Direct Foreign Investments in USA, Essay Example

The British have the largest direct investment  holding in the USA with Netherlands in the second place.  As both countries are in the European Union (EEC) the combined holding of the EU countries is reported as being around 54%. Japan holding around 21% and the remaining 25% spread around other countries in the world (1990 Statistics) (Ott).  At the end of 1990 it was recorded that around 60% of foreign assets in the United States of America were owned by foreign governments.  In 1987 Eric Rosengten compiled  statistics showing the acquisition of US companies. i.e. under foreign ownership or direct investment, was Britain being  the largest [640], Canada.  [435], Germany.  [150] and France [113].

The attraction of investing in the USA has historically been due to the fact that there are no restrictions on the movement of labor or capital.  The US has attracted a high number of professional migrants from Europe, owing to better pay and working conditions and the ability to  improve the quality of life by moving to the US.  In the 1980s the US sold off a lot of foreign assets in order to invest in building so domestic economy.  The UK also attracts a lot of foreign investment, because it is a wealthy consumer base and spent a vast amount of consumer goods.  Foreign investment is good for the USA, and people in general terms are not too fussy with the capital injection comes from.  It has defects of increasing wages and salaries, raising the levels of output, generating income and wealth and improving overall productivity.

Statistics in 2004 ( See Fig 2 above)  (Jackson).  Indicated that there was about $100 billion of foreign investment into the USA.  “This investment having doubled on that of the previous year 2003.  In the UN world investment report, global foreign direct investment flows dropped by 41% to 2001 and 21% in 2002 pages slow economic growth around the world”  (Jackson).  In 2004 there was a decline in the amount of direct foreign investment into the USA.  This was not just the USA alone, but a trend experienced by other countries.  In 2005 it was the first time that FDI into the UK was higher than that of the USA.,  With a quoted 61% more investment into the UK.  Toyota has topped the number of corporate investors with 183 project recorded between 2002 to 2005.  IKEA, Metro and Siemens were also high performers.

2005 the number of projects invested to the USA created 1.5 5 million jobs and contribution $1.2 trillion in investment.  Since 2005 there’s been a gradual time, and this seems to center around the following industries through it, beverages, tobacco, chemicals, plastics and rubber.

The amount of FDI from Japan has dropped with hundred 83 fewer projects reported in the first half of 2005.  Canada should be raising its profile as an important source market with a market target locator of USA, China and Mexico. (OCO Consulting)

USA has traditionally been strongest in the areas of transport, ICT and financial services.  Nevertheless, these groupings have declined by 41%, 35% and $.55 respectively.  New England experienced one of the biggest percentage drop to 2005.  [72%].  Equally the Southeast USA seek to express the largest drop in the number of projects from 97 to 49 between 2002 to 2005. ” World foreign direct investment (FDI) inflows in 2006 will reach some US$1.2trn, a 22% increase over the 2005 total of US$955bn, and the first time since 2000 that global FDI will have surpassed the US$1trn mark, according to World Investment Prospects to 2010: Boom or Backlash, released today. The report, published jointly by the Economist Intelligence Unit and The Columbia Program on International Investment (CPII), predicts that FDI flows will rise moderately through to the end of decade to US$1.4trn.”  (Kekic).   The USA, a number of direct competitors in terms of direct foreign investment [FDI] into the country.  Figure 5 provides an illustration of this based upon the opinion of three major competitors.  It was interesting to see that China media, both emerging economic superpowers, are seen as the prime threat.  Canada is also creeping up in the ranks but is perceived as less of a threat because of Canada’s ownership in the US industry companies, and a strong alignment with US business interests.   China and India both show a strong middle class that is driving up consumer spending and the need for more government spending on infrastructure investment.  ” For the foreseeable future, multi-national corporations will likely continue to invest in building capability and capacity to service these high population markets. I did find the inclusion of Canada and Mexico as a healthy reminder that Brand America continues to compete with our NAFTA partners”  (Burghard Group).

The Burghard group also conducted research into what was the perceived barriers of FDI for the USA.  These 2006 statistics are very revealing, as shown in Fig 7.  Cost comes over as the biggest factor in all three individual contributions.  Regulatory fear being second.  In 2010 we have now seen this play out a little more with the financial system collapse but the final statistics are not yet generally available.

Works Cited

Burghard Group. Barriers to U.S. FDI Inflow Share Growth. 2010. 6 5 2005 <http://strengtheningbrandamerica.com/blog/?p=259>.

Jackson, James K. Foreign Direct Investment in the United States: An Economic Analysis. Report to Congress. Washington DC: CRS, 2005.

Kekic, Sheila Allen Laza. Global FDI Set to Surge Past US$1trn in 2006, Despite Fears of Backlash. 5 9 2006. 6 5 2010 <http://www.unglobalcompact.org/newsandevents/news_archives/2006_09_04.html>.

OCO Consulting. Attracting FDI to the USA. Conference Paper. Chicago: OCO, 2005.

Ott, Mack. Foreign Investment in the United States. 1993. 6 5 2010 <http://www.econlib.org/library/Enc1/ForeignInvestmentintheUnitedStates.html>.