Asian FDI in the United States
This is one of eleven essays in the “2014 Asia-Pacific Watch List.”
By Sonia Luthra
December 19, 2013
As Asian countries look to maintain their high levels of economic growth, the United States could become a much greater part of the region’s investment plan. This should be very welcome news to the U.S. marketplace. The U.S. share of global FDI has dwindled over the last decade, from 37% in 2000 to 17% in 2012. While the United States remains a magnet for investment, the advantages it offers have diminished somewhat due to growth in emerging markets. In the coming year, a stronger U.S. economy, new policies, and greater integration with the Asia-Pacific may help return the tide of foreign investment to the United States, particularly from Asia.
Asia is no stranger to investing in the United States. The region already provides a significant portion of incoming FDI, with Japan and South Korea being among the largest foreign investors, but there is still significant opportunity for growth. Over five years after the global recession started, the U.S. economy is growing at a faster than predicted pace. The United States is also in the late stages of negotiating the Trans-Pacific Partnership agreement with twelve other countries, an agreement that will cover 40% of global GDP and remove many trade and investment barriers.
Asia is likewise primed to increase its investment in the United States. It survived the 2008–9 economic recession in much better shape than other regions and has the highest savings rate in the world, creating an abundance of capital that has not been absorbed domestically. Affiliates of Asian companies have an outsized impact on the U.S. marketplace, fostering innovation, investing in the economy, and creating jobs that pay higher than average wages.
President Obama has made the case that increased FDI is necessary for U.S. economic growth, and he recently expanded SelectUSA, a federal initiative to highlight investment opportunities in the United States. Additionally, as midterm elections loom, officials at all levels of government will be eager to demonstrate that they can draw investments and jobs to their localities, including from Asia. Yet as potential FDI from Asia increases, there is likely to be greater scrutiny of many deals, with a focus on potential national security risks. This is particularly true of investments from China and other countries where the state has a heavy hand.
The U.S. Congress will also once again take up comprehensive immigration reform, which would likely include provisions making it easier for companies to bring in high-skilled workers. This is attractive to foreign companies, particularly the outsourcing giants from India, which believe that the current policy has discriminatory provisions, such as those related to H-1B and L-1 visas. During the impasse on immigration reform, some of these companies have been building up operations in Mexico and other countries with friendlier visa policies, thereby undermining U.S. investment targets.
U.S. policymakers at all levels should work to overcome bureaucratic roadblocks to increasing potential investment from Asia and move forward on critical issues such as visa reform and finalizing the Trans-Pacific Partnership. Increased FDI from Asia will not only help the domestic economy grow but also strengthen bilateral ties with key partners in the region as the United States implements its rebalancing strategy.
Sonia Luthra is Assistant Director for Outreach at NBR, where she leads NBR’s outreach to Congress, engagement with the corporate community, and media relations.