US manufacturing sector enjoys rising FDI

Despite claims by US president Donald Trump, FDI in the US manufacturing sector has been steadily increasing since 2006.

As both a candidate and now as president, Mr Trump has criticised foreign firms for “stealing” US manufacturing jobs, most notably through the use of multilateral trade deals, such as the North American Free Trade Agreement and the Trans-Pacific Partnership. 

During a Pennsylvania campaign rally in June 2016, Mr Trump claimed that US politicians “have aggressively pursued a policy of globalisation, moving our jobs, our wealth and our factories to Mexico and overseas”.

Yet his consistent attacks on globalisation overlook the importance and growing presence of FDI within the US manufacturing sector. In fact, the sector has attracted more FDI in the past decade than any other, including $1200bn in 2015, according to a report released by SelectUSA, the investment promotion agency of the US Department of Commerce.

During the past decade, FDI in US manufacturing has increased at an average rate of 9% per year, with an average FDI inflow of $132.9bn over the past five years (2011-15), according to US Bureau of Economic Analysis data as per the report.

The top source markets for US manufacturing by total FDI share are the UK (17%), Ireland (14%), Germany (11%), and Japan (10%). Most notably, the total share of Irish FDI in the US manufacturing sector has increased from 1.5% in 2006 to 14% by the end of 2015, as recorded by the US Department of Commerce.

The US manufacturing sector includes several underlying industries, such as food, transportation and computer electronics. By the end of 2015, the chemicals industry received 39% ($475.7bn) of all manufacturing FDI, making it the largest FDI recipient within the sector.

Foreign-owned affiliate companies were responsible for the creation of 2.4 million manufacturing jobs nationwide in 2014. California was the largest employer of FDI-supported manufacturing jobs in 2014 with 209,500, according to the Department of Commerce. The state’s largest source of greenfield foreign investment is the chemicals industry, according to data compiled by crossborder investment monitor fDi Markets.

Foreign investors consider the US as an ideal manufacturing destination, based on its “skilled workforce availability” and “close proximity to markets or customers”, fDi Markets found.