What Happened To The Tidal Wave Of Foreign Investment?

In the late 1960s, Europeans worried that investment by the powerhouse U.S. economy was threatening their economic independence. In the 1980s, Americans voiced similar fears about a tidal wave of direct investment by Japanese and European companies. Now, however, investment flows have changed direction again.

Economists at DRI/McGraw-Hill point out that direct investment in the U.S. by foreign companies actually declined last year for the first time in recent memory. A small inflow of new direct investment was overshadowed by debt repayments by U.S. subsidiaries of foreign companies to their overseas parents. The latest tally marks a sea change from the acquisition boom of the late 1980s, when such investment inflows averaged $60 billion a year.

Meanwhile, net U.S. direct investment overseas has been picking up steam. After averaging $20 billion in the late 1980s, it jumped to $35 billion last year from $27.1 billion in 1991.

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