Overseas Investment In Decline

Excessive and complex taxes and growing competition have cut the percentage of foreign investment in U.S. subsidiaries to less than half of what it was a decade ago.

Increasing global competition and a labyrinthine tax code are slowing foreign investment in the U.S. economy, according to a new study from the Organization for International Investment.

The first-of-its-kind OFII report said U.S. subsidiaries of foreign companies account for over 21 million direct and indirect jobs, or 12.2 percent of all domestic employment. These companies and their suppliers contribute $2 trillion to the overall economy, or 14 percent of GDP, and $1.2 trillion of U.S. compensation springs from the same source.

The United States attracted about 17 percent of all global investment in 2009, down from over 41 percent a decade before, OFII head Nancy McLernon told Reuters, citing another study from October.

"The global investment pie around the world has been getting larger, but our slice of that pie has been getting smaller, as well as the share of GDP that foreign investment in the U.S. represents," McLernon said. Each dollar spent directly by foreign-based U.S. units adds $2 more to total U.S. compensation for supply-chain workers and companies that benefit from paycheck spending. Worker compensation at these companies averages $77,597, about one-third higher than the average at U.S. companies, according to the report.

Roughly 2 million of the jobs directly created by U.S. subsidiaries are in manufacturing, representing about 17 percent of all American manufacturing jobs. And the ?EUR??,,????'?????< The cause-and-effect relationship between foreign investment and domestic growth is the best argument for revising U.S. policies to become more competitive, especially as other countries are implementing lower tax rates and other incentives, McLernon said. Since Japan dropped its corporate tax rate in April, the U.S. has become the highest corporate tax collector in the developed world, at 39.2 percent.