Eighty-five Alabamians descended on Britain this week. Despite the timing, they will not be tourists in garish shorts. This group wears pinstriped suits and includes Alabama's governor. Its destination is the Farnborough Air Show. Their goal, in flying overseas, is to persuade foreign investors to return the favor.
In America's political lexicon, few words are more poisonous than "outsourcing." Foreign direct investment in America, meanwhile, is politically fraught; witness the uproar in St. Louis over a Belgian brewer's successful bid for Anheuser-Busch. But behind this debate, foreign investors are being wooed by a growing number of politicians, from Manhattan to Mobile, Ala. "Globalization is a reality," explained Sam Jones, Mobile's mayor. "You can sit around and wish that something else was taking place or you can take advantage of globalization, what we call 'insourcing.'"
Foreign investors went shopping in the United States last year, attracted partly by the cheap dollar. Spending to acquire or establish American businesses grew to $276.8 billion in 2007, 67 percent more than in 2006 and the highest level since the peak in 2000, according to the Bureau of Economic Analysis (BEA). The vast share of this was acquisitions, but spending on existing businesses grew too, up by 29 percent over 2006. Net foreign direct investment, which also includes funding for existing operations, was $204.4 billion, up by 13 percent. More Americans are getting their paychecks from foreign firms: 5.3 million in 2006, or 4.5 percent of the private workforce.
This growth comes despite a host of obstacles. Visa rules remain a deterrent. China's attempt to acquire an American oil company in 2005 and Dubai Ports' bid to operate six big harbors in 2006 were met with panic. Congressmen agonized over security in both cases. But protectionism extends beyond strategic assets -- unless you count beer as a national resource.
The Commerce Department insists that America is open for business. In 2007 it launched "Invest in America" to help attract foreign companies and calm those afraid of them. The 33-year-old Committee on Foreign Investment is refining its process for examining deals that might threaten security. But Mark O'Connell of consulting firm OCO Global describes the national strategy for foreign direct investment as "embryonic."
States are far more aggressive, courting foreign investors through trips abroad and incentives. California, New York and Texas have proved the biggest magnets, topping OCO Global's list of foreign investment in new facilities or expansions from 2003 to '07. But even Michigan, one of the rustier states, has seen a boost from foreign investors, ranking fourth.
Despite states' efforts to attract foreigners, Matt Slaughter, an economist at the Tuck School at Dartmouth who served on George Bush's Council of Economic Advisers, is concerned by "a protectionist drift." He argues that even foreign acquisitions, which politicians hardly court but which account for the bulk of foreign direct investment, play a vital role. Some acquisitions may lead to a loss of jobs, but on the whole they make companies more productive, create higher-wage jobs and help pay for the current-account deficit.
Ron Blackwell, chief economist for the AFL-CIO, the labor union federation, said his organization is "less concerned with the source than the nature of investment," and that greenfield projects and expansions will do most to buoy the economy in the long term.
In this debate, politicians remain muddled. On July 7, Barack Obama said no law barred shareholders from selling Anheuser-Busch to a foreign firm, but that such a deal would be "a shame."
