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EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, WEDNESDAY, JULY 24, 2019

BEA 19—34

Direct Investment by Country and Industry, 2018

The U.S. direct investment abroad position, or cumulative level of investment, decreased $62.3 billion to $5.95 trillion at the end of 2018 from $6.01 trillion at the end of 2017, according to statistics released by the Bureau of Economic Analysis (BEA). The decrease was due to the repatriation of accumulated prior earnings by U.S. multinationals from their foreign affiliates, largely in response to the 2017 Tax Cuts and Jobs Act. The decrease reflected a $75.8 billion decrease in the position in Latin America and Other Western Hemisphere, primarily in Bermuda. By industry, holding company affiliates owned by U.S. manufacturers accounted for most of the decrease.

The foreign direct investment in the United States position increased $319.1 billion to $4.34 trillion at the end of 2018 from $4.03 trillion at the end of 2017. The increase mainly reflected a $226.1 billion increase in the position from Europe, primarily the Netherlands and Ireland. By industry, affiliates in manufacturing, retail trade, and real estate accounted for the largest increases.

Chart of sDirect Investment Positions, 2017-2018

Effects of the 2017 Tax Cuts and Jobs Act (TCJA) on U.S. Direct Investment Abroad

The TCJA generally eliminated taxes on dividends, or repatriated earnings, to U.S. multinationals from their foreign affiliates. Dividends of $776.5 billion in 2018 exceeded earnings for the year, which led to negative reinvestment of earnings, decreasing the investment position for the first time since 1982. Tables 3 and 4 provide information on the country and industry breakdown of dividends.

By country, nearly half of the dividends in 2018 were repatriated from affiliates in Bermuda ($231.0 billion) and the Netherlands ($138.8 billion). Ireland was the third largest source of dividends, but its value is suppressed due to confidentiality requirements. By industry, U.S. multinationals in chemical manufacturing ($209.1 billion) and computers and electronic products manufacturing ($195.9 billion) repatriated the most in 2018.

Chart of USDIA: Dividends by Country of Affiliate: 2017-2018

U.S. direct investment abroad (tables 1 – 6)

U.S. multinational enterprises (MNEs) invest in nearly every country, but their investment in affiliates in five countries accounted for more than half of the total position at the end of 2018. The U.S. direct investment abroad position remained the largest in the Netherlands at $883.2 billion, followed by the United Kingdom ($757.8 billion), Luxembourg ($713.8 billion), Ireland ($442.2 billion), and Canada ($401.9 billion).

By industry of the directly-owned foreign affiliate, investment was highly concentrated in holding companies, which accounted for nearly half of the overall position in 2018. Most holding company affiliates, which are owned by U.S. parents from a variety of industries, own other foreign affiliates that operate in a variety of industries. By industry of the U.S. parent, investment by manufacturing MNEs accounted for 54.0 percent of the position, followed by MNEs in finance and insurance (12.1 percent).

U.S. MNEs earned income of $531.0 billion in 2018 on their cumulative investment abroad, a 12.8 percent increase from 2017.

Foreign direct investment in the United States (tables 7 – 10)

By country of the foreign parent, five countries accounted for more than half of the total position at the end of 2018. The United Kingdom remained the top investing country with a position of $560.9 billion. Canada ($511.2 billion) moved up one position from 2017 to be the second largest investing country, moving Japan ($484.4 billion) into third, while the Netherlands ($479.0 billion) and Luxembourg ($356.0 billion) switched places as the fourth and fifth largest investing countries at the end of 2018.

By country of the ultimate beneficial owner (UBO), the top five countries in terms of position were the United Kingdom ($597.2 billion), Canada ($588.4 billion), Japan ($488.7 billion), Germany ($474.5 billion), and Ireland ($385.3 billion). On this basis, investment from the Netherlands and Luxembourg was much lower than by country of foreign parent, indicating that much of the investment from foreign parents in these countries was ultimately owned by investors in other countries.

Foreign direct investment in the United States was concentrated in the U.S. manufacturing sector, which accounted for 40.8 percent of the position. There was also sizable investment in finance and insurance (12.1 percent).

Foreign MNEs earned income of $208.1 billion in 2018 on their cumulative investment in the United States, a 19.7 percent increase from 2017.

Updates to Direct Investment Statistics Delayed

Updates to BEA’s detailed country and industry statistics for U.S. direct investment abroad and for foreign direct investment in the United States for 2016 and 2017 were delayed due to the impact of the partial federal government shutdown that started in late December 2018. BEA will update the 2016 and 2017 statistics in 2020 along with updates to the 2018 statistics."

Next release: July 2020
Direct Investment by Country and Industry, 2019

Full Release & Tables (PDF)

Tables Only (Excel)

Release Highlights (PDF)

U.S. direct investment abroad data

Foreign direct investment in the United States data

Technical

Ryan Smith

301-278-9246

Ryan.Smith@bea.gov

Media

Connie O'Connell

301-278-9003

Connie.OConnell@bea.gov

Resources

More statistics on direct investment by country and industry are available on the BEA website.
A description of the estimation methods used to compile statistics on direct investment by country and industry is provided in U.S. International Economic Accounts: Concepts and Methods.
Stay informed about BEA developments by reading the BEA blog, signing up for BEA’s email subscription service, or following BEA on Twitter @BEA_News
Historical time series for these estimates can be accessed in BEA’s interactive data application.
Summary data by country are available in BEA’s International Trade and Investment Country Facts.
Access BEA data by registering for BEA’s Data Application Programming Interface (API).
Additional information on direct investment positions will be published in the August issue of the Survey of Current Business.

Definitions

Direct investment is an investment by an entity resident in one economy that represents a lasting interest, defined as 10 percent or more voting ownership, in an enterprise resident in another economy.

A foreign affiliate is a foreign business enterprise that is at least 10 percent owned by a single U.S. person or entity.

A U.S. parent is a U.S. person or entity that owns 10 percent or more of a foreign business enterprise.

A U.S. affiliate is a U.S. business enterprise that is at least 10 percent owned by a single foreign person or entity.

A foreign parent is the first person or entity outside the United States in a U.S. affiliate’s ownership chain that has a direct investment interest in the affiliate.

The ultimate beneficial owner (UBO) is that person or entity, proceeding up a foreign parent’s ownership chain, that is not owned more than 50 percent by another person or entity.

The direct investment position is the value of direct investors’ equity in, and net outstanding loans to, their affiliates. Changes in the position result from financial transactions and other changes, including capital gains and losses, currency-translation adjustments, and other changes in volume and valuation, such as adjustments to book value from affiliates’ current sale or purchase price.

Direct investment financial transactions are financial transactions that increase or decrease financial claims and liabilities between the parent group and their affiliates. Direct investment financial transactions consist of reinvestment of earnings, equity investment other than reinvestment of earnings, and investment in debt instruments.

Reinvestment of earnings is the difference between an affiliate’s total earnings less dividends. It represents the part of earnings that are reinvested in the affiliate rather than repatriated to the parent.

Equity investment other than reinvestment of earnings is measured as the difference between equity increases and decreases. Equity increases are transactions that result in the parent increasing their equity interest in their affiliate. Equity decreases are transactions that result in the parent reducing their equity interest in their affiliate.

Debt instruments investment reflects parent group lending to and borrowing from their affiliates.

Income earned on direct investment includes income on equity—whether profits or losses and whether distributed or reinvested—and net interest on debt.

Statistical conventions

BEA’s direct investment statistics are primarily based on data reported in the Quarterly Survey of U.S. Direct Investment Abroad (BE-577) and the Quarterly Survey of Foreign Direct Investment in the United States (BE-605). Both surveys are conducted by BEA.

The countries identified in this release reflect the location of the immediate counterpart, unless otherwise noted. The countries identified for the U.S. direct investment abroad position may not reflect the ultimate destination of the funds. Likewise, the countries identified for the foreign direct investment position in United States may not reflect the ultimate source of the funds, which is often the ultimate beneficial owner.

The direct investment positions in this release are valued at historical cost. Positions reflect the book value of direct investors’ equity in, and net outstanding loans to, their affiliates. This valuation is derived principally from the accounting records of affiliates, which are primarily compiled under U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). This differs from the market value measure featured in the U.S. net international investment position accounts.

This release presents statistics on a directional basis rather than the on the asset/liability basis featured in the U.S. international transactions accounts and the U.S. net international investment position accounts. On a directional basis, direct investment claims and liabilities are classified according to whether the direct investor is a U.S. resident or a foreign resident. U.S. direct investment abroad occurs between a U.S. parent and its foreign affiliates. Foreign direct investment in the United States occurs between a foreign parent and its U.S. affiliates. On an asset/liability basis, direct investment statistics are organized according to whether the investment relates to an asset or liability for U.S. parents or for U.S. affiliates of foreign parents.

Related Statistics

Statistics on direct investment by country and industry are one part of a broader set of U.S. international economic accounts that, taken together, provide a comprehensive, integrated and detailed picture of U.S. international economic activities.

Statistics on direct investment and multinational enterprises (MNEs) include annual statistics on the activities of U.S. MNEs and U.S. affiliates of foreign MNEs as well as on new foreign direct investment in the United States.

The international investment position (IIP) accounts are released quarterly. The IIP is a statistical balance sheet that presents the dollar value of U.S. financial assets and liabilities with respect to foreign residents at a specific point in time.

The international transactions accounts (ITAs) are released quarterly. The ITAs are a statistical summary of economic activity between U.S. residents and the residents of other countries.

Statistics on international services, released annually, include detailed annual information on trade in services and on services supplied through the channel of direct investment by affiliates of MNEs.

U.S. international trade in goods and services, released by BEA and the U.S. Census Bureau, provides monthly statistics on trade in goods and services.