In a welcome but little noted move, President Biden laid out his administration’s “Commitment to Open Investment” in a statement last month. Nearly every U.S. president over the past 50 years has articulated an “Open Investment Policy” along these lines, and this one was timed to mark the kickoff of the U.S. Department of Commerce’s annual SelectUSA conference, whose goal is to encourage businesses from around the world to invest, build, and hire in the United States.
The president’s statement reads in part:
“We believe that our country – and our world – are safer, more resilient, and more prosperous because of the investment of foreign-owned companies in the United States. As we continue to advance our agenda to revitalize American manufacturing, build an inclusive 21st century workforce, and maintain our competitive edge, the United States welcomes foreign investment.”
The U.S. Chamber couldn’t agree more. Indeed, international investment is a two-way street, with benefits for Americans on both sides of the equation. Keeping the door open to international investment supports economic growth, resilience, and middle-class jobs.
Consider the following facts compiled by U.S. Chamber staff:
- Investment from abroad creates millions of American jobs. U.S. subsidiaries of foreign-headquartered companies employed 7.8 million Americans directly in 2018, reports the U.S. Department of Commerce. For every American directly employed at an international company, investment from abroad supports an additional three jobs at other companies across the United States, reports the Global Business Alliance.
- U.S. companies invest in foreign markets to serve those markets — not as a substitute for domestic production. Overseas sales by foreign affiliates of U.S. multinationals topped $6.7 trillion in 2018, reports the U.S. Department of Commerce. U.S. imports produced by those same affiliates accounted for less than 6% of their total sales. In other words, more than 94% of the production of foreign affiliates of U.S. multinationals is sold outside the United States. Indeed, investing abroad is often the only way U.S. firms can sell services or hard-to-export goods to foreign consumers.
- Investing abroad makes American companies resilient. Even as the Great Recession caused the U.S. economy to shed 7 million jobs between 2007 and 2009, U.S. multinational corporations added 1.3 million American jobs, reports the U.S. Department of Commerce. A similar dynamic held during the Covid-19-related recession as well, with U.S. multinationals retaining and even creating jobs as they helped keep the economy afloat. Operating in multiple markets allows businesses to diversify their risks and makes them less dependent on a single market.
- Earnings from foreign investments help U.S. companies innovate here at home. Revenues earned abroad help underwrite U.S. multinationals’ research and development activities, 85% of which are performed in the United States, reports the U.S. Department of Commerce. U.S. multinationals’ R&D expenditures topped $380 billion in 2018.
- U.S. multinational companies are overwhelmingly focused on the United States. While 95% of the world’s customers live outside the United States, 66% of these firms’ employment, 74% of their value-added, and 79% of their capital expenditures were in the United States in 2018, reports the U.S. Department of Commerce.
- Most U.S. investment abroad goes to developed countries with high wages, labor standards, and environmental protections. Far from a race to the bottom, U.S. companies have directed nearly 70% of their investments abroad to Europe, Canada, Japan, and other high-income nations, reports the U.S. Department of Commerce.
- Companies that invest abroad are great employers here at home. Not only do U.S. multinational companies employ more than 28 million Americans, the compensation they offer is nearly 30% higher than the U.S. private sector average, reports the U.S. Department of Commerce.
“Offshoring” is a trivial contributor to the loss of U.S. jobs. According to reports by the Bureau of Labor Statistics, the movement of work to overseas locations accounted for less than one-half of one percent of all U.S. jobs lost in “mass layoffs” in 2011 (when it stopped collecting these data). According to a report by Ball State University, “almost 88 percent of job losses in manufacturing in recent years can be attributable to productivity growth.” Meanwhile, employment in U.S. manufacturing has expanded modestly in recent years.
- America’s global companies represent one of the biggest markets in the world for U.S. small and medium-sized businesses. U.S. parents of multinational corporations purchase more than $5.3 trillion in intermediate inputs from other U.S. companies annually, according to a report by Dartmouth’s Matthew Slaughter.
- International investment is a powerful driver of U.S. exports. U.S. multinational corporations generated more than 50% of all merchandise exports in 2018, with their foreign affiliates purchasing over one-fifth of the total, reports the U.S. Department of Commerce.
Again, the administration’s Open Investment Policy is welcome news. In our view, international investment — with benefits from both inbound and outbound investments — can be a powerful engine of U.S. economic growth and job creation. The U.S. Chamber is committed to continuing to work to secure these benefits for the American people.