Foreign Direct Investment in the US in 2016 | Free Essay Example

Foreign Direct Investment in the US in 2016

Words: 566
Topic: Business & Economics

The article “Foreign Direct Investment in the United States” by Michael Cortez opens with a brief introduction to the report’s contents. It describes how the report is based on the data provided by the Bureau of Economic Analysis. All of the collected data is separated into three distinct groups, with connections to various elements of foreign direct investment. The first is focused on international transactions and data on direct investments. The second concerns operational and financial data of United States affiliates of foreign firms. This group includes information on both “majority” and “minority” affiliates. The last group includes only new foreign direct investments. The introduction concludes with a statement that all three groups would be examined in the report.

The next section is focused on the United States’ inbound foreign direct investment. The first half of this section is dedicated to overall trends and country-level data. The article describes how foreign direct investment in 2016 was $3.7 trillion on a historical-cost basis, $6.6 trillion on a market value basis, and $4.4 trillion on a current-cost basis. To assist the reader, the authors present a brief explanation of these three accounting methods in a separate text box. Only the historical cost is usually considered. According to the report, manufacturing, banking, finance, and insurance were the most common industries to receive foreign direct investment in 2016. The changes in investments between the years show that the strength of foreign direct investment remained high at $457.1 billion. This number is not as high as in 2015 but is expected as it almost doubled in 2015. Other figures show that the majority of investments came from only a few advanced companies. By country, Luxembourg and Switzerland are the largest sources of foreign direct investment in recent years. Historically, Japan had the highest foreign direct investment in the United States. However, it has declined in recent years.

The second half of the section is dedicated to industry-level data. The article states that the manufacturing sector consistently brought foreign direct investment into the country. The trend continued in 2016 and accounted for $1.5 trillion, which makes up 41 percent of all investments. Pharmaceutical manufacturing attracted a large number of investments in 2016 and made up 32.5 percent of all manufacturing investments. Petroleum-based industries made up 7.8 percent. Transportation equipment manufacturing made up 9.4 percent. The non-manufacturing industry also grew to $2.2 trillion.

The next section of the report is focused on the majority-owned United States affiliates of foreign firms. The report states that affiliates employed 6.8 million United States citizens in 2015, which was an increase from the previous year. Thirty-six percent of all affiliate jobs were in the manufacturing industry, which made up 20 percent of all United States manufacturing. Other industries that involved affiliates of foreign firms are administration, support, and waste management sectors. Wages at these jobs averaged at over $79,000 per employee in 2015.

The last section is dedicated to new investments in the United States economy. The report states that new investment is estimated at a total of $7.7 billion. $5.6 billion was spent on an expansion of existing affiliates. Foreign investments spent on acquiring new companies in the United States were $365.7 billion in the United States. The real estate industry received the largest amount of investments in 2016. The section ends with a statement that the majority of investments came from developed economies and China.