To understand the dynamics of trade among nations in a world of increasingly porous borders, we must explore the field of international investment. In The Foreign Investment Debate, the American Enterprise Institute has made a significant contribution. The contributors to this volume analyze the gradual shift within the U.S. government away from an open-door policy, and toward a policy of conditional national treatment; that is, regulating inward flows of foreign direct investment as a tool for improving market access. Considering the significant role that foreign direct investment plays in the U.S. economy, the disturbing implications of this shift demand our attention.
In the 1980s, the United States became the world's largest host country to foreign direct investment, as well as the largest home country of multinational corporations. Foreign direct investment in the United States more than doubled between 1985 and 1990. Today, however, there is a congressional drive to impose restrictive conditions on foreign firms and to limit access to our market by mandating reciprocity agreements. This approach to opening markets simply does not make economic sense in the present global economy. Kenichi Ohmae said it best:
When governments are slow to grasp the fact that their role has changed from protecting their people and their natural resource base from outside economic threats to ensuring that their people have the widest range of choice among the best and the cheapest good and services from around the world— when, that is, governments still think and act like the saberrattling, mercantilist ruling powers of centuries past—they discourage investment and impoverish their people.1
Foreign direct investment should be encouraged rather than restricted. It is the engine of growth and innovation that creates measurable benefits for the host country by improving the physical infrastructure, educating and training employees, improving living stan