US Losing Shares of Direct Foreign Investments

Monday, 09 Dec 2013 09:09 AM

By Melanie Batley

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America's share of new foreign direct investment has been shrinking in recent years as emerging markets have for the first time eclipsed developed countries, The Wall Street Journal reports

The United States continues to be the largest single recipient of foreign investment with 12 percent of the world's total. But in a signal of the shifting global competitive landscape, its investment inflows fell 28 percent from 2011 to 2012, and dropped another 22 percent in the first six months of 2013 compared to the same period last year.

"For many firms, it doesn't matter if they're based in Washington state or Mexico City or in Europe or wherever, because communication is so easy," Steve McCorriston, professor at the Britain's University of Exeter Business School, told the Journal.

The change is partially due to a weak macroeconomic landscape, but is also a result of improvements from developing economies in infrastructure, workforce education, and legal frameworks to support investment, according to the Journal.

Meanwhile, America's stagnation may be explained by a lack of ongoing reform of the corporate tax system and trade policy. The U.S. has also been faltering in its negotiations of two major trade pacts, including the U.S.-E.U. accord and an agreement with Asian countries.

But one expert on foreign direct investment, Lindsay Oldenski, assistant professor at Georgetown University's School of Foreign Service, said emerging markets "have a much farther distance to go in terms of liberalizing trade and reducing tariffs. Whereas with the U.S., there is already so much global integration and relatively low tariff barriers."

Related stories:
Democrats Balk Over Obama Seeking Europe, Asia Trade Pacts

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