Cynthia A. Beltz
The United States is at an important juncture in its foreign investment policy. Traditionally, the United States has maintained an open door at home while also promoting investment liberalization abroad. 1 These efforts have paid off, with other countries moving at an unprecedented rate to imitate the United States and to reduce barriers to international investment flows. Multilateral and regional agreements have been signed (the Uruguay Round and NAFTA), and unilateral liberalization measures have been taken by a growing number of countries. 2 At the same time, however, a new movement has been gaining ground in the United States to manage and impose new conditions on inward flows of investment. At issue is whether we should use foreign investors in the domestic economy as a trade tool to "level the playing field" and open markets abroad.
As the world's largest source of foreign direct investment, with a record outflow of $50 billion in 1993, the United States has much to gain from the elimination of barriers to cross-border investment. But our choice of tactics is critical. What goes around can easily come around, with American multinational corporations the losers if other countries imitate the United States and respond in kind with new investment barriers of their own. The boomerang effect of our policies demands that challenges to America's open door be examined in the context of both long-term U.S. objectives as well as the changing global economy.
Perhaps the most striking change over the past decade has been the growth of transnational corporations, which now control roughly one-third of the world's private assets. Foreign direct investment (FDI), which is the most frequently used measure to track the significance of these corporations, surged in the 1980s. 3 By 1993, the global stock of FDI reached $2.1 trillion, with annual outflows of $195