For more than half a century, the United States has led international efforts to reduce restrictions on foreign investment. In part, these efforts are related to a general commitment to open markets and to the free flow of international capital as an important component in economic development. At the same time, the United States is the largest foreign direct investor in the world and also the largest recipient of foreign direct investment. By year-end 2011, foreign direct investment in the United States had reached $2.6 trillion and U.S. direct investment abroad had reached $4.1 trillion, when direct investment is measured at historical cost. This dual role means that globalization, or the spread of economic activity by firms across national borders, has become a prominent feature of the U.S. economy and that through direct investment the U.S. economy has become highly enmeshed with the broader global economy. The globalization of the economy also means that the United States has important economic, political, and social interests at stake in the development of international policies regarding direct investment. With some exceptions for national security, the United States has established domestic policies that treat foreign investors no less favorably than U.S. firms. In addition, the United States has led efforts over the past 50 years to negotiate internationally for reduced restrictions on foreign direct investment, for greater controls over incentives offered to foreign investors, and for equal treatment under law of foreign and domestic investors. In light of the terrorist attacks on the United States on September 11, 2001, however, some Members of Congress have been reexamining some elements of this open-door policy and have argued for greater consideration of the long-term impact of foreign direct investment, especially where that investment takes the form of an acquisition, a merger, or a take-over of an existing U.S. company. In particular, these concerns have centered around the impact of such investments on the structure and the industrial capacity of the economy, and on the ability of the economy to meet the needs of U.S. defense and security interests, including a terrorist attack. As a result of these concerns, in 2007 Congress changed the way foreign direct investments are reviewed through P.L. 110-49 , the Foreign Investment and National Security Act of 2007. Through P.L. 110-49 , Congress strengthened its role in reviewing foreign investments by enhancing its oversight capabilities. There is no precise way, however, to estimate the exact dollar amount for the economic costs and benefits of national policies that attempt to direct or restrict foreign direct investment for national security concerns. Also, there is no way to determine if foreign investment policies are implemented to enhance national security or to engage in a form of economic protectionism. In some cases, other policy tools may well be preferred over intervening in the foreign investment process. Foreigners invested $234 billion in nominal terms in U.S. businesses and real estate in 2011, according to data published by the Department of Commerce. As Figure 1 shows, this represents a 14% increase over the $155 billion invested in 2010. Investments abroad by U.S. parent firms increased by 28% in 2011 to $419 billion, up from the $328 billion they invested abroad in 2010. The increase in foreign direct investment flows mirrors a rebound in global flows following the sharp drop in direct investment flows in 2009 and 2010. The cumulative amount, or stock, of foreign direct investment in the United States on a historical cost basis rose from $2.26 trillion in 2010 to about $2.55 trillion in 2011. This marked an increase of 12.5%. The Department of Commerce does not attempt to deflate the annual nominal amounts for direct investment with a specific price deflator. Instead, the department publishes alternative estimates based on current cost and market value to provide other measures of the value of direct investment. Foreign direct investments in the U.S. manufacturing sector as a whole in 2011 were higher than in 2010 and accounted for nearly half of the overall increase in foreign direct investment in 2011. Foreign direct investment in the banking, finance, retail trade, and professional services all increased in 2011, compared with investments in 2010. In comparison, investments were down in the wholesale trade, real estate, and information sectors. Data for the first two quarters of 2012 indicate that foreign direct investment in the United States is down about 41% from the amount recorded in the comparable period in 2011. Such investments may well continue to lag behind similar investment in 2010 in the second half of the year if the rate of economic growth stalls. New spending by U.S. firms on businesses and real estate abroad, or U.S. direct investment abroad, although substantial, fell sharply in 2009 compared to 2008. Net investments fell from $332 billion in 2008 to $221 billion in 2009, according to the Department of Commerce. As indicated in Figure 1 , a drop in U.S. direct investment abroad that occurred in 2005 reflects actions by U.S. parent firms to reduce the amount of reinvested earnings going to their foreign affiliates for distribution to the U.S. parent firms in order to take advantage of one-time tax provisions in the American Jobs Creation Act of 2004 ( P.L. 108-357 ). According to the U.N. World Investment Report , global foreign investment flows reached $1.5 trillion in 2011, a 16% increase over the amount recorded in 2010 in 2011, as indicated in Table 1 . The growth in foreign investment flows reflects higher profits by multinational corporations and an increase in the rate of growth in developing countries. In 2009, global foreign investment flows dropped by 33% from that recorded in 2008, reflecting the financial crisis and drop in economic growth in most developed economies. The developed economies traditionally have absorbed about two-thirds of global direct investment flows, but this share dropped to half between 2009 and 2011, reflecting the differential impact of the financial crisis which affected the developed economies more than the developing economies. Africa continues to receive the smallest share, generally less than 5%, with Latin America receiving about 14% and Asia getting close to one-third during the 2009-2011 period. A study on investment trends by the Organization for Economic Cooperation and Development (OECD) reported that direct investment outflows reached a record $1.8 trillion in 2007, in part due the decline in the value of the dollar relative to the Euro, which results in an upward valuation in dollar terms in investments that originally had been priced in Euros. Globally, the total, or cumulative, amount of foreign direct investment surpassed $20 trillion in 2011 (the latest year for which detailed data are available), as indicated in Figure 2 . Nearly three-fourths of this amount is invested in the most economically-advanced developed economies. The developed economies as a group not only are the largest recipient of investment funds, but they are also the largest source of those funds. Similar to the United States, those countries that are the largest overseas investors also tend to be the most attractive destinations for foreign investments. The clear exception to this general observation is Japan, which had invested $962 billion abroad through 2011, but had received $226 billion in investment inflows. Among the developing economies, Asia, which includes China, had accumulated $4.0 trillion in direct investment, followed by Latin America (2.05 trillion) and Africa ($570 billion). By the end of 2010, there were about 2,300 U.S. parent companies with nearly 27,000 affiliates operating abroad, as Table 2 indicates. In comparison, foreign firms had about 6,000 affiliates operating in the United States. U.S. parent companies employed nearly 23 million workers in the United States, compared with the 13.3 million workers employed abroad by U.S. firms and the 5.8 million persons employed in the United States by foreign firms. Although the U.S.-based affiliates of foreign firms employ less than half as many workers as the foreign affiliates of U.S. firms, they paid about 80% of the aggregate employee compensation in the United States as did the U.S. affiliates operating abroad. The affiliates of foreign firms operating in the United States had a higher value of gross product than did the foreign affiliates of U.S. parent companies. The foreign affiliates of U.S. firms, however, had total sales that were nearly twice as high as those of the U.S. affiliates of foreign firms. The foreign affiliates of U.S. firms, however, paid 10 times more in taxes to foreign governments than the affiliates of foreign firms operating in the United States paid in taxes to the U.S. government. U.S. multinational companies also play an important role in the U.S. economy. According to the total output of U.S. parent companies, or gross product, they produced $2.9 trillion in goods and services in 2010, up 21% from the $2.4 trillion dollars they produced in 2009. This amount comprised about 21% of total U.S. private industry gross product, a share of total gross product of U.S. parent companies that has remained fairly consistent since the early 1990s despite significant changes in the U.S. economy as a whole. The data also demonstrate the impact the improvement in the U.S. economy after 2002 had on the operations of U.S. multinational companies. Since the end of World War II, the United States has led efforts internationally to reduce official government restrictions on foreign investment. One prominent exclusion to these efforts and to commitments incorporated in international treaties is the right of nations to protect their own "essential security interests." The terrorist attacks of September 11, 2001, combined with the growing role of state-backed investors, or sovereign wealth funds (SWFs), has spurred a number of nations to reconsider their national security interests relative to inward investment and to consider placing additional restrictions on foreign investments in areas considered to be an essential security interest. For the most part, such restrictions apply to mergers, acquisitions, and takeovers of existing firms and not generally to new establishments.