Policy Documents

Foreign Direct Investment

Matthew Glans –
February 15, 2008

Dear Friend:

 

We live in a global economy. The economic livelihoods of every nation rely on the free movement of money and capital across national borders. A new issue that is emerging on the global economic front is the involvement of foreign companies in the U.S. economy through foreign direct investment (FDI).

Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. FDI plays a strong role in the global economy. It can help provide new opportunities for U.S. businesses, including access to new markets and marketing channels, cheaper production facilities, and access to new technology, products, skills, and financing. According to the U.S. State Department, U.S. affiliates of foreign companies employ 5.3 million workers, paying a higher average wage than U.S.-based companies.

Legislation has been introduced in Congress that would toughen the U.S.'s foreign investment rules, in the name of protecting national security. These new rules encourage protectionism and could hurt the country's ability to acquire foreign investment, a key economic engine.

As you work to stay on top of this key issue, the following articles may help by providing further information on foreign direct investment and its role in the U.S. economy.

Foreign Investment in the United States
http://www.econlib.org/library/Enc/ForeignInvestmentintheUnitedStates.html
This article, written by Mack Ott for the online Concise Encyclopedia of Economics, examines how foreign direct investment affects the economy and describes the long-term consequences of such investment.

Exon-Florio Reform Could Hinder Investment to the United States
http://www.iie.com/publications/newsreleases/graham-marchick3918.pdf
This news release summarizes a new book written by Edward M. Graham of the Peterson Institute and David M. Marchick of Covington & Burling, who examine the possible negative effects on the U.S. economy of proposed reform of the current foreign investment rules, known as Exon-Florio.

A Misplaced Curb on Investment
http://www.iie.com/publications/opeds/oped.cfm?ResearchID=568
This op-ed, published in the Financial Times in October 2005 and written by Graham and Marchick, examines the economic consequences of toughening rules on foreign investments.

Foreign Direct Investment: Current Issues
http://assets.opencrs.com/rpts/RL33984_20070427.pdf
This April 2007 study, published by the Congressional Research Service, examines the current issues related to foreign direct investment in the economy and the development of U.S. policy toward inward and outward direct investment.

US Keeps up Foreign Investment in Face of Deficits
http://afp.google.com/article/ALeqM5hltXkLVScrwBQPNuULstucnPsEnQ
This January 3, 2008 news article summarizes a report by economists at the New York Federal Reserve, who examined the effects of foreign direct investment on the U.S. economy and its importance in stabilizing U.S. deficits.

U.S. Has No Fear of Sovereign Wealth Funds
http://www.reuters.com/article/governmentFilingsNews/idUSL2417202820080124
This January 24, 2008 news article reports on the Bush administration's reaction to foreign investment.

For further information on the subject, you can visit The Heartland Institute's Web site at www.heartland.org, where you will find information on Foreign Direct Investment available through PolicyBot™, Heartland's free research database.

If you have any questions about this issue please contact Matthew Glans, legislative specialist for insurance and finance at The Heartland Institute at 312/377-4000 or emailmglans@heartland.org.

 

For more information about The Heartland Institute, contact Harriette Johnson, Heartland's media relation manager, at 312/377-4000 or email hjohnson@heartland.org.