President Trump's America first and 'buy American, hire
American' rhetoric has spurred existing and hopeful recipients
of US direct investment abroad (USDIA) to wonder whether that
investment will continue to flow as it has.
This concern, over whether the defiantly protectionist
administration will allow foreign investment to grow –
as it has been doing – or incentivise it not to, has
also reignited a global debate over protectionism. The rhetoric
may have given impetus more protectionist agendas
The concerns emanating from the US have often focused on a
handful of specific domestic pressure points. These include an
idea that US foreign investment means less domestic investment
by US firms, fewer US jobs, a risk to certain sectors of the US
economy (manufacturing, for example) and lower exports. The
Bring Jobs Home Act is one policy response to this concern;
incentivising US companies to build domestic operations over
foreign ones via insourcing.
Investment data and the opinions of leading private practice
lawyers on the ground examined in this Report give a much more
Still in its first year, the Trump administration has not
enshrined this policy in any legislation. It has however backed
up its stance with strong statements, including the withdrawal
from the Paris climate agreement and the Trans-Pacific
Partnership (TPP), and the intention to renegotiate the North
American Free Trade Agreement (Nafta).
Unbundling the issues around America first
This Report provides a crucial glimpse into what the data
say about US foreign investment, what private practice lawyers
in USDIA-receiving countries think the real concerns are and
what, if any, have been the legal practical implications.
In an exclusive piece for IFLR, James Jackson, trade
specialist at the US Congress' non-partisan think-tank, the
Congressional Research Committee, debunks some of the more
widespread criticisms of USDIA. In contrast to chasing low
wages and weaker environmental and labour regimes, Jackson
asserts that "on the whole, US firms appear to invest abroad to
serve foreign markets, rather than to produce goods to export
back to the US".
The data reveal that in 2016, 96% of USDIA came from
reinvested earnings, financed by the foreign affiliates of US
companies, and therefore did not displace domestic investment.
It also shows that foreign investment tends to stimulate US
exports by increasing intra-company trade. These data are at
odds with the issues and aims often associated with the America
Jackson does highlight that some quarters of the US feel
that US companies are not competing on a level playing field.
This idea is reinforced by the prominence of state-owned
enterprises among the world's largest companies and a trend in
countries taking up national security review mechanisms to vet
investments. Given these issues, how seriously should a threat
to reform USDIA be taken?
The view from USDIA recipient countries
Private practice lawyers have so far seen few real
implications for USDIA. In Albania, domestic reforms are seen
to be more of a factor for US investment flows than US policy.
Ardjana Shehi and Irv Vaso of Kalo & Associates point out
that the protectionist agenda may impact US development aid. In
the Dominican Republic, Mariangela Pellerano and Caroline
Bonó of Pellerano & Herrera see a likely decrease in
investment due to caution, stemming from US policy.
Ruby Asturias and Martin Barrillas of Pacheco Coto in
Guatemala, and Peter Burke and Nattha Srisomwong of Axis Legal
in Thailand, anticipate little impact and point to domestic
factors that will remain attractive to US investors. A similar
idea emerges from Mori Hamad & Matsumoto's Masakazu Kumagai
and Hiroyuki Kurihara in Japan, that protectionist measures are
unlikely to stray into the key Japanese markets for US
In the Philippines, Aris Gulapa, Oliver Baclay and Marie
Yasmin Sanchez strike a slightly more cautious note, seeing
benefit to the Philippines as a nation that was not part of
TPP, but noting that TPP was generally seen as "promising for
regional integration". The lawyers do see a possible concern
over Filipino remittances from the US. Feroz Dubash, Shruti
Zota and Kanwardeep Singh of Talwar Thakore & Associates in
India remain positive on USDIA but see possible disruption from
a tightening of Food and Drug Administration rules.
After six months in office the outlook is still unclear and
the data reveal a tension in the protectionist agenda. A lack
of clarity surrounding the USDIA outlook and what the
administration will be able to legislate, means that IFLR's US
Outbound Investment Report 2017 comes at a crucial time.