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1 1 (January 4, 2021)

handle is hein.crs/goveajz0001 and id is 1 raw text is: Foreign Direct Investment: Overview and Issues Overview The growing prominenceof foreign direct investment (FDI) raises questions about its costs andbenefits to the U.S. economy. Traditionally, the United States has supported a rules-based and open investment environment internationally in order to promote economic growth and advance otherpolicy objectives. U.S. investment policy includes negotiating rules, disciplines, and market access commitments concerning FDIin trade agreements and Bilateral Investment Treaties (BITs) and administering investment promotion programs. It also involves reviewing certain proposed inbound FDI trans actions for U.S. national security implications. FDIis a part of U.S. trade policy, given that it is a major driver of trade and plays a role in facilitating globalsupply chains. These policy components have beenthe subjectoflong- standing debate. For some policymakers, foreign investment expands markets abroadforU.S.firms and draws in capital and businesses that support localjobs. Some policymakers also as sert that FDI can advance U.S. foreign policy and other strategic objectives. Others argue that U.S. direct investment abroad (USDIA) may contribute to slow growth in U.S.jobs and wages and outsources U.S. jobs. Some policymakers argue that certain foreign direct investment in the United States (FDIUS), particularly by entities owned or controlled by a foreign government, may compromise U.S. nationalsecurity. During the Trump Administration, the U.S. investment policy landscape experiencednotable changes. In response to various policy debates, as well as concerns raisedby China's FDI activity, in 2018, Congress updated laws governing reviews of foreign investment in the United States for national security concerns with the Foreign Investment Risk Review Modernization Act (FIRRMA, P.L. 115-232). It also consolidated and expanded U.S. authorities to s upportprivate investment overseas for foreign policy and strategic economic aims, with the Better Utilization of Investments Leading to Development Act (BUILD Act, P.L. 115-254). Other developments included the enactment oflegislation to implement the U.S.-Mexico- Canada Agreement(USMCA, P.L.116-113), which contained investor protections that varied in key respects from existing U.S. trade agreements. FDI Trends and Recent investments With $8.8 trillion in total USDIA, and $10.5 trillion in total FDIUS in 2019-at market value-the United States is the world's largest source and recipient of FDI. During 2005 through 2019, USDIA more than tripled, and FDIUS more than doubled (Figure 1), but both levels are expected to dip in 2020 amid the Coronavirus Disease 2019 (COVID-19) pandemic. Updated January 4, 2021 For U.S. multinational firms (combined U.S.parent companies and foreign affiliates), activities of the U.S parent companies accounted for more than two-thirds of world-wide value added, capital expenditures, and research and development. Figure 1. U.S. Outward and Inward FDI Position, at Market Value, 2019 Cumulative total, $ in trillions $12 USDIA $8 $4 FDIUS $0 2005 2007 2009 2011 2013 2015 2017 2019 Source: Department of Commerce, Bureau of Economic Analysis. By geographic area, about75% of the U.S. direct investment position abroad (cumulative amount) is concentrated in high-income developed countries where consumertastes are similarto thosein the United States: investments in Europe alone account for 60% of all USFDI, or $3.6 trillion. Similarly, direct investments by European firms account for 64% ofthe FDIUS position. U.S. firms have placed a slightly larger share of their investments in Latin America (LA) than in Asia, while Asian firms have invested more in the United States than have Latin American firms. (See Figure 2.) Figure 2. Share of U.S. Direct Investment Position Abroad (USDIA) and FDI Position in the United States (FDIUS) by Region, Historical Cost, 20 1 9 Europe Asia and Pacific 3% Canada LA and West. Hem ~USDIA Middle East 0U% 03%~ I DIUs Africa I 2% Source: Department of Commerce, Bureau of Economic Analysis. By sector, USDIA is concentrated in high technology, finance, and services industries located in highly developed countries with advanced infrastructure andcommunications systems. Thelargest shareofFDIUS (40%) is in the U.S. https://crsrepc

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