July 27, 2010

Seventy-two Percent of Respondents at U.S. Subsidiaries of Foreign Companies Say Environment for Doing Business in the U.S. has Worsened Over the Last Year

WASHINGTON, DC- A recent survey commissioned by the Organization for International Investment (OFII) of senior executives at U.S. subsidiaries of foreign companies say they have growing concerns about the business environment in the United States.  According to the survey findings, lowering the corporate tax rate and expanding open trade policies would make the United States a more attractive location for foreign direct investment.

OFII commissioned the assurance, tax and advisory firm of PricewaterhouseCoopers LLP to conduct the survey, which was based on nearly a hundred responses from CFOs at U.S subsidiaries of foreign companies. These top executives play a vital role in determining whether the global parent company should increase U.S. investment and employment.  As such, the survey represents a “customer satisfaction” assessment of doing business in the U.S. 

“U.S. subsidiaries already play a crucial role in the American economy, directly employing 5.5 million Americans, producing 6% GDP and manufacturing close to 20% of total U.S. exports,” said Nancy McLernon, OFII President & CEO.  “As Congress and the Administration look to enact policies that stimulate job creation, efforts to attract foreign companies to locate and employ people in the United States should be a priority.”  McLernon continued, “The survey has some good news; with almost half of CFOs reporting that their companies plan to increase investment and employment in the United States over the next year.”

According to Fried-Walter Muenstermann, BASF Executive Vice President & CFO, a global chemical company based in Germany, “The U.S. economy is indeed competitive with other countries on several fronts, including quality of the workforce.  However, the realities of today’s global economy offer companies great discretion in choosing locations.  The OFII survey shows that the United States needs to reverse a troubling trend and focus on ways to attract more investment that in turn will create more jobs for Americans in this country.”  

“Many foreign-headquartered companies, such as Thomson-Reuters have been in the United States for decades and have demonstrated a commitment and confidence in the U.S. workforce,” said Robert Daleo, Executive Vice President & Chief Financial Officer at Thomson Reuters, the world’s leading source of information for businesses and professionals. “If you examine the OFII survey results, it is noteworthy that the United States has within its ability to draw more of the world’s businesses within its borders.  The policy changes that would provide an incentive, such as an open trade policy, are doable.” 

Key Survey Findings:

 Plans for Investment & Employment Over the Next 12-18 months:

• 53% of U.S. subsidiaries plan to increase U.S. investment – compared to 10% who plan to decrease U.S. investment
• 49% of U.S. subsidiaries plan to increase U.S. employment – compared to 22% who plan to decrease U.S. employment
• U.S. subsidiaries rank China, U.S., India, Germany, and Brazil as their top priorities for investment (in that order)

 U.S. Business Climate for U.S. Subsidiaries of Foreign Companies:

• 39% of U.S. subsidiaries view the U.S. as having a strong competitive business environment for foreign companies compared to other countries – while 28% say the U.S. business environment is weaker for foreign companies compared to other countries. 
• 72% of U.S. subsidiaries believe the U.S. business climate for foreign companies has deteriorated over the last year - compared to 13% who believe the U.S. business climate for foreign companies is getting better

 Factors Influencing Investment Decisions:

• U.S. subsidiaries view a skilled workforce as the most important influencing factor for choosing where to invest, followed by:
  • Political environment for foreign companies
  • Corporate tax system
• The U.S. ranks high, compared to other countries, on quality of workforce;
  • Ranks the U.S. very low on corporate tax policy

Policy Issues of Concern for U.S. subsidiaries:

• U.S. subsidiaries believe that tax is the most important policy area that will impact their companies’ decision to invest in the United States;
  • Open trade ranks as the second most important policy area
• Narrowing in on changes to tax policy, lowering the corporate tax rate ranks as the most important;
  • Transfer pricing rules rank as the second most important tax policy area that can impact their companies’ decisions to invest in the United States

To see full survey results click here

The Organization for International Investment is a Washington-based business association representing U.S. subsidiaries of international companies headquartered abroad. For additional information, see OFII’s web site at www.ofii.org.