Foreign Direct Investment in the United States and U.S. Trade

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Abstract
Foreign-owned manufacturing firms' shares of U.S. trade grew from almost nothing in the 1960s to 7 or 8 percent of trade in manufactured goods by the 1980s. It has changed little in the past decade, except for fluctuations related to changing U.S. exchange rates. The foreign affiliates' comparative advantage relative to U.S. parent firms and U.S. firms in general is concentrated in chemicals and metals industries. The trade of the foreign-owned firms, as measured by exports-sales and imports-sales ratios and by export-import ratios, fluctuates more than that of U.S. firms. In particular, foreign affiliates seem to be more responsive than U.S. parents to exchange rate changes, shifting their export production and sources of imports as the value of the dollar rises and falls.

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