The U.S. Congress is considering legislation to bolster America’s competitiveness in attracting Foreign Direct Investment (FDI) from abroad, which can strengthen U.S. competitiveness and create good jobs.  USCIB is among the business voices leading the call for Congress to adopt the “Global Investment in American Jobs Act” (S. 1023/HR 2052). In a rare display of bipartisanship, the House of Representatives passed the bill by a vote of 370-32 on September 9. USCIB and our business coalition partners are now urging the U.S. Senate to move quickly to adopt the Bill (click here to view the coalition letter to the U.S. Senate).

The legislation would put the U.S. government clearly on record as welcoming international investment. The legislation would also task the secretary of commerce to lead a government-wide effort to focus on America’s investment competitiveness, and to develop and implement a plan to make the U.S. the unquestioned “gold standard” option for the best international companies to locate new facilities.

“Inward FDI is good for America,” said Shaun Donnelly, USCIB’s vice president for investment and financial services. “The competition among nations around the world to attract high quality investment projects increases daily, and the U.S. needs to up its game as a destination for FDI. This piece of legislation is a good place to start.”  USCIB commends the bill’s sponsors in the House (Lee Terry, R-NE; Jan Schakowsky, D-IL; Peter Roskam, R-IL; and John Barrow, D-GA) and the Senate (Bob Corker, R-TN; Amy Klobuchar, D- MN; Roy Blunt, R- MO; and Kay Hagan, D- NC) for their leadership in introducing this legislation.

USCIB has long been a leading business voice in Washington and internationally on the importance of both inward and outbound FDI to U.S. economic competitiveness, exports, economic growth and jobs. According to Donnelly, inward FDI brings not only needed capital but also technology, innovation and access to foreign markets. USCIB co-chairs the investment policy committees of the broad U.S. business coalitions working with the Obama administration on the two major ongoing trade negotiations, the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.

Staff contact: Shaun Donnelly

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A report launched by the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the UN Conference on Trade and Development (UNCTAD) finds that global value chains (GVCs) have become “a dominant feature of the world economy,” with between 30 and 60 percent of G20 countries’ exports comprised of imported inputs or used as inputs by others, and offer new prospects for sustainable growth, development and jobs.

The report, entitled Implications of Global Value Chains for Trade, Investment, Development and Jobs, concludes that both the cost of trade and investment protectionism and the benefits of multilateral opening are much higher than previously thought, and highlights the urgent necessity of comprehensive policy reforms that enhance trade and investment openness.

These conclusions, which were presented to the G20 Summit in St. Petersburg in response to the G20 leaders’ request at the 2012 Summit to analyze the functioning of GVCs and their relationship with international trade and development, parallel those of a study by Dartmouth’s Matthew Slaughter,  American Companies and Global Supply Networks, published earlier this year by USCIB and the Business Roundtable, which found that the operations of globally engaged U.S. companies benefit American economic growth and job creation.

In our highly interconnected world, participation in GVCs can produce considerable gains: developing economies with the fastest growing GVC participation have per-capita GDP growth rates two percent above the average, according to the report. Likewise, countries that attract more foreign direct investment tend to have higher GVC participation levels and to generate more value added from trade. Thus, the report states that practical trade facilitation reforms are crucial in reducing trade costs and increasing GVC participation, and that policies conducive to open markets will help ensure that development and growth potential is realized and widely inclusive. Sustainable GVC growth also relies on multilateral cooperation so that policies are coordinated between exporters and importers, and host countries and home countries.

“Trade facilitation is about easing access to the global marketplace and doing away with the complicated border crossing procedures and excess red tape that raise costs, which ultimately fall on businesses, consumers and our economies,” said OECD Secretary General Angel Gurría. “Reducing global trade costs by just one percent would increase worldwide income by more than $40 billion, 65 percent of which would accrue to developing countries.”

One of the key challenges remaining is to understand and address the obstacles to such access that developing economies experience – access that would help build productive capacity where local firms can capture a significant share of the value added. Significant investment, though, would be required to aid technology dissemination, skill building, education and infrastructure upgrading.

Staff contacts: Rob Mulligan and Shaun Donnelly

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Smithfield Foods (of Smithfield, Virginia) announced on September 6 that the U.S. government’s Committee on Foreign Investment in the U.S. (CFIUS) has approved Smithfield’s acquisition by Shuanghui Holdings, a large Chinese/Hong Kong food company.  CFIUS, a nine-agency committee chaired by the Treasury Department, routinely reviews major acquisitions of U.S. firms by foreign firms for national security concerns.

USCIB welcomed the move. “CFIUS has never been a broad national screening mechanism for foreign direct investment into the U.S.,” noted Shaun Donnelly, USCIB’s vice president for investment and financial services.  “Nor in our view should CFIUS’s mandate be expanded beyond its present scope. We commend the Obama administration, and the CFIUS agencies in particular, for conducting the Smithfield/Shuanghui review rigorously and in compliance with long-established procedures and criteria laid out in relevant U.S. legislation and regulation.”

After the acquisition was first announced, there were calls from some in Congress and the media to expand the CFIUS mandate beyond clear national security criteria. “Had we succumbed to these siren calls to turn CFIUS into some sort of protectionist tool to deflect foreign acquisitions, especially from China or other ‘controversial’ partners, it could have jeopardized America’s traditional welcome mat for FDI,” Donnelly said. “The U.S. needs to be, and to be seen to be, a strong and consistent voice for open and transparent investment policies and regulations at home and abroad. Both inward and outward FDI are good for the U.S. economy, competitiveness and jobs. “

Staff contact: Shaun Donnelly

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