Foreign Direct Investment in the U.S. And U.S. Trade

39 Pages Posted: 19 Sep 2007

See all articles by Robert E. Lipsey

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Date Written: February 1991

Abstract

Foreign-owned manufacturing firms' shares of U.S. trade grew from almost nothing in the 1960s to 7 or 8 per cent of trade in manufactured goods by the 1980s. It has changed little in the past decade, except for fluctuations related to changing U.S. exchange rates. Foreign-owned firms are less export-oriented than U.S. parent companies, overall and in the same industries, and more dependent on imports, relative to their sales. The foreign affiliates' comparative advantage relative to U.S. parent firms and U.S. firms in general is concentrated in chemicals and metals industries. Foreign-owned firms in machinery and transport equipment do relatively little exporting from the U.S. in comparison with U.S.-owned firms. The trade of the foreign-owned firms, as measured by exports/sales and imports/sales ratios and by export/import ratios, fluctuates more than that of U.S. firms. In particular, foreign affiliates seem to be more responsive than U.S. parents to exchange rate changes, shifting their production between sales in the U.S. and exports and their inputs between U.S. production and imports as the value of the dollar rises and falls.

Suggested Citation

Lipsey, Robert E., Foreign Direct Investment in the U.S. And U.S. Trade (February 1991). NBER Working Paper No. w3623. Available at SSRN: https://ssrn.com/abstract=471560

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

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