Introduction
International investment pays huge and essential dividends for the country’s financial system and its workers. This happens through the escalation of exports, enhancing productivity, generating new employment opportunities, and increasing wages. The protection of international investments and the relevant shareholders is crucial for the realization of an enabling environment for the investment (BEA, 2012).
The protection is also crucial for ensuring that American investors are treated in line with the investment regulations in foreign markets. International investments are normally relevant when the country maximizes the benefits of working in a foreign marketplace (USTR, 2012). International investment entails both the American companies and the workers in foreign countries. This paper discusses how the United States (U.S) undertakes international investment (BEA, 2012).
Organizational History
International investment is not a recent trend; it stretches back into the past beyond Phoenicians. Companies have operated across borders throughout the documented civilization. The U.S has also interacted with other countries through international investment for many years (Vandevelde, 2005). However, the U.S international investment took shape in the 1950s and 1960s through starting with big companies.
The companies undertook interrelated manufacturing and sales functions in many parts of the world including European and Asian countries among others. The U.S has normally recorded an increasing flow in international investment since then surpassing her national economic expansion (Lipsey, Schimberni, and Lindsay, 1998). The emergence of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) has significantly liberalized international investment (Vandevelde, 2005).
Organizational Current Situation
Notably, America’s international investment position corresponds to the amassed U.S.-held resources abroad calculated annually at the closure of the calendar year. The international investments include trading in the areas of goods and services such as asset income, government, and monetary flows. The investments also include international assets and direct investment by U.S multinational companies (Jackson, 2012). The international investment position (IIP) provides a comprehensive overview of the summary of the accumulated stocks abroad held by the U.S operatives. The assets normally include official stocks belonging to the government, official reserve assets, direct investment assets, and portfolio investment reserves (Jackson, 2012).
The international investments include Trans – boundary exports and imports of undisclosed services and on services provided by multinational companies largely owned by U.S. citizens and their foreign counterparts. The American Trans – boundary exports and imports entail business deals between America and citizens of foreign countries (Jackson, 2012). These represent worldwide trade in the usual sense confirmed by signing the International Trade Agreements (ITAs). Furthermore, the services supplied to cross-border citizens by foreign associates of the U.S also form part of the international investments (Jackson, 2012).
The current state of international investments for the U.S. has expanded over the years. However, it is notable that foreign investment in the country has always surpassed U.S. investments abroad. The U.S. realized IPP worth -$4,030.3 billion in the year ending 2011. This was a reduction given that in 2010 the value was much higher. This value was negative because the foreign investments in the country have been performing better than the country’s international investments.
The nature of the country’s international investments was characterized by an escalation in the prices of American Treasury Bonds and diminished foreign stock values. This escalated the value of a foreign investment in the country while lessening the value invested by the U.S. abroad. The U.S. also acquired assets overseas (Jackson, 2012). Furthermore, the U.S. dollar gained value compared to the trade-weighted index for collaborating countries. However, U.S. international investment has continued to grow. In the year 2011, the international investment value represented 2.6% of all America’s financial assets. This increase as compared to 2010 was 1.6%.
IFM Related Information
The U.S. engagement in international investment has attempted to take advantage of the International Financial Management (IFM) to enjoy a competitive advantage. The American companies and assets in the global have continued to perform well. However, due to the large foreign investment in the country, the performance has always been lower than in the foreign countries (Jackson, 2012). This has made the U.S. become an international investment debtor. It is notable to recognize the role America has played in supporting other countries globally. These are also treated as assets but cannot be documented as part of the IPP.
The country’s acquirement of monetary assets out of the country exclusive of economic derivatives accounted for $483.7 billion (Jackson, 2012). This value was down from the 2010 figures, which were 939.5 billion. In the year 2011, there was an increase in the U.S. official assets and reserves. The direct investments also escalated and the purchase of foreign securities surpassed sales (Jackson, 2012). Their monetary outflows contributed to offsetting the gaps by diminishing the claims of the American financial institutions and security brokers.
Furthermore, the IFM experienced shifts in the financial markets including acquisitions of financial assets. The country lost additional assets to foreign investors including the monetary derivatives. For the year 2011, the value was $1,001.0 billion a reduction from the 2010 values that were $1,308.3 billion (Jackson, 2012). The year 2011 was also critical for the U.S. in the IFM. This is because the foreign assets in the country, some banks, and security brokers also affected the financial markets (Vandevelde, 2005).
In addition, the debts to foreign investments together with direct investments escalated thus outstripping the U.S. performance in the global market. The foreign investors’ activities in the global marketplace were high because the purchases of U.S. Treasury securities by foreign investors promoted sales (Jackson, 2012). These monetary inflows significantly led to offsetting the foreign sales of the country and bureau bonds that surpassed the sales.
Personal Observation and Situation Analysis
Notably, U.S. international investment has continued to grow. The U.S. does international investment activities through diverse strategies. The notable strategies include investing in other countries through direct government assets such as bonds and securities. The investments also take place through official government reserves and assets (BEA, 2013a). In addition, the investments take place through large multinational companies investing individually or in collaboration with players in the local marketplace (BEA, 2013a). The U.S. investments have escalated over the years. The performance of the U.S. international investments has remained high in another world.
It is notable that the U.S. significantly escalated her assets in the foreign markets. The financial derivatives that are held as assets also escalated over the recent past (Lipsey, Schimberni and Lindsay, 1998). The official reserves assets for the U.S. government also increased because of the price appreciation of the country’s gold stock and the escalated status of the U.S. in the International Monetary Fund (BEA, 2012). The increase in the foreign currency assets that changed hands in the investment market also enabled the U.S. to realize a better performance. The stock of the American investment in the foreign marketplace also escalated because of the good financial outflows (BEA, 2012). There was a decrease in the country’s foreign securities and the fall was associated by the diminished prices for stocks.
Comparison with Other Organizations
It is notable that Canada’s net resource base position of direct investment increased by $4.0 in the last quarter of 2011. The country’s asset base also increased because Canada acquired more foreign securities (Government of Canada, 2013). During, the 2011 international investment year the Canadian dollar went down against the U.S. dollar at 1.2%. Overall, the Canadian direct foreign investment was higher than that of foreign investors in the country. This indicates that Canada performed better that the U.S (Government of Canada, 2013).
Findings
Research has indicated that the interaction between U.S. and foreign countries financial systems often decide the direction and extent of direct investment movement. The flows are impacted upon by other challenges such as inflation and anticipation about national economies performance (Vandevelde, 2005). This is an indication that sometimes the international investments efforts can be erratic. There is an observable increase in the U.S. direct investment in other countries for 2011. This is reflected by the 10% escalation in the reinvested revenue. The international investments were supported by almost 30 percent rise in equity and a change to outflows involving intercompany liabilities also contributed to the overall U.S. international investment (BEA, 2013b).
Challenges with the global financial markets also caused a decline in the value of stocks owned by the U.S. The American international investment grew in the year 2006 through to 2010 surpassing that of foreign investments. The investments were also strong in the initial half of 2011 (BEA, 2013b). The performance of the U.S. international investments declined in the second half of 2011 due to the financial crisis in the European markets. The U.S. international investments are the largest in the world in terms of investments.
Suggestions
This paper provides a suggestion that the U.S. international investment should consider lowering the value of financial assets provided to other countries as assistance. This is because the country has continued to perform poorly as opposed to the foreign investments (Vandevelde, 2005). Furthermore, the country’s performance in the financial markets was not excellent because of the challenges of the economic crisis. Therefore, it is notable that the U.S. should consider expanding their participation in the marketplace through the injection of additional funds (Vandevelde, 2005).
Summary and Conclusion
In summary, it is notable that the U.S undertakes her international investments through diverse strategies. The government undertakes the investment through the official government assets and reserves. These are taken to the marketplace through the financial markets and other appropriate avenues. The government also invests the stock and securities in the global financial marketplace. The government normally trades the stocks and securities through larger financial institutions. The U.S. multinational companies have also played significant role in the international investment practices.
The U.S. international investment also takes place through the trading of gold stocks. It is notable that the U.S international investments abroad has had mixed performance. The historical marketplace investment activities started several years ago and eventually took shape in the 1950s and 1960s. The formation of two regulator bodies contributed to easing the challenges in the international investment practices. The foreign direct investments into the U.S. have surpassed that of the government’s direct investments abroad.
List of References
Bureau of Economic Analysis (BEA) 2012, U.S. Net International Investment Position at Yearend 2011. Web.
Bureau of Economic Analysis (BEA) 2013a, U.S. Net International Investment Position: End of the Fourth Quarter and Year 2012. Web.
Bureau of Economic Analysis (BEA) 2013b, U.S. Direct Investment Abroad. Web.
Government of Canada 2013, Canada’s international investment position, fourth quarter 2012. Web.
Jackson, J 2012, U.S. Direct Investment Abroad: Trends and Current Issues. Web.
Lipsey, R., Schimberni., and Lindsay, R 1998, Changing Patterns of International Investment in and by the United States, University of Chicago Press, Chicago.
Office of the United States Trade Representative (USTR) 2012, Investment. Web.
Vandevelde, K 2005, A Brief History of International Investment Agreements, University of California, Vol. 12, pp. 157 – 194. Web.