At the White House on Tuesday, President Obama put a positive spin on his administration’s efforts to recruit foreign investors, in a roundtable discussion with executives from Lufthansa (LHA:GR), Ericsson (ERIC), Ford Motor (F), Hankook Tire (161390:KS), Zurich North America (ZURN:VX), and others. And the White House has just released a glowing report (PDF) about the U.S. advantage in skills, productivity, innovation, energy costs, and market access. “Businesses are Increasing Investment in the United States,” reads one headline in the document.
A close look at the data, though, shows the White House doesn’t have a lot to brag about—at least not yet. The authoritative, unspun numbers can be found in a report called U.S. Net International Investment Position: End of the Fourth Quarter and Year 2013, which is put out by the Department of Commerce’s Bureau of Economic Analysis. It was released in March.
According to a spreadsheet that’s linked to the BEA report, the value of all foreign direct investment in the U.S. rose just 4 percent from 2012 to 2013. That was considerably less than the 8 percent annual increase in the value of all foreign-owned assets in the U.S., excluding the volatile category of financial derivatives.
A word of explanation: Foreign direct investment, the slower-growing component, is what Obama is trying to recruit—things such as factories, real estate, and major ownership stakes in U.S. companies. Foreign direct investment can create jobs.
The broader, faster-growing category of all foreign-owned assets in the U.S. includes ownership of Treasury bonds, Fannie Mae debt, etc. For that broad category to grow is really no achievement, because it’s just the flip side of the U.S. trade deficit. It means foreigners selling goods and services to the U.S. are accepting American IOUs in exchange, rather than importing U.S. goods and services.
The Obama administration’s long-term performance is no better than the one-year performance. Compared with the last quarter of 2008, right before Obama took office, the value of foreign direct investment in the U.S. at current cost grew 33 percent, not as fast as the 42 percent growth in the value of all foreign-owned assets excluding those volatile financial derivatives.
For another perspective, look at the chart below, which goes only through 2012 but includes more detail. It puts the inflow of foreign direct investment at $166 billion in 2012, down from $310 billion in 2008 (George W. Bush) and a peak of $321 billion way back in 2000 (Bill Clinton).
That’s not to say this is easy or that the weakness will persist. The Obama administration’s SelectUSA may start to pay off soon. As the new White House report says:
“The United States is an increasingly attractive location for business investment from global companies. In AT Kearney’s 2013 FDI Confidence Index, the United States surged past countries like China, Brazil and India to become the country with the top FDI prospects globally, as ranked by 302 companies representing 28 countries and multiple industry sectors. This marks the first time that the U.S. occupied the #1 spot in the survey since 2001. In a survey of U.S. manufacturers with production abroad late last year, BCG [Boston Consulting Group] found that the majority (54 percent) are looking at re-shoring to the United States, up from 37 percent in 2012.”
So the omens are good. But up until now, Obama’s effort to recruit foreign investors doesn’t have much to show for itself.