Investing in America

Investing in America

Trade surpluses and deficits measure the movement of money across borders. So buying an EV made in China moves a car into the U.S. and money out to China. While that's a fair trade, the accounting follows the money. That fair trade gives China money in exchange for its metal car and is booked as a deficit. This accounting includes investments. Like the car buyer invests in the Chinese EV, the investor invests in an economy.

Surpluses simply mean that global investors, including those in the country in question, consistently find better investment opportunities outside of that country than within that country. Why countries, such as the U.S., that are net recipients of these investments, should complain is a mystery. This is the advantage of lower corporate tax rates: they attract investment.

An even worse error is to describe surplus countries as “trying to … acquire other countries’ assets.” The amount of capital in the world or in any country isn’t fixed; it can and does grow. When the Dutch company Ikea builds a store in Newark, it doesn’t so much acquire assets that once belonged to Americans as it creates assets in America that would not otherwise exist – assets that improve employment opportunities for Americans as well as expand Americans’ access to goods and services. Ditto when the German company BASF builds facilities in Louisiana, when the Mexican company Cemex constructs a plant in Texas, and when the Japanese company Toyota erects a factory in Kentucky. It’s beyond mysterious why someone, who’s frantic to have more manufacturing in the U.S., peddles policies that would reduce such foreign investment on America’s shores.

The foreign buying of so-called 'strategic land' is probably a different question and is worth discussion though it might be reasonable to start with being less polite to spy balloons.