The value of FDI drives interest at Hannover Messe

SelectUSA to promote Foreign Direct Investment at fair

By Bob Vavra December 2, 2015

As the United States’ global economic recruiter, SelectUSA is constantly in search of new ways to attract foreign direct investment (FDI) to U.S. soil. As the U.S. prepares for its starring role on the global stage at Hannover Messe 2016 in Germany, SelectUSA’s responsibilities ever have been more important.

For the first time, the United States will be the Partner Country at Hannover Messe, and that creates an opportunity to bring the U.S. manufacturing story to the world’s largest industrial trade show. SelectUSA officials and its bosses at the U.S. Department of Commerce are preparing to showcase the American manufacturing economy as growing and stable.

It’s been an easier story to tell in recent years. According to a report from the Manufacturing Institute, U.S. manufacturing on its own ranks as the world’s eighth-largest economy.

An October 2013 White House report cited the value of foreign direct investment for the U.S. and its specific impact on manufacturing. Among the key points:

  • Foreign-owned companies with U.S. affiliates employed 5.6 million people, with one-third of those jobs in the manufacturing sector.
  • Foreign-owned U.S. affiliates were more stable companies in the midst of the 2008-09 recession, and the affiliates’ share of overall manufacturing employment in the U.S. rose from 14.8% in 2007 to 17.8% in 2011.
  • The report found pay and other compensation generally was higher for the foreign-owned affiliates.

"Looking ahead," the report concluded, "the United States will remain an attractive destination for foreign investment, and this investment will help bolster our economy. However, we need to continue to nurture and build upon the underlying strengths of the U.S. economy that make firms want to invest here, including an open-investment regime, a large economy, a skilled labor force, community colleges, world-class research universities, a predictable and stable regulatory regime, adequate infrastructure, and new energy sources."

Making the case for Hannover

The U.S. Commerce Department is stepping up the effort to deliver American manufacturing business leaders and especially American economic development leaders from all 50 states to the U.S. Pavilion at Hannover Messe. The 24,000-sq-ft pavilion will be in Hall 3 near the north entrance to the fairgrounds.

In a video promoting the U.S. Partner Country stats at Hannover, Commerce Secretary Penny Pritzker called Hannover Messe "an unparalleled, unique opportunity for American businesses to showcase their products and capabilities to thousands of advanced manufacturing leaders from all over the world. This means that American businesses will be front and center in both the exhibition hall and during the special events.

"The United States is home to the most innovative and forward-thinking companies in the world. But in today’s global economy, it is not enough to simply be the best—we must also let the world know that America is open for business," Pritzker added. As part of that invitation, the Commerce Department will be the host at the U.S. Investment Pavilion, where state and local economic-development organizations will meet with European and global manufacturers. "The International Trade Administration will have international trade specialists available on the show floor to provide insights into global industry trends, identify the best market opportunities for U.S. products, and facilitate introductions to international buyers, distributors, and investors," Commerce Department officials said in a press release.

German officials are equally excited about the U.S. Partner Country status. "Having the USA as the featured Partner Country will give us a golden opportunity to convey our dynamic business relations to the fullest while at the same time widening and deepening them," said Dr. Peter Wittig, the German Ambassador to the United States.

A challenging global landscape

Despite U.S. manufacturing success in recent years, there are global headwinds. According to the United Nations Conference of Trade and Development, the U.S. slipped to third in foreign direct investment in 2014 as overall investment also slowed. Foreign firms invested $128 billion in China and $111 billion in Hong Kong (calculated separately from China). The U.S. was third with $86 billion in foreign investment. Overall, the report found foreign investment fell 8% from 2013.

The importance of such investments stretches beyond the jobs created and products produced. A 2015 report from the nonprofit Brookings Institute noted there are three foundational benefits from foreign direct investment:

  • Innovation: "Foreign companies account for roughly 19% of total corporate (research and development) spending in the United States," the Brookings report stated. "But beyond this direct investment in innovation, foreign companies introduce ideas, technologies, and knowledge from abroad into the U.S. market that other businesses can then learn from, recombine, and turn into novel products, services, and business models themselves."
  • Skills: "Foreign companies tend to invest more in worker training than do domestic firms. They also bring with them best practices in education and training that domestic companies and institutions emulate," the report stated. "A classic example is the German apprenticeship model, pioneered in this country by companies such as Bosch and Siemens and now being scaled in places such as Michigan and North Carolina.
  •  Ecosystems: The report defined ecosystems as "regional industrial communities within which firms operate." The report also noted that such ecosystems help individual companies. "By injecting brand-new ideas and approaches into these regional ecosystems, FDI strengthens them more than do most other investments," the report stated, adding, "Not coincidentally, innovation, skills, and ecosystems are factors that attract high-quality FDI to the United States in the first place."

Support at the fair

The Department of Commerce has services available to U.S. manufacturers before, during, and after this year’s Hannover Messe. During the first webcast in a series designed to help U.S. manufacturers and economic development leaders learn more about Hannover Messe, U.S. Commercial Services representatives discussed how it could support attendees.

While U.S. companies can and do exhibit outside of the U.S. pavilion, the larger presence will help focus the attention of the show’s expected 200,000 attendees on U.S.-based businesses and economic development regions.

The U.S. Commercial Service has analyzed the top 25 participating industries at Hannover Messe, and can provide preshow advice on how and where to exhibit. The information is available here.

During the show, the Commercial Service will assist with introductions to prospective manufacturing partners, and also with lead generation and vetting of potential business partners through its global network.

The expected attendance of President Obama for the gala Opening Ceremonies on Sunday, April 24, adds another layer of global attention to Hannover Messe 2016, and to American manufacturing.

"It’s a really exciting opportunity for the USA brand and USA industry," said Ethan Carter, sales director for Hannover Fairs USA, the U.S. subsidiary of Hannover Messe.


Foreign Direct Investment in U.S. manufacturing by product

4% Electronics and appliances

5% Computers and electronics

5% Primary and fabricated metals

8% Food

9% Machinery

11% Transportation equipment

32% Chemicals

26% Other manufacturing

(Source: U.S. Bureau of Economic Analysis)

Author Bio: Bob is the Content Manager for Plant Engineering.