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Foreign direct investment (FDI) in the United States

FDI in Figures

According to UNCTAD's 2021 World Investment Report, FDI flows to the U.S. declined by 40%, from USD 261 billion in 2019 to USD 156 billion in 2020, mainly due to a reduction in reinvested earnings. The U.S. FDI stock in 2020 reached USD 10,802 billion. FDI Inflows decreased significantly in finance (-45%) and wholesale trade (-87%), while they increased in chemicals (22%). Investments by European multinationals fell by 15 % and those from Asia by 53 %. The drop in corporate profits directly impacted reinvested earnings, which fell to USD 71 billion - a 44% drop from one year earlier. Moreover, equity investments declined by a fifth, as reflected in the decline in cross-border M&A and announced greenfield investments. Cross-border M&A sales of U.S. assets to foreign investors plummeted for the fourth consecutive year (by 36%, to USD 100 billion), especially in the primary sector (by USD 18 billion to USD -2.5 billion) and manufacturing (-39%). However, the country remained the world’s largest recipient of FDI (followed closely by China), thanks to its large consumer base, a predictable and transparent justice system, a productive workforce, a highly developed infrastructure and a business environment that fosters innovation. According to data from the U.S. International Trade Administration, almost 8 million jobs in the country are directly supported by FDIs, with USD 71.4 billion of investments being directed towards R&D activities. The main investing countries in the U.S. are Japan, Canada, Germany, the United Kingdom, Ireland and France. Most of these investments are in manufacturing, financial and insurance activities, and trade and maintenance. By U.S. state, Texas received the largest investment, with expenditures of USD 18.6 billion, followed by California (USD 17.8 billion) and New Jersey (USD 14.1 billion). The latest data available from OECD shows that in the first semester of 2021 FDI inflows to the U.S. totalled USD 149 billion, tripling the level reached in the same period one year earlier (when investments stood at USD 49.4 billion).

According to the latest World Bank's Doing Business report, the United States ranks 6th out of 190 countries for the quality of its business climate, gaining two spots compared to the previous edition. The country remains the world's leading economic power, the largest international financial centre, and the third-largest country in the world in terms of population. The United States is one of the countries with the best regulatory performance in paying taxes. Starting a business is now easier (online filing of the statement of information for limited liability companies) and enforcing contracts too (electronic filing and electronic payment of court fees). On the down side, there are the increasing inequalities and the polarised political landscape, as well as a high level of household debt. Furthermore, the Foreign Investment Risk Assessment Modernization Act (FIRRMA) significantly expanded the review authority of the Foreign Investment Commission (CFIUS) on the grounds of national security, a matter that has been seen as one of the major causes of the drop in Chinese investments towards the U.S. in recent years (as many Chinese investing companies are state-owned).

Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 225,108150,828367,376
FDI Stock (million USD) 9,362,94210,813,50713,619,023
Number of Greenfield Investments* 2,0151,6411,671
Value of Greenfield Investments (million USD) 101,21067,16185,936

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors United States OECD Germany
Index of Transaction Transparency* 7.0 6.5 5.0
Index of Manager’s Responsibility** 9.0 5.3 5.0
Index of Shareholders’ Power*** 9.0 7.3 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in the United States

Strong Points

The United States' strong points include:

  • The United States offers the largest consumer market on earth with a GDP of $23 trillion and 333.9 million people.
  • The US has the first world economy, solid and performance in various sectors
  • A dominant position in R&D
  • A flexible and reactive employment market
  • A very good quality of national statistics
  • 70% of public debt held by Americans
  • The American workforce has a comparatively high level of qualifications and is considered to be one of the most productive and innovative in the world
  • The dollar is central to the world economic system
  • Notably thanks to the shale gas, the country is on his way to energetic autonomy  
  • The development of regional ‘clusters’ (collections of companies in the same activity sector in a geographic area) is very attractive to foreign investors
Weak Points

Weak points for FDI in the US:

  • The US market is very competitive. Consumers are accustomed to have many choices and are not necessarily brand loyalists
  • A high number of Americans are unemployed and outside the employment market
  • A decreasing productivity
  • High public debt
  • Polarised political landscape
  • Strong socio-economic disparities
  • Infrastructure network is partially in decay
  • A risk of explosion of the student loan bubble
  • Strong dollar increases the trade deficit
Government Measures to Motivate or Restrict FDI
The US is the world's largest recipient of foreign direct investment (FDI). The US government policies on taxation and regulation offer foreign investors wide freedom. Nevertheless investments controlled by foreign governments may be subject to restrictions.

Foreign investment is reviewed by the Committee on Foreign Investment in the United States (CFIUS) to consider national security risks that may be present in a foreign investment in a US business. In 2018, Congress passed, and the President signed into law,  the Foreign Investment Risk Review Modernisation Act (FIRRMA) which aims to modernise and reinforce the Committee of Foreign investments (CFIUS) in order to watch investments that may cause problems for the national security of the United States. FIRRMA was finally adopted in February 2020. Until the adoption of FIRRMA, there was no concept of a mandatory filing for any acquisition or investment (controlling or non-controlling). FIRRMA established the requirement of a mandatory filing for investments in 27 specific industries (pilot programme industries) involving so-called ‘critical technologies’, “critical infrastructure” and “sensitive personal data”.
In October 2017, Congress also adopted the United States Foreign Investment Review Act which will allow the Department of Commerce to examine the economic effects of certain foreign investments. Certain sectors are particularly targeted because they are regarded as strategic for the US. And FDI coming from certain countries is being more carefully screened. More information on these decrees is available here.

SelectUSA is a program led by the U.S. Department of Commerce that facilitates and promotes job-creating business investment into the United States. For more information about FDI incentives, click here.
Bilateral investment conventions signed by the United States
The U.S. is a signatory to 47 conventions. The UNCTAD website allows you to visualise and download the list of conventions signed by the United States.

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Latest Update: January 2023

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