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Chapter 8 - United States: The Paradigm of Review on National Security Grounds

from Part IV - Ex Ante Evaluation on National Security Grounds in Practice

Published online by Cambridge University Press:  13 October 2018

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Summary

Foreign investment has always played and still plays a vital role in the economic development of the US. Since at least since the 1870s, it has contributed to the development of US economy. This positive attitude has nevertheless coexisted with the existence of sectors were FDI has traditionally been limited and with certain moments in US history in which foreign investment was not really welcomed, mostly on national security grounds. Concerns about investment originating from certain countries have been repeated over time in the US: Germany during WWI, Japan in the 1980s, and now the PRC.

According to the White House, in 2013 foreign firms employed more than 5 million people in the country, 4.1% of the total private sector workforce. These affiliates accounted in 2011 for 9.6% of US private investment and 15.9% of US private research and development spending. Despite the financial crisis and the sharp drop in investment flows that it caused, the US continues to be the world's number one recipient of FDI. Since 2010, almost 84% of FDI in the US has come from Japan, Canada, Australia, Korea and some European countries. FDI from emerging economies, mostly China, is still small but growing rapidly. Despite these impressive figures, the White House has historically been well aware of the need to protect the leading position of the US as a major recipient of FDI and this is deemed to be directly linked, among other factors, to the existence of an open, predictable and stable FDI regulatory landscape in the US.

However, this situation may change significantly in the near future due to the policies of the new US administration, which is fostering some commercial protectionist policies that will surely affect the level of both outwards and inwards FDI in the US, as well as possibly leading to certain changes in the existing legal framework on FDI. If this does happen, it would be contrary to the position maintained by the US over the last few decades, which has been characterised both by the constant reference to the economic and non-economic benefits of FDI and by the pressure routinely exerted on other countries to open their economies to market forces and to more freely allow foreign investment.

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Publisher: Intersentia
Print publication year: 2018

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