Foreign Direct Investment in the United States: A Comprehensive Analysis

This report provides a detailed understanding of Foreign Direct Investment (FDI) in the United States, including its concept, economic and financial trends, and the country's actions related to international events. It explores the advantages and disadvantages of FDI and offers a comprehensive analysis of FDI in the chosen country. The report aims to provide valuable insights for investors and businesses interested in FDI.

AS1 Report

Contents
Chapter 1. INTRODUCTION.........................................................................................................................3
Chapter 2. Literature Review......................................................................................................................3
Concept of FDI.........................................................................................................................................3
Country’s actions related to the international events including changing regulations and tariff, political
issues and major developments over recent years.................................................................................4
Important economic / financial trends for the chosen country over 5 years..........................................5
Chapter 3. FDI Analysis of the chosen country...........................................................................................6
Chapter 4. Conclusion.................................................................................................................................7
RFERENCES..................................................................................................................................................8

Chapter 1. INTRODUCTION
Foreign Direct Investment or FDI can be defined as an investment that is made by either
a firm or an organization in one country with the main interest of business located in another
country. FDI generally takes place when an investor establishes their business operations in a
foreign country. This report is based on Foreign Direct Investment in the United States, which is
the largest recipient of FDI in the world (Chilton, Milner and Tingley, 2020). This is because
companies recognize the country as one of the most stable as well as innovative markets. But
as the global economy continues to evolve, it is important for the country to compete actively
and attract as well as retain investment. The report provides a detailed understanding of the
concept of FDI as well as detailed knowledge of the country’s foreign direct investment. Lastly,
there is also an explanation about the latest economic as well as financial trends for the chosen
country over 5 years.
Chapter 2. Literature Review
Concept of FDI
Foreign Direct Investment is recognized as one of the powerful aspects that is important
for the growth as well as economic development of a country. It enables the countries that do
not have enough capital to build up their physical capital and create various employment
opportunities as well as enhance the skills of local labor. FDI takes place when an investor sets
up a business in a foreign country or sets their business operations there (Sapkota and Bastola,
2017). Foreign Direct Investments are utilized actively utilized in open markets rather than
closed markets for investors. There are three different types of Foreign Direct Investments,
namely, Horizontal, Vertical as well as Conglomerate. Horizontal FDII refers to establishing the
same type of business in another country whereas vertical FDI means that a related business is
established, where as conglomerate FDI involves unrelated business in a new country. As far as
FDI in the United States is concerned, The Bureau of Economic Analysis tracks the same.
Foreign Direct Investments are generally made in economies that are open and offer a
skilled workforce growth prospects for the investor. FDI involves more than just a capital

investment. The BES or Bureau of Economic Analysis reported total FDI into US businesses of
nearly $4.46 trillion at the end of the year 2019. On analyzing the reports, it was found that
manufacturing represented the top industry. There are different methods through which a
company or an investor can acquire voting power in a foreign country. Some of the examples of
these methods can include mergers and acquisitions, joint ventures with foreign companies etc.
There are many benefits of Foreign Direct Investment for a company or an investor, for
example, market diversification, tax incentives, lower costs of labor, subsidies as well as
preferential tariffs (Foreign Direct Investment (FDI), 2021). On the other hand, some of the
disadvantages of the same can include displacement of local business as well as impact on the
overall profitability of the business.
Country’s actions related to the international events including changing regulations and tariff,
political issues and major developments over recent years
A tariff can be defined as a customs duty that is levied on goods as well as services that
are imported as well as exported. Tariffs within a country can change due to various reasons
and different countries can adopt various actions related to different regulations (Seid, 2018).
There was a rise in the wave of foreign direct investment in the United States mainly because of
the interest of the Japanese as well as European firms to match the global perspective. The
United states of America is considered to be one of the most politically advanced as well as
stable countries in the world, ahead China. Not only this, the country also has a strong GDP but
with the outbreak of the pandemic, there has been a significant impact on the overall potential
growth. There are many political issues that have arised and keep on coming up from time to
time.
USA has always dealt with the such situations in an effective manner and by adopting
many different strategies (Shi and et.al., 2017). It is a known fact that the Unites States is a
developed country and there have been a lot of major developments over the recent years. The
country has responded to the same in a very significant way due to which it has also gained a
chance to stand out against other countries in the world.

Entry of big giants may additionally cause the displacement of neighborhood companies.
Repatriation of income if the corporations do now not reinvest profits returned into the host united
states. This will lead to massive capital outflows from the host the country. These are some of the
disadvantages of conducting FDI or foreign direct investment in the USA.
Important economic / financial trends for the chosen country over 5 years
Even although the services sector is the main engine of the financial system, the U.S.
Additionally has a critical production base, which represents kind of 15% of output. The U.S. Is
the second largest producer inside the international and a frontrunner in better-fee industries
such as cars, aerospace, equipment, telecommunications and chemical substances. Meanwhile,
agriculture represents much less than 2% of output. However, huge amounts of arable land,
superior farming technology and beneficial government subsidies make the U.S. An internet
exporter of food and the biggest agricultural exporting country in the international.
One of the major economic trends for the chosen country, USA is that it can have
potential gains from the purchasing power of the citizens (Zafar and et.al., 2019). Not only this,
overall economic growth of the country is also expected to grow in the coming years. This is
because the spending power of the country will increase which had been got affected due to
the outbreak of the pandemic. The unemployment rate will be low and the customer
confidence levels will increase. This will be beneficial for the country as will be able to get back
to its normal position before the pandemic. This will be supportive for the household spending
and the customers will have the appropriate level of income to buy different things as per their
need and preference.
Despite going through demanding situations at the home degree along with a swiftly
transforming global panorama, the U.S. Economic system continues to be the most important
and maximum vital within the international. The U.S. Economy represents about 20% of general
worldwide output, and remains large than that of China. Moreover, in keeping with the IMF,
the U.S. Has the sixth maximum consistent with capita GDP (PPP). The U.S. Financial system
capabilities a noticeably-evolved and technologically-advanced services sector, which bills for
about 80% of its output. The U.S. Economy is dominated by offerings-orientated agencies in
areas along with generation, economic offerings, healthcare and retail. Large U.S. Corporations

additionally play a main position on the global degree, with extra than a 5th of companies at
the Fortune Global 500 coming from the United States.
It has been expected that there will be rapid growth in the overall economy of the
country. Service sector is the main engine of the US economy; therefore, it is being forecasted
that it is one of the major sectors that will be impacted positively. This is because more jobs will
be created and this will lead to an increase in the overall employment rate for the country.
Also, Governments discourage or restrict FDI through ownership restrictions, tax quotes,
and sanctions. Governments inspire FDI thru economic incentives; properly-installed
infrastructure; applicable administrative approaches and regulatory environment; educational
funding; and political, economic, and legal balance. Increased FDI boosts the producing as well
as the offerings sector. This in flip creates jobs, and facilitates lessen unemployment a few of
the knowledgeable young people - in addition to skilled and unskilled labour - in the USA.
Chapter 3. FDI Analysis of the chosen country
It refers to an investment from a party in one nation into a business or establishment in
another country with the purpose of setting up or establishing a lasting interest. Lasting interest
diversifies FDI from foreign portfolio investments where investors passively hold and maintain
securities form a foreign nation. A foreign direct investment can be devised through acquiring a
lasting interest or by expanding particular business in to a foreign nation. FDI can maximise and
improve national savings, foreign exchange and tax revenue. Foreign direct investment bridges
the skills and technology gap, if any (Welfens and Baier, 2018). Recession and credit crunch
have affected the foreign direct investment in USA in real estate, hardware, energy, electronic
components and chemicals. Foreign direct investment in the UK has been steadily maximising
since their records started in 2011. This is testament to the develop world class start-ups with
pioneering technologies. And even in the midst of the corona virus pandemic, international
interest in UK organises has overcame. Apart from this UK fell for the second year in a row,
reaching USD 59 billion, in comparison to USD 65 billion in 2018 and USD 101 billion in 2017.
FDI stock in 2019 was in context of USD 2 trillion, compared to USD 1430 billion in 2018.

According to the World Bank's Doing Business 2020 document, the United States ranks 6th
out of one hundred ninety countries for the quality of its enterprise climate, gaining two spots
compared to 2019. The USA remains the world's leading monetary electricity, the biggest
worldwide monetary centre, and the third-largest USA. In the international in terms of
population. The United States is one of the countries with the fine regulatory overall
performance in paying taxes. Starting a business is now simpler (on-line filing of the assertion of
statistics for limited liability groups) and implementing contracts too (digital filing and
electronic price of court docket expenses). When global organizations determine to set up
operations inside the United States, they % alongside a lot extra than the capital required to
construct a facility. Often, they “import” international-magnificence team of workers schooling
programs and enterprise-leading fine practices that assist to spur productivity at U.S.
Companies. They additionally create value for U.S. Shareholders and retirement plans.
International companies additionally increase America’s economic system and make it
greater resilient. After all, while an global company invests inside the United States, its
domestic united states now has a stake in America’s success, which is ideal for our economic
system and U.S. Overseas coverage. The United States gives the biggest client market on the
earth with a GDP of $20 trillion and 330 million human beings. The US has the primary world
economy, strong and performance in numerous sectors. It has a dominant function in R&D and
a flexible and reactive employment marketplace. According to UNCTAD's World Investment
Report 2020, FDI inflows in 2019 amounted to USD 246 billion, down from USD 254 billion of
2018 (-2.Nine%).
Chapter 4. Conclusion
From the above report, it can be concluded that foreign direct investment is one of the
major contributors to the overall economy of a country. The investors have to either have their
business operations in a foreign country. This helps in enhancing their overall business
operations as well as profitability. As a result, they are able to conduct their business
operations in an effective manner. it can also be concluded that there are certain advantages as

well as disadvantages of the FDI in the USA. But by adopting effective strategies, these
challenges can be overcome.

RFERENCES
Books & Journals
Buckley, P. J. and et. al., 2018. A retrospective and agenda for future research on Chinese
outward foreign direct investment. Journal of International Business Studies, 49(1), pp.4-
23.
Chilton, A. S., Milner, H. V. and Tingley, D., 2020. Reciprocity and public opposition to foreign
direct investment. British Journal of Political Science. 50(1). pp.129-153.
Sapkota, P. and Bastola, U., 2017. Foreign direct investment, income, and environmental
pollution in developing countries: Panel data analysis of Latin America. Energy
Economics. 64. pp.206-212.
Seid, S. H., 2018. Global regulation of foreign direct investment. Routledge.
Shi, W. S. and et.al., 2017. Institutional fragility and outward foreign direct investment from
China. Journal of International Business Studies. 48(4). pp.452-476.
Welfens, P. J. and Baier, F. J., 2018. BREXIT and foreign direct investment: Key issues and new
empirical findings. International Journal of Financial Studies, 6(2), p.46.
Zafar, M. W. and et.al., 2019. The impact of natural resources, human capital, and foreign direct
investment on the ecological footprint: the case of the United States. Resources Policy
63. p.101428.
Online
Foreign Direct Investment (FDI). 2021. [Online]. Available through:<
https://corporatefinanceinstitute.com/resources/knowledge/economics/foreign-direct-
investment-fdi/ >.
Foreign Direct Investment in the UK | 2020. 2020. [Online]. Available Through:
<https://www.beauhurst.com/blog/foreign-direct-investment-in-the-uk-2020/>.