An Overview of the U.S. in Foreign Direct Investment

Most foreign companies that choose to invest in the United States typically have made the decision based on market factors that drive the need to expand from their home countries. Once the decision is made to invest in the United States, these companies face the difficult tasks of determining the best site location and transportation infrastructure, finding qualified workers and capital necessary for construction, and learning about legal ramifications, tax structures, and other difficult factors. These incentives and credits offered in the United States are completely different than those offered in the rest of the world.

A key difference is that incentives and credits are determined primarily at the state level. To the foreign investor, the myriad of incentive and credit programs and the regulations and requirements of each can be daunting compared to the investor’s working knowledge of comparable incentive programs offered by the home country. In addition, the range and complexity of incentives and credits offered by each U.S. state or local community are constantly evolving, making the comparison of various incentive and credit packages more difficult than expected.

Foreign Direct Investment (FDI) plays a crucial role in economic development. Besides bringing capital, it facilitates the transfer of technology, organizational and managerial practices and skills, as well as access to international markets. FDI in the United States in the first quarter of 2017 totaled $83.6 billion, a 62% increase from fourth quarter from 2016.

FDI continues to support a host of benefits in the United States, such as good jobs and innovation resulting from research and development. FDI inflows in 2015 totaled a record $348 billion and the record was again set in 2016 at $468 billion. The United States also remains the largest recipient of FDI in the world, and the U.S. manufacturing sector continues to benefit greatly from inbound FDI. As these numbers increase, so do the incentives and programs set forth at the federal, state and local levels resulting in states competing with one another to develop a favorable and competitive climate for foreign investors.

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