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Wednesday, March 3, 2010

Foreign Direct Investment: Current Issues

James K. Jackson
Specialist in International Trade and Finance

The United States is the largest recipient of foreign direct investment in the world and the largest investor abroad. As a result of this dual role, the United States has led negotiations in various international forums to remove restrictions on foreign investment and other market-distorting measures to maximize the benefits of such investment. In 2006, foreign investors spent $184 billion investing in U.S. businesses and real estate, the highest amount foreign investors have spent since 2000. 

Within the economy, foreign direct investment is sparking a mixed reaction. Although the environment for foreign investors is still friendly, some Members of Congress and some in the public argue that the events of September 11, 2001, raise new concerns about the nation's economic security that challenges the traditionally open policy the United States has had toward foreign investment, particularly foreign investment in critical industries and in sectors that are vital to homeland security. As part of these concerns, Congress is considering legislation that would revamp the Committee on Foreign Investment in the United States (CFIUS), an interagency committee housed in the Treasury Department that has served Presidents since 1975 as the chief federal government organization responsible for overseeing the national security implications of foreign investment in the economy. In contrast to these actions, the International Trade Administration of the Department of Commerce announced on March 7, 2007, that it was creating a new initiative: Invest in America. The initiative appears to depart from the longstanding U.S. policy of official neutrality toward inward and outward direct investment by having the federal government actively internationally promoting the United States as a foreign direct investment destination. It also will serve as the primary U.S. government mechanism responsible for managing inward investment. 

This report presents an overview of current issues related to foreign direct investment in the economy and the development of U.S. policy toward inward and outward direct investment. This report also assesses the role of foreign direct investment in the economy and the costs and benefits of direct investment.

Date of Report: February 11, 2010
Number of Pages: 25
Order Number: RL33984
Price: $29.95

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