Does Foreign Direct Investment Benefit the United States?

[rogercbryan]

I’ve been talking to a lot of people about the current trend with major US Corporations to seek foreign funding. I want to say that I am for globalization and support free market economies. I’m still worried that we are letting oil rich countries with sovereign funds buy large stakes in our financial companies. No one can argue that our financial companies don’t need the money. I did some research and found this interesting article about the benefits of foreign investment. All of these things sound great. I guess I feel that we are sending our money overseas to buy oil and it is now coming back into the US, but what are we really giving away?

What do you all think…

How Foreign Direct Investment Benefits the United States

• Foreign Direct Investment (FDI) Creates New Jobs: U.S. affiliates of foreign companies (majority owned) employ 5.3 million U.S. workers, or 4.7% of private industry employment. (Source: Bureau of Economic Analysis (BEA), U.S. Department of Commerce)

• Foreign Investment Boosts Wages: U.S. affiliates of foreign companies tend to pay higher wages than U.S. companies. Foreign companies support an annual U.S. payroll of $318 billion, with average annual compensation per employee of over $60,000. Average compensation per employee within these companies has risen every year since 1992 (Source: BEA). Some studies have found that foreign companies have paid wages in the past that were as much as 15% higher on average than wages paid by U.S. companies. (Source: National Bureau of Economic Research – Robert Lipsey, Working Paper 9293)

• Foreign Investment Strengthens U.S. Manufacturing: 41 percent of the jobs related to U.S. affiliates of foreign companies are in the manufacturing sector. (Source: BEA)

• Foreign Investment Brings in New Research, Technology, and Skills: Affiliates of foreign companies spent $30 billion on research and development in 2003 and $109 billion on plants and equipment. (Source: BEA). These advances are often adopted by locally-owned companies.

• Foreign Investment Contributes to Rising U.S. Productivity: The increased investment and competition from FDI leads to higher productivity growth, a key ingredient that increases U.S. competitiveness abroad and raises living standards at home. (Source: Bureau of Economic and Business Affairs (EB), U.S. Department of State)

• Foreign Investment Contributes to U.S. Tax Revenues: In 2002, foreign affiliates paid $17.8 billion in taxes, which represented 12 percent of U.S. corporate tax revenues. (Source: Internal Revenue Service)

• Foreign Investment Can Help U.S. Companies Penetrate Foreign Markets, and Increase U.S. Exports: U.S. companies can use multinationals’ distribution networks and knowledge about foreign tastes to export into new markets. Approximately 21 percent of all U.S. exports come from U.S. subsidiaries of foreign companies. (Source: BEA)

• Foreign Investment Helps Keep U.S. Interest Rates Low: The inflow of foreign capital also decreases the cost of borrowing money for domestic entrepreneurs, especially in the small- to medium-sized enterprise sector. (Source: EB)

[BusinessAdviser]

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