Foreign direct investment (FDI) is an essential component of the U.S. economy. This paper analyzes FDI trends and examines policies that may affect foreign investment in the United States.

Foreign investment contributes to productivity growth, generates U.S. exports, and creates high-paying jobs for American workers. Advanced and developing economies have recognized the value of foreign investment, resulting in an increasingly competitive international environment for FDI flows. Each member of the Organization for Economic Cooperation and Development (OECD) now maintains an investment promotion agency to attract foreign investment, and most international investment in the United States originates from OECD countries.

The United States welcomes foreign investment and provides international investors a stable and open economy. President George W. Bush recently reaffirmed America’s long-standing policy of openness to foreign direct investment. Although the United States has historically been the most attractive destination for FDI, this leadership position has eroded since the late 1980s. To maintain competitiveness in attracting inward investment, the United States should address specific issues that concern foreign investors.

Among the issues needing to be addressed are availability of business visas, the complexity of the legal system, onerous healthcare costs, and high corporate taxes. Additionally, a federal force is necessary to complement existing state efforts that already have a strong record of attracting foreign investment into the United States. Invest in America is the primary U.S. government mechanism to coordinate federal inward investment promotion.