Investment in the United States by companies from other countries is an often overlooked yet important source of economic activity and expansion. Foreign direct investment (FDI) boosts U.S. productivity, increases exports, and creates well-paying jobs for U.S. workers. Foreign-owned business activities in the United States generate approximately 7.9 million direct jobs (even more if spillover effects are included) across a range of industries and generate significant research and development spending. These companies also account for approximately 23 percent of U.S. exports.
The motivations for foreign investment in the U.S. economy are manifold. The U.S. economy and consumer market is by far the largest, with a gross domestic product of $25 trillion and a population of 335 million. Although only 4% of the world’s population lives in the U.S., U.S. households account for nearly one-third of global household consumption. Beyond this large domestic market, there are 20 countries that interact with the U.S. through free trade agreements, creating additional opportunities.
Further strengths of the US include a business-friendly regulatory environment, a stable democracy with strong political and economic institutions, the world’s dominant currency, and a transparent and predictable legal environment. The US has a large and diverse workforce, and American workers are among the most productive (with rising interest rates also helping to boost productivity). The list goes on.
It’s no surprise then that the United States has been the largest recipient of foreign direct investment for 12 consecutive years, recently rising to nearly one-third of the global total, compared with about 18% before the pandemic. During the same period, China’s share fell from 7% to 3%.
Texas has been the leading destination for FDI spending in the United States for the past two decades. Approximately 660,500 jobs are directly supported by majority foreign-owned businesses, and over 1,900 foreign-owned companies continue to operate in the state. The largest investor is the United Kingdom, accounting for 19% of projects, followed by Germany (8%), Canada (8%), Japan (7%) and France (5%). More recently, Taiwan, Hong Kong, Egypt and Mexico have also begun to invest in earnest.
Key industry sectors represented by projects in Texas include software and IT services, business services, industrial equipment, renewable energy, and transportation and warehousing. Much of this activity is naturally concentrated in major metropolitan areas, but notable investments are occurring in other regions as well.
FDI is a win-win, as it gives foreign companies access to U.S. markets, labor, and resources. At the same time, these investments foster economic growth and prosperity at home. Texas is a clear winner, with projects in everything from energy to technology to aviation contributing significantly to the state’s dynamic economy, expanding opportunities for Texans and improving potential for future growth. Watch out!
Editor’s note: The above guest column was written by Dr. M. Ray Perryman, president and CEO of The Perryman Group (www.perrymangroup.com), which has served the needs of more than 3,000 clients over the past 40 years. The above column appears in the Rio Grande Guardian International News Service with permission from the author. Perryman can be contacted by email at shelia@perrymangroup.com.
