U.S. officials say all the right things about inward investment. They must also support outbound FDI, which is critically important for U.S. exports, competitiveness and jobs.
By Peter M. Robinson
We were delighted when, in early November, the U.S. Department of Commerce spearheaded a very successful “Select USA Investment Summit” aimed at wooing overseas investors to our shores. But while it was truly heartening to have the Obama administration fully and publicly on board with a strong message that inward foreign direct investment (FDI) is good for the U.S. economy – for U.S. jobs, for our competitiveness, and for our communities – we could still do a lot more. The FDI glass is really only half-full in terms of administration policies, which seem to stress inward investment to the exclusion of outbound FDI by U.S.-based firms. We and the administration need to take a balanced approach to achieve the best results of this new push for FDI.
The Select USA Summit was a fantastic step in the right direction. It was great to have President Obama, Secretaries Pritzker, Kerry, Lew and Perez, plus U.S. Trade Representative Michael Froman and National Economic Council NEC ChairGene Sperling, all sounding a consistent pro-investment message. Leaders from USCIB member companies also spoke, including Andrew Liveris of Dow Chemical,Bill Simon of Wal-Mart USA, Joe Echevarria of Deloitte, Doug Oberhelman of Caterpillar, Bill Black of Fleishman-Hillard and others. They delivered a strong message, and we agree that the U.S. needs to jump into the fray at both the federal and sub-federal levels and compete to make America the most attractive global destination for FDI.
“Sayonara” to investment xenophobia
We are only eight years removed from the Dubai Ports World (DPI) debacle of 2005, when congressmen and senators from both parties sought to out-do each other in demonizing foreign investment in America’s infrastructure. The Bush administration seemed stuck in neutral, unable or unwilling to articulate coherent pro-investment policies. Some may even remember the anti-Japanese paranoia of the 1980s, fueled largely by xenophobia. We’ve come a long way from such narrow-minded thinking.
More encouraging, the real story today is outside Washington – in America’s states, cities, and towns, where inward FDI is planting new “greenfield” manufacturing and services enterprises, and reviving established companies, creating good jobs and fueling economic growth as well as tax revenues and new infrastructure. We are clearly on an FDI roll, and it’s great to have the administration both celebrating it and doubling down to hone America’s investment competitiveness.
But we’re clapping with just one hand. A careful reading of high-level speeches and conference documents from the Select USA Summit suggests an administration still too timid when it comes to outward investment by U.S.-based firms. In today’s globalized, supply chain-driven economy with competition sharper than ever, the feeling I get is that some in the administration and on Capitol Hill still seem trapped in the old, tired “outsourcing/exporting jobs” mindset. U.S. firms, large and small, need to have the option of investing abroad to bolster their global competitiveness and grow good jobs here at home.
Outbound FDI drives exports, jobs, R&D at home
Several recent studies (including from USCIB and from the Peterson Institute for International Economics) show that increased FDI abroad by U.S. firms correlates with increased exports, job creation, R&D expenditures, and tax revenues here at home. Investing abroad is good for the U.S. economy: it’s the only truly viable national strategy for U.S. competitiveness in today’s global economy, in which 90 percent of the world’s consumers and 75 percent of global GDP exist outside U.S. borders. Our businesses need access to local elements of supply chains, to service outlets close to markets, and to key inputs and natural resources. Not investing abroad would force U.S. companies to compete with one hand tied behind their back.
There are numerous ways in which companies and the administration can utilize and support outward FDI, the most effective being agreeing on high-standard bilateral investment treaties (BITs). Far-reaching and inclusive BITs, including one with China currently under negotiation, will provide the groundwork for strong trade in both directions. Shaking hands with our partners on these high-standard treaties – the sooner the better – will give America a big advantage in spurring growth and jobs.
Nostalgia for the “good old days” when U.S. business had no international competitors, when we could make everything in America and ship it to the world, is certainly understandable. But nostalgia can’t drive U.S. economic policy making. We need U.S. economic policies, led by the administration, attuned to today’s economic realities, including the growth of global value chains. These have to include strongly pro-FDI policies – for both inward and outward investment.
Let’s get everyone pulling in the same direction, for consistent pro-investment policies to help American companies and American workers compete around the world. Let’s start clapping with both hands on FDI!
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