investment Archives - Shopfloor

New State Department “Investment Climate Statements” Serve as Important Resource for Businesses and Roadmap for Governments to Grow

By | Shopfloor Policy, Trade | No Comments

The U.S. State Department just released its annual “investment climate statements” that examine trade, investment, rule of law and related issues for more than 170 foreign markets. As I explained at an event organized by the Center for Strategic & International Studies (CSIS), these statements provide invaluable information for U.S. manufacturers and other businesses that seek access to foreign markets through exports, investments and other partnerships.

International commerce and investment are critical to manufacturers in the United States. Exports support the jobs of more than half of America’s 12 million manufacturing workers, and foreign investment by U.S. companies spurs those exports.

Foreign investment and U.S. exports work hand-in-hand to benefit U.S. companies, consumers and workers. Indeed, U.S. companies that invest overseas are outsized participants in the U.S. economy and are stronger because of their access to foreign markets. In fact, the primary reason that companies invest abroad is to sell to foreign consumers and bolster their U.S. operations.

Based on the most recent data available from the U.S. Bureau of Economic Analysis, consider that U.S. companies that invest overseas are some of America’s:

  • Largest exporters, exporting 47 percent of all U.S.-manufactured goods sold overseas ($660 billion in 2014). More than 40 percent ($269 billion) of those manufactured exports go to the overseas operations of American companies to help promote U.S. products in foreign markets.
  • Biggest producers, accounting for nearly $1.4 trillion, or almost 65 percent, of all U.S. private-sector value-added manufacturing output in 2014.
  • Most important innovators, expending nearly $269 billion on research and development in the United States in 2014. Of that, 68 percent (or $183 billion) was spent by manufacturers.
  • Largest investors in capital expansion, investing $713.5 billion, or 24 percent, of all spending on new property, plants and capital equipment in the United States in 2014.
  • Most generous employers, paying U.S. manufacturing workers on average $96,030, or about 18 percent more than average U.S. manufacturing wages in 2014.

For manufacturers and other businesses seeking foreign customers, identifying the most promising foreign markets is a difficult, time-consuming process that requires extensive knowledge. The State Department “investment climate statements” provide a valuable resource to businesses, offering detailed information on many of the critical factors they need to understand, including:

  • Openness to trade and investment, market barriers and business requirements;
  • Rule of law, including transparency, impartial rulemaking, corruption and the legal system;
  • The protection of private property (foreign and domestic), including innovation and intellectual property, the sanctity of contracts and land rights;
  • Competition policy, including with respect to state-owned enterprises,
  • Political risk; and
  • Digital policy trends.

Manufacturers welcome this year’s analysis of digital issues, including regulations on cross border data flows and the localization of information and communications technology infrastructure. As manufacturers implement technology and data in overseas sales, production and product usage, these issues have become increasingly important.

These investment climate statements also aid foreign countries looking to bolster their commercial climate. Many of manufacturers’ strong concerns with barriers, distortions and weak standards that are limiting U.S. growth appear in these statements.

Given the significance of international commercial engagement to the U.S. economy, manufacturing sector and workforce, the National Association of Manufacturers advocates open markets overseas, robust standards of governance and the protection of property. This includes investment and intellectual property as well as strong enforcement mechanisms like neutral investment dispute settlement mechanisms to prevent foreign country mistreatment or theft of U.S. property.

To learn more, read about or listen to the discussion at the launch of these statements at the CSIS event.

FCC Moves to Increase Broadband Infrastructure Investment

By | Shopfloor Policy | No Comments

The chairman of the Federal Communications Commission (FCC), Ajit Pai, announced today that the agency intends to repeal the 1930s-era regulations known as “Title II” that have been imposed on the internet since 2014. This move will benefit all manufacturers that increasingly depend on connected technology and the robust broadband infrastructure needed for it to succeed.  Read More

Hawaii: A Rapidly Growing Hub for Manufacturing

By | General | No Comments

When people think of Hawaii, they tend to think about warm sunny beaches, palm trees and volcanoes. What they may not realize is the presence of manufacturing in the state and what a huge generator it is for the state’s economy. Manufacturers employed 13,500 workers in Hawaii in May. In addition, manufacturing activity continues to accelerate, with output in the sector growing from $1.3 billion in 2010 to $1.5 billion in 2014. That represents roughly two percent of overall gross state product – a ratio that we anticipate will grow moving forward. Read More

ISDS is All About Fair Play and American Values

By | General | No Comments

From soccer matches in Europe to Monday Night Football in the United States, referees are a critical component of competitive sports, acting as an impartial party that ensures rules are followed by members of both teams. For small and large manufacturers, Investor-State Dispute Settlement (ISDS) provisions fill this this critical role of referee, ensuring that basic rules of due process, non-discrimination, fair treatment and property protection. In short, ISDS ensures fair play in the global economy.

Manufacturers typically make the vast majority of their investments domestically. Yet, just as companies from Europe, Asia, Latin America and beyond invest in America to reach the American consumer, many U.S. manufacturers also need to invest overseas to sell more successfully to the 95 percent of consumers that live outside our borders. By reaching millions of new customers overseas, U.S. investment overseas helps strengthen America’s manufacturing base, spurring approximately 50 percent of U.S. exports and supporting higher-paying American jobs, R&D and capital investment. When companies investment overseas, some 90 percent of their sales stay outside the United States. Read More

MAPI: Manufacturing Activity Expanded at a Slightly Slower Pace in October

By | Economy | No Comments

The Manufacturers Alliance for Productivity and Innovation (MAPI) Foundation said that its Composite Business Outlook Index dropped from 71 in July to 67 in October. Despite the decline, manufacturing activity remained quite strong, with index readings over 50 indicating expansion. Indeed, the pace of new orders was unchanged (78) at a healthy rate of growth in the fourth quarter report, continuing to reflect improvements from six months ago (71).

Still, several of the key indicators eased in this survey. This included export orders (down from 67 to 65), the orders backlog (down from 72 to 69), prospective U.S. shipments (down from 87 to 83) and prospective foreign shipments (down from 76 to 72). Each of these readings, however, continues to reflect both strong growth.

In contrast, there were some areas of weakness to note. The percentage of respondents operating above 85 percent capacity dropped from 30.0 percent in July to 26.7 percent in October. Expected business investments also slowed considerably in this survey, with 2015 U.S. investment spending nearly just barely above 2014’s pace (down from 67 to 52) whereas foreign investment activity was expected to decline next year relative to this year (down from 64 to 48). On the other hand, the rate of R&D spending was expected to accelerate slightly (up from 67 to 70).

Overall, these data support the notion that manufacturing activity continues to improve, mirroring similar findings from other indicators. The MAPI Foundation has a generally upbeat outlook for the coming months. They predict that manufacturing production will increase by 3.4 percent and 4.0 percent in 2014 and 2015, respectively.

Chad Moutray is the chief economist, National Association of Manufacturers. 

Manufacturing Construction Spending Rose 1.5 Percent in August

By | Economy | No Comments

The Census Bureau said that manufacturing construction spending rose 1.5 percent in August, increasing for the fifth straight month. Manufacturers have continued to edge their construction dollars higher since bottoming out at $46.84 billion at the annual rate in March. Manufacturing construction rose from $55.47 billion in July to $56.31 billion in August, with year-over-year growth of 14.9 percent. This indicates that manufacturers are stepping up their investments in new structures, which is consistent with the recent pickup in demand and output.

Meanwhile, total construction spending fell 0.8 percent in August, pulling back from the 1.2 percent gain observed in July. Both private and public sector spending were lower for the month, down 0.8 percent and 0.9 percent, respectively. Private, nonresidential construction activity was off 1.4 percent. In addition to manufacturing, other areas with higher levels of spending in August were communication (up 3.6 percent), educational (up 1.4 percent), religious (up 0.9 percent) and lodging (up 0.4 percent) projects. However, these were offset by declines for power (down 3.9 percent), amusement and recreation (down 3.7 percent), commercial (down 3.5 percent), and transportation (down 2.0 percent) firms, among others.

It should be noted that the year-over-year data for private, nonresidential construction spending, which has risen 9.2 percent over the past 12 months. The top five areas for growth in the past year were office (up 18.6 percent), power (up 17.2 percent), manufacturing (up 14.9 percent), commercial (up 10.2 percent) and lodging (up 9.7 percent) construction projects.

Public, nonresidential construction spending was off 1.0 percent for the month but has increased 2.3 percent over the past 12 months. Some bright spots at the public sector level year-over-year include office (up 20.2 percent), conservation and development (up 18.3 percent), amusement and recreation (up 16.2 percent), power (up 9.9 percent), sewage and waste disposal (up 4.7 percent), transportation (up 3.2 percent) and educational (up 2.9 percent) endeavors.

Chad Moutray is the chief economist, National Association of Manufacturers. 

Toyota Will Boost Production in U.S. and Create More Jobs

By | Economy | No Comments

Today Toyota Motor Manufacturing announced that the company plans to begin manufacturing the Lexus ES 350 in Kentucky. Production will take place at the company’s Georgetown plant and will create 750 new jobs. The company is investing $360 million in the facility and will start producing vehicles in 2015. This will be the first time Toyota has manufactured Lexus vehicles in the United States.

This is positive news for manufacturing in the United States and also shows the benefits of direct foreign investment for job creation. One of the top goals of the NAM which is laid out in our Growth Agenda is to make the United States the best place in the world to manufacture and attract direct foreign investment.

Just yesterday the NAM’s Vice President of International Economic Affairs Linda Dempsey testified before the House Energy & Commerce Subcommittee on Commerce, Manufacturing and Trade hearing about global investment in America. She discussed the economic impact of foreign investment on manufacturing in the United States.

“Foreign Direct Investment (FDI) plays a critical role in manufacturing. Based on data from the Commerce Department’s Bureau of Economic Analysis, FDI inflows in manufacturing equaled nearly $83.4 billion in 2012, accounting for almost 50 percent of total FDI inflows. FDI in manufacturing has shown substantial growth since 2003 and is showing a rebound from the weakness in 2008 and 2009. About 95 percent of all FDI in the United States comes from developed countries, starting with the United Kingdom. While the share fluctuates yearly, a substantial portion of such investment since 2005 has been in the manufacturing sector. The most recent data from 2012, which are still preliminary, show that FDI in manufacturing accounts for nearly 50 percent of total FDI that year.”

With the global competition growing there is clearly more room for growth in FDI. It currently remains 20 percent more expensive to manufacture in the United States compared to our largest trading partners.  To make America the best place for foreign direct investment policymakers must move forward with pro-growth policies laid out in the NAM’s Growth Agenda.


Manufacturing Construction Spending Was Lower in November

By | Economy | No Comments

The Census Bureau said that construction spending decreased 0.3 percent in November, its first decline since March. The decrease was largely due to lower levels of activity in the nonresidential sector, which decreased 0.7 percent and was negative four of the past six months. With businesses anxious about the impending fiscal cliff and tighter government budgets dampening public sector spending, nonresidential activity has been soft at best for much of the second half of 2012.

This has definitely been true in the manufacturing sector, which had seen its construction spending levels fall 2.0 percent since September. With at least some of the uncertainties surrounding the fiscal cliff over, I would expect for these figures to improve moving into 2013 if sales improve and the global economic environment stabilizes.  As a sign that manufacturers have been willing to invest for the future, increased construction spending earlier in the year helped to push up year-over-year activity by 5.1 percent.

Looking specifically at the November numbers, the one bright spot was the residential sector, with construction spending up 0.4 percent for the month and private sector housing activity up 19.0 percent since November 2011. On the private sector nonresidential side, construction was down across-the-board, with only transportation and communications sector activity higher.

Public sector nonresidential spending was off 0.5 percent, but it was more mixed. Sectors with increased public sector activity included commercial, power, sewage and waste disposal, highway and street, and transportation projects. The largest monthly declines were in conservation and development, amusement and recreation, office, water supply, and public safety projects.

Chad Moutray is the chief economist, National Association of Manufacturers.

More Evidence in Favor of Keeping Tax Rates Low on Investment

By | Taxation | No Comments

As each day goes by, manufacturers across the country are eyeing ever more warily the “perfect storm” of tax increases that will take effect at the end of this year if Congress doesn’t act to stop them. The need to extend one particular tax benefit – which reduced and paired the tax rate on savings and investment – in current law is highlighted in a new study released today by the Alliance for Savings and Investment. This coalition of dividend paying companies, investor organizations and trade associations – including the NAM – fights for a continuation of these policies that promote economic growth and job creation by fostering private savings and investment. In a nutshell the study finds that:

Taking into account both the corporate and investor level taxes on corporate profits and state level taxes, the United States has among the highest integrated tax rates among developed countries and these integrated tax rates will rise sharply in 2013:

  • The current top US integrated dividend tax rate of 50.8 percent will rise to 68.6 percent in 2013, significantly higher than in all other OECD and BRIC countries.
  • The current top US integrated capital gains tax rate of 50.8 percent will rise to 56.7 percent in 2013, the second highest among OECD and BRIC countries.

The reduced tax rate on capital gains and dividends was enacted in 2003 as part of an effort to reduce the burden of double taxation on corporate profits while also synchronizing the tax rates on dividends and capital gains in an effort to eliminate any bias for one type of investment over another.

Although obvious to the astute observer, it is essential that in this debate – and in any debate about corporate tax policy – one remember that capital is more mobile in today’s world than ever before and tax policy can go a long way to influence decision making of investors both on the individual and the institutional level.

The NAM has long held that an important objective of long-term tax policy is to maintain competitive tax rates that are low enough to attract the capital formation and investment necessary to ensure durable economic growth – making permanent the synchronized, lower rates on capital gains and dividends is essential to that task.