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Council on Foreign Relations Press
Council Special Report No. 34
Foreign investment has been a principal engine of global economic growth in recent years.
Both developed and developing countries have reaped substantial gains. This investment offers direct benefits to host countries, including job creation and increased tax revenue. In addition, it helps source countries, i.e., those where multinational firms are based, by allowing these firms to compete and earn profits abroad. Investment is also important to the global economy as a way to finance current account imbalances.
Foreign investment, though, is not immune to the sort of resistance that we are seeing with respect to the movement of goods and services. Indeed, just as with trade, calls to restrict investment are growing louder in many countries, with potentially significant adverse political and economic consequences. In this Council Special Report, David M. Marchick and Matthew J. Slaughter track the rise of investment protectionism. They examine trends in a number of countries, documenting moves toward restricting investment through both legislation and regulation. They also analyze the reasons behind these trends, such as increased concern over investment from “nontraditional” sources, both private and sovereign wealth funds.
The report ends with recommendations for policymakers. Acknowledging governments’ legitimate national security interests, it lays out clear principles for host countries to follow in regulating foreign investment. The authors also recommend actions to be taken by international organizations to help foster sound policies in these host countries. The result is a compelling analysis and a strong case for governments everywhere to take steps to maintain openness to investment.
Part of the Bernard and Irene Schwartz Series on American Competitiveness.
David M. Marchick serves as managing director and global head of regulatory affairs for the Carlyle Group, a global public equity firm. In this position, Mr. Marchick provides government affairs, regulatory, and strategic advice and support to Carlyle's fund managers and portfolio companies on a global basis. Prior to joining Carlyle, Marchick was a partner and vice chair of the international practice group at the law firm Covington & Burling LLP. He is an expert on foreign investment issues and has advised on a number of significant recent foreign acquisitions of U.S. companies. Mr. Marchick is the coauthor of the book U.S. National Security and Foreign Direct Investment (Institute for International Economics), has authored numerous articles in major business and trade publications such as the Financial Times, Wall Street Journal, and Far Eastern Economic Review, and frequently testifies before Congress. Mr. Marchick earned his BA from the University of California, San Diego, his MA from the University of Texas, and his JD from the George Washington University Law School.
Matthew J. Slaughter is associate dean of the MBA program and professor of international economics at the Tuck School of Business at Dartmouth. He is also currently a research associate at the National Bureau of Economic Research; an adjunct senior fellow at the Council on Foreign Relations; an academic adviser to the McKinsey Global Institute; and a member of the advisory boards of the International Tax Policy Forum and the Tuck Center for Private Equity and Entrepreneurship. From 2005 to 2007, Professor Slaughter served as a member of the Council of Economic Advisers in the Executive Office of the President. In recent years he has also been affiliated with the Federal Reserve Board, the International Monetary Fund, the World Bank, the National Academy of Sciences, the Institute for International Economics, and the Department of Labor. Professor Slaughter joined the Tuck faculty in 2002. Hereceived his bachelor’s degree summa cum laude and Phi Beta Kappa from the University of Notre Dame in 1990, and his doctorate from the Massachusetts Institute of Technology in 1994.