- The Washington Times - Saturday, June 6, 2009

The for-sale signs in front of U.S. businesses attracted lots of foreign buyers last year.

Foreign investors spent $260.4 billion in 2008 to acquire or establish U.S. businesses, the Commerce Department reported this week in its annual survey. These outlays reflected a 3 percent increase over 2007 and were the third-largest on record. They jumped for the sixth consecutive year following a two-year falloff that began in 2001, when the U.S. economy suffered its last recession.

“With the stock market and real estate market so low, the U.S. is a bargain right now,” said Peter Morici, a business professor at the University of Maryland.

Last year, as in previous years, most outlays by foreign investors - $242.8 billion, or 93 percent - were to acquire existing businesses. Only $17.6 billion, which was 38 percent less than in 2007, was spent to establish new businesses. Eighty-two percent of total outlays were made by, or through, existing foreign-owned U.S. businesses.

“It’s great when Toyota builds a new manufacturing plant in the U.S., but it’s a little different when China buys Hummer,” Mr. Morici said.

“Since 1992, 90 percent of $2.2 trillion in foreign direct investment has gone to acquire existing U.S. assets worldwide,” said Charles McMillion, chief economists of MBG Information Services. Over the same period, the United States has incurred trade-related current account deficits totaling $6.5 trillion. The $2.2 trillion used by foreigners to acquire U.S. assets “represents a recycling of a portion” of these cumulative deficits, Mr. McMillion said.

Some types of foreign investments are preferred over others. A green field investment, for example, essentially involves constructing new facilities on open fields or other empty spaces. These investments directly increase employment. Think of Nissan’s investment in Tennessee or Toyota’s Kentucky plant, its largest in North America.

Rather than have foreign investors purchase existing firms, it would be better for America if they made green field investments, said William Cline, a senior fellow at the Peterson Institute for International Economics.

“However, the basic concept of open capital markets is that it is fair for foreign investors to purchase existing firms, and, of course, we do the same over there,” Mr. Cline said. “We’d rather have foreign investors using their dollars to purchase U.S. businesses than withholding their capital from the United States.”

Foreign investment in manufacturing businesses reached $141.1 billion last year and accounted for more than half of total outlays. By far the biggest transaction last year involved the $52 billion purchase of Budweiser-brewing Anheuser-Busch by Belgian-based InBev. It was the third-largest foreign takeover of a U.S. company in history.

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