The National Association of Manufacturers is pleased to see President Obama’s commitment to an open investment policy that invites foreign companies to do business in the United States, employ Americans and contribute to our economic growth. It is an important signal to the rest of the world that the United States spruces up its “welcome” mat for foreign investors every so often, and such statements have been issued by Republican and Democratic presidents in a reaffirmation that Foreign Direct Investment (FDI) is a non-partisan issue.
Foreign companies employ more than 5 million Americans and pay above-average wages. These companies contribute to the U.S. research and development base and export their products around the world. Having ties to other markets helps companies weather difficult economic conditions, and is another reason to welcome FDI in the United States. We should be aggressively courting international investors, which is why the NAM welcomed the Administration’s SelectUSA initiative last week.
Equally important to our economic success is investment by U.S. companies abroad. A commonly held misperception that U.S. manufacturing companies investment abroad necessarily means the loss of jobs here in the United States. This misperception fails to understand the nature of U.S. foreign direct investment abroad, which is mostly to serve the local market.
In 2008, over 70 percent of U.S. manufacturing foreign direct investment by value was in developed countries, and only four percent of total FDI was in China. Even during the relatively high growth years from 2000-2008 manufacturing jobs at U.S. manufacturing multinationals’ foreign affiliates increased by only 314,000 – and more than a third of those were located in Europe. Roughly 90 percent of these foreign manufacturing affiliates’ sales were to local markets, not to export back to the United States.
Foreign affiliates are key export targets for U.S. manufacturing multinational companies. In 2008 alone these affiliates received nearly half ($240 billion) of their total U.S. parent’s exports.
Foreign Direct Investment is a winner for the United States.
Stephen Jacobs is senior director of international business policy, National Association of Manufacturers.