UNCLE SAM WANTS YOUR FDI: Thousands of foreign investors and state economic officials are in town this week for the Commerce Department’s SelectUSA Investment Summit, with new deals valued at more than $1 billion expected to be announced at the event. “Since its inception, SelectUSA has assisted thousands of clients, facilitating over $200 billion in client-verified investment, supporting 200,000 jobs across the United States and its territories,” Deputy Commerce Secretary Don Graves told reporters. “These clients range across various critical industries such as clean energy, biopharma and more, as well as various sizes of companies and geographies.” 2024 election effect: However, this year’s summit — the 10th since 2012 — comes amid rising concern that the United States’ openness to foreign direct investment is taking a backseat to presidential politics. Both President Joe Biden and his presumptive Republican rival Donald Trump have opposed Japanese company Nippon Steel’s high-profile bid to acquire U.S. Steel. Biden has said U.S. Steel must remain an American-owned company and Trump has insisted he would block Nippon from buying it. Everyone knows: A senior Commerce Department official, who briefed reporters on the grounds he not be identified, insisted there was no contradiction between the come-and-invest message of the SelectUSA conference and the administration’s wary approach to the Nippon deal after Trump and a number of Midwestern lawmakers voiced their opposition. “We are about to welcome the largest attendance ever at one of our summits,” the official said, putting the figure at close to 5,000 attendees. “The whole world knows the United States is open for business … [But] the president has also made clear that as we welcome foreign investment, we will first and foremost protect American national security and protect American interests in the best way that we can.” Industry view: Still, Biden’s response to the proposed Nippon-U.S. Steel deal sent a negative “market signal to would-be investors that perhaps deals won't be allowed to proceed based on merit and that there may be politics involved,” said Jonathan Samford, executive vice president at the Global Business Alliance, which represents foreign companies invested in the U.S. But Samford credited Biden for issuing an “Open Investment Policy Statement” early in his administration, which is something Trump never did. FDI trends: Buoyed by legislation such as the Inflation Reduction Act, the CHIPS and Science Act and the Bipartisan Infrastructure Law, the United States remained the top destination for foreign direct investment in 2023, attracting about 25 percent of global FDI, according to the United Nations Conference on Trade and Development. The Commerce Department’s own figures show FDI in the United States totaled $289 billion in 2023, down from $353 billion in 2022 and $403 billion in 2021. Despite the downward slope, FDI in the United States has generally been higher during the Biden administration than during the Trump administration, when it averaged about $228 billion annually over the four-year period. Don’t worry too much about China: China accounts for less than 1 percent of FDI in the United States and has “been on the decline over the past five years,” despite many politicians’ concerns, Samford said. In contrast, Japan, Canada, the United Kingdom, France, Germany, Ireland, Switzerland and the Netherlands account for about 75 percent of FDI in the U.S. — all ally countries, Samford said. Cocktail conversation: India is expected to have the biggest delegation at this week’s SelectUSA Summit. Over 2,300 foreign investor companies will be attending from over 90 foreign markets. Eleven U.S. governors and the mayor of Washington DC are also participating. And for the first time, all 56 U.S. states and territories will be represented. USTR CONSIDERS ITS NEXT STEP: USTR is considering how to respond to Canada’s digital services tax, an agency official told Morning Trade after the neighboring country’s parliament gave final approval to the measure last week. “USTR is concerned with Canada’s digital services tax and any unfair discrimination against U.S. businesses,” the official said, speaking on condition they not be identified. “We are assessing, and are open to using, all available tools that could result in meaningful progress toward addressing unilateral, discriminatory DSTs. The Treasury Department is also engaging in the OECD/G20 negotiations that could bring a comprehensive solution to the challenge of DSTs. We will continue to support Treasury in those efforts.” BIG SERVICES TRADE SAVINGS POSSIBLE: A new OECD report released today estimates implementation of an ambitious set of services trade reforms could produce annual trade cost savings in the range of $1 trillion — with important gains in business sectors, financial services, transport and communications services. That would equal about 1 percent of global GDP or around 13 percent of the value of global services trade in 2023, the report said. The release coincides with a visit by OECD Secretary-General Mathias Cormann to Washington, where he will deliver a speech tonight to the Coalition of Services Industries and receive an award. He also will present the OECD’s latest economic survey of the United States at the Brookings Institute on Tuesday. Digital barriers increasing: “On a global level, barriers to digitally-enabled services rose by 25 percent between 2014 and 2023, driven by increasing regulatory hurdles that affected communication infrastructures and data connectivity,” the report said. “Moreover, regulatory differences among countries have grown over the past decade.” Other findings: The report draws on 10 years of data collected for the OECD’s Services Trade Restrictiveness Index. Some takeaways include: — Services trade barriers are high and asymmetric. — Market access barriers represent a substantial portion of services trade barriers. — New WTO disciplines on services domestic regulations adopted earlier this year are expected to pave the way for easier licensing and authorization processes and to enhance regulatory transparency across participating countries. — That WTO agreement could lower trade costs by up to $150 billion annually. CHINA WON’T ASK FOR PANEL TODAY: China is skipping its first opportunity today to ask the WTO to establish a panel to hear its complaint against provisions of the U.S. Inflation Reduction Act, according to an agenda of the organization’s Dispute Settlement Body. The issue is not listed on the items to be discussed and “panel requests aren't something you can slip on at the last minute,” one Geneva-based trade official said. China could still ask for a panel at a future DSB meeting. However, the country still has not requested a panel in a dispute over U.S. export controls that it initiated in December 2022 — so it’s possible Beijing’s IRA complaint could languish in a similar manner.
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