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Foreign Direct Investment in the US in 2012
Introduction
Foreign direct investment is usually defined as ownership or control of 10% or more of the voting securities of a United States business by a foreign person or company, as well as equivalent investments into a US-owned company. The presented article analyzes the changes in foreign direct investment in the United States over the recent years. This paper will provide a summary of the main points of the article.
Summary
The first section of the article is dedicated to recent investments into the United States economy. It states that in 2012, foreign direct investments equaled $166 billion, while in 2013 the investments were estimated to be $147 billion. The paper is dated 2013, and at the time, the exact sum of foreign investments was not clear. The decrease in the estimate is blamed on the decrease in global flows in 2012. The author also states that the investment from the United States to foreign countries during 2012 was approximately $388 billion. Nonresidential foreign investment recorded a fall in 2012 to 11%, which fell from 20% in 2009. The decrease of foreign investment is tied to a high reduction of net equity investment and intercompany debt. Equity values reduced from 40% in 2011 to 35% in 2012. This section concludes with the notion that investment spending by developed economies makes up the vast majority of all foreign direct investment, specifically 95% of it. The manufacturing sector is the main target of those investments with 34% of all of them going directly to it. On the second place are banks and financial organizations with 21%. The third place is taken up by retail and wholesale industries with 13%.
The second section is short and is dedicated to acquisitions and establishments. The article points out that foreign direct investment can be tracked through the transactions of foreign persons in the acquisition of existing United States companies, as well as the establishment of new firms by foreign agents. New investments are shown to be the preferred option due to their benefit of adding new employment opportunities for the local job market. Acquisitions, on the other hand, do not add any new positions for the employment market to fill. The value of new foreign investments is predominantly in the acquisitions with 90% of all funding being dedicated to them. The article states that annual reports on foreign acquisitions are no longer being published by the Department of Commerce.
The last section of the article is about economic performance. The article examines the data from 2011 and shows that less than 4% of the American civilian labor force was employed by foreign firms. Every state had a direct investment present in it, but the number of employees ranges drastically from 590,000 in California to 6,100 in Montana. The majority of the employees work in the manufacturing sector. They make up 37% of the laborers and earn on average $84,000 every year. Foreign-owned firms tend to have lower rates of return than the United States-owned companies. However, the gap between them is relatively narrow. These two groups of companies are not fully equivalent to each other, and a direct comparison may be inaccurate due to additional factors that foreign-owned firms have to contend with.
Conclusion
Foreign direct investments into the United States play a large role in its economy. The presented article shows that the manufacturing, financial, and retail sectors are the most popular among investors. Acquisitions are also common as opposed to establishments of new foreign companies. Due to a high level of acquisitions, only 4% of the civilian population is employed by foreign firms. It is likely that the situation has changed since the writing of the article, so additional research is required.
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