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Factories Reaping Rewards from Biden’s Incentives for Foreign Investment

New tax breaks and incentives for advanced manufacturing signed into law by President Biden have led to a shift in direct foreign investment in the American economy, according to an analysis by the White House. The analysis shows that a greater portion of spending on new and expanded businesses is now being directed towards the factory sector.

Data from the months following the enactment of these laws indicate a slight decrease in foreign investment compared to the previous year, adjusted for inflation. However, the overall amount of foreign direct investment in the economy has not increased. Instead, the laws have redirected where foreign investment is being focused.

The White House Council of Economic Advisers has conducted a new analysis that reveals a rapid shift in capacity-enhancing spending towards factories, aligning with one of Biden’s key economic objectives.

The analysis shows that in 2022, two-thirds of foreign direct investment, excluding corporate acquisitions, was in the manufacturing sector. This is more than double the average share from 2014 to 2021.

Although the surge is relatively small in the context of the overall economy, administration officials view it as an encouraging indication that multinational companies are attracted to America by Biden’s industrial policy agenda. The analysis also highlights that construction spending on new manufacturing facilities in the United States has grown significantly faster than in other wealthy Group of 7 nations and Europe over the past year.

According to a Commerce Department survey, foreign investors are primarily from Britain, continental Europe, Canada, Japan, and South Korea. China accounts for only half of 1 percent of the investment.

Most of the foreign investment is directed towards computer and electronics manufacturing, particularly semiconductors, which were the focus of a bipartisan industrial policy bill signed by Biden. The president also signed a bill later that summer, which included subsidies for renewable energy technology manufacturing.

Since the signing of these laws, numerous companies have announced planned investments in the United States totaling over $500 billion. These include semiconductor plants in Arizona and advanced battery facilities in Georgia. Many of these projects involve foreign companies like Taiwan Semiconductor Manufacturing Company.

Administration officials argue that shifting investment towards factories, even without a change in overall investment levels, can have positive effects on the economy. The White House analysis highlights higher wages in manufacturing jobs and the potential for increased productivity as foreign firms share knowledge with domestic manufacturers.

Jared Bernstein, the chair of the Council of Economic Advisers, stated, “Foreign direct investment in manufacturing doesn’t just help us build up this critical sector in key focal areas of Bidenomics, such as semiconductors and clean energy. It also allows us to learn valuable production lessons from international companies in these and other areas.”

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