Keeping the United States Open to Investment
In May, a series of public events—part of the first-ever Invest in America Week—highlighted the important role that foreign direct investment plays in the U.S. economy.
by Jennifer Derstine
A clear message regarding the United States’ openness to foreign direct investment (FDI) was sent on May 12, 2008, when Secretary of Commerce Carlos M. Gutierrez and California Governor Arnold Schwarzenegger toured a manufacturing plant of Hitachi Automotive Products USA Inc. (HAP) in Los Angeles, California.
“The bright spot of our economy right now is trade, and Hitachi is a great example of why we need to be open to foreign investment and to trade,” said Gutierrez during the visit. “Over 5 million jobs in the country are generated by foreign investors. [W]e welcome foreign investment, and we think foreign investment is an important part of our economy.”
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|Secretary of Commerce Carlos M. Gutierrez (left) and California Governor Arnold Schwarzenegger (right) join officials of Hitachi Automotive Products USA Inc. during a tour of the company’s facility in Los Angeles, California, on May 12, 2008. The tour coincided with the inaugural celebration of Invest in America Week. (photo courtesy of Hitachi Automotive Products USA)
HAP’s parent company, Hitachi, has 16,000 employees in the United States, and in 2007, it had $8 million in export sales from its Los Angeles plant.
The tour was the finale to a week’s worth of similar events held in 12 states across the country. The inaugural celebration of Invest in America Week, which was sponsored by the Department of Commerce’s Invest in America program, was held on May 5–9, 2008. The week’s events highlighted the importance of FDI to U.S. jobs and economic growth.
Diversity by Industry, Size, and Location
Nineteen companies, as well as current and potential investors worldwide, were featured in events during the week. The companies were a diverse group by size, location, and industry. They included American Power Conversion, a division of Schneider Electric (France) that employs 1,100 in West Kingston, Rhode Island; Lonza Biologics (Switzerland), a large-scale mammalian cell culture facility that employs 642 in Portsmouth, New Hampshire; Osstem (South Korea), a manufacturer of dental implants newly located in Fairless Hills, Pennsylvania; and Taiyo (Japan), a manufacturer of coatings for circuit boards that employs 41 in Carson City, Nevada.
Importance of FDI to U.S. Economy
According to the Department of Commerce’s Bureau of Economic Analysis, more than 100 countries contributed $1.8 trillion of FDI in 2006. This foreign capital plays an important role in the U.S. economy. It supports more than 5 million jobs and accounts for 10 percent of U.S. capital investment, 15 percent of annual research and development investment, and nearly 20 percent of U.S. exports.
U.S. workers seek jobs supported by foreign capital because the wages are 25 percent higher than the U.S. private-sector average. In 2005, nearly 40 percent of these jobs were in the manufacturing sector, whereas only 12 percent of the overall U.S. workforce is employed in manufacturing.
Foreign capital stimulates competition, which leads to innovation and increased productivity. The outcomes ensure a healthy manufacturing sector, which is vital to maintaining a thriving U.S. economy and a rising standard of living.
An Advocate at the Federal Level
Historically, the United States has been the most attractive destination for FDI, but that position has eroded since the late 1980s. This decline can be attributed to the rising share of FDI attracted by emerging markets, such as China, India, and Eastern Europe.
In March 2007, the Department of Commerce launched Invest in America to counter that trend. It is the first federal-level investment promotion effort in a generation. In addition to complementing individual states’ efforts to promote investment, Invest in America focuses on outreach to foreign governments and investors. The program promotes the United States as the best market for investment and addresses federal-level business climate concerns that may impede investment.
As the ombudsman for the international investment community, Invest in America provides a single point of contact at the federal level to help foreign investors work through difficulties they encounter with federal bureaucratic or regulatory matters.
Overcoming Regulatory Roadblocks
Visa and entry processes are the most common issues raised by potential investors. In November 2007, the Department of Commerce published a paper, “Visas and Foreign Direct Investment,” that identified the challenge of balancing safety and security while facilitating business travel to the United States (see the January 2008 issue of International Trade Update).
Since then, Invest in America staff members have been working with the Department of Homeland Security, Department of State, and Department of the Treasury to develop a series of programs that introduces investors to the various aspects of investing in the United States—starting with applying for a visa. These programs aim to improve public access to information on the visa and entry processes.
Invest in America will be publishing a paper on FDI trends and policies in the United States. A second policy paper will address legal issues that affect U.S. competitiveness for FDI.
The United States must continue to address issues that may hinder it in the global competition for capital. As globalization continues to bring the world closer together and to increase trade and investment flows, the United States will be rewarded for its diligence in maintaining the most attractive investment environment in the world.
The United States is a center for innovation, but its commitment to openness must extend beyond goods, services, and capital to welcome people and ideas in order to maintain its place as a global leader in science and technology.
Jennifer Derstine is an international investment specialist for the Department of Commerce’s Invest in America program.
Exports: the “Silent Stimulus”
by Carlos M. Gutierrez and Arnold Schwarzenegger
As immigrants, we're proud of America and the strength it derives from being uniquely open to trade, to investment, and to ideas and people. Recently, prominent voices in punditry and politics have questioned the benefits of America's openness and called for an isolationist U-turn that would choke off our innovation and prosperity.
In every state of the union, such a retreat would be disastrous for jobs, economic growth and consumer choice. Nowhere is this more clear than here in Torrance, California, where today we are visiting a Hitachi plant that remanufactures auto parts. This "foreign" company employs 16,000 Americans—8,000 in California alone—and is just one of hundreds of overseas firms that invest directly in the U.S. From where we're standing, what America needs is more openness here and abroad—not less.
"But what about American manufacturing?" one might ask. "What about American exports?" Even at a time when our economy has slowed, U.S. exports are booming. In 2007, we saw a record $1.6 trillion in exports, up 12.6 percent from the prior year. And exports are growing even faster in 2008. In the first quarter of this year, export growth is up nearly 18 percent from the same period last year. Nearly a third of all U.S. agricultural products and more than 20 percent of the goods we manufacture were exported last year. Indeed, exports have been a kind of silent stimulus over the past year, helping even a slowing economy stay in the black.
Yet in the global trading system, America isn't just a buyer and seller, we're a huge investment magnet. That giant cash register sound you're hearing is the nearly $200 billion pumped into U.S. businesses from abroad in 2006 alone. Foreign-owned companies operating in the U.S. employ more than five Americans, and a third of foreign direct investment is in the manufacturing sector.
Carlos M. Gutierrez is U.S. secretary of commerce. Arnold Schwarzenegger is governor of California.
(A longer version of this text appeared in the May 12, 2008, edition of The Wall Street Journal. © 2008, The Wall Street Journal. Reprinted with permission.)