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U.S. Direct Investment Abroad: Trends and Current Issues , Record No.: RS21118, Date: April 26, 2006 1 (April 26, 2006)

handle is hein.tera/crser0137 and id is 1 raw text is: Order Code RS21118 Updated April 26, 2006 CRS Report for Congress Received through the CRS Web U.S. Direct Investment Abroad: Trends and Current Issues James K. Jackson Specialist in International Trade and Finance Foreign Affairs, Defense, and Trade Division Summary The United States is the largest investor abroad and the largest recipient of direct investment in the world. For some Americans, the national gains attributed to investing overseas are offset by such perceived losses as displaced U.S. workers and lower wages. Some observers believe U.S. firms invest abroad to avoid U.S. labor unions or high U.S. wages, however, 70% of U.S. foreign direct investment is concentrated in high income developed countries. Even more striking is the fact that the share of investment going to developing countries has fallen in recent years. Most economists conclude that direct investment abroad overall does not lead to fewer jobs or lower incomes overall for Americans and that the majority of jobs lost among U.S. manufacturing firms over the past decade reflect a broad restructuring of U.S. manufacturing industries. This report will be updated as events warrant. Recent Investments New spending by U.S. firms on businesses and real estate abroad, or U.S. direct investment abroad1, fell sharply in 2005 to $21 billion, or less than one-tenth of the $252 billion U.S. firms invested in 2004, according to the Department of Commerce.2 This drop in investment spending contrasts with a 20% increase in spending by foreign firms in 2005 to reach $129 billion. The drop in U.S. direct investment abroad reflects actions by U.S. parent firms to reduce the amount of reinvested earnings going to their foreign affiliates for distribution to the U.S. parent firms in order to take advantage of one-time The United States defines direct investment abroad as the ownership or control, directly or indirectly, by one person (individual, branch, partnership, association, government, etc.) of 10% or more of the voting securities of an incorporated business enterprise or an equivalent interest in an unincorporated business enterprise. 15 CFR § 806.15 (a)(1). 2 Bach, Christopher L., U.S. International Transactions in 2005. Survey of Current Business, April 2005, p. 468. 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. Congressional Research Service +. The Library of Congress

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