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Keeping the United States Open to Investment In May, a series of public events—part of the first-ever Invest in America Week—highlighted the important role that foreign direct investment plays in the U.S. economy. by Jennifer Derstine A clear message regarding the United States’ openness to foreign direct investment (FDI) was sent on May 12, 2008, when Secretary of Commerce Carlos M. Gutierrez and California Governor Arnold Schwarzenegger toured a manufacturing plant of Hitachi Automotive Products USA Inc. (HAP) in Los Angeles, California. “The bright spot of our economy right now is trade, and Hitachi is a great example of why we need to be open to foreign investment and to trade,” said Gutierrez during the visit. “Over 5 million jobs in the country are generated by foreign investors. [W]e welcome foreign investment, and we think foreign investment is an important part of our economy.”
HAP’s parent company, Hitachi, has 16,000 employees in the United States, and in 2007, it had $8 million in export sales from its Los Angeles plant. The tour was the finale to a week’s worth of similar events held in 12 states across the country. The inaugural celebration of Invest in America Week, which was sponsored by the Department of Commerce’s Invest in America program, was held on May 5–9, 2008. The week’s events highlighted the importance of FDI to U.S. jobs and economic growth. Diversity by Industry, Size, and Location Nineteen companies, as well as current and potential investors worldwide, were featured in events during the week. The companies were a diverse group by size, location, and industry. They included American Power Conversion, a division of Schneider Electric (France) that employs 1,100 in West Kingston, Rhode Island; Lonza Biologics (Switzerland), a large-scale mammalian cell culture facility that employs 642 in Portsmouth, New Hampshire; Osstem (South Korea), a manufacturer of dental implants newly located in Fairless Hills, Pennsylvania; and Taiyo (Japan), a manufacturer of coatings for circuit boards that employs 41 in Carson City, Nevada. Importance of FDI to U.S. Economy According to the Department of Commerce’s Bureau of Economic Analysis, more than 100 countries contributed $1.8 trillion of FDI in 2006. This foreign capital plays an important role in the U.S. economy. It supports more than 5 million jobs and accounts for 10 percent of U.S. capital investment, 15 percent of annual research and development investment, and nearly 20 percent of U.S. exports. U.S. workers seek jobs supported by foreign capital because the wages are 25 percent higher than the U.S. private-sector average. In 2005, nearly 40 percent of these jobs were in the manufacturing sector, whereas only 12 percent of the overall U.S. workforce is employed in manufacturing. Foreign capital stimulates competition, which leads to innovation and increased productivity. The outcomes ensure a healthy manufacturing sector, which is vital to maintaining a thriving U.S. economy and a rising standard of living. An Advocate at the Federal Level Historically, the United States has been the most attractive destination for FDI, but that position has eroded since the late 1980s. This decline can be attributed to the rising share of FDI attracted by emerging markets, such as China, India, and Eastern Europe. In March 2007, the Department of Commerce launched Invest in America to counter that trend. It is the first federal-level investment promotion effort in a generation. In addition to complementing individual states’ efforts to promote investment, Invest in America focuses on outreach to foreign governments and investors. The program promotes the United States as the best market for investment and addresses federal-level business climate concerns that may impede investment. As the ombudsman for the international investment community, Invest in America provides a single point of contact at the federal level to help foreign investors work through difficulties they encounter with federal bureaucratic or regulatory matters. Overcoming Regulatory Roadblocks Visa and entry processes are the most common issues raised by potential investors. In November 2007, the Department of Commerce published a paper, “Visas and Foreign Direct Investment,” that identified the challenge of balancing safety and security while facilitating business travel to the United States (see the January 2008 issue of International Trade Update). Since then, Invest in America staff members have been working with the Department of Homeland Security, Department of State, and Department of the Treasury to develop a series of programs that introduces investors to the various aspects of investing in the United States—starting with applying for a visa. These programs aim to improve public access to information on the visa and entry processes. Upcoming Efforts Invest in America will be publishing a paper on FDI trends and policies in the United States. A second policy paper will address legal issues that affect U.S. competitiveness for FDI. The United States must continue to address issues that may hinder it in the global competition for capital. As globalization continues to bring the world closer together and to increase trade and investment flows, the United States will be rewarded for its diligence in maintaining the most attractive investment environment in the world. The United States is a center for innovation, but its commitment to openness must extend beyond goods, services, and capital to welcome people and ideas in order to maintain its place as a global leader in science and technology. Jennifer Derstine is an international investment specialist for the Department of Commerce’s Invest in America program.
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