Obama encourages foreign firms to make U.S. investments

President Obama on Monday issued an official statement encouraging foreign direct investment in the United States. 

The business community hailed the statement and said it was the first of its kind from a Democratic administration in 30 years.

Obama in the statement vowed to pursue business-friendly policies to increase foreign direct investment.
 
“In a global economy, the United States faces increasing competition for the jobs and industries of the future. Taking steps to ensure that we remain the destination of choice for investors around the world will help us win that competition and bring prosperity to our people. Consistent with our national security and while ensuring a level playing field for American investors, we will do just that,” the White House statement reads.

{mosads}A new report out from the White House Council of Economic Advisers said that in 2010, foreign direct investment increased by 49 percent from the low it reached in 2009, after the financial crisis. The report says more than 5 million jobs have been created by the investment.

The report comes amid some fears that the U.S. has become less hospitable to foreign investment, particularly from China.  

“The president’s statement sends a critically important message to global business, showing the U.S. is open for business and values the high-end jobs the U.S. operations of foreign companies create for American workers,” the Organization for International Investment (OFII), a lobbying group that represents the U.S. subsidiaries of foreign firms, said in a statement reaction to the president.
 
 The White House has launched a program called SelectUSA Initiative to try to market the U.S. as a destination for investment.
 
Council of Economic Advisers Chairman Austan Goolsbee told reporters that Obama has been encouraging FDI through the National Export Initiative, which tried to make it easier for firms in the U.s. to export, such as by paring down on controls on sensitive technology, and by investment subsidies included in the December tax deal.
 
The deal involved the largest temporary investment incentive in U.S. history, permitting businesses to deduct 100 percent of equipment purchases in the 2011 tax year.
 
Goolsbee said FDI could be further encouraged if Congress moved to make the research and development tax credit permanent, approved a National Infrastructure Bank and completed a simplification of the corporate tax code.

He said that FDI could also be upped by approval of a plan to be unveiled soon by Obama to reorganize the economic departments of the executive branch. The Department of Commerce might be expanded into a larger business department that would include the Office of the U.S. Trade Representative and certain functions of the Treasury Department. 

Goolsbee told reporters the U.S. does not favor adding new conditions to foreign investment such as instituting a process that excludes FDI that hurts the U.S. economy.

Currently, investments detrimental to national security can be blocked by the interagency Committee on Foreign Investment in the United States (CFIUS),
 
CFIUS investigations increased from 25 in 2009 to 35 in 2010.

A business source said that international business community had been pushing Obama to issue the statement in order to relieve uncertainty over whether Democrats would embrace policies damaging to FDI.

The Bush administration had issued a similar reassurance after Congress moved to block an investment by Dubai Ports World, which sought to manage six major U.S. ports in 2006, over national security concerns.

{mosads}The source said that CFIUS investigations are increasing in number and duration. Congressional rhetoric last year about adding Buy America provisions to appropriations bills often included foreign-owned U.S. companies, and the administration also used rhetoric about campaign contributions coming from foreign owned companies, the source said.

The president’s 2012 budget proposes a reinsurance tax that only hits non-US reinsurance companies and would imposed new capitalization rules on “inverted” companies that were once U.S.-based and have incorporated abroad.

The source said business hopes that the administration moves away from such policies and rhetoric now that the open investment statement has been issued.
 
Goolsbee emphasized that in terms of investments flowing to the U.S. and overall stock of foreign held investments, the U.S. is the top destination in the world, with FDI at three times that of the U.K.
 
He noted that in the wake of the financial crisis, U.S. is “dramatically” more competitive due to increased productivity and wages that have not risen at the same pace as those in developing countries.

He said the president’s Jobs Council has urged Obama to get foreign capital off the sidelines in order to reduce unemployment.