Foreign Direct Investment in the United States--The Federal Role
ID-80-24: Published: Jun 3, 1980. Publicly Released: Jun 3, 1980.
- Full Report:
The growth of foreign direct investment in the United States, the Federal Government's efforts to assist the States in attracting foreign investment, and the interstate and international competition for investment are matters which have received considerable congressional attention. GAO reviewed these matters in order to assess the Government's role in foreign direct investment in the United States.
Federal and State laws restrict foreign investment in such areas as aviation, shipping, atomic energy, broadcasting, and mineral development on Federal lands. Proposals for further restrictions were rejected, but legislation was enacted to meet concerns about the lack of information on foreign investment. The Commerce Department gathers data to measure investment flows between foreign sources and the United States and is responsible for monitoring and analyzing the affects of foreign direct investment. However, it has published little analytical work since 1976 and has not systematically collected applicable studies by the private sector. Most States actively seek foreign investments through overseas offices, overseas visits by State officials, and through offering site location assistance and tax, financial, and labor-training incentives. States believe that the Federal role should continue to be limited to facilitating State efforts and maintaining a policy conductive to investment. GAO agrees with the belief of State officials that Federal officials could do more to help identify investment prospects. In implementing U.S. policy, the Commerce Department and U.S. embassy officials may facilitate planned foreign investment, but not promote or attempt to generate interest. Competition among States for investment has led to increased use of investment incentives; and competition between some Canadian provinces and U.S. States has also led to increased incentives. Both countries feel that coordination is needed to ensure acceptance of whatever ground rules are negotiated.
Recommendation for Executive Action
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Recommendation: The Secretary of Commerce, in cooperation with the Interagency Committee on Foreign Investment in the United States, should place greater emphasis on analyzing and publishing studies on the economic impact of foreign direct investment. More emphasis should also be placed on reviewing and collecting similar studies made by the private sector. The Secretary should develop and issue operational guidance on inward investment that encourages the facilitation of State efforts to attract investment by: designating Embassy commercial officers as focal points to support the States overseas promotional efforts; requiring commercial officers to place more emphasis on developing investment leads and furnishing such leads directly to States that request them; and ensuring that the Department's facilitative efforts support the needs of Embassy commercial officers, State domestic programs, and foreign visitors who are considering U.S. investments. Finally, the Secretary should revise its Form BE-13 to provide for identifying the types of investment incentives being received by foreign investors and make periodic studies of investments to determine the costs of such factors as the number of jobs created and capital outlay for the investment.