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Unit 27: FDI : Types and Issues

international investment will generally result in the most efficient allocation of Notes
economic resources if it is allowed to flow according to market forces; there is no
basis for concluding that a general policy of actively promoting or discouraging
international investment would further the U. S. national interest; unilateral U. S.
Government intervention in the international investment process could prompt
counteractions by other governments with adverse effects on the U. S. economy
and U. S. foreign policy; and the United States has an important interest in seeking
to assure that established investors receive equitable and non-discriminatory
treatment from host governments.
This statement is based on an assessment that the free flow of international investment generally will
result in the most efficient allocation of economic resources if it is allowed to flow according to market
forces. During the Reagan Administration, the neutrality statement was clarified to include three
related objectives. These objectives include the liberalization of barriers and the reduction of distortions
to international investments abroad, the encouragement of a greater role for private foreign investment
in the economic development of less developed countries (LDCs), and the maintenance of the maximum
degree of openness of the U.S. economy to the contribution of foreign direct investment.
The Clinton Administration’s policy toward inward and outward direct investment can best be
characterized by its support for the Multilateral Agreement on Investment (MAI). The Agreement
was expected to be a comprehensive international agreement on foreign investment among the most
economically developed countries in the world, as represented by the Organization for Economic
Cooperation and Development (OECD). In addition, the Agreement was intended to address various
issues, including formal barriers to direct investment, discriminatory treatment, dispute settlement
mechanisms, and legal and regulatory uncertainties abroad, that hamper the flow of investment
funds. Ultimately, a range of unresolved issues among the OECD Ministers combined with concerns
by some groups in the United States to undermine support for the Agreement. In particular, some
groups were concerned that the requirement for “national treatment” in the Agreement could have
created legal problems for state and local governments that enforce environmental, labor, and other
corporate practices that could have been considered discriminatory.

On May 10, 2007, President Bush released his policy statement on open economies.

The statement offered strong support for the international flow of direct investment. In part, the
statement reads:
A free and open international investment regime is vital for a stable and growing
economy, both here at home and throughout the world. The threat of global
terrorism and other national security challenges have caused the United States and
other countries to focus more intently on the national security dimensions of foreign
investment. While my Administration will continue to take every necessary step to
protect national security, my Administration recognizes that our prosperity and
security are founded on our country’s openness.
As both the world’s largest investor and the world’s largest recipient of investment,
the United States has a key stake in promoting an open investment regime. The
United States unequivocally supports international investment in this country and
is equally committed to securing fair, equitable, and nondiscriminatory treatment
for U.S. investors abroad. Both inbound and outbound investment benefit our
country by stimulating growth, creating jobs, enhancing productivity, and fostering
competitiveness that allows our companies and their workers to prosper at home
and in international markets. My Administration is committed to ensuring that the
United States continues to be the most attractive place in the world to invest. I urge
other nations to join us in supporting an open investment policy and protecting
international investments.

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