During this year’s political campaigns, we’ve heard a lot of talk about jobs moving overseas due to trade agreements or other factors. But we hear nothing about jobs created by foreign companies choosing to invest and build in America.
The United States is the world’s largest host of foreign direct investment, or FDI – meaning investment in bricks and mortar, such as factories, distribution centers, and office buildings; and investment in large shares of American companies’ equities.
The accumulated value, or “stock,” of such investment surpassed $3 trillion in 2015, about one-fifth of the world’s total. (Europe as a whole attracts more.) Leading investors in America are from the United Kingdom, Japan, Canada, Germany, and France.
According to the Organization for International Investment (ofii.org), manufacturing tops the list of total FDI stock in America, followed by finance and insurance, and wholesale trade. In the manufacturing sector, the biggest share is in pharmaceuticals, medicines, and other chemicals, with transportation equipment – mostly autos and auto parts – coming in second.
Foreign companies choose to invest in America for many reasons. A big motivator is to gain direct access to the world’s largest and wealthiest consumer market. It costs a lot of time and money to ship goods across oceans and continents, and bad weather or labor strikes (as in California’s seaports in 2015) can wreak havoc with production schedules or getting goods to market in time for big holidays.
Foreign companies also view America as a good place to invest for other reasons. Our overall climate for doing business is seen as stable and predictable. Our legal system is solid and generally fair, which helps with enforcing contracts, patents and copyrights, and broader property rights. We have a skilled and flexible labor force. And our market is generally open, which makes it easy to source goods and services from the best or lowest cost supplier.
U.S. subsidiaries of foreign companies employ over 6 million American workers, including in 2.4 million manufacturing jobs – about 20 percent of America’s manufacturing workforce. Those jobs are spread throughout the country, including small numbers in Montana with such firms as Siemens power generation, Shell oil and gas, Johnson Controls, and others.
During a recent trip to the Midwest, I took the opportunity to tour the Toyota Motor Manufacturing plant in Georgetown, Kentucky, not far from Louisville. It was the third auto production facility I’ve visited and – given the long passage of time since my last visit to a GM plant in Baltimore – by far the most automated.
Robots were visible throughout the plant, handling dangerous or injury-prone jobs such as welding and lifting engine blocks into place inside chasses. Driverless, self-guided vehicles also coursed through the facility, following magnetic tracks to deliver parts to various sections of the long assembly line.
Toyota says its Kentucky plant is the largest integrated auto production facility in the world – producing not only cars, but also engines and many parts. That said, the plant still sources parts from hundreds of independent producers, many of them based in the region.
Despite the high automation, I was surprised to learn that this Toyota plant employs 8,000 full-time workers in two shifts on the manufacturing side, 2,000 part-time workers, and 1,000 contract employees working as tour guides and other ancillary jobs.
Like many foreign manufacturers, Toyota has located its production in America’s South, where land, labor, and other costs often are lower than in the upper Midwest, which has experienced the loss of many manufacturing jobs – many of them unionized.
There’s also no doubt that the value of America’s direct investment and jobs created overseas exceed the investment value and number of jobs created by foreign companies in America.
But attracting and keeping investment from leading companies throughout the world strengthens our economy and job base. U.S. subsidiaries of foreign companies account for about six percent of private sector production and more than one-quarter of U.S. exports. They pay 14 percent of federal corporate income taxes.
Despite America’s appeal as an investment location, U.S. subsidiaries of foreign companies express many of the same concerns about the investment climate as wholly American firms, with our tax system and regulatory environment topping the list. They also worry about anti-foreign rhetoric in our political discourse and what that might mean for the future investment climate.
As I’ve said before, important tasks await our next president and Congress to help ensure America’s continued attractiveness as a place for doing business and creating jobs. Continued stalemate will hurt us all.