The United States is becoming an increasingly popular target for "destination weddings" — no, not couples but — foreign companies hitching up with America in terms of new investment.
They are drawn in by what can be described as America's "new competitiveness," which is the theme of this year's SelectUSA Investment Summit, conference organized by the Department of Commerce that aims to connect investors with economic-development organizations to facilitate investing in the U.S. The prospect of tying the knot and putting down roots in the U.S. is proving a strong draw for 1,200 corporate leaders and development officials from around the world. Indeed, demand was so strong that conference registration was closed before it even began: 1,400 people were turned away for lack of space.
Energy and foreign investment is one of the key topics, and I am chairing the plenary session on that subject.
We will be getting diverse perspectives — from Siemens, Schlumberger, the Spanish renewable company Abengoa — and Heather Zichel, top energy official in the White House.
According to Commerce Secretary Penny Pritzker, $160 billion in foreign investment flowed into the U.S. last year. Given the importance of investment for stimulating what continues to be a sluggish economy beset with high unemployment, the administration urgently wants to see that inflow increase.
And that is why President Obama showed up at the summit on Thursday, promoting more of these "destination marriages." In the process, he made clear that he regards serving as America's top investment salesman as part of his job description. Indeed, he said, he already earned "at least a gold watch at the end of my tenure" for having "racked up some pretty good sales." He pledged to "do even more to make the case for investing in America." He said he's making "attracting foreign investment a formal part of the portfolios of our ambassadors."
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The case for investing in the U.S. has already become more compelling. America's "new competitiveness" is very much on the minds of Asian manufacturers. With wages rising as much as 15 to 20 percent per year in some parts of China, the balance of competitiveness is changing, especially when transportation costs and proximity to markets are figured in. For European companies, the issue is even more urgent. In the face of economic weakness in the euro zone and policy-induced rising energy costs, the U.S. looks like an increasingly attractive place to invest — unlike Europe. As one European CEO put it, the "exodus" to America has already begun. And when the energy-intensive companies move, their suppliers move with them. This, in fact, is one of the main economic worries for the new government in Germany, a country highly dependent on exports and thus on being competitive.
Of course, investment is not just about the costs you can measure in advance. There is also likely to be discussion, if not on the podiums at least in the corridors, about one worrying set of issues that is a counterpoint to the new competitiveness. That is the unpredictable regulatory and litigation risk that many non-U.S. executives cite as a critical concern when evaluating investing in the U.S. And, indeed, those risks can come with very high costs of their own.
The dramatic change in America's energy position is one of the main reasons for the "new competitiveness," for it is a major enabler for what has become known as the manufacturing renaissance. The unconventional revolution — shale gas and tight oil — has transformed the energy outlook in the U.S. Natural gas, in particular, gives the U.S. a major cost advantage over other countries. Prices here are one-third that of Europe and one-fourth or one-fifth that of Asia.
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This unconventional revolution has proved to be one of the brightest spots in the U.S. economy over the the economic downturn.
Last year, it supported over two million jobs and increased household disposable income by $1,200. It is also stimulating a great deal of investment. Dow Chemical has identified over $100 billion of specific investments scheduled for the U.S. because of highly-competitive energy costs. A significant part of them are from non-U.S. companies. And the turn-out at this SelectUSA summit is a clear indicator that many more of these energy-fueled destination marriages are in the works — or pretty soon will be.
— By Daniel Yergin.
The SelectUSA Investment Summit is taking place Oct. 31-Nov. 1 in Washington, D.C. Daniel Yergin is vice chairman of IHS and a Pulitzer Prize-winning author. His latest book is "The Quest: Energy, Security, and the Remaking of the Modern World." Follow him on Twitter @danielyergin.