EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL OF ECONOMIC ADVISERS

U.S. INBOUND FOREIGN DIRECT INVESTMENT 

JUNE 2011 

 
EXECUTIVE SUMMARY

The United States welcomes the investment and the jobs supported by the U.S. affiliates of 

foreign-domiciled companies. These companies either build plants and other facilities in the 

United States, or they provide additional capital to businesses that already operate domestically. 

Their businesses employ millions of American workers and produce goods and services for sale 

throughout the United States and the world. 

The key findings of the report include the following: 

 Majority-owned U.S. affiliates of foreign-domiciled companies play an important role in 

crucial areas of U.S. economic activity. In the most recent year for which comprehensive 

data were available, economic contributions of U.S. affiliate activity included: 

o Producing $670 billion in goods and services, accounting for nearly 6 percent of total 

U.S. private output – over 42 percent of which is concentrated in the U.S. 

manufacturing sector. 

o Employing 5.7 million U.S. workers, accounting for 5 percent of the U.S. private 

workforce and over 2 million workers (13 percent) in the U.S. manufacturing sector. 

o Investing $188 billion in capital expenditures, accounting for over 11 percent of total 

U.S. private capital investment. 

o Investing $40.5 billion in research and development, accounting for over 14 percent 

of total U.S. private investment in research and development. 

o Exporting more than 18 percent of total U.S. merchandise exports. 

 The United States continues to receive the most foreign direct investment (FDI) of any 

country in the world, helping to support millions of high-quality, well-paid U.S. jobs. 

 In 2010, U.S. inbound FDI rebounded sharply and increased by 49 percent from the 

economic crisis level it reached in 2009. 

The United States’ open investment climate allows it to rank highly on cross-country and surveybased measures of FDI openness indicating that the United States remains a pre-eminent 

destination for investment in productive economic activity. 
 1 

I. INTRODUCTION

The United States welcomes the investment and jobs supported by the U.S. affiliates of 

foreign-domiciled companies. These companies play an important role in the U.S. economy, as 

they build plants and other facilities or provide additional capital to businesses that already 

operate locally in the United States. They invest in knowledge creation and fund research and 

development. 

The open nature of the U.S. economy has meant substantial investment over time. The 

United States continues to receive the most foreign direct investment (FDI) of any country in the 

world. U.S. policies and the resulting investment climate rank it highly on cross-country and 

survey-based measures of openness toward FDI. Establishment of the SelectUSA Initiative to 

facilitate additional investment reconfirms the federal government’s ongoing and unwavering 

commitment to an open investment climate. 

II. BENEFITS TO THE U.S. ECONOMY

Inbound foreign direct investment can fund production plants, research and development 

(R&D) facilities, sales offices, warehouses, or service centers. It can take the form of a 

“greenfield” establishment that creates something from scratch or a merger or acquisition of a 

sufficiently large stake in an existing enterprise.1 

U.S. “majority-owned” affiliates of foreign corporations owned $11.7 trillion in U.S. 

assets and had $3.5 trillion in annual sales in 2008, according to the most recently available data 

from the Bureau of Economic Analysis.2 Their value-added production within the United States 

was $670 billion in goods and services, which accounted for 5.9 percent of total U.S. private 

output. These firms employed 5.7 million U.S. workers, accounting for 5.0 percent of 

employment in the U.S. private workforce. 

Inbound foreign direct investment provides a number of benefits to the U.S. economy. 

The U.S. affiliates of multinational companies are typically high-productivity firms that are 

major private-sector contributors to national efforts to innovate and build. Figure 1 indicates that 

U.S. affiliates of foreign multinationals contribute 11.3 percent of total U.S. private investment 

and 14.3 percent of total U.S. private R&D. U.S. affiliates are also well-integrated globally and 

are the source of 18.1 percent of total U.S. goods exports. 

 

1

 Inbound FDI refers to a foreign entity, typically a foreign person or corporation, making an investment in the 

United States that results in an ownership of at least a ten percent stake in a U.S. domestic business entity. 

2

 This section analyzes “majority-owned” U.S. inbound foreign direct investment in 2008 for reasons of data 

availability. The data for 2007 are comparable to the information reported here for 2008. The report does not yet rely 

on the 2009 data because they are not fully available and they also reflect anomalies associated with the global 

economic crisis. Note also that “majority-owned” U.S. inbound foreign direct investment implies a 50 percent 

ownership threshold, which typically is associated with a controlling stake. There are important foreign investments 

in U.S. businesses that involve less than a 50 percent ownership stake. 
 2 

0

2

4

6

8

10

12

14

16

18

20

Output Employment Capital

Investment

R&D Exports

Percent of total 

for U.S. economy

Figure 1. Economic Activities of Majority-owned U.S. Affiliates of Foreign Companies, 2008

Source: Department of Commerce, Bureau of Economic Analysis. 

U.S. affiliate firms make substantial investments in capital equipment and R&D and tend 

to hire and train skilled workers and pay excellent wages. These firms paid out wages and other 

forms of compensation that averaged more than $71,000 per U.S. employee in 2008 (as 

compared to average earnings of $54,000 for full-time annual workers in the economy as a 

whole). 

U.S. affiliates of foreign multinationals are particularly important for the American 

manufacturing sector. Over 42 percent of the U.S. affiliates’ total value-added production was 

concentrated in the U.S. manufacturing sector. Roughly one third of the 5.7 million U.S. 

employees of these affiliates worked in the manufacturing sector. Put differently, the U.S. 

affiliates of foreign multinationals employed 13 percent of the entire manufacturing sector 

workforce in the United States. 

III. U.S. OPENNESS TOWARD INBOUND FDI 

The United States is an extremely open economy with very low barriers to foreign direct 

investment. This is reflected in both the size of the FDI inflows received and in the evidence 

from surveys. 

According to the latest data available across FDI-receiving countries from UNCTAD, the 

United States had the largest annual flow of inbound foreign direct investment of any economy 

in the world in every year between 2006 and 2009. The growth of a number of emerging 
 3 

economies such as Brazil, Russia, India, and China and the ongoing process of their integration 

into the global economy has led to large relative increases in the flows of new foreign direct 

investment making its way to these markets. But this is only in relative terms (Figure 2). 

The United States remains the largest destination for new FDI inflows. This continued 

even during the height of the global economic crisis in 2009 when foreign direct investment 

flows shrank dramatically for almost all countries around the world. Total worldwide FDI flows 

in 2009 were roughly 50 percent less than their 2007 levels. As the economy recovered from the 

recession, inbound FDI in the United States increased by 49 percent in 2010 compared to 2009. 

As Figure 2 also illustrates, in many of the years prior to 2009, the United States welcomed more 

than twice as much new FDI as even a large emerging-market recipient like China. 

0 

50 

100 

150 

200 

250 

300 

350 

2006 2007 2008 2009 2010

Billions of dollars Figure 2. Annual FDI Inflows, Selected Countries

United States

China

Russia

India

Brazil

Sources: UNCTAD and Bureau of Economic Analysis. Non-U.S. data for 2010 are not yet available. 

The vast majority of FDI in the United States stems from firms domiciled in other 

advanced economies. In particular, almost 90 percent of the U.S. inbound FDI flows in 2010 

came from firms domiciled in Canada, Europe and Japan. Only 2.1 percent of the total came 

from firms domiciled in Brazil (1.2 percent), China (0.6 percent), and India (0.4 percent). 

Survey data support the attractiveness of the United States as a place to invest. One 

particular survey of Chinese enterprises conducted jointly by a private-sector organization in 

China, the European Commission, and UNCTAD indicates the United States as the most 

desirable investment location of any major economy in the world.3 

As Figure 3 indicates, at $3.1 trillion in 2009, this U.S. stock of inbound FDI (the 

cumulative investment over time) was nearly three times larger than stocks for each of the next 

largest recipients (France and UK) and more than six times the amount of China’s inbound FDI 

stock ($473 billion). 

 

3

 China Council for the Promotion of International Trade, European Commission, and UNCTAD (2010) “Survey on 

Current Conditions and Intention of Outbound Investment by Chinese Enterprises,” April. 
 4 

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0

0.5

1

1.5

2

2.5

3

3.5

United

States

United

Kingdom

France Germany Brazil Korea India Japan Mexico Russia China

Inbound FDI Stock in 2009,

left axis

FDI Restrictiveness Index

(1 = closed, 0 = open), right axis 

Trillions of dollars Index

Figure 3. Inbound FDI Stocks and FDI Restrictiveness, 2009

OECD average for

FDI Restrictiveness

Sources: FDI Restrictiveness Index is from OECD; Inbound FDI Stocks is from UNCTAD. 

According to the OECD’s Foreign Direct Investment Restrictiveness Index, the United 

States is close to the OECD average of “openness” toward inbound foreign direct investment. 

According to this index, and as illustrated in Figure 3, the United States is much more open to 

FDI than emerging economies like India, Russia, China, and Mexico.4 

IV. CONCLUSIONS

Inbound foreign direct investment has long played an important role in the U.S. economy. 

Foreign companies with operations in the United States invest billions of dollars here. They 

employ millions of U.S. workers and offer higher-than-average levels of compensation. Their 

investments help to modernize the U.S. capital stock, and they are important contributors to the 

U.S. manufacturing sector. Furthermore, evidence from continued high levels of flows of 

inbound FDI, as well as cross-country comparisons and firm-level surveys, reveal that the United 

States has a very open investment climate and remains an attractive destination for investment. 

 

4

 Most of the countries that are ranked as more open than the United States are smaller European countries; for many 

of them, presumably much of their inbound foreign direct investment stems from encouragement and incentives 

resulting from intra-European Union ties.