Page 307 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

Unit 27: FDI : Types and Issues

direct investment that provide the basic data on such investments. The Treasury Department, however, Notes
takes the lead in negotiating international agreements on the treatment of direct investment and it
chairs the inter-agency Committee on Foreign Investment in the United States, which represents the
President as the chief federal government organization responsible for overseeing the national security
implications of foreign investment in the economy.
The United States is widely recognized as the premier location for foreign firms to invest, as evidenced
by the data in Table 1. According to the United Nation’s World Investment Report, the United States
had received a cumulative amount of $3.1 trillion in foreign direct investment by year-end 2008,
more than double the $1.5 trillion invested in the United Kingdom, the next single largest host to
foreign direct investment, and it accounted for nearly 20% of the total cumulative amount of foreign
direct investment among all nations. The United States is also the largest foreign investor in the
world, with over $2.3 trillion invested abroad. According to the U.N. report, of the $12.5 trillion in the
total cumulative amount of foreign direct investment among all nations, the most economically
advanced developed economies were host to 70% of this amount. From 1980 to 1990, this share
increased sharply from 56% of total amount of foreign direct investment to 79%. From 1990 to 1995,
the developed country share fell slightly to about 70%, where it has stayed relatively stable over the
past decade.

Table 1 : Foreign Direct Investment Inward Position
(in billions of U.S. dollars)

1985 1990 1995 2000 2006 2008

World $972.2 $1,789.3 $2,992.1 $5,810.1 $11,998.8 $16,205.7
Developed Economies 569.7 1,416.9 2,035.8 4,031.3 8,453.8 13,623.6
Western Europe 285.0 815.2 1,213.0 2,293.8 5,717.2 8,997.4
European Union 267.1 768.2 1,136.0 2,180.7 5,434.3 8,086.8
France 36.7 86.8 191.4 259.8 782.8 1,397.0
Germany 36.9 111.2 192.9 271.6 502.4 1,450.9
United Kingdom 64.0 203.9 199.8 438.6 1,135.3 1,510.6
United States 184.6 394.9 535.5 1,256.9 1,789.1 3,162.0
Canada 64.7 112.8 123.3 212.7 385.2 520.4
Developing Economies 402.5 370.3 916.7 1,707.6 3,155.9 2,356.6
Africa 33.8 58.4 77.3 153.2 315.1 98.0
Latin America 80.1 118.1 200.1 481.0 908.6 561.4
Asia 288.5 380.2 636.5 1,073.4 1,932.2 1,697.3

Source : World Investment Report, United Nations Council on Trade and Development, various
issues.

The Costs and Benefits of Foreign Direct Investment
Generally, economists conclude that direct investment benefits both the home and the host country
and that the benefits of such investment outweigh the costs. Some groups within the U.S. economy,
however, are concerned about the potentially negative effects of inward and outward direct investment.
Most economists argue that free and unimpeded international flows of capital, such as direct
investment, positively affect both the domestic (home) and foreign (host) economies. For the home

LOVELY PROFESSIONAL UNIVERSITY 301