The U.S. is for sale – and foreign investors are buying
The dollar's slump makes scooping up US businesses and real estate a financial bargain.
(Page 2 of 2)
"We are very vulnerable now," says Mr. McMillion. To finance the trade deficit, the US must borrow money or sell assets worth $2 billion a day – a shift that will eventually erode American living standards, he argues.Skip to next paragraph
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In the first four months of this year, US exports were up 18.8 percent from the same period a year earlier and imports up 12.7 percent. That represents a slow positive shift. Higher farm prices have helped.
On June 27, the Bureau of Economic Analysis will publish its annual statement on the "US net international investment position" at the end of 2007. It will again be negative, indicating the US position as the world's biggest debtor nation continues to worsen. At the end of 2006, the value of foreign investments in the US exceeded the value of US investments abroad by $2.54 trillion. That was up $300 billion from the year before.
Of course, the US remains a vital, huge economy with a relatively stable political system. McMillion blames "the overwhelming power of Wall Street's debt industry with the media" for the widespread touting of the US as a great place to invest and for the nation's complacency over record trade deficits and foreign debts.
Professor Morici sees as "insidious" the growing purchase by foreigners of the US business engines that generate wealth. He notes that the financial crisis of the last year forced several major American banks to replace lost capital with more than $30 billion of foreign money. This has left them "beholden" to the owners of that money, including the Saudi royal family in the case of Citibank.
US lawmakers have become more interested in foreign direct investment. Both the Senate and House held hearings this spring on sovereign wealth funds, pools of money owned by foreign governments. Their assets are expected to reach $12.5 trillion in five years as dollars accumulate abroad. Last month Treasury Deputy Secretary Robert Kimmit in a speech said the US should be sending the message "we are open for investment."
But Mr. Tantillo complains that US firms face "the rampant use of foreign trade-distorting practices and subsidies." His big complaint is the Value Added Tax (VAT) employed by 149 countries, including most of Europe, but not the US. It is a tax averaging 15.5 percent on domestic goods and services, but also is imposed on imports and rebated on exports. This "subsidy," he says, puts US companies at a $428 billion disadvantage in competing on world markets, he says. Tantillo hopes a bill before Congress dealing with the VAT problem will get more traction next year with a new Congress and president.