Impacts of FDI

The United States is the world’s largest recipient of foreign direct investment. In 2007 alone, the United States received $237 billion in FDI. The total stock of FDI in the United States in 2006 was equivalent to 13.5 percent of U.S. GDP. Foreign direct investment impacts the U.S. economy in many positive ways. For example, FDI:

Creates New Jobs: U.S. affiliates of foreign companies (majority-owned) employ approximately 5.3 million U.S. workers, or 4.5% of private industry employment. Between 2003 and 2007, over 3,300 new projects were announced or opened by foreign companies, yielding $184 billion in investment and about 447,000 new jobs.

Boosts Wages: U.S. affiliates of foreign companies tend to pay higher wages than other U.S. companies. Internationally owned companies support an annual U.S. payroll of $335.9 billion, with average annual compensation per employee of over $66,000. On average, U.S. subsidiaries of foreign firms pay 25 percent higher wages and salaries than that of all U.S. establishments.

Increases U.S. Exports: U.S. companies use multinationals’ distribution networks and knowledge about foreign tastes to export into new markets. Approximately 19 percent of all U.S. exports ($169.2 billion) come from U.S. subsidiaries of foreign companies.

Strengthens U.S. Manufacturing and Services: Thirty-nine percent of the jobs supported by U.S. affiliates of foreign companies are in the manufacturing sector, a sector that accounts for just 12 percent of overall private sector employment. Furthermore, approximately 60 percent of all foreign investment in the United States is in the service sector, improving the global competitiveness of this critical segment of the U.S. economy.

Brings in New Research, Technology, and Skills: Affiliates of foreign companies (majority-owned) spent nearly $32 billion on research and development in 2005 and $121 billion on plants and equipment.

Contributes to Rising U.S. Productivity: Inward investment leads to higher productivity growth through an increased availability of capital and resulting competition. Productivity is a key factor that increases U.S. competitiveness abroad and raises living standards at home.