Foreign Direct Investment in the United States--The Federal Role

The growth of foreign direct investment in the United States, the Federal Government's efforts to assist the States in attracting foreign investment, and the interstate and international competition for investment are matters which have received considerable congressional attention. GAO reviewed these matters in order to assess the Government's role in foreign direct investment in the United States.

Federal and State laws restrict foreign investment in such areas as aviation, shipping, atomic energy, broadcasting, and mineral development on Federal lands. Proposals for further restrictions were rejected, but legislation was enacted to meet concerns about the lack of information on foreign investment. The Commerce Department gathers data to measure investment flows between foreign sources and the United States and is responsible for monitoring and analyzing the affects of foreign direct investment. However, it has published little analytical work since 1976 and has not systematically collected applicable studies by the private sector. Most States actively seek foreign investments through overseas offices, overseas visits by State officials, and through offering site location assistance and tax, financial, and labor-training incentives. States believe that the Federal role should continue to be limited to facilitating State efforts and maintaining a policy conductive to investment. GAO agrees with the belief of State officials that Federal officials could do more to help identify investment prospects. In implementing U.S. policy, the Commerce Department and U.S. embassy officials may facilitate planned foreign investment, but not promote or attempt to generate interest. Competition among States for investment has led to increased use of investment incentives; and competition between some Canadian provinces and U.S. States has also led to increased incentives. Both countries feel that coordination is needed to ensure acceptance of whatever ground rules are negotiated.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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