The following article originally appeared on the South Carolina Economic Developers Association site.
Foreign direct investment (FDI) in the United States has been a key driver in the recent manufacturing recovery. Capital investment in automotive, chemical, textile, aerospace and other manufacturing and production facilities by foreign-owned companies has been on a steady increase in the Southeast United States.
While reshoring activity accounts for a portion of this investment, the upsurge that may be most beneficial to U.S. workers is how investments are being redirected based on the new economics of manufacturing in the U.S. According to the Organization for International Investment (OFII), it is insourcing, or foreign direct investment (FDI) in the United States, that truly bolsters U.S. manufacturing. The OFII’s Foreign Direct Investment in the United States 2014 Report showed that in 2013, manufacturing accounted for one-third of cumulative FDI, in an amount exceeding $900 billion.
The Global Supply Chain Institute at the University of Tennessee conducted a study on outsourcing and global supply chains and reported that companies are adopting regional supply chain models. “Our research suggests that global supply chains across the world will eventually break into a series of supply pods where regional procurement and manufacturing operations will supply the major demand centers of the area, at least for a significant percentage of production requirements.”
These trends from the large U.S. market are attractive to many corporations overseas because companies are increasingly making their products in multiple stages from supply networks in many countries that are linked together by trade and investment. Some other attractive and key advantages that provide incentive to FDI are:
- Proximity to markets
- Dependable infrastructure
- Training and education
- Business-friendly regulatory environments
Southern states have a strong lead in building their manufacturing base. A 2011 Southern Business Development article stated “of total investments made in this country by foreign-owned companies since 2001, the South’s take has averaged 43 percent of the U.S. annual total.” The growing roster of facilities that have already been built increases the likelihood that new manufacturers will be close to their customers if they, too, build facilities in the south. A solid infrastructure, encompassing not only roads but ports and waterways, is already in place. And a 2014 USA Today article credited the south with a trifecta of incentives: “lower costs, generous state incentive packages and right-to-work laws.”
With continued growth on the horizon and a suite of advantages working in America’s favor, manufacturers will continue to look at capital investments in the United States.
