Lori Ann LaRocco conducts the following interview:
The deal between the Deutsche Boerse and the NYSE Euronext (NYSE:NYX) will be reviewed by The Committtee on Foreign Investment in the United States [CFIUS] and while insiders expect the deal to go through since it approved the Nasdaq OMX (NASDAQ:NDAQ) and Borse Dubai deal, the concerns about “national security” continue to be tossed around.
U.S. Subsidaries play an important role in the U.S. economy, some five percent of all jobs are created by them. I decided to ask Nancy McLernon President and CEO of the Organization for International Investment which represents U.S. subsidiaries, about her outlook on this merger and why U.S. Subsidaries are kicking up more cash to have a slice of American business.
LL: When it comes to foreign investment in a U.S. “institution” it is often met with criticism and even protectionism when it comes from Congress. Why is it important to have foreign direct investment for the U.S. economy?
NM: Foreign direct investment is a substantial source for job growth in the U.S. and is tremendously important—particularly now as America continues to rebuild our economy. It’s important to remember the economy we live in and operate today is a global one.
Setting aside for a moment this latest high profile merger, think back to some of the many iconic U.S. institutions that received a capital infusion from abroad—and how that’s been a reliable source of U.S. economic growth. For instance, American Alka-Seltzer known for its popular “plop plop fizz fizz” campaign, which was founded in 1931, and was purchased by Germany-based Bayer AG in 1979.
You can now find Alka-Seltzer on grocery and drug-store shelves worldwide. Same goes for Ben & Jerry’s Ice cream, which was purchased by British-Dutch Unilever (NYSE:UN) a decade ago and today has streamlined production and expanded internationally.
Without the investment, Ben & Jerry’s may have been no longer. And in 1989 Japan-based Sony (NYSE:SNE) acquired the American film and television production company Columbia Pictures Entertainment Inc. from the Coca Cola Company (NYSE:KO). Today Sony Pictures Entertainment (NYSE:SNE) is one of the largest film production and distribution units in the world.
LL: We always here about the outsourcing of jobs. Let’s talk about insourcing. How many jobs do U.S. subsidiaries of global companies create?
NM: Insourcing is when a non-U.S. company invests in the United States and employs American workers. Global companies have been investing in the U.S. for decades, some for more than a century.
According to the Commerce Department’s most recent data, 5.6 million Americans—close to 5 percent of all private sector workers are employed by the U.S. operations of global companies. In fact, these companies support an annual payroll of more than $400 billion with the average compensation per worker 33 percent higher than compensation at all U.S. companies.
LL: What are the leading technologies/sectors you see popping in foreign investment?
NM: Global companies are leading the way in many sectors—in green energy, pharmaceuticals, auto manufacturing, and infrastructure.
These companies continue to invest in the U.S. and each year create thousands of American jobs. It’s important for us to make sure these companies know and understand the value of investing in the United States. In today’s world, global companies can take their operations anywhere. It’s up to us to make sure we let them know the U.S. is open for business.
LL: Tax reform is one of the many items on the Administration’s agenda to possibly tackle- what are U.S. susidiaries saying they would like to see?
NM: Lowering the corporate tax rate ranked as the top policy change that would incentivize more foreign direct investment in the U.S., according to a recent survey we conducted of the U.S. CFOs of our companies.
Addressing the high corporate tax rate, which is among the highest in the world, is absolutely a crucial element to increasing American global competitiveness and promoting foreign direct investment in the United States.
LL: What are U.S. subsidaries telling you in regards to the latest flap about the NYSE-Deutsche Börse merger?
NM: It’s unfortunate when a merger like this is met with a knee-jerk reaction here in Washington. What’s important to keep in mind is that the world is watching. Anti-foreign jabs can make other global companies worry about pumping much-needed capital into the U.S.
LL: All foreign investment is not through acquisitions alone, how much foreign investment is done a year?
NM: Foreign direct invest is on the rise again, after declining last year. Historically the U.S. has been the largest host and home of foreign investment. With the increasing attractiveness of investing in developing countries, the U.S. should actively work to encourage global companies to invest and employ Americans.
Lori Ann LaRocco is a Senior Talent Producer at CNBC, and author of “Thriving in the New Economy:Lessons from Today’s Top Business Minds.”
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