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Report: U.S. foreign direct investment decreases in 2018


U.S. direct investments abroad decreased in 2018, due largely to repatriation of prior earnings by U.S. multinationals from their foreign affiliates, according to a report released today by the Bureau of Economic Analysis. 

The U.S. direct investment abroad position, or cumulative level of investment, decreased $62.3 billion to $5.95 trillion at the end of 2018 from $6.01 trillion at the end of 2017.  

By industry, holding company affiliates owned by U.S. manufacturers accounted for most of the decrease, which the report said was a response to the 2017 Tax Cuts and Jobs Act. The tax reform legislation generally eliminated taxes on dividends, or repatriated earnings, to U.S. multinationals from their foreign affiliates. 

Conversely, the flow of money into the U.S. increased in 2018. Foreign direct investment in the United States increased $319.1 billion to $4.34 trillion at the end of 2018 from $4.03 trillion at the end of 2017. 

The increase mainly reflected a $226.1 billion increase in the position from Europe, primarily the Netherlands and Ireland. By industry, affiliates in manufacturing, retail trade and real estate accounted for the largest increases. 

Looking at U.S. multinational enterprises investments abroad, their investment in affiliates in five countries accounted for more than half of the total U.S. direct investment position at the end of 2018. The U.S. direct investment abroad position remained the largest in the Netherlands at $883.2 billion, followed by the United Kingdom ($757.8 billion), Luxembourg ($713.8 billion), Ireland ($442.2 billion) and Canada ($401.9 billion). 

U.S. multinational enterprises recorded earned income of $531 billion in 2018 on their cumulative investment abroad, a 12.8% increase from 2017.

Increasing the levels of exports by Central Iowa companies and foreign direct investment in Greater Des Moines are key priorities for the Greater Des Moines Partnership. 

According to a 2016 report conducted for the Partnership by the Global Cities Initiative, a joint project of Brookings and JPMorgan Chase, Greater Des Moines will need to be more focused on  global engagement in order to capture opportunities that exist beyond the marketplace in the United States.

That report laid out strategies for increasing global trade opportunities for Greater Des Moines, which lags behind many U.S. cities in attracting foreign investment. In 2011, the Des Moines MSA ranked 81st in jobs in foreign-owned enterprises. While the total share of private employment in FOEs continues to increase, Central Iowa is still below the national average.

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