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Europe: Mutual Foreign Investment Crucial To U.S. and Europe

  • Robert Lyle

Washington, 6 September 1996 (RFE/RL) -- People in the nations of Central and Eastern Europe and the former Soviet Union sometimes feel that "foreign investment" is a kind of evil way for wealthy people in rich countries to gain control of property and assets in poor countries.

But a new study by the European-American Chamber of Commerce says that mutual trade and foreign investment is most common among rich, developed nations and that far from being a device to take someone else's assets, foreign investment and trade economies grow and creates jobs.

The president of the Washington-based European-American chamber, Willard Berry, says that commercial ties between the nations of Western Europe and the United States amount to over $1.7 trillion per year and create more than 12 million jobs directly and indirectly in both the European Union (EU) and the U.S.

"We too often hear that the global economy threatens U.S. workers because multinational companies prefer to invest in low-wage countries," Berry told a press conference in Washington Thursday.

However, he said, "in reality, most international companies must invest in developed markets if they wish to remain competitive there."

Germany's automobile, rail and air transport manufacturer, Daimler-Benz, which financed the study, says that it currently provides or creates nearly 80,000 jobs in the United States and plans to greatly expand its investment in all of North America in the coming year. An official of Daimler-Benz's Washington office, Jeffrey Thinnes, says the company wants to invest more in the United States, Canada and Mexico to "improve productivity, put our production closer to our markets and reduce the foreign currency risks."

While the study did not cover investment or trade ties with the transition countries in Central Europe and the ex-U.S.S.R., experts say companies look to invest in this region for the same reasons.

Berry says, however, that to get full benefit, the trade and investment between two countries or groups of countries should be balanced and unhindered.

"Transatlantic trade and investment remains nearly perfectly balanced," the study says, "which is striking when compared to the trade deficits and investment barriers that often strain relations between the United States and its Pacific trading partners," particularly Japan.

The study found that Western Europe is the number one investor in 41 of the 50 American states, and ranks second in the remaining nine states. It says Europe is also the first and second export market for 42 of the U.S. states.

It says that European investment in the United States is valued at $392 billion while U.S. investment in western Europe is valued at $384 billion dollars. In 1995, it says, European investment in the United States accounted for 65 percent of all foreign direct investment in the country.

Even on the U.S. Pacific coast, investment and trade ties with Europe are strong. California, for example, has nearly $38 billion of investment from Europe which produces nearly 274,000 jobs in that state alone. In addition, California goods exported to Europe create another 129,500 jobs.

Berry says that trade is important for all nations, developed and developing. Even when Western Europe was in an economic slump and the market was growing at only around two percent annually, he says, it was still adding $140 billion dollars in value each year.