The United States was both the largest source and largest destination of foreign direct investment (FDI) in the world during 1999-2004, according to a new staff research study by the U.S. International Trade Commission (ITC) Office of Industries.

Trends in U.S. Inbound and Outbound Direct Investment examines trends, by country and by industry, for inbound FDI, outbound FDI, and the relationship between FDI and cross-border trade. The study looks at the different incentives for FDI by sector through analyses of the copper mining, salmon farming, chemicals, and computer services industries. It also examines the phenomenon of services offshoring and the contributions of U.S. FDI to economic growth in foreign host countries.

The research study was prepared by ITC staff. The findings included in the publication are those of the author and do not necessarily reflect the views of the U.S. International Trade Commission or any of the Commissioners.

Principal findings regarding U.S. direct investment trends include:

• Outbound FDI stock was $2.1 trillion in 2004, compared with inbound stock of $1.5 trillion, with outbound FDI recording faster growth.

• For both U.S. inbound and outbound investment, the European Union and Japan accounted for the largest shares of total FDI stock, but U.S. direct investment in developing countries, including China, has also been rising rapidly.

• The service sector accounted for 74 percent of outbound FDI stock in 2004, compared with 21 percent for manufacturing, 5 percent for mining, and a negligible amount for agriculture. Proportions were similar for inbound FDI stock, with 63 percent in services and 34 percent in manufacturing.

• Affiliate sales are a much higher proportion of total deliveries to both U.S. and foreign customers than cross-border exports or imports.

• Intrafirm trade accounted for 30 percent of U.S. exports and 36 percent of imports in 2003.

Trends in U.S. Inbound and Outbound Direct Investment (Staff Research Study No. 29, USITC publication 3870, July 2006) is available on the ITC's Internet server at http://hotdocs.usitc.gov/docs/pubs/research_working_papers/pub3870.pdf.