Foreign Companies: We Want the U.S. to Honor Its Debt
This morning President Obama received this letter from 50 of the largest global companies which have subsidaries in the U.S. applauding his recent comments on the economic benefits of foregin direct investment in the United States. Companies from Siemens , Nokia , GlaxoSmithKline and UBS were among those who signed the letter.
And while the rhetoric coming from the White House may have warmed their hearts, now comes the hard part—seeing action. With the true unemployment rate at around 16 percent, the jobs market needs as many avenues as possible to generate jobs. U.S. subsidiaries of foreign companies are an important part to the nation's jobs market, employing more than five million American workers and supporting over $408 billion in annual U.S. payroll.
These subsidiaries also account for 13 percent of total U.S. manufacturing jobs, and reinvested an annual $93.1 billion back into their U.S. operations. I caught up with Nancy McLernon President and CEO of the Organization for International Investment, a business association representing U.S. subsidiaries of global companies on the letter and what is their biggest fear that could curtail jobs generation.
LL: This morning you are sending a letter to the President about his investment policy statement that recognizes the importance of global investment in the U.S. economy. The White House has sent mixed messages on globalization for the last two and half years. Do you think the President's leadership on this well help lead his party to more business friendly initiatives?
NM: The letter, signed by more than 50 of the largest global companies with significant operations in the United States, is evidence of how important the open investment statement is to this slice of the business community. The recognition of the economic contributions made by foreign direct investment in this country at the very highest levels of government make it that much less likely for isolationist policies to gain traction.
LL: Do you fear this is just rhetoric coming FROM the President? Many of my contacts say what the President does and says are two different things.
NL: The statement was unequivocal in its support for cross border investment in the United States, however much work will need to be done to hold the Administration to this standard – which will require education on how certain initiatives impact foreign-headquartered companies doing business in the United States.
LL: What is the biggest barrier to business here right now that your members would like to see changed?
NM: Uncertainty is one of the biggest barriers to investment in this country and much of the uncertainty results from policy proposals that target the inbound business community. The world has changed pretty dramatically over the last 15 years –and policy changes must take into consideration that global companies have an ever-widening choice of locations where to do business.
Lawmakers typically focus on the trade of goods and services when considering how best to benefit from globalization. Yet, the value of cross border capital now rivals that of trade. My members, similar to U.S.-headquartered multinational companies, would like to see a lower corporate tax rate, modernization of infrastructure and a more open trade environment with other countries. Certainty in these areas would provide incentives for more foreign investment in this country.
LL: The Financial Crisis impacted U.S. Subsidiary activity. What is your foreign direct investment outlook now?
NM: Worldwide cross-border investment contracted along with the global recession – which included foreign investment in the United States.
In 2010, foreign investment here increased, but is still much below that of historic levels. The current value of the dollar and U.S. assets priced to sell due to the impact of the U.S. recession, make it a good time for foreign companies to invest in the United States.
And, global foreign investment overall is primed to take off. But, in order for the U.S. to benefit, it needs to actively recruit global companies to set up operations here. Other countries are aggressively seeking such investment, and we must do the same. In this regard, two weeks ago the Administration launched SelectUSA – a government-wide initiative headed up by the Commerce Department whose chief purpose is to market the U.S. as a location for foreign companies to do business.
This move, especially coupled with the “open investment statement,” is an extremely positive message to send to global business.
LL: The US share of global FDI has fallen steadily. With the challenges of complex taxation and weak infrastructure. What are your members looking for that will entice them to invest more in the US?
NM: The U.S. has competitive advantages—and the quality of the American workforce is one often cited by my members as a reason to do business in the U.S. We need to ensure we don’t lose that advantage with the next generation of workers. Educating and training a high-skill manufacturing workforce will be a core component of recruiting the best companies in the world.
LL: Which countries are the most enticing right now for FDI?
NM: Emerging markets represent new challenges and opportunities for global companies. However, the U.S. is still the single largest recipient of worldwide investment and remains an important economy in which to do business. How much of their business is done here will be dependent on many factors, including macroeconomic policies that hit the bottom line.
LL: How concerned are your members about the debt ceiling battle?
NM: Similar to U.S. multinationals, my members want the U.S. to honor its debt—domestic and foreign. It is critical to preserving global investors' confidence in the creditworthiness of the United States.
A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."
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