Facts About
Modern Manufacturing
U.S. Manufacturers Invest Primarily in High-Wage Countries
A very large share of U.S. foreign direct investment in manufacturing goes to developed, high-wage countries. In 2013, 68% of the new investment dollars in manufacturing affiliates abroad were spent in Europe, Canada, Japan, Australia, and New Zealand, and this percentage share is down only slightly from 71% in 2000. Cheap labor is clearly not the driving force behind FDI—the main factor is access to sizable and growing markets, and this link attracts long-term investment. With 95% of the world’s consumers living outside the United States, the primary motivation for taking an ownership position in a foreign country is to establish a regional presence and participate in the global market.
China is the world’s fastest-growing marketplace for industrial products, so it is not surprising that U.S. firms are eager to engage with those consumers. U.S. FDI in manufacturing within China has risen at an 11% annual rate since 2000, compared with 5% growth in total manufacturing FDI. As a result, China’s share in U.S. FDI in manufacturing has more than doubled during this century. Nevertheless, U.S. FDI in China remains a small proportion of overall investment, totaling only 6% of U.S. manufacturing FDI flow in 2013.