Vanderbilt Journal of Transnational Law

First Page



Direct investment in the United States by foreigners exceeded direct investment abroad by Americans for the first time in 1981. This development continued in subsequent years. The inflow of capital has clearly resulted in economic growth and added employment. Moreover, the inflow of foreign investment capital has supplemented comparatively low levels of United States savings" and helped increase investment in new plant and equipment--essential for future productivity growth.

The inflow can be expected to continue at high rates as long as the United States economy continues to grow. A real crisis of confidence in the dollar may prove to be a short term deterrent. A fall in the value of the dollar, however, will make investments relatively cheaper, and therefore act as a further stimulus to investment. Ultimately, two factors will continue to attract foreign direct investment into this country. First is the confidence in the United States as a "safe haven" for capital. Second is the realization by foreign multinationals that access to the United States market is an essential component of a successful global strategy.

In the past, the United States has relied on dividend, interest, royalty and fee income from investments overseas to partially off-set the growing trade deficit. These incomes may be outweighed in the future by the ever increasing outflow of dividends, interest, royalties and fees to the foreign parents of United States affiliates.

More work needs to be done on examining capital flows and the imports and exports generated by foreign owned affiliates; and whether there are significant differences between affiliates of different home country parents. Also, it is unclear what impact the increasing number of satellite parts suppliers around major investments will have on the United States trade balance, or on the overall world competitive position of United States companies. As Japanese automobile manufacturers invest in the United States and take an increasing share of the automobile market, it is likely that United States parts suppliers also will suffer.