In 2004, the total foreign direct investment (FDI) in the United States (U.S.) stood at $1.5 trillion, equivalent to $2.7 trillion in today’s market value which represents approximately 10% of the total current market value of all publicly traded companies in U.S.
- European companies made up 65-70% of direct investment in the U.S., with United Kingdom (UK) leading the way. 1/3rd of the total investment from Europe came from UK, with $250 billion invested in 2004. UK, Germany, Netherlands and France were the top four investors in U.S. in that particular order.
- Asian and the Pacific firms had the next highest level of investment in the U.S., at approximately $219 billion in 2004. Japan accounted for 75% of the investment. Chinese & Indian investments in 2004 were minimal. However that is bound to change with a number of acquistions by Chinese and Indian firms.
- Canada finished in the third spot.
- Direct investment from Latin American investors totals $86 billion. The biggest presence from South American firms came from Panama due to it financial hub status. Brazil ranked #4 behind Mexico and Venezuela respectively.
- Investment from Africa and the Middle East were less than $10 billion, only 1-2% of the total foreign investment. Israel was the largest investor from the Middle East, with some $4.1 billion in investments. Kuwait follows with $1.2 billion.
- 1/3rd of FDI in the U.S. is held in the manufacturing sector.
- 14% of FDI is invested in the financial services sector.
- Asian and Pacific FDI holdings in the U.S. manufacturing sector amounted to 12.3% in 2004.
Quick Review on Benefits of Foreign Investment
Creates New Jobs: U.S. affiliates of foreign companies employ 5.3 million U.S. workers.
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. 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.
Strengthens U.S. Manufacturing: 41% of the jobs related to U.S. affiliates of foreign companies are in the manufacturing sector.
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.
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.
Contributes to U.S. Tax Revenues: In 2002, foreign affiliates paid $17.8 billion in taxes, which represented 12% of U.S. corporate tax revenues.
Increase U.S. Exports: U.S. companies can use multinationals’ distribution networks and knowledge about foreign tastes to export into new markets. Approximately 21% of all U.S. exports come from U.S. subsidiaries of foreign companies.
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.
Some Major Acquisition In Recent Years
- Acquisition by Lenovo, the largest personal computer company in China, of IBM’s personal computer and laptop unit.
- State-owned China National Offshore Oil Corporation’s attempted acquisition of UNOCAL.
- State-owned Dubai Ports World’s planned acquisition of P&O, the operator of many US ports.
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(Source: US Dept of State, Bureau of Economic Analysis, TickerSense)