governments’ investment promotion efforts, and addressing business climate concerns by serving as ombudsman in Washington for the international investment community.

Specifically these efforts help to:

Facilitate Investment Inquiries: Invest in America welcomes all inquiries from foreign investors who want to learn more about investing in the United States. Invest in America provides information about the U.S. economy as a whole, assists in making contacts with appropriate federal and state agencies, and helps investors learn more about U.S. policies and investment procedures.
Acts as Ombudsman: Invest in America serves as an ombudsman in Washington, D.C., for the international investment community, working across the federal government to address investor concerns and issues involving federal agencies.
Advise on Policy: Invest in America reviews and acts upon specific policy issues that are raised by international investors. Invest in America regularly engages with U.S. government stakeholders to address policy concerns and provides recommendations to improve the U.S. investment climate.
Connect Investors with U.S. States: Invest in America is a federal complement to existing U.S. state and local efforts to promote inward investment and remains neutral in any competition. Invest in America works with each of the 50 states, the District of Columbia, and U.S. territories to connect potential investors with U.S. investment officials.
Provide Investor Education: Invest in America continually develops programs and services to educate international investors on topics related to investing in the United States. Invest in America also works to educate domestic audiences on the benefits foreign direct investment offers their communities.

For more information about Invest in America, visit the U.S. Department of Commerce website.

Staff Contact: Susanne Stirling