American Manufacturing in Foreign Countries

Report Outline
Rise in U.S. Private Investment Abroad
Attractions in Foreign Manufacturing
Aspects of American Production Abroad
Domestic Effects of Foreign Investment
Special Focus

Rise in U.S. Private Investment Abroad

Tripling of the Value of Direct Investments

Interest among American manufacturers in market potentialities for their products in foreign countries has been growing steadily since World War II. More and more companies have expanded exports from their plants at home; licensed patents and processes to foreign producers in exchange for royalties or a share of profits; or established subsidiary companies or branch factories abroad. The last-named of the three main ways of penetrating foreign markets has attained special importance in the past decade. The huge dollar investment poured into foreign production facilities by American business has forged strong private economic ties with many countries.

Ten years ago, exports of non-military goods and foreign sales of goods produced abroad by American companies each amounted to about $12 billion. By 1958, U.S. exports had risen to $16.3 billion, while American companies producing in foreign countries rang up sales estimated at $30 billion. Net earnings of American business from operations abroad exceeded $3.3 billion in 1957, latest year for which the figures are available.

These earnings were derived from direct private investments valued by the Department of Commerce at $25.3 billion. Actually, direct private investments abroad—as distinct from indirect or portfolio investments, i.e. investments in foreign securities—are worth much more. Department of Commerce figures are based on book value, or original cost of plant and equipment, rather than current market value, and the totals do not include those American holdings abroad which represent less than 25 per cent ownership in a foreign enterprise. Business Week recently hazarded the statement that total direct private investment “in foreign branches, subsidiaries, and affiliates may be worth $50 billion.”