U.S. Expands Efforts to Draw More Foreign Investment
The inaugural SelectUSA investment summit held last week in Washington, D.C., saw the launch of an expanded effort to increase foreign direct investment in the U.S. SelectUSA was launched in 2011 to coordinate federal resources on promoting and facilitating FDI, and the summit was billed as an opportunity for investors looking to establish or expand their U.S. footprint to find the most suitable locations for their needs.
Program Enhancement. President Obama announced at the summit an expansion and enhancement of SelectUSA that will “create the first-ever, fully coordinated U.S. government effort to recruit businesses to invest and create new jobs in the United States.” This broadened effort will include four components.
- Domestic and overseas commercial teams at the departments of Commerce and State will make recruiting business investment one of their core priorities, alongside their traditional focus on export promotion and commercial advocacy. This will begin in 32 priority markets that represent over 90% of FDI into the U.S. and will involve developing country-specific strategies.
- A coordinated process will be established to link DOC and State teams with senior U.S. officials to actively advocate with overseas business leaders to locate production and investment in the U.S.
- A single point of contact at the federal level will be created to help potential investors cut through red tape. In partnership with state and local economic development officials, SelectUSA will help investors gather information and navigate through federal agency processes. SelectUSA headquarters will also increase support for its investment teams around the world, providing them with the information, analysis, services and process coordination needed to engage with investors and promote the U.S.
- U.S. states, cities and regions will be given more tools to help them attract investment, including connecting with overseas markets and investors through trade missions, counseling on implementing best practice strategies, and data and analysis of investment trends.
The president indicated that these efforts will require funding from Congress but, in a nod to the current fiscal environment, asserted that “it’s not necessary to spend a lot of money.”
Subsidiaries Now Eligible for Manufacturing Council. Also at the summit Commerce Secretary Penny Pritzker announced revisions to the membership eligibility requirements for the Manufacturing Council that will allow representatives of U.S. subsidiaries of foreign-owned or -controlled firms to join this panel, which advises DOC on policies and initiatives to increase domestic and foreign direct investment in the U.S. manufacturing sector, including SelectUSA.
Status and Benefits of FDI. A DOC report issued at the summit states that to draw more FDI the U.S. should “nurture and build upon” underlying strengths such as “an open investment regime, a large economy, a skilled labor force, community colleges, world-class research universities, a predictable and stable regulatory regime, adequately capacitated infrastructure, and new energy sources.”
According to the report, the U.S. has been the world’s largest recipient of FDI since 2006 and current stocks total $2.6 trillion, with inflows of $1.5 trillion since 2006 alone. The manufacturing sector draws a considerable share of FDI, led by pharmaceuticals, petroleum and coal products. Outside manufacturing, wholesale trade, mining, non-bank holding companies, finance and insurance, and banking receive the greatest shares of foreign investment. FDI comes mostly from a small number of industrial countries, with Japan, Canada, Australia, Korea and seven European countries collectively accounting for more than 80% of new FDI in the U.S. since 2010. Flows from emerging economies like China and Brazil are still small but are growing rapidly.
The report also documents the benefits of FDI to the U.S. economy. Value added by majority-owned U.S. affiliates of foreign companies accounted for 4.7% of total U.S. private output in 2011. These affiliates represent 4.1% of private-sector employment, 9.6% of U.S. private investment and 15.9% of U.S. private research and development spending. Employment at these companies was more stable than overall private-sector employment during the 2008-09 recession and subsequent recovery, and as a result their share of total U.S. manufacturing employment rose from 14.8% in 2007 to 17.8% in 2011. Compensation at U.S. affiliates has been consistently higher than the U.S. average over time for both manufacturing and non-manufacturing jobs.