The United States remains an attractive foreign direct investment (FDI) destination for a variety of reasons, including its large consumer base, a productive workforce, a business environment that encourages innovation and its legal protections. As a result, foreign firms make investments in the United States on a regular basis by establishing new operations, purchasing existing operations of another company, or providing additional capital to their existing U.S. operations. This report highlights the latest available Bureau of Economic Analysis data on FDI, building on previous reports by the Office of the Chief Economist.

FDI trends identified in our earlier reports continued in 2016. FDI inflows on a historical cost basis in 2015 were the largest on record at $465.8 billion while 2016 inflows, though slightly lower at $457.1 billion, were at the second highest level on record. FDI in these two years was more than double the average annual inflows of roughly $200 billion for 2012-2014. Increased investment in manufacturing, specifically in chemical manufacturing, accounted for most of the investment gains for both 2015 and 2016.

• The United States had an inward FDI stock of $3.3 trillion and $3.7 trillion, on a historical-cost basis, for 2015 and 2016 respectively. The United States' FDI stock in 2015 ($5.6 trillion on a current-cost basis) was more than three times larger than that of the next largest destination country.¹ Total inward stock in the United States grew at an average annual rate of 7.8 percent per year from 2009-2016.
• In 2016, as in the previous year, advanced economies, led by the United Kingdom, Japan, Canada and Germany, held the largest FDI positions in the United States.²
• Majority-owned U.S. affiliates of foreign entities exported $352.8 billion in goods, accounting for over 23 percent of total U.S. goods exports in 2015 (the most recent year for which this data is available). They are also a catalyst for research and development, spending $56.7 billion in 2015 on R&D and accounting for 15.8 percent of the U.S. total expenditure on R&D by businesses.³
• Majority-owned U.S. affiliates of foreign entities employed 6.8 million U.S. workers in 2015, up from 6.6 million in 2014, and provided compensation of nearly $80,000 per U.S. employee in 2015. That is higher than the U.S. average of $64,000 in the economy as a whole for the same year.
• The U.S. manufacturing sector continues to benefit from inbound FDI flows. More than 70 percent of FDI flows in 2015 and over 44 percent in 2016 were in the U.S. manufacturing sector.
• "Greenfield" investment expenditures by foreign entities totaled $7.7 billion in 2016.⁴ This included expenditures on establishing new businesses ($5.6 billion) and expenditures on expanding existing businesses ($2.2 billion).⁵
• In 2016, foreign investors spent $365.7 billion on new acquisitions of U.S. companies. Therefore, total first-year expenditures by foreign entities were $373.4 billion (acquisitions plus expansions plus the establishment of new businesses).

¹ Inward FDI stock data measured in U.S. dollars at current prices and current exchange rates. United Nations Conference on Trade and Development UNCTADstat Database. unctadstat.unctad.org/ Accessed 6/7/2017.

² Based on the latest available 2016 inward FDI position by Ultimate Beneficial Owner (UBO) data. The UBO measure of investment attributes FDI ownership to the country of the highest level decision maker in a company's ownership chain. This measurement removes distortions in data that may arise from FDI into the United States that passes through intermediary countries. Foreign Direct Investment in the U.S.: Balance of Payments and Direct Investment Position Data. U.S. Bureau of Economic Analysis. Accessed July 31, 2017. www.bea.gov/international/di1fdibal.htm

³ The latest available data on compensation, employment, goods exports, and R&D activities by U.S. affiliates of foreign entities is from 2015. Activities of U.S. Affiliates of Foreign Multinational Enterprises, U.S. Bureau of Economic Analysis. Accessed July 6, 2017. www.bea.gov/international/di1fdiop.htm "Business R&D Performance in the United States Increases Over 5.6% to $341 Billion in 2014," Infobrief. National Science Foundation (NSF). August 25, 2016. https://www.nsf.gov/statistics/2016/nsf16315/

⁴ FDI can be characterized as either a "greenfield" or "M&A" investment. Greenfield investments occur when a company newly establishes an affiliate "from scratch" or expands an existing affiliate by building a new plant or facility. Mergers and Acquisitions, or M&A investment occurs when a foreign entity acquires a 10 percent or more lasting voting interest in an incorporated U.S. business enterprise. BEA reinstated the survey of new foreign direct investment in the United States, which collects data on acquisitions and establishment of new entities, in 2014. The reinstated survey now also includes data on expansions of existing entities. Data on greenfield investments is only available for 2014 - 2016.

⁵ Expenditures by Foreign Direct Investors for New Investment in the United States, 2014-2016. Bureau of Economic Analysis. www.bea.gov/newsreleases/international/fdi/fdinewsrelease.htm