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Secure U.S. Investment Overseas

Americans derive important benefits from U.S. investment abroad. While three-quarters of U.S. multinationals' capital expenditures are in the United States, sales by their foreign affiliates nonetheless topped $5 trillion in 2008. In fact, roughly half of all revenue earned by Fortune 200 companies came from their foreign affiliates in recent years. These earnings provide American companies with a growing pool of capital to help them grow, innovate, and create better jobs at home.

An open investment regime that allows U.S. multinationals to invest abroad does not create a zero-sum game in which a job created abroad is a job eliminated at home. In fact, U.S. companies that invest abroad create 2.3 jobs in the United States for every one they create overseas. U.S. companies with worldwide operations tend to pay higher wages and create more jobs in the United States than other firms do. Earnings from abroad help fund U.S. multinationals' R&D, 80% of which is performed in the United States.

Nor does an open investment regime that allows U.S. multinationals to invest abroad create a race to the bottom. Two-thirds of U.S. investment abroad goes to developed countries with wages and labor standards similar to those in the United States. When U.S. multinationals do invest in developing countries, they often create the best paying jobs around, with the best working conditions.

Most U.S. investment abroad is in sectors that cannot be served by means of exports. More than 93% of the production of foreign affiliates of U.S. multinational companies is sold outside the United States, a fact that belies the myth that foreign investment is all about "offshoring" jobs in pursuit of low wages.

The U.S. Chamber is committed to ensuring strong protection of U.S. investments overseas. The rule of law, sanctity of contracts, and respect for property rights are the touchstones of respect for international investment—and the United States should fight for these principles in markets around the globe.

For three decades, the United States has negotiated bilateral investment treaties (BITs) to protect U.S. investments abroad, and similar provisions are included in bilateral trade agreements. BITs open foreign markets to U.S. investment, uphold contract and property rights, and level the playing field by prohibiting discrimination against U.S. companies and guaranteeing them the same rights and responsibilities as domestic investors. BITs guarantee transparency with respect to investment-related laws and regulations.

BITs also provide recourse to investor-State arbitration in the event of expropriation. These arbitral procedures mirror U.S. Constitutional protections against arbitrary government actions and against taking of property without compensation.

In developing countries where local judiciaries are at times slow, ineffective, or corrupt, U.S. companies have benefited significantly from recourse to investor-State arbitration. Even though these provisions are invoked infrequently, they serve as a positive admonition to governments to avoid arbitrary actions in commercial disputes lest the case wind up before an international arbitration panel.

Unfortunately, the United States badly lags its trade competitors in the race to open foreign markets through BITs. Germany, China, the United Kingdom, and France have each entered into BITs with 100 or more nations, while the United States has done so with just 40. A Chamber analysis recently found that the 10 countries with the most extensive investment treaty networks have entered into BITs with more than 100 countries where the United States has no investment agreement of any kind. As a result, U.S. companies are increasingly placed at a competitive disadvantage in growing markets such as China, India, and Russia.

The substance of these treaties is equally critical. In this context, the Chamber has urged a closer examination of the challenges posed by state-owned and state-influenced enterprises abroad. U.S. BITs have long recognized that some foreign governments skew the playing field to favor national champions and discriminate against U.S. and other foreign companies. Future BIT negotiations provide a unique opportunity to address these growing challenges.

Now more than ever, foreign governments are finding more subtle and damaging ways to evade the spirit of BIT commitments — which a focus principally on governmental rather than private action — by leveraging the state's involvement in commercial enterprises. The Chamber has pressed for meaningful changes to the current model BIT to ensure that state involvement in economic affairs is conducted in a transparent, open, and market-based manner. Otherwise, American workers and businesses may be placed at a competitive disadvantage for years to come.

America's continued prosperity in a highly competitive world demands that we negotiate additional high-standard investment treaties. The Chamber strongly supports negotiating BITs with China, India, and Vietnam, and, when circumstances permit, with additional large economies such as Brazil and Russia. As other countries around the globe pursue their own BITs, decision-makers in Washington should be wary of how these may place U.S. companies at a competitive disadvantage should the United States lag in its own negotiations.

In the end, BITs and other measures to protect investment are crucial, but the underlying principles of the rule of law, sanctity of contracts, and respect for property rights are even more so. Their protection should always be at the fore of American international economic policy, even in countries where formal investment protection agreements remain a distant goal.

Chamber Recommendations

  • The United States should vigorously defend the rule of law, sanctity of contracts, and respect for property rights as central to our international investment policy.
  • The United States should move forward in already launched bilateral investment treaty (BIT) negotiations with China, India, and Vietnam and open talks with other major markets.
  • Future BITs should include disciplines on state-owned enterprises and guard against policies that promote them as national champions and discriminate against U.S. and other foreign companies.