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1 1 (April 17, 2017)

handle is hein.crs/govcfvu0001 and id is 1 raw text is: 0,;0 , ri .$ ,- , .-,- , April 17, 2017 Foreign Direct Investment: Overview and Issues e ' -'.. The growing prominence of foreign direct investment raises questions about its costs and benefits to the U.S. economy. Traditionally, the United States has supported a rules-based open and liberalized investment environment internationally as a key to promoting economic growth, including by negotiating investment provisions in free trade agreements (FTAs) and bilateral investment treaties (BITs). It also has included administering investment promotion programs. All of these efforts have been debated. For some policymakers, foreign investment expands markets abroad for U.S. firms and draws in capital and businesses that support local jobs. Others argue that U.S. direct investment abroad (USDIA) contributes to slow growth in U.S. jobs and wages and outsources U.S. jobs. Other policymakers argue that certain foreign direct investment in the United States (FDIUS), particularly by entities owned or controlled by a foreign government, compromises U.S. national security. In response, some policymakers argue that U.S. national security reviews of foreign investment transactions should be reformed, for example, to protect and promote certain industrial sectors in the economy. With $7 trillion in total outward investment (USDIA), and $6.5 trillion in inward investment (FDIUS), the United States is the largest source and the largest recipient of FDI. Figure I. U.S. Direct Investment Position Abroad and Foreign Direct Investment Position in the United States at Market Value (Cumulative Amount) (dollars in trillions) -USDIA -FDIUS Source: Department of Commerce. For U.S. multinational firms (combined U.S. parent companies and foreign affiliates), activities of the U.S parent company accounted for more than two-thirds of world-wide value added, capital expenditures, and research and development. By geographic area, about 74% of the U.S. direct investment position abroad is concentrated in high income developed countries where consumer tastes are similar to those in the United States: investments in Europe alone account for 60% of all USDIA, or $2.9 trillion. Similarly, direct investments by European firms account for 70% of FDIUS. U.S. firms have placed a slightly larger share of their investments in Latin America than in Asia, while Asian firms are investing more in the United States than are Latin American firms. Figure 2. Share of U.S. Direct Investment Position Abroad and Foreign Direct Investment Position in the United States by Region, Historical Cost, 2015 (in percent) USDLA k FDIUS 69% 17% 15%18% ins1111,11 '\\1\\\1%% 1% 1%j Canada Europe Latin Asia Africa Middle America East Source: Department of Commerce By sector, U.S. direct investment abroad is concentrated in high technology, finance, and services industries located in highly developed countries with advanced infrastructure and communications systems. The largest share of inward foreign investment (40%) is in the U.S. manufacturing sector, primarily in chemicals and transport industries. b ,, ,'-es c .o' For some, USDIA contributes to slow growth in jobs and wages in the U.S. economy because U.S. firms are seen as outsourcing jobs, particularly manufacturing jobs, to lower wage countries. There are examples of U.S. firms closing a plant in the United States and opening a similar plant abroad, but there are no official sources that track such activities. Most USDIA, however, is in developed economies that are similar to the United States and most of this production is consumed where it is produced. Economists generally argue that the loss of jobs in the U.S. manufacturing sector can be traced to a number of factors, including two economic recessions (1999-2000, and 2008- 2009) and improvements in productivity that have allowed the manufacturing sector to produce more goods with fewer workers: since 1980, employment in the U.S. manufacturing sector has fallen by one-third, while output 'O 'T 's gn'a', , q 'S SL IN 11LULANJILiN,

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