Foreign direct investment in the United States.

Fahim-Nader, Mahnaz ; Zeile, William J.

Outlays by foreign direct investors to acquire or establish businesses in the United States surged to a record $80.5 billion in 1996 from $57.2 billion in 1995. The previous record of $72.7 billion was in 1988 (chart 1). Outlays increased 41 percent in 1996, following increases of 25 percent in 1995 and 74 percent in 1994 (table 1)(1).

[CHART 1 OMITTED]

Table 1. --Selected Data on Newly Acquired or Established U.S. Businesses and on Nonbank U.S. Affiliates, 1997-96

 Newly acquired or established
 U.S. businesses

 Outlays Employment
 (millions of (thousands of
 dollars) employees)

1977 n.a. n.a.
1978 n.a. n.a.
1979 n.a. n.a.
1980 12,172 292.5
1981 23,219 442.8
1982 10,817 233.8
1983 8,091 108.1
1984 15,197 172.5
1985 23,106 275.5
1986 39,177 438.0
1987 40,310 394.1
1988 72,692 736.3
1989 71,163 722.0
1990 65,932 474.3
1991 25,538 249.0
1992 15,333 141.5
1993 26,229 289.1
1994 45,626 289.3
1995 (r)57,195 (r)312.9
1996 (p)80,537 (p)443.4

 All nonbank U.S. affiliates

 U.S. affiliate
 share of
 Gross gross product
 Employment product originating in
 (thousands of (millions of private industries(1)
 employees) dollars) (percent)

1977 1,218.7 35,222 2.3
1978 1,429.9 42,920 2.5
1979 1,753.2 55,424 2.9
1980 2,033.9 70,906 3.4
1981 2,416.6 98,828 4.2
1982 2,448.1 103,489 4.3
1983 2,465.5 111,490 4.3
1984 2,714.3 128,761 4.4
1985 2,882.2 134,852 4.3
1986 2,937.9 142,120 4.3
1987 3,224.3 157,869 4.5
1988 3,844.2 190,364 5.0
1989 4,511.5 223,420 5.4
1990 4,734.5 239,279 5.5
1991 4,871.9 257,834 5.9
1992 4,715.4 266,333 5.8
1993 4,785.8 285,738 5.8
1994 4,840.5 (r)312,981 6.0
1995 (p)4,928.3 (p)326,955 6.0
1996 n.a. n.a. n.a.

 Addendum:
 Employment
 by newly
 acquired or
 established
 U.S. businesses as a
 percent of employment by
 all nonbank
 U.S. affiliates(2)

1977 n.a.
1978 n.a.
1979 n.a.
1980 14.4
1981 18.3
1982 9.6
1983 4.2
1984 6.4
1985 9.6
1986 14.9
1987 12.2
1988 19.2
1989 16.0
1990 10.0
1991 5.1
1992 3.0
1993 6.0
1994 6.1
1995 6.3
1996 n.a.

(p) Preliminary.

(r) Revised

(1.) For improved comparability with U.S. affiliate gross product, gross product originating in private industries was adjusted to exclude gross product originating m depository institutions and private households, imputed rental income from owner-occupied housing and business transfer payments.

(2.) Because the data on new affiliates include bank affiliates the percentages shown in this column are biased upward. In all years, the bias is less than 1 percentage point; in most years, it is less than 0.3 percentage point

n.a. Not available.

Outlays for new investments include both those made directly by foreign investors and those made through their existing U.S. affiliates. The outlays in 1996 were notable not only because of their large size but also because of the channels through which the outlays were made, the sources of financing, and the industry composition. As in past years, outlays made directly by foreign investors were smaller than outlays made by existing U.S. affiliates; however, outlays made directly by foreign investors accounted for a substantially higher share of total outlays than in any year since this series began in 1980. To some extent, this pattern may reflect a larger-than-usual share of outlays accounted for by foreign investors who were making direct investments in the United States for the first time; these investors lack U.S. affiliates through which new investments could be channeled. Reflecting these patterns, the share of outlays financed with funds from foreign direct investors rather than from other foreign sources or U.S. sources also was higher than in past years. Finally, the industry composition of the investments in 1996 tended to be more heavily weighted with services-type industries--including finance, insurance, communication, and a number of business services--than in past years, and the investments in manufacturing tended to be more concentrated in industries that are information related or that use advanced technologies.

Continued favorable economic conditions in the United States, as well as factors specific to particular industries, reinforced foreigners' incentives to invest in the United States. The growth in outlays in 1996 coincided with, but was much sharper than, an increase in overall merger and acquisition activity in the United States. Additional highlights on new investment in 1996 follow:

* There were 19 investments of $1 billion or more--a new record--and these investments accounted for nearly one-half of new investment outlays. The number of investments of $2 billion or more increased to eight from five in 1995.

* As in the past, most new investment was accounted for by outlays to acquire existing companies rather than by outlays to establish new companies.

* By investing country, the largest increases in outlays were by investors from the United Kingdom, Japan, the Netherlands, and France.

Most measures of the overall operations of nonbank U.S. affiliates of foreign companies--which include the operations of existing as well as new affiliates--increased in 1995, the latest year for which such measures are available; however, the rates of increase in some key measures were lower than in 1994.(2) The gross product (or value added) of affiliates increased 4 percent to $327.0 billion in 1995, following an increase of 10 percent in 1994.(3) The relatively modest increase in 1995 was partly due to the sales of foreign-ownership interests in large U.S. companies. It also reflected a slowdown in the sales and operating profits of existing affiliates from unusually strong growth in 1994. Despite the reduction in growth associated with these factors, the share of total gross product originating in private U.S. businesses that was accounted for by affiliates held steady at 6.0 percent (chart 2).

[CHART 2 OMITTED]

Additional highlights of the operations of U.S. affiliates in 1995 follow:

* Employment by affiliates increased 2 percent. Much of the increase was accounted for by net expansions in the operations of existing affiliates.

* Exports and imports of goods by affiliates increased at a slightly slower pace than total U.S. exports and imports of goods. However, exports of goods by affiliates to their foreign parent groups (intrafirm exports) increased at a slightly faster pace.

* By country of ultimate beneficial owner (UBO), the gross product of Canadian-owned affiliates decreased 12 percent as a result of selloffs.(4) The decrease lowered Canada's ranking from the third- to the fourth-largest investing country (and raised Germany's ranking from fourth to third). The United Kingdom and Japan remained the top two investing countries.

* By industry, the affiliate share of all-U.S.-business employment decreased in mining and manufacturing, the two major industries in which the shares were largest. Within manufacturing, the affiliate share decreased substantially in the chemical and the petroleum and coal product industries. The share increased substantially in the stone, clay, and glass product and the paper industries, mainly as a result of new investments. (Unlike in 1996, new investments in manufacturing in 1995 were not concentrated in industries that are information related or that use advanced technologies.)

* By State, the affiliate share of total business employment continued to be largest in Hawaii. The affiliate share of manufacturing employment was largest in Kentucky. The affiliate share of manufacturing employment dropped sharply in Delaware and West Virginia, the States with the largest shares in 1994.

* The net income of affiliates increased $7.5 billion, or 92 percent, to $15.6 billion in 1995, following an increase of $12.5 billion in 1994 from losses in 1993. Unlike the increase in 1994, much of the increase in 1995 was due to a decline in capital losses rather than to improved results from operations. Profit-type return--operating profits on an economic-accounting basis--increased 18 percent to $26.7 billion after more than doubling in 1994.

New Investment in 1996

Outlays to acquire and establish U.S. businesses were $80.5 billion in 1996, the largest outlays since this series began in 1980 (table 2).(5) Outlays increased $23.3 billion, or 41 percent, following a 25 percent increase in 1995. The increase in outlays for new foreign direct investment coincided with an increase in overall merger and acquisition activity in the United States in 1996, but the rate of growth for foreign investment was faster.(6) As in the past, outlays to acquire existing U.S. companies rather than to establish new U.S. companies accounted for most--90 percent--of total outlays in 1996.

Table 2.--Investment Outlays, Investments, and Investors, 1990-96

 Outlays (millions of dollars)

 1990 1991 1992 1992

Investments, total 65,932 25,538 15,333 26,229
 U.S. business acquired 55,315 17,806 10,616 21,761
 U.S. business established 10,617 7,732 4,718 4,468

Investors, total 65,932 25,538 15,333 26,229
 Foreign direct investors 14,026 8,885 4,058 6,720
 U.S. affiliates 51,906 16,653 11,275 19,509

 1995(r) 1996(p)

Investments, total 57,195 80,537
 U.S. business acquired 47,179 72,253
 U.S. business established 10,016 8,284

Investors, total 57,195 80,537
 Foreign direct investors 11,927 35,234
 U.S. affiliates 45,268 45,303

 Number

 1990 1991 1992 1993 1994

Investments, total 1,617 1,091 941 980 1,036
 U.S. business acquired 839 561 463 554 605
 U.S. business established 778 530 478 426 431

Investors, total 1,768 1,220 1,019 1,094 1,144
 Foreign direct investors 670 438 350 368 345
 U.S. affiliates 1,098 782 669 726 799

 1995(r) 1996(p)

Investments, total 1,124 1,158
 U.S. business acquired 644 707
 U.S. business established 480 451

Investors, total 1,213 1,304
 Foreign direct investors 345 351
 U.S. affiliates 868 953

(p) Preliminary.

(r) Revised.

Several general factors have provided foreigners with the opportunities and the incentives to invest in the United States. The U.S. economy expanded for the fifth year in a row, providing a favorable environment for profitable operations. In addition, business conditions remained strong in the United Kingdom, traditionally one of the largest sources of new investments; as a result, the earnings of British companies increased, and therefore, the funds available to them for investing also increased. Economic expansion was also relatively strong in Japan and the Netherlands, which are also significant sources of new investments. Finally, corporate restructuring in the United States, which has led many companies to shed units that were unprofitable or unrelated to their main lines of business, continued to provide investment opportunities for foreigners, especially in industries where deregulation or the application of new technologies are increasing competitive pressures.

In addition, factors specific to particular industries may have motivated a number of large new investments. In services (particularly computer and data processing services) and in manufacturing (particularly printing and publishing), a desire to gain access to the advanced and growing technological base in the United States led a number of foreign companies to acquire information-related businesses. Also in services a number of foreign companies acquired U.S. companies providing medical care services in order to gain access to this growing and profitable market. In insurance, foreign companies' desire to consolidate into larger, more efficient units and to become better able to spread risks and pay large claims led a number of foreign companies to acquire insurance companies in the United States. In "finance, except depository institutions," foreign banks and finance companies' desire to broaden their range of services and to gain more direct access to the large U.S. capital market resulted in a number of U.S. acquisitions.

The substantially higher level of outlays in 1996 partly reflects an increase in the number of very large investments. The number of investments of over $1 billion more than doubled, from 9 in 1995 to 19 in 1996, 8 of the investments in 1996, compared with 5 in 1995, were $2 billion or more (table 3). Investments of $1 billion or more accounted for almost one-half of total outlays in 1996.

Table 3.--Number of Investments by Size of Outlays,
1990-1996
 1990 1991 1992 1993 1994

Total 1,617 1,091 941 980 1,036

$2 billion or more 5 1 0 1 4
$1 billion-$1.9 billion 6 1 0 1 4
$100 million-$999 million 74 45 28 47 71
$10 million-$99 million 499 273 252 252 273
Less than $10 million 1,033 771 661 679 684

Addenda:
 Percent of total
 outlays:
 Investments of $1
 billion or more 40 12 0 19 39
 Investments of $100
 million or more 73 59 42 64 78

 1995(r) 1996(p)

Total 1,124 1,158

$2 billion or more 5 8
$1 billion-$1.9 billion 11 11
$100 million-$999 million 79 103
$10 million-$99 million 329 360
Less than $10 million 707 676

Addenda:
 Percent of total
 outlays:
 Investments of $1
 billion or more 41 49
 Investments of $100
 million or more 84 84

(p) Preliminary.

(r) Revised.

By industry, outlays increased in most major industries in 1996. Increases were particularly large in services and insurance (table 4). Within services, the outlays were largest in business services, particularly computer and data processing services, and in health services. Within manufacturing, the largest increases were in "other manufacturing" and in primary and fabricated metals. The increase in "other manufacturing" was mainly accounted for by large increases in printing and publishing and in transportation equipment.

Table 4.--Investment Outlays by Industry of U.S. Business Enterprise
and by Country of Ultimate Beneficial Owner, 1990-96
[Millions of dollars]

 1990 1991

 Total 65,932 25,538

By Industry:
 Petroleum 1,141 702
 Manufacturing 23,898 11,461
 Food and kindred products 997 1,247
 Chemicals and allied products 7,518 2,897
 Primary and fabricated metals 2,447 797
 Machinery 3,795 4,929
 Other manufacturing 9,141 1,591
 Wholesale trade 1,676 623
 Retail trade 1,250 1,605
 Depository institutions(1) 897 482
 Finance, except depository institutions(1) 2,121 2,199
 Insurance 2,093 2,102
 Real estate 7,771 3,823
 Services 19,369 2,256
 Other industries 5,716 284

By country(2):
 Canada 3,430 3,454
 Europe 36,011 13,994
 France 10,217 4,976
 Germany 2,363 1,922
 Netherlands 2,247 1,661
 Switzerland 3,905 1,327
 United Kingdom 13,096 2,169
 Other Europe 4,183 1,939
 Latin America and Other Western Hemisphere 796 375
 South and Central America 399 108
 Other Western Hemisphere 397 267
 Africa ([sup.D]) ([sup.D])
 Middle East 472 1,006
 Asia and Pacific 23,170 6,560
 Australia 1,412 251
 Japan 19,933 5,357
 Other Asia and Pacific 1,825 952
 United States(3) ([sup.D]) ([sup.D])

 1992 1993

 Total 15,333 22,229

By Industry:
 Petroleum 463 882
 Manufacturing 6,014 11,090
 Food and kindred products 404 1,294
 Chemicals and allied products 1,644 5,035
 Primary and fabricated metals 1,187 1,297
 Machinery 1,002 1,778
 Other manufacturing 1,778 1,686
 Wholesale trade 698 837
 Retail trade 256 1,495
 Depository institutions(1) 529 958
 Finance, except depository institutions(1) 797 1,599
 Insurance 291 1,105
 Real estate 2,161 1,883
 Services 2,023 4,162
 Other industries 2,101 2,218

By country(2):
 Canada 1,351 3,797
 Europe 8,344 16,845
 France 406 1,249
 Germany 1,964 2,841
 Netherlands 1,331 2,074
 Switzerland 1,259 804
 United Kingdom 2,255 8,238
 Other Europe 1,129 1,639
 Latin America and Other Western Hemisphere 1,438 874
 South and Central America 1,152 527
 Other Western Hemisphere 286 347
 Africa ([sup.D]) ([sup.D])
 Middle East 238 1,308
 Asia and Pacific 3,716 3,004
 Australia 164 129
 Japan 2,921 2,065
 Other Asia and Pacific 631 810
 United States(3) ([sup.D]) ([sup.D])

 1994 1995(r)

 Total 45,626 57,195

By Industry:
 Petroleum 469 1,520
 Manufacturing 21,218 26,643
 Food and kindred products 4,567 3,802
 Chemicals and allied products 6,905 12,511
 Primary and fabricated metals 1,485 547
 Machinery 1,867 4,489
 Other manufacturing 6,393 5,293
 Wholesale trade 2,156 1,168
 Retail trade 1,542 2,838
 Depository institutions(1) 2,026 2,301
 Finance, except depository institutions(1) 2,195 7,837
 Insurance 450 654
 Real estate 2,647 2,996
 Services 7,163 5,881
 Other industries 5,760 5,539

By country(2):
 Canada 4,128 8,029
 Europe 31,920 38,195
 France 1,404 1,129
 Germany 3,328 13,117
 Netherlands 1,537 1,061
 Switzerland 5,044 7,533
 United Kingdom 17,261 9,094
 Other Europe 3,346 6,261
 Latin America and Other Western Hemisphere 1,352 1,550
 South and Central America ([sup.D]) 1,283
 Other Western Hemisphere ([sup.D]) 267
 Africa ([sup.D]) ([sup.D])
 Middle East ([sup.D]) 447
 Asia and Pacific 5,263 8,688
 Australia 1,522 2,270
 Japan 2,715 3,602
 Other Asia and Pacific 1,026 2,816
 United States(3) 201 ([sup.D])

 1996(p)

 Total 80,537

By Industry:
 Petroleum ([sup.D])
 Manufacturing 28,976
 Food and kindred products 1,239
 Chemicals and allied products 4,038
 Primary and fabricated metals 3,193
 Machinery 4,673
 Other manufacturing 15,834
 Wholesale trade 5,092
 Retail trade 3,216
 Depository institutions(1) 2,154
 Finance, except depository institutions(1) 7,709
 Insurance ([sup.D])
 Real estate 2,995
 Services 15,306
 Other industries 8,942

By country(2):
 Canada 10,240
 Europe 50,402
 France 6,196
 Germany 13,041
 Netherlands 6,633
 Switzerland 4,789
 United Kingdom 15,473
 Other Europe 4,270
 Latin America and Other Western Hemisphere 771
 South and Central America 396
 Other Western Hemisphere 376
 Africa ([sup.D])
 Middle East ([sup.D])
 Asia and Pacific 12,677
 Australia 2,425
 Japan 9,311
 Other Asia and Pacific 941
 United States(3) ([sup.D])

([sup.D]) Suppressed to avoid disclosure of data of individual companies.

(p) Preliminary.

(r) Revised.

(1.) Prior to 1992, "depository institutions" exclude, and "finance, except depository institutions" include, savings institutions and credit unions. Beginning with 1992, savings institutions and credit unions have been reclassified from "finance, except depository institutions" to "depository institutions.

(2.) For investments in which more than one investor participated, each investor and each investor's outlays are classified by country of each ultimate beneficial owner.

(3.) See footnote 4 in text for explanation.

By country, the four nations whose investors had the largest increases in outlays in 1996--the United Kingdom, Japan, the Netherlands, and France--accounted for almost all of the increase in total outlays (table 4). Outlays by Japanese investors, at $9.3 billion, increased for the third year in a row. The economic recovery in Japan boosted corporate profits in nonfinancial industries, so the funds available for investment increased. Despite the increase, the outlays by Japanese investors in 1996 remained only about one-half as large as those in the peak year of 1990 (chart 3).

[CHART 3 OMITTED]

Investments from the United Kingdom were particularly large in manufacturing, especially motor vehicles and equipment, and in wholesale trade. Investments from Japan were particularly large in printing and publishing within manufacturing and in "finance, except depository institutions." Investments from the Netherlands were also large in printing and publishing and in retail trade. Investments from France were particularly large in machinery and in primary and fabricated metals within manufacturing and in communication and public utilities within "other industries."

The portion of outlays financed with funds from foreign parents increased $27.6 billion, to $58.4 billion. The increase partly reflected an increase in direct funding by the foreign parents investing in the United States for the first time. The increase contributed to the overall increase in net capital inflows for foreign direct investment in the United States (FDIUS) that are recorded in the U.S. balance of payments accounts for 1996.(7) Outlays financed with funds from other foreign sources or from U.S. sources decreased $4.3 billion, to $22.1 billion.

The total assets of newly acquired or established affiliates were $239.2 billion in 1996, up from $97.1 billion in 1995 (table 5); of the total, assets of businesses acquired were $227.0 billion. The increase in assets was much sharper than the increase in investment outlays and was concentrated in finance (including depository institutions) and insurance--industries in which persons other than owners (for example, depositors or policyholders) tend to be important sources of financing.

[TABULAR DATA 5 NOT REPRODUCIBLE IN ASCII]

U.S. businesses that were newly acquired or established employed 443,000 persons in 1996, up from 313,000 in 1995. The largest shares of employment were accounted for by manufacturing (30 percent) and services (21 percent).

Affiliate Operations in 1995

In 1995, the gross product of nonbank U.S. affiliates of foreign companies increased 4.5 percent, less than one-half the rate of increase in 1994 (table 6). The slowdown was partly due to the sale of foreign-ownership interests in a number of large U.S. companies. These selloffs also contributed to the very slow rate of growth--2 percent--in the gross property, plant, and equipment of affiliates.

[TABULAR DATA 6 NOT REPRODUCIBLE IN ASCII]

Affiliate sales increased 8 percent, and compensation of employees increased 4 percent--slightly less than the increases in 1994. Partly because of large reductions in capital losses, the net income of affiliates jumped 92 percent to $15.6 billion, continuing a sharp upward trend. In 1990-93, affiliate net income was negative.

Employment by affiliates increased 2 percent in 1995, following a slightly smaller increase in 1994 (chart 4). (The rate of growth in total U.S. employment in private industries was 3 percent in both years.) Most of the increase in 1995 was accounted for by net expansions in the operations of existing affiliates: Expansions of existing operations increased employment by 103,600--compared with 98,100 in 1994--whereas cutbacks in existing operations reduced employment by only 45,700--compared with 55,400 in 1994 (table 7). Changes in the affiliate universe-as a result of new investments or of sales or liquidations-had a more modest net effect on employment. While the increases and decreases in employment were large in gross terms, they tended to be offsetting: New investments added 249,100 employees in 1995--compared with 280,000 in 1994--and sales and liquidations reduced employment by 216,200--compared with 245,200.(8)

Table 7.--Sources of Change in Nonbank U.S. Affiliate Employment,
1990-95 [Thousands of employees]

Line 1990 1991

1 Change in total affiliate employment 223.0 137.5
 Change in employment of large affiliates
 resulting from:
2 New investments 481.6 291.1
3 Expansions of existing operations 107.9 107.4
4 Sales or liquidations of businesses -354.1 -152.2
5 Cutbacks in existing operations -126.5 -136.4
6 Combinations of new investments and
 sales or liquidations of businesses -16.9 -9.6
7 Change not accounted for in lines 2-6 131.1 37.3

Line 1992 1993

1 Change in total affiliate employment -156.5 50.2
 Change in employment of large affiliates
 resulting from:
2 New investments 101.7 261.9
3 Expansions of existing operations 141.1 110.2
4 Sales or liquidations of businesses -316.2 -239.9
5 Cutbacks in existing operations -132.2 -95.1
6 Combinations of new investments and
 sales or liquidations of businesses -18.0 6.3
7 Change not accounted for in lines 2-6 67.1 6.8

Line 1994 1995

1 Change in total affiliate employment 74.9 87.7
 Change in employment of large affiliates
 resulting from:
2 New investments 280.0 249.1
3 Expansions of existing operations 98.1 103.6
4 Sales or liquidations of businesses -245.2 -216.2
5 Cutbacks in existing operations -55.4 -45.7
6 Combinations of new investments and
 sales or liquidations of businesses -7.4 13.4
7 Change not accounted for in lines 2-6 -4.9 -16.4

Note.--Lines 2-6 cover large affiliates--that is, affiliates with more then 500 employees. Coverage is limited to large affiliates because a substantial number of small affiliates change their organizational structures, and in such cases, it is particularly difficult to determine the reasons for the changes.

Line 2 equals the yearend employment of affiliates that were acquired or established during the year plus the change in employment of existing affiliates that had an increase in employment and that had acquired another UPS. business during the year.

Line 3 equals the change in employment of affiliates that did not acquire another U.S. business but had an increase in employment

Line 4 equals the employment at the end of the prior year of affiliates that were liquidated or sold during the year plus the change in employment of affiliates that had a decline in employment and that sold a business or business segment during the year.

Line 5 equals the change in employment of affiliates that did not sell a business or business segment but had a decline in employment.

Line 6 equals the change in employment of affiliates that both acquired and sold a business or business segment during the year

Line 7 equals the change in employment of large affiliates not accounted for in lines 2-6 plus all changes in employment for affiliates with fewer man 500 employees. It includes changes resulting from the addition to the survey universe of affiliates that were required to report in earlier years but did not.

In 1995, U.S. exports of goods shipped by affiliates to all foreigners increased 13 percent, and U.S. imports of goods shipped to affiliates by all foreigners increased 10 percent. For both exports and imports, the rate of increase was slower than that for the corresponding all-U.S. totals (14 percent and 12 percent, respectively). As a result, affiliates' shares of total U.S. exports of goods and of total U.S. imports of goods fell slightly in 1995, to 23 percent and 34 percent, respectively. However, the shares of U.S. trade accounted for by the intrafirm trade of affiliates--trade between affiliates and their foreign parent groups--remained unchanged. Exports by affiliates to their foreign parent groups increased 15 percent, and their share in total U.S. exports of goods held steady at 10 percent. Imports by affiliates from their foreign parent groups increased 12 percent, and their share in total U.S. imports of goods held steady at 26 percent.

Gross product

In 1995, gross product originating in U.S. affiliates increased 4.5 percent to $327 billion, following an increase of 9.5 percent in 19940 (The rate of growth in current-dollar gross domestic product (GDP) was 4.4 percent in 1995 and 4.6 percent in 1994.) Estimates of real affiliate gross product are not available, but the current-dollar increases were well above the increases in prices recorded for U.S. businesses.(9) In both years, the U.S. affiliate share of total U.S. GDP originating in private industries was 6.0 percent (table 1).

The relatively slow growth in affiliate gross product in 1995 reflected both a slowdown in growth in existing operations of affiliates and net selloffs of affiliates. Selloffs of affiliates reduced affiliate gross product in 1995 more than new foreign investments increased it: Sales and liquidations reduced affiliate gross product about 5 percent, whereas new investments increased affiliate gross product about 2 percent.(10)

By industry.--As a result of selloffs' the gross product of affiliates in manufacturing dipped slightly in 1995. Manufacturing's share of total affiliate gross product declined from 50.2 percent to 48.0 percent, a share that was still much larger than manufacturing's one-fifth share of the gross product of all U.S. businesses (table 8).(11)

Table 8.--Gross Product of Nonbank U.S. Affiliates by Industry of
Affiliate, 1990-95

 1990 1991

 All Industries 239,279 257,634

Petroleum 26,678 24,705

Manufacturing 119,849 125,934
 Food and Kindred products 11,243 12,260
 Chemicals and allied products 37,217 38,996
 Primary metal industries 8,436 8,568
 Fabricated metal products 6,186 6,305
 Industrial machinery and equipment 10,257 10,455
 Electronic and other electric equipment 13,091 14,370
 Paper and allied products 3,240 3,627
 Printing and publishing 5,631 5,528
 Rubber and plastics products 5,149 4,296
 Stone, clay and glass products 5,757 5,691
 Motor vehicles and equipment 2,616 3,191
 Instruments and related products 4,234 5,498
 Other manufacturing 6,792 7,148

Wholesale trade 24,516 28,451
 Motor vehicles and equipment 6,507 8,157
 Other 18,009 20,294

Retail trade 17,078 21,441
Finance, except depository institutions(1) 3,442 4,034
Insurance 5,835 6,789
Real estate 6,763 7,039
 17,533 18,362
Services 2,737 3,276

 Hotels and other lodging places 7,489 7,756
 Business services 2,163 1,559
 Motion pictures 5,144 5,771
 Other

Agriculture, forestry, and fishing 795 824
Mining 3,495 4,484
Construction 4,014 3,999
Transportation 7,361 9,182
Communication and public utilities 1,921 2,025

 1992 1993

 All Industries 266,333 285,738

Petroleum 25,553 25,919

Manufacturing 134,127 142,478
 Food and Kindred products 12,283 11,548
 Chemicals and allied products 41,940 44,300
 Primary metal industries 8,710 9,971
 Fabricated metal products 6,310 6,498
 Industrial machinery and equipment 10,160 10,402
 Electronic and other electric equipment 15,694 16,512
 Paper and allied products 3,513 3,752
 Printing and publishing 6,054 7,530
 Rubber and plastics products 5,459 5,992
 Stone, clay and glass products 6,215 6,497
 Motor vehicles and equipment 2,659 3,738
 Instruments and related products 6,100 6,596
 Other manufacturing 9,029 9,142

Wholesale trade 31,000 33,358
 Motor vehicles and equipment 7,866 8,918
 Other 23,134 24,440

Retail trade 19,896 20,862
Finance, except depository institutions(1) 3,222 2,495
Insurance 5,666 7,000
Real estate 6,390 6,723

Services 20,260 23,591

 Hotels and other lodging places 3,383 3,870
 Business services 8,953 8,710
 Motion pictures 1,995 4,123
 Other 5,928 6,888

Agriculture, forestry, and fishing 659 548
Mining 5,527 4,983
Construction 3,230 3,026
Transportation 7,609 11,408
Communication and public utilities 3,195 3,345

 1994 1995

 All Industries 312,981 326,955

Petroleum 28,849 30,525

Manufacturing 157,061 156,991

 Food and Kindred products 12,273 12,229
 Chemicals and allied products 48,548 39,768
 Primary metal industries 9,601 10,525
 Fabricated metal products 6,802 7,278
 Industrial machinery and equipment 12,881 13,693
 Electronic and other electric equipment 18,524 18,470
 Paper and allied products 4,078 5,309
 Printing and publishing 8,546 9,094
 Rubber and plastics products 6,906 7,380
 Stone, clay and glass products 6,787 8,383
 Motor vehicles and equipment 5,657 7,318
 Instruments and related products 6,079 6,454
 Other manufacturing 10,380 11,090

Wholesale trade 35,251 39,135

 Motor vehicles and equipment 9,394 8,373
 Other 25,857 30,762

Retail trade 21,901 23,951
Finance, except depository institutions(1) 2,099 2,910
Insurance 9,177 8,557
Real estate 6,431 5,574

Services 23,537 23,753

 Hotels and other lodging places 4,271 4,624
 Business services 8,948 9,629
 Motion pictures 4,476 2,212
 Other 5,842 7,288

Agriculture, forestry, and fishing 672 650
Mining 5,853 6,667
Construction 3,028 3,427
Transportation 11,692 13,404
Communication and public utilities 7,431 11,412

 1990 1991 1992

 All Industries 100.0 100.0 100.0

Petroleum 11.1 9.6 9.6

Manufacturing 50.1 48.9 50.4

 Food and Kindred products 4.7 4.8 4.6
 Chemicals and allied products 15.6 15.1 15.7
 Primary metal industries 3.5 3.3 3.3
 Fabricated metal products 2.6 2.4 2.4
 Industrial machinery and equipment 4.3 4.1 3.8
 Electronic and other electric equipment 5.5 5.6 5.9
 Paper and allied products 1.4 1.4 1.3
 Printing and publishing 2.4 2.1 2.3
 Rubber and plastics products 2.2 1.7 2.0
 Stone, clay and glass products 2.4 2.2 2.3
 Motor vehicles and equipment 1.1 1.2 1.0
 Instruments and related products 1.8 2.1 2.3
 Other manufacturing 2.8 2.8 3.4

Wholesale trade 10.2 11.0 11.6

 Motor vehicles and equipment 2.7 3.2 3.0
 Other 7.5 7.9 8.7

Retail trade 7.1 8.3 7.5
Finance, except depository institutions(1) 1.4 1.6 1.2
Insurance 2.4 2.6 2.1
Real estate 2.8 2.7 2.4

Services 7.3 7.1 7.6

 Hotels and other lodging places 1.1 1.3 1.3
 Business services 3.1 3.0 3.4
 Motion pictures .9 .6 .7
 Other 2.1 2.2 2.2

Agriculture, forestry, and fishing .3 .3 .2
Mining 1.5 1.9 2.1
Construction 1.7 1.6 1.2
Transportation 3.1 3.6 2.9
Communication and public utilities .8 .8 1.2

 1993 1994 1995

 All Industries 100.0 100.0 100.0

Petroleum 9.1 9.8 9.3

Manufacturing 49.9 50.2 48.0

 Food and Kindred products 4.0 6.9 3.7
 Chemicals and allied products 15.5 15.5 12.2
 Primary metal industries 3.5 3.1 3.2
 Fabricated metal products 2.3 2.2 2.2
 Industrial machinery and equipment 3.6 4.1 4.2
 Electronic and other electric equipment 5.8 5.9 5.6
 Paper and allied products 1.3 1.3 1.6
 Printing and publishing 2.6 2.7 2.8
 Rubber and plastics products 2.1 2.2 2.3
 Stone, clay and glass products 2.3 2.2 2.6
 Motor vehicles and equipment 1.3 1.8 2.2
 Instruments and related products 2.3 7.9 2.0
 Other manufacturing 3.2 3.3 3.4

Wholesale trade 11.7 11.3 12.0

 Motor vehicles and equipment 3.1 3.0 2.6
 Other 8.6 8.3 9.4

Retail trade 7.3 7.0 7.3
Finance, except depository institutions(1) .9 .7 .9
Insurance 2.4 2.9 2.6
Real estate 2.4 2.1 1.7

Services 8.3 7.5 7.3

 Hotels and other lodging places 1.4 1.4 1.4
 Business services 3.0 2.9 2.9
 Motion pictures 1.4 1.4 .7
 Other 2.4 1.9 2.2

Agriculture, forestry, and fishing .2 .2 .2
Mining 1.7 1.9 2.0
Construction 1.1 1.0 1.0
Transportation 4.0 3.7 4.1
Communication and public utilities 1.2 2.4 3.5

 Addendum:
 Percent
 Change in
 affiliate
 gross
 product,
 1994-95

 All Industries 4.5

Petroleum 5.8

Manufacturing (*)

 Food and Kindred products -.4
 Chemicals and allied products -18.1
 Primary metal industries 9.6
 Fabricated metal products 7.0
 Industrial machinery and equipment 6.3
 Electronic and other electric equipment -.3
 Paper and allied products 30.2
 Printing and publishing 6.4
 Rubber and plastics products 6.9
 Stone, clay and glass products 23.5
 Motor vehicles and equipment 29.4
 Instruments and related products 6.2
 Other manufacturing 6.8

Wholesale trade 11.0

 Motor vehicles and equipment -10.9
 Other 19.0

Retail trade 9.4
Finance, except depository institutions(1) 38.7
Insurance -6.8
Real estate -13.3

Services .9

 Hotels and other lodging places 8.3
 Business services 7.6
 Motion pictures -50.6
 Other 24.7

Agriculture, forestry, and fishing -3.3
Mining 13.9
Construction 13.2
Transportation 14.6
Communication and public utilities 53.6

(*) Between 0 and -0.05 percent.

(1.) See table 4, footnote 1.

Within manufacturing, the effect of selloffs on the gross product of affiliates in chemicals was particularly pronounced; their gross product decreased 18 percent, and their share of the gross product of all affiliates decreased from 15.5 percent to 12.2 percent. In the paper and in the stone, clay, and glass industries, the gross product of affiliates increased sharply, reflecting a combination of new foreign investments and expansions of existing operations. In motor vehicles, affiliate gross product also increased sharply; however, this increase was primarily due to changes in the industry classification of affiliates with operations in more than one industry rather than to higher production by affiliates that were classified in this industry in both 1994 and 1995.

Wholesale trade and communication and public utilities were the two industries that had the largest increases in the shares of affiliate gross product. The increase in the share for wholesale trade, from 11.3 percent to 12.0 percent, was partly due to new investments. The increase in the share for communication and public utilities, from 2.4 percent to 3.5 percent, partly reflected changes in the industry classification of affiliates.

As in previous years, majority-owned affiliates accounted for a dominant share of affiliate economic activity: These affiliates accounted for more than two-thirds of affiliate gross product in most industries and for nearly 80 percent of the gross product of all nonbank affiliates combined (table 9). However, the share was low--less than 30 percent--in transportation and in communication and public utilities, partly reflecting restrictions on foreign ownership in the domestic air transport, telecommunications, and broadcasting industries.

Table 9.--Gross Product of Majority-Owned Affiliates as a Percentage of That of All Nonbank U.S. Affiliates, by Industry of Affiliate, 1993-95

 1993 1994 1995

 All Industries 78.0 78.2 79.7

Petroleum 80.3 80.0 82.5

Manufacturing 80.9 81.8 87.6

 Food and kindred products 99.1 97.0 97.8
 Chemicals and allied products 73.6 73.4 90.7
 Primary metal industries 51.6 59.1 56.2
 Fabricated metal products 91.9 91.2 91.0
 Industrial machinery and equipment 78.5 84.6 87.0
 Electronic and other electric equipment 94.0 95.2 96.1
 Paper and allied products G G G
 Printing and publishing G 78.7 81.5
 Rubber and plastics products 92.3 91.5 91.5
 Stone, clay, and glass products 89.4 90.4 91.3
 Motor vehicles and equipment 75.9 80.2 87.2
 Instruments and related products 95.9 93.6 90.9
 Other manufacturing 79.2 H H

Wholesale trade 95.6 93.5 90.5

 Motor vehicles and equipment 99.6 99.6 99.8
 Other 94.0 91.2 88.0
Retail trade 75.9 74.6 71.1
Finance, except depository institutions 49.7 77.2 89.6
Insurance 59.3 67.9 63.0
Real estate 76.0 73.4 69.5

Services 72.9 79.3 62.6

 Hotels and other lodging places 88.0 87.7 90.1
 Business services 82.7 68.6 68.7
 Motion pictures F F 92.4
 Other G G 66.9

Agriculture, forestry, and fishing 66.7 65.5 63.2
Mining 73.8 80.1 60.6
Construction 80.6 78.9 61.6
Transportation 26.8 27.4 25.1
Communication and public utilities 60.3 25.4 18.9

Note.--Size ranges are given in calls that are suppressed to individual companies. The percentage size ranges are: C-0.1 to to 59.9; G-60.0 to 79.9; H-80.0 to 100.

By country--In 1995, the five largest investing countries in terms of affiliate gross product were the United Kingdom, Japan, Germany, Canada, and the Netherlands (table 10). Affiliates with ultimate beneficial owners (UBO'S) in these five countries together accounted for nearly 70 percent of the gross product of all U.S. affiliates.

Table 10--Gross Product of Nonbank U.S. Affilliates by Country of Ultimate Beneficial Owner, 1990-95

 1990 1991 1992 1993

 All countries 239,279 257,634 266,333 285,738

Canada 38,304 39,289 33,479 41,062

Europe 139,824 149,305 161,226 168,296

 Belgium 3,108 2,879 3,725 3,711
 Denmark 1,014 1,155 1,143 1,689
 Finland 940 1,071 1,262 1,435
 France 14,934 17,132 18,899 19,274

 Germany 24,133 25,733 28,716 32,055
 Ireland 1,702 1,695 1,852 1,655
 Italy 1,404 2,081 2,318 2,541
 Luxembourg 500 559 697 814
 Netherlands 18,255 18,607 19,657 20,765

 Norway 450 492 563 709
 Sweden 4,861 6,787 7,053 5,944
 Switzerland 14,604 15,290 17,117 16,847
 United Kingdom 53,259 55,017 57,412 59,864
 Other 660 807 812 992

Latin America and Other
 Western Hemisphere 8,639 9,137 8,739 10,126

 Mexico 723 776 1,109 1,400
 Panama 1,356 1,489 1,638 1,460
 Venezuela 2,283 2,669 3,124 3,757

 Bermuda 1,385 1,398 1,153 1,274
 Netherlands Antilles 1,285 1,368 1,071 1,233
 Other 1,606 1,437 645 1,002

Africa 1,260 1,241 1,267 1,387
 South Africa 912 891 877 897
 Other 348 350 390 489

Middle East 3,142 3,919 3,460 4,556
 Kuwait 774 998 953 1,062
 Saudi Arabia 2,009 2,493 2,117 2,923
 Other 359 428 390 571

Asia and Pacific 46,269 52,551 54,318 56,342

 Australia 8,096 8,809 8,101 7,732
 Hong Kong 799 974 1,056 1,395
 Japan 34,484 40,056 42,659 44,539

 Korea, Republic of 497 560 549 693
 Taiwan 426 545 560 744
 Other 1,967 1,607 1,392 1,239

United States 1,842 2,191 3,843 3,969

 1994 1995 1990 1991 1992

 All countries 312,981 326,955 100.0 100.0 100.0

Canada 41,613 36,532 16.0 15.3 12.6

Europe 188,372 202,361 28.4 58.0 60.5

 Belgium 4,161 4,395 1.3 1.1 1.4
 Denmark 1,915 1,989 .4 .4 .4
 Finland 1,450 1,454 .4 .4 .5
 France 23,163 24,178 6.2 6.6 4.1

 Germany 35,043 37,182 10.1 10.0 10.8
 Ireland 1,937 2,643 .7 .7 .7
 Italy 2,992 3,302 .6 .8 .9
 Luxembourg 968 989 .2 .2 .3
 Netherlands 24,927 28,013 7.6 7.2 7.4

 Norway 1,043 1,232 .2 .2 .2
 Sweden 5,255 5,744 2.0 2.6 2.6
 Switzerland 17,113 18,624 6.1 5.9 6.4
 United Kingdom 67,288 71,049 22.3 21.4 21.6
 Other 1,117 1,567 .3 .3 .3

Latin America and Other
 Western Hemisphere 12,045 13,345 3.6 3.5 3.3

 Mexico 1,642 1,798 .3 .3 .4
 Panama 1,275 851 .6 .6 .6
 Venezuela 4,729 5,537 1.0 1.0 1.2

 Bermuda 2,022 2,395 .6 .5 .4
 Netherlands Antilles 1,208 1,225 .5 .5 .4
 Other 1,169 1,539 .4 .6 .2

Africa 1,571 2,393 .5 .5 .5
 South Africa 1,012 1,885 .4 .3 .3
 Other 590 509 .1 .1 .1

Middle East 5,802 4,861 1.3 1.5 1.3
 Kuwait 1,057 784 .3 .4 .4
 Saudi Arabia 3,204 2,917 .5 1.0 .8
 Other 1,541 1,160 .2 .2 .1

Asia and Pacific 58,769 62,558 19.3 20.4 20.4

 Australia 4,680 4,211 3.4 3.4 3.0
 Hong Kong 1,312 1,494 .3 .4 .4
 Japan 48,810 52,000 14.4 15.5 16.0

 Korea, Republic of 657 1,309 .2 .2 .2
 Taiwan 1,359 1,720 .2 .2 .2
 Other 1,951 1,824 .8 .6 .5

United States 4,810 4,904 .8 .9 1.4

 addendum:
 Percent
 change in
 affilliate
 1993 1994 1994 gross
 product,
 1994-95

 All countries 100.0 100.0 100.0 4.5

Canada 14.4 13.3 11.2 -12.2

Europe 58.9 60.2 61.9 7.4

 Belgium 1.3 1.3 1.3 5.6
 Denmark .6 .6 .6 3.8
 Finland .5 .5 .7 .3
 France 6.7 7.4 7.4 4.4

 Germany 11.2 11.2 11.4 6.1
 Ireland .6 .6 .8 36.5
 Italy .9 1.0 1.0 10.4
 Luxembourg .3 .3 .3 2.2
 Netherlands 7.3 8.0 8.6 12.4

 Norway .2 .3 .4 18.1
 Sweden 2.1 1.7 .8 9.3
 Switzerland 5.9 5.5 5.7 8.8
 United Kingdom 21.0 21.5 21.7 5.6
 Other .3 .4 .5 40.3

Latin America and Other
 Western Hemisphere 3.5 3.8 4.1 10.8

 Mexico .5 .5 .5 9.5
 Panama .5 .4 .3 -33.2
 Venezuela 1.3 1.5 1.7 17.1

 Bermuda .4 .6 .7 18.4
 Netherlands Antilles .4 .4 .4 1.4
 Other .4 .4 .5 31.7

Africa .5 .5 .7 52.3
 South Africa .3 .3 .6 86.3
 Other .2 .2 .2 -9.0

Middle East 1.6 1.9 1.5 -16.2
 Kuwait .4 .3 .2 -25.8
 Saudi Arabia 1.0 1.0 .9 -9.0
 Other .5 .5 .4 -24.7

Asia and Pacific 19.7 18.8 19.1 6.4

 Australia 2.7 1.5 1.3 -10.0
 Hong Kong .5 .4 .5 13.8
 Japan 15.6 15.6 15.9 6.5

 Korea, Republic of .2 .2 .4 99.1
 Taiwan .3 .4 .5 26.6
 Other .4 .6 .6 -6.5

United States 1.4 1.5 1.5 2.0

The share of affilliate gross product accounted for by Canadian-owned affiliates dropped substantially in 1995, to 11.2 percent, and Canada's ranking slipped from the third- to the fourth-largest investing country. As recently as 1990, Canada had ranked as the second-largest investing country (chart 5). The drop in 1995 was more than accounted for by selloffs of minority-ownership shares in large U.S. companies; as a result, the majority-owned affiliates' share of the gross product of all Canadian-owned affiliates increased from 54 percent to 70 percent (table 11).

[CHART 5 ILLUSTRATION OMITTED]

Table 11. --Gross Product of MaJority Owned Affiliates as a Percentage of That of All Nonbank U.S. Affiliates, by Country of UBO, 1993-95

 1993 1994 1995

 All countries 78.0 78.2 79.7

Canada 56.8 54.2 70.5

Europe 86.5 84.3 82.8

 Belgium 97.0 98.8 98.5
 Denmark H H 100.2
 Finland 93.1 91.0 92.0
 France 87.2 87.6 90.8

 Germany 82.0 80.8 80.7
 Ireland E. E 37.7
 Italy 90.7 80.7 95.4
 Luxembourg F 59.9 F
 Netherlands 89.4 80.9 80.5

 Norway 74.7 72.3 76.1
 Sweden 72.0 94.8 62.5
 Switzerland 92.2 91.0 87.2
 United Kingdom 88.2 84.5 82.9
 Other 83.7 81.5 G

Latin America and Other 77.2 84.5 84.6
 Western Hemisphere

 Mexico 73.5 82.0 80.4
 Panama 97.5 97.2 H
 Venezuela 65.6 G G

 Bermuda 85.5 95.2 91.1
 Netherlands Antilles 92.5 96.7 96.5
 Other 66.7 H 100.5

Africa E E 42.3
 South Africa F E F
 Other C 18.8 E

Middle East 32.1 41.8 37.9
 Kuwait 52.0 F F
 Saudi Arabia 12.6 8.6 12.8
 Other 95.2 H H

Asia and Pacific 76.0 82.7 82.2

 Australia 30.4 82.8 78.4
 Hong Kong 95.5 55.7 91.4
 Japan 82.5 81.3 81.2

 Korea, Republic of 82.0 13.2 90.3
 Taiwan 95.2 95.5 56.5
 Other 87.3 88.1 91.8

United States F E 36.6

Notes.--Shares of more than 100 percent may result where the gross product of minority-owned affiliates is negative.

Size ranges are given in cells that are suppressed to avoid disclosure of data of individual companies. The percentage size ranges are: C--0.1 to 19.9; E--20.0 to 39.9; F--40.0 to 59.9 G--60.0 to 79.9; H--80.0 to 100.

Affiliates with UBO'S in the Netherlands and Japan had the largest increases in gross product share in 1995. For both countries, the increases were mainly due to expansions in existing operations.

In addition, the gross product of affiliates with UBO'S in South Africa and the Republic of Korea increased substantially, largely as a result of new investments. The gross product of affiliates with UBO'S in Panama and Kuwait decreased, mainly as a result of selloffs and liquidations.

Share of U.S. employment

In 1995, the share of total U.S. private-industry employment accounted for by U.S. affiliates of foreign companies was 4.9 percent, the same as in 1994. The share decreased in 1992-94 after increasing steadily from 1.8 percent in 1977 to 5.3 percent in 1991. The recent decreases partly reflected the concentration of affiliate activity in manufacturing, in which recent employment growth at the all-U.S. level has been much slower than in services and most other industries.

By industry.--In 1995, as in most years, the shares of total U.S. private-industry employment accounted for by affiliates were largest in mining and manufacturing (table 12).(12) Within manufacturing, the affiliate shares were largest in chemicals and in stone, clay, and glass products.

Table 12.--Employment by Nonbank U.S. Affilliates by Industry of Sales, 1990-1995

 Thousands of employees

 1990 1991 1992

 All industries(2) 4,734 4,872 4,715

Agriculture, forestry, and fishing 33 44 32
Mining, excluding oil and gas extraction 77 73 68
Construction 80 73 68

Manufacturing(3) 2,130 2,174 2,140

 Food and kindred products 207 211 198
 Textile mill products 37 40 45
 Apparel and other textile products 28 29 32
 Lumber, wood, furniture, and fixtures 28 32 31
 Paper and allied products 50 52 52
 Printing and publishing 109 103 101
 Chemicals and allied products 332 341 348
 Pertroleum and coal products(4) 106 105 89
 Rubber and plastics products 129 126 130
 Stone, clay, and glass products 110 102 107
 Primary metal industries 112 111 110
 Fabricated metal products 101 109 110
 Industrial machinery and equipment 218 220 217
 Electronic and other electric equipment 271 276 263
 Motor vehicles and equipment 90 96 90
 Other transportation equipment 41 50 50
 Instruments and related products 112 118 111
 Other 49 52 56

Transportation 221 218 198
Communication and public utilities 29 29 33
Wholesale trade 355 344 346
Retail trade 848 890 798
Finance, except depository institutions(5) 63 71 70
Insurance 127 144 143
Real estate 34 33 32

Service(6) 660 719 702

 Hotels and other lodging places 141 144 161
 Business services 277 307 299
 Motion pictures 29 28 24
 Other 213 240 217

Unspecified(7) 78 61 87

 1993 1994 1995

 All industries(2) 4,766 4,841 4,928

Agriculture, forestry, and fishing 31 32 29
Mining, excluding oil and gas extraction 75 67 63
Construction 64 61 68

Manufacturing(3) 2,149 2,193 2,155

 Food and kindred products 184 188 179
 Textile mill products 44 50 47
 Apparel and other textile products 46 56 47
 Lumber, wood, furniture, and fixtures 33 33 26
 Paper and allied products 52 51 57
 Printing and publishing 113 119 121
 Chemicals and allied products 354 354 314
 Pertroleum and coal products(4) 77 69 54
 Rubber and plastics products 130 135 135
 Stone, clay, and glass products 108 104 115
 Primary metal industries 113 116 111
 Fabricated metal products 114 117 114
 Industrial machinery and equipment 218 221 235
 Electronic and other electric equipment 259 268 291
 Motor vehicles and equipment 98 113 124
 Other transportation equipment 38 32 34
 Instruments and related products 112 114 112
 Other 54 54 40

Transportation 250 250 262
Communication and public utilities 39 80 95
Wholesale trade 359 363 378
Retail trade 831 830 880
Finance, except depository institutions(5) 60 63 65
Insurance 140 137 134
Real estate 31 27 25

Service(6) 673 676 720

 Hotels and other lodging places 133 137 134
 Business services 265 275 290
 Motion pictures 35 37 40
 Other 240 228 256

Unspecified(7) 64 60 54

 As a percentage of
 total U.S. employment
 in nonbank private
 industries(1(

 1990 1991 1992

 All industries(2) 5.1 5.3 5.1

Agriculture, forestry, and fishing 1.8 2.3 1.7
Mining, excluding oil and gas extraction 24.4 24.6 24.0
Construction 1.5 1.5 1.4

Manufacturing(3) 10.6 11.5 11.5

 Food and kindred products 12.5 12.6 11.9
 Textile mill products 5.4 3.0 6.7
 Apparel and other textile products 2.7 2.9 3.2
 Lumber, wood, furniture, and fixtures 2.2 2.7 2.6
 Paper and allied products 7.1 7.6 7.5
 Printing and publishing 6.8 6.6 6.6
 Chemicals and allied products 30.5 31.4 32.1
 Pertroleum and coal products(4) 19.1 18.9 17.4
 Rubber and plastics products 14.5 14.5 14.8
 Stone, clay, and glass products 19.8 19.6 20.8
 Primary metal industries 14.8 15.4 15.9
 Fabricated metal products 7.1 8.0 8.3
 Industrial machinery and equipment 10.3 10.9 11.2
 Electronic and other electric equipment 16.2 17.3 17.2
 Motor vehicles and equipment 11.2 12.2 11.0
 Other transportation equipment 3.5 4.5 4.9
 Instruments and related products 11.2 12.2 11.9
 Other 8.5 9.3 10.2

Transportation 6.2 6.2 5.6
Communication and public utilities 1.3 1.3 1.5
Wholesale trade 5.7 5.6 5.6
Retail trade 4.2 4.5 4.0
Finance, except depository institutions(5) 5.2 6.0 6.3
Insurance 5.8 6.4 6.5
Real estate 2.5 2.4 2.4

Service(6) 2.3 2.5 2.3

 Hotels and other lodging places 8.2 8.6 9.7
 Business services 5.4 6.0 5.5
 Motion pictures 7.1 6.8 5.9
 Other 1.0 1.1 1.0

Unspecified(7) n.a n.a n.a

 1993 1994 1995

 All industries(2) 5.0 4.9 4.9

Agriculture, forestry, and fishing 1.7 1.7 1.5
Mining, excluding oil and gas extraction 28.1 25.1 23.9
Construction 1.3 1.2 1.3

Manufacturing(3) 11.6 11.7 11.4

 Food and kindred products 10.9 11.2 10.6
 Textile mill products 6.5 7.4 7.0
 Apparel and other textile products 4.7 5.7 5.0
 Lumber, wood, furniture, and fixtures 2.7 2.6 2.0
 Paper and allied products 7.5 7.3 8.2
 Printing and publishing 7.4 7.6 7.7
 Chemicals and allied products 32.9 33.4 30.3
 Pertroleum and coal products(4) 15.5 14.1 11.6
 Rubber and plastics products 14.3 14.1 13.8
 Stone, clay, and glass products 20.7 19.4 21.2
 Primary metal industries 16.6 16.6 15.7
 Fabricated metal products 8.5 8.4 7.9
 Industrial machinery and equipment 11.2 11.1 11.3
 Electronic and other electric equipment 16.9 17.0 17.9
 Motor vehicles and equipment 11.7 12.6 13.0
 Other transportation equipment 4.2 3.8 4.2
 Instruments and related products 12.4 13.2 13.3
 Other 9.7 9.6 7.1

Transportation 6.8 6.5 6.6
Communication and public utilities 1.7 3.6 4.3
Wholesale trade 5.9 5.8 5.8
Retail trade 4.1 3.9 4.0
Finance, except depository institutions(5) 5.0 4.9 5.1
Insurance 6.3 6.1 5.9
Real estate 2.2 1.9 1.8

Service(6) 2.2 2.1 2.1

 Hotels and other lodging places 7.9 8.0 7.7
 Business services 4.5 4.3 4.2
 Motion pictures 8.4 8.1 7.8
 Other 1.0 1.0 1.0

Unspecified(7) n.a n.a n.a

(n.a) Not applicable.

(1) The data on U.S. employment in private industries that were used in calculating these percentages are classified by industry of establishment. The data for 1990-94 are from table 6.4C of the "National Income and Product Accounts (NPA) Tables" (see the January/February 1996 issue of the SURVEY OF CURRENT BUSINESS). The data for 1995 were estimated by extrapolating the NIPA data using employment data from the Bureau of Labor Statistics. The total for U.S. employment in nonbank private industries is equal to employment private industries less the employment of depository institutions and private households. The U.S. private-industry employment totals used to calculate the affilliate shares in "all industries" in this table differ from the U.S. employment totals to calculate affilliate shares in table 13 and 14; the data used for table 13 and 14 are from BEA's Regional Economic Information System. The estimates used for table 13, unlike those used for this table, do not exclude employment in depository institutions. The estimates used for tables 13 and 14, unlike those used for this table, exclude U.S. residents temporarily employed abroad by U.S. business. They may also differ from NIPA estimates used for this table because of different definitions and revision schedules.

(2.) For consistency with the coverage of the data on U.S. employment in private industries, U.S.-affilliate employment in Puerto Rico, in "other U.S. areas," and in the "foreign" category was exclude from the U.S.-affilliate employment total when the percentage shares on this line were computed.

(3) Total affilliate manufacturing employment and the shares of all-U.S.-business manufacturing employment accounted for by affilliates shown in this table differ from this shown in table 14. In this table, employment is classified by industry of sales, and the total for manufacturing includes some nonmanufacturing employees (see the box "Using Employment Data to Estimate Affilliate Shares of the U.S. Economy"), whereas in table 14, affilliate manufacturing employment consists only of the on the payroll of manufacturing plants. Data on the latter basis are not available for the subindustries within manufacturing shown in this table. In addition, the total for manufacturing in this table includes oil and gas extraction, which is excluded from the manufacturing total in table 14.

(4) For both U.S. affilliates and all U.S. businesses, includes oil and gas extraction. (See note below.)

(5.) Affilliate data for 1990-91 include, but data for 1992-95 exclude, saving institutions and credit unions. For consistency with the coverage of the data on U.S. employment in "finance, except depository institutions," U.S. affilliate employment in savings institutions and credit unions was excluded from the U.S. affilliate total in this industry when percentage shares for 1990-91 on this line were calculated.

(6.) Excludes private households.

(7.) In the breakdown of employment by industry of sales, U.S. affilliates that filled long forms in the annual surveys (that is, affilliates with assets, sales, or net income or loss greater than $50 million) had to specify their eight largest sales categories, and U.S. affilliates that filed short forms had to specify their three largest sales categories. Employment in all unspecified industries combined is shown on this line.

NOTE:--In this table, petroleum is not shown as a separate major industry. Instead, in order to be consisted with the all-U.S. data on employment by industry, affilliate employment in the various pertroleum subindustries is distributed among the other major industries. This, manufacturing include petroleum and coal products, wholesale trade include petroleum wholesale trade, retail trade include gasoline service stations, and transportation includes petroleum tanker operations, pipeline, and storages. A significant portion of U.S. affilliate employment in pertroleum and coal products is accounted for by integrated petroleum companies that have, in addition to their manufacturing employees, substantial numbers of employees in petroleum extraction; because these employees cannot be identified separately, they are include in petroleum and coal products manufacturing. For consistency, employees of affilliates classified in the "oil and gas extraction without refining" industry are also included in petroleum and coal products manufacturing rather than in mining. In previous articles in this series, oil and gas extraction without refining was included in mining.

Among the major industries, the affiliate share in mining decreased the most, from 25.1 percent to 23.9 percent, partly as a result of sales and liquidations of affiliates. The share in communication and public utilities increased the most, from 3.6 percent to 4.3 percent.

The affiliate share in manufacturing dipped to 11.4 percent. Within manufacturing, the largest decrease in affiliate share was in chemicals (chart 6). The decrease, from 33.4 percent to 30.3 percent, was due to selloffs. The share in petroleum and coal products also decreased substantially' from 14.1 percent to 11.6 percent, mainly as a result of selloffs.

[CHART 6 ILLUSTRATION OMITTED]

The largest increase in the affiliate share within manufacturing was in stone, clay, and glass products: The share increased from 19.4 percent to 21.2 percent, mainly as a result of new investments. The share also increased substantially in the paper and the electronic equipment industries. The increase in paper, to 8.2 percent, was mainly due to new investments. The increase in electronic equipment, to 17.9 percent, was mainly due to expansions in existing operations.

By State.--In 1995, the shares of private-industry employment accounted for by affiliates were highest in Hawaii (11.3 percent), South Carolina (8.1 percent), and North Carolina (7.5 percent) (table 13). Delaware had the largest decline in share--from 10.4 percent in 1994 to 4.8 percent in 1995--as a result of the sale of foreign-ownership interests in companies with large employment in that State.

In manufacturing, the affiliate shares in 1995 were highest in Kentucky (18.6 percent), South Carolina (18.9 percent), and Wyoming (17.4 percent). In 1994, Delaware, West Virginia, and Kentucky had the highest shares (table 14). The share for Delaware dropped from 27.0 percent in 1994 to 10.2 percent in 1995, while the share for West Virginia dropped from 24.3 percent in 1994 to 16.3 percent in 1995; in both States, the drop in share was due to selloffs.

Profitability

The net income of affiliates--after-tax profits on a financial-accounting basis--increased $7.5 billion, to $15.6 billion in 1995; net income had shifted to profits of $8.1 billion in 1994 from losses of $4.3 billion in 1993.(13) (In 1990--93, affiliates incurred net losses.) Unlike in 1994, the increase in net income in 1995 was only partly due to increased operating profits: "Profit-type return"--before-tax profits generated from current production on an economic-accounting basis--increased only $4.1 billion in 1995, to $26.7 billion, following a $13.8 billion increase in 1994 (table 15).(14) Much of the difference between the increase in affiliates' net income and the increase in profit-type return in 1995 was accounted for by a large decrease in affiliates' capital losses, which had a large effect on net income but no effect on profit-type return. The decrease in capital losses reflected a reduction in the incidence of affiliate restructurings as well as financial gains by affiliates that invested in security markets.

By major industry, affiliate net income increased substantially in petroleum, manufacturing, and finance, and it turned positive in "other industries." Net income decreased substantially for affiliates classified in wholesale trade, reflecting large capital losses associated with writedowns of the affiliates' investments in secondary industries.

Profit-type return of affiliates improved in every major industry except insurance and real estate. The increase was especially large in "other industries," as profit-type return turned positive in transportation.

In some industries, profit-type return has been negative for several years (that is, affiliates have continued to incur losses from current operations). In 1995, as in earlier years, operating losses were particularly large for affiliates in real estate. Within services, profit-type return has been negative in the hotel and motion-picture industries.

Return on assets.--The return on assets for noindent nonfinancial U.S. affiliates has been considerably lower than that for all U.S. nonfinancial corporations over the last decade.(15) For U.S. affiliates, the rate of return during 198-94 ranged from 2.8 percent in 1991 and 1992 to 6.5 percent in 1984. For all U.S. nonfinancial corporations, the rates were higher and more stable, ranging from 7.5 percent in 1986 to 9.3 percent in 1994 (chart 7 and table 16).

[CHART 7 OMITTED]

[TABULAR DATA 16 NOT REPRODUCIBLE IN ASCII]

The rate of return on assets for nonfinancial affiliates increased to 4.7 percent in 1995 from 4.3 percent in 1994. The data needed to construct estimates for 1995 for all U.S. nonfinancial corporations are not yet available.

To some extent, the relatively low rates of return for U.S. affiliates may reflect the newness of much foreign direct investment in the United States. The data on new investment indicate that the initial rates of return were particularly low for the companies acquired or established during 1984-94. An estimate of property income On an economic-accounting basis cannot be derived from the data on new investment, but an examination of the net income data for newly acquired or established affiliates suggests that the initial profitability of these affiliates has been very low or, in many cases, negative. For the newly acquired companies, profitability was low or negative at the time of the acquisition and, in many cases, may have remained low for some time. For many of the newly established companies, profitability was low because of startup costs. In addition, many of the newly established companies were in real estate, where in recent years many foreign investors have sustained both operating losses and losses associated with the depressed value of commercial real estate.

The relatively low rates of return for U.S. affiliates are difficult to explain, but in some cases, they may reflect the particular strategies of foreign direct investors. For example, some foreign investors may temporarily settle for a below-average rate of return in order to gain access to the large U.S. market, to take advantage of economies of scale and technological efficiencies in other parts of their worldwide operations, or to respond to differences across countries in the cost and availability of capital, the tax treatment of income, or tariff and nontariff barriers.(16)

Tables 17 through 22.2 follow.

[TABULAR DATA 13-14, 17-18.1 NOT REPRODUCIBLE IN ASCII]

Table 15.--Net Income and Profit-Type Return of Nonbank U.S. Affiliates by Industry of Affiliate, 1990-95 [Millions of dollars]

 Net income(1)

 1990 1991

 All industries -4,535 -11,018

Petroleum 2,811 508
Manufacturing -31 -3,265
 Food and kindred products 89 210
 Chemicals and allied products 4,923 3,886
 Primary and fabricated metals 363 -1,072
 Machinery -3,659 -3,105
 Other manufacturing -1,746 -3,186
Wholesale trade -1,189 -1,284
Retail trade -964 -614
Finance, except depository institutions(3) -1,425 -839
Insurance 2,284 2,602
Real estate -2,055 -3,370
Services -2,042 -3,737
 Of which:
 Hotels and other lodging places -977 -1,458
 Motion pictures -501 -1,365
Other industries -1,924 -1,019
 Of which:
 Transportation -2,948 -1,046
 Communication and public utilities 596 -274

 1992 1993

 All industries -21,331 -4,354

Petroleum -485 1,098
Manufacturing -9,171 -6,351
 Food and kindred products 238 -1,621
 Chemicals and allied products -1,281 3,338
 Primary and fabricated metals -2,029 -1,854
 Machinery -2,749 -3,970
 Other manufacturing -3,350 -2,244
Wholesale trade -335 -70
Retail trade -2,086 -611
Finance, except depository institutions(3) 551 1,087
Insurance 2,318 4,960
Real estate -4,672 -3,142
Services -3,125 -2,539
 Of which:
 Hotels and other lodging places -1,603 -1,427
 Motion pictures -1,200 -422
Other industries -4,326 1,034
 Of which:
 Transportation -1,355 2,055
 Communication and public utilities -2,346 -457

 1994 1995

 All industries 8,132 15,608

Petroleum 428 2,419
Manufacturing 6,432 9,824
 Food and kindred products -172 632
 Chemicals and allied products 5,123 3,903
 Primary and fabricated metals 384 1,547
 Machinery 66 176
 Other manufacturing 1,032 3,566
Wholesale trade 1,787 174
Retail trade 982 759
Finance, except depository institutions(3) 473 1,392
Insurance 2,961 3,570
Real estate -2,248 -2,283
Services -2,347 -1,975
 Of which:
 Hotels and other lodging places -1,181 -1,100
 Motion pictures -314 -547
Other industries -336 1,729
 Of which:
 Transportation -1,092 376
 Communication and public utilities 544 574

 Profit-type return(2)

 1990 1991

 All industries 770 -1,669

Petroleum 6,041 2,962
Manufacturing 852 169
 Food and kindred products -366 236
 Chemicals and allied products 5,031 4,386
 Primary and fabricated metals 369 -572
 Machinery -2,834 -1,992
 Other manufacturing -1,348 -1,890
Wholesale trade -193 6
Retail trade -751 125
Finance, except depository institutions(3) -670 75
Insurance 2,297 1,498
Real estate -1,922 -2,291
Services -2,138 -3,295
 Of which:
 Hotels and other lodging places -1,018 -1,504
 Motion pictures -962 -1,220
Other industries -2,746 -919
 Of which:
 Transportation -3,221 -1,252
 Communication and public utilities -297 -492

 1992 1993

 All industries 2,914 8,798

Petroleum 3,044 3,298
Manufacturing 1,680 4,329
 Food and kindred products 384 151
 Chemicals and allied products 4,602 6,323
 Primary and fabricated metals -483 -78
 Machinery -2,049 -2,060
 Other manufacturing -774 -7
Wholesale trade 770 1,529
Retail trade 14 272
Finance, except depository institutions(3) 547 894
Insurance 1,966 2,726
Real estate -2,706 -2,199
Services -2,310 -1,620
 Of which:
 Hotels and other lodging places -1,541 -1,206
 Motion pictures -682 -434
Other industries -91 -431
 Of which:
 Transportation -1,178 -533
 Communication and public utilities -20 -94

 1994 1995

 All industries 22,615 26,737

Petroleum 4,062 5,044
Manufacturing 12,310 12,554
 Food and kindred products 211 55
 Chemicals and allied products 7,921 5,220
 Primary and fabricated metals 323 2,044
 Machinery 1,181 1,090
 Other manufacturing 2,673 4,145
Wholesale trade 3,090 4,360
Retail trade 1,778 2,338
Finance, except depository institutions(3) 512 758
Insurance 3,379 2,446
Real estate -2,049 -2,376
Services -2,221 -2,070
 Of which:
 Hotels and other lodging places -1,147 -1,054
 Motion pictures -555 -855
Other industries 1,755 3,683
 Of which:
 Transportation -586 769
 Communication and public utilities 1,404 1,358

(1.) Net income is after-tax profits on a financial accounting basis, as shown n affiliates' income statements. It includes capital gains and losses, income from investments, and other nonoperating income.

(2.) Profit-type return is a component of gross product originating in U.S. affiliates. It is before income taxes; it includes capital gains and losses, income from investments, and other nonoperating income; it is before deduction of depletion charges; and it includes an inventory valuation adjustment.

(3.) Estimates for 1990-91 include, but those for 1992-95 exclude, savings institutions and credit unions.

(1.) The estimates of outlays for 1996 are preliminary. The 1995 estimate of total outlays has been revised up 5 percent from the preliminary estimate published last year.

(2.) A U.S. affiliate is a U.S. business enterprise in which there is foreign-direct investment--that is, in which a single foreign person owns or controls directly or indirectly, 10 percent or more of the voting securities of an incorporated U.S. business enterprise or an equivalent interest in an unincorporated U.S. business enterprise. An affiliate is called a "U.S. affiliate" to denote that it is located in the United States; in this article, "affiliate" and "U.S. affiliate" are used interchangeably. "Person" is broadly defined to include any individual, corporation, brand,, partnership, associated group, association, estate, trust, or other organization and any government (including any corporation, institution, or other entity or instrumentality of a government). A "foreign person is any person resident outside the United States--that is, outside the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, and all U.S. territories and possessions.

(3.) The estimates of gross product and the other data items on affiliate operations for 1995 are preliminary. The estimates for 1994 are revised; for most of the key data items, the revisions from the preliminary estimates were small, resulting in changes to the totals of -2.2 to 0.4 percent. However, net income is revised down 39 percent, and U.S. exports and imports of affiliates are each revised up 6 percent. In the preliminary estimates of net income, BEA had estimated the data for a number of affiliates whose reports were received too late to be processed; for several of these affiliates, the actual data showed unusually large changes in net income, so the incorporation of these data led to substantial revisions.

(4.) The UBO is that person, proceeding up a U.S. affiliate's ownership chain, beginning with and including the foreign parent, that is not owned more than so percent by another person. The foreign parent is the first foreign person in the affiliate's ownership chain. Unlike the foreign parent, the UBO of an affiliate may be located in the United States. The UBO of each U.S. affiliate is identified to ascertain the person that ultimately owns or controls and that, therefore, ultimately derives the benefits from owning or controlling the U.S. affiliate.

(5.) The new investment data cover U.S. business enterprises (including banks) that have total assets of over $1 million or that own at least 200 acres of U.S. land in the year they are acquired or established. U.S. enterprises that do not meet these criteria are required to file partial reports, primarily for identification purposes; the data from these reports are not included in the accompanying tables. For 1996, the total assets of the U.S. enterprises that filed partial reports were only $149.1 million, about on percent of the total assets of $239.2 billion of the U.S. enterprises that filed complete reports.

A U.S. business enterprise is categorized as "established" if the foreign parent or its existing U.S. affiliate (a) creates a new legal entity that is organized and begins operating as a new U.S. business enterprise or (b) directly purchases U.S. real estate. A U.S. business enterprise is categorized as "acquired" if the foreign parent or its existing U.S. affiliate (a) obtains a voting equity interest in a previously existing, separate legal entity that was already organized and operating as a U.S. business enterprise and continues to operate it as a separate legal entity, (b) purchases a business segment or operating unit of an existing U.S. business enterprise that it organizes as a new separate legal entity, or (c) purchases through the existing U.S. affiliate a U.S. business enterprise or a business segment or an operating unit of a U.S. business enterprise and merges it into the affiliate's own operations rather than continuing or organizing it as a separate legal entity.

The data on new investments do not cover the acquisition of additional equity in an existing U.S. affiliate by the foreign parent or the acquisition of an existing U.S. affiliate from a different foreign investor. They also do not cover expansions in the operations of existing U.S. affiliates, and selloffs or other disinvestments are not netted against the new investments.

(6.) Overall merger and acquisition activity in the United States increased 27 percent in 1996, according to a January 3, 1997, news release from the Securities Data Company.

(7.) In addition to outlays from foreign parents to acquire or establish U.S. affiliates, net capital inflows for FDIUS include foreign parents' financing of their existing U.S. affiliates. In 1996, net capital inflows for FDIUS increased $23.7 billion, to $84.0 billion. Preliminary estimates of these inflows were published in tables 1 and 5 of "U.S. International Transactions, Fourth Quarter and Year 1996. Survey of Current Business 77 (April 1997): 43 and 50.

(8.) The increase in employment from new investments is smaller than the number of employees of newly acquired or established U.S. businesses in 1995 that is shown in table 1. Part of the difference is attributable to the exclusion of depository institutions from the data on affiliate operations; the remainder may reflect such factors as differences in timing, post-acquisition restructuring of affiliates, and the existence of some changes in nonbank affiliate employment that could not be categorized. For more information, see the note to table 7, and see the appendix "Sources of Data" in Survey 75 (May 1995): 68 70.

(9.) The data used to estimate affiliate gross product are reported to BEA in current dollars. BEA'S chain-type price index for the gross domestic product of nonfarm U.S. businesses less housing increased 2.2 percent in both 1994 and 1995. The rates of price increase for affiliate gross product were probably lower, because affiliate gross product is heavily concentrated in manufacturing where price increases have tended to be lower than in other industries.

(10.) Based on the methodology used to construct the estimates in table 7, the change in affiliate gross product resulting from new investments was estimated as the gross product of large affiliates that were acquired or established during the year plus the change in the gross product of large affiliates that had an increase in employment and that had acquired another U.S. business during the year.

The change in affiliate gross product resulting from sales or liquidations was estimated as the gross product in the prior year of large affiliates that were liquidated or sold during the year plus the change in the gross product of large affiliates that had a decline in employment and that had sold a business or business segment during the year.

(11.) The most recent data on gross product by industry indicate that manufacturing accounted for 20.0 percent of the gross product originating in U.S. private industries in 1994. See "Improved Estimates of Gross Product by Industry, 1959-94," SURVEY 76 (August 1996): 150.

(12.) The employment data used to estimate shares are by industry of sales, a basis that approximates the establishment-based disaggregation of the con responding data for all U.S. businesses. See the box "Using Employment Data to Estimate Affiliate Shares of the U.S. Economy."

(13.) Net income of affiliates is as shown in the affiliates' income statements: it includes capital gains and losses, income from investments. and other nonoperating income.

(14.) Affiliates' profit-type return is before the deduction of income taxes or depletion charges, and it excludes capital gains and losses, income from investments, and other nonoperating income. In table 15, it includes an inventory valuation adjustment (IVA). (Conceptually, it should also include a capital consumption adjustment (CCAdj), but estimates of CCAdj by industry are not available; estimates of profit-type return with both IVA and CCAdj are presented for all industries combined in table 16.) For a more detailed description of this measure and for a comparison of this measure and the corresponding measure used in the U.S. national income and product accounts, see "Gross Product of U.S. Affiliates of Foreign Companies, 1977-87" SURVEY 70 (June 1990):53.

(15.) For both groups of firms, the rates of return are measured as profit-type return plus interest paid as a percentage of total assets. In the computation of these measures, both the return and the assets generating the return are valued in prices of the current period.

For U.S. domestic nonfinancial corporations, data on property income are from tables 1.16 and 8.18 in the national income and product accounts (NIPA'S); data on total assets are from Federal Reserve Board of Governors, Balance Sheets for the U.S. Economy, 1945-94 (Washington, DC: June 1995). Unlike the data used to compute the rates of return presented in the "Business Situation" in this issue, the data used to compute the rates of return for all U.S. nonfinancial corporations do not reflect the most recent N]PA revisions because the effects of the revisions have not yet been reflected in the data on total assets published in Balance Sheets for the U.S. Economy.

For a description of the data and the methodology used to estimate the rates of return during 1984-94, see footnote 19 in "Foreign Direct Investment in the United States: New Investment in 1995 and Affiliate Operations in 1994," SURVEY 76 (July 1996): 118.

(16.) For a discussion of the rates of return on direct investment from a balance-of-payments perspective, see "Rates of Return on Direct Investment," SURVEY 72 (August 1992): 79-86.

RELATED ARTICLE: Data Availability

New investment data

A set of supplementary tables containing detail on the number of investments and investors for 1992-95 and on investment outlays and selected operating data for the newly acquired or established businesses for 1992-96 is available on diskette for $20.00: Accession No. 50-97-40-405. In addition, a comparable set of tables for 1980-91 is available on diskette: Accession No. 50-96-40-406, price $20.00. To order by mail, send a check payable to the "Bureau of Economic Analysis" to the Public Information Office, Order Desk, BE-53, Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230, or to order using Visa or MasterCard, call (202) 606-9827. When ordering, please specify the accession number. For further information on data, call (202) 606-9828.

Operations data

Publications and diskettes presenting the revised estimates of U.S. affiliate operations for 1994 and the preliminary estimates for 1995 from the annual surveys will be available later this summer. These estimates are comparable with those in this article, but they are presented in greater detail.

The detailed estimates of U.S. affiliate operations for 1977-93 are available on diskettes; for order information, call (202) 606-9827. The estimates for 1991-93 are also available in publications; for order information, call (202) 606-9827. For additional information on BEA'S publications on U.S. affiliate operations, see the International Investment Division Product Guide on BEA'S Web site at http://www.bea.doc.gov/bea/iidpg-d.htm.

RELATED ARTICLE: Using Employment Data to Estimate Affiliate Shares of the U.S. Economy

In this article, data on employment are used to estimate affiliate shares of the U.S. economy because these data can be disaggregated by industry of sales, a basis that approximates the disaggregation of the data for all U.S. businesses by industry of establishment. Thus, the data on affiliate employment can be used to calculate the affiliate shares of the U.S. economy at a greater level of detail than can be calculated using the gross product estimates or other data, which can only be disaggregated on the basis of industry of affiliate.(1)

In the classification by industry of sales, the data on affiliate employment (and sales) are distributed among all of the industries in which the affiliate reports sales.

As a result, employment classified by industry of sales should approximate that classified by industry of establishment (or plant), because an affiliate that has an establishment in an industry usually also has sales in that industry.(2)

In the classification by industry of affiliate, all of the operations data (including the employment data) for an affiliate are assigned to that affiliate's "primary" industry--the industry in which it has the most sales. As a result, any affiliate operations that take place in secondary industries will be classified as operations in the primary industry.(3)

(1.) Establishment-level data from a joint project of BEA and the Bureau of the Census can be used to calculate affiliate shares at an even greater level of detail. These data show each four-digit manufacturing industry in the Standard Industrial Classification; they are currently available for 1987-92. The data for 1990 are analyzed in "Characteristics of Foreign-Owned U.S. Manufacturing Establishments, SURVEY 74 (January 1994): 34-59. The data for 1991 are analyzed in "Differences in Foreign-Owned U.S. Manufacturing Establishments by Country of Owner," SURVEY 76 (March 1996): 43-60

(2.) However, if one establishment of an affiliate provides all of its output to another establishment of the affiliate, the affiliate will not have sales in the industry of the first establishment. For example, if an affiliate operates both a metal mine and a metal manufacturing plant and if the entire output of the mine is used by the manufacturing plant, all of the affiliate's sales will be in metal manufacturing, and none in metal mining. When the mining employees are distributed by industry of sales, they am classified in manufacturing even though the industry of the establishment is mining.

(3.) An affiliate's primary industry is based on a breakdown of the affiliate's sales by three-digit BEA International Surveys Industry classification code. These codes are adapted from the Standard Industrial Classification Manual 1987.

RELATED ARTICLE: Data on Foreign Direct Investment in the United States

Bea collects three broad sets of data on foreign direct investment in the United States (FDIUS) (1) New investment data, (2) financial and operating data of U.S. affiliates, and (3) balance of payments and direct investment position data. This article presents the first two sets of data; the balance of payments and direct investment position data will be published in the articles "The International Investment Position of the United States in 1996," "U.S. International Transactions, First Quarter 1997," and "Direct Investment Positions on a Historical Cost Basis: Country and Industry Detail for 1996," in the July issue of the Survey of Current Business.

Each of the three data sets focuses on a distinct aspect of FDIUS. The new investment data track U.S. businesses that are newly acquired or established by foreign direct investors, regardless of whether the invested funds were raised in the United States or abroad; the financial and operating data provide a picture of the overall activities of the U.S. affiliates; and the balance of payments and direct investment position data track cross-border transactions and positions of both new and existing U.S. affiliates with their foreign parents.

New investment data.--The data on outlays by foreign direct investors to acquire or establish affiliates in the United States are collected m sEA's survey of new FDIUS. The data on investment outlays and on the number and types of investment and investors are on a calendar year basis.

In addition, the new investment survey collects selected data on the operations of the newly acquired or established affiliates. For newly acquired affiliates, these data are for (or as of the end of) the most recent fiscal year preceding the acquisition, and for newly established businesses, they are projected for (or as of the end of) the first year of operation. The data cover the entire operations of the business, irrespective of the percentage of foreign ownership.

Financial and operating data of U.S. affiliates.--The data on the overall operations of U.S. affiliates are collected in BEA'S annual and benchmark surveys of FDIUS. The data cover U.S. affiliates' balance sheets and income statements, employment and compensation of employees, trade in goods, research and development expenditures, sources of finance, and selected data by State. In addition, the gross product of affiliates is estimated from data reported in these surveys.

Except in benchmark survey years, these data, unlike the new investment data, cover only nonbank affiliates. All data on the overall operations of nonbank U.S. affiliates are on a fiscal year basis. The data cover the entire operations of the U.S. affiliate, irrespective of the percentage of foreign ownership.

Balance of payments and the direct investment position data.--These data are collected in the quarterly survey of FDIUS. The data cover the U.S. affiliate's cross-border transactions and positions with its foreign parent or other members of its foreign parent group, and hence focus on the foreign parent's share, or interest, in the affiliate rather than on the affiliates overall size or level of operations. The major items included in the U.S. balance of payments are direct investment capital flows, direct investment income, royalties and license fees, and other services transactions with the foreign parent group.

For a more detailed discussion of the differences between these three sets of data, see "A Guide to BEA Statistics on Foreign Direct Investment in the United States," Survey 70 (February 1990): 29-37. For a comparison of the data on affiliate operations with the data on new investment, see the appendix "Sources of Data" in "Foreign Direct Investment in the United States: New Investment in 1994 and Affiliate Operations in 1993," Survey 75 (May 1995): 68-70.

Acknowledgments

The survey on new foreign direct investment m the United States was conducted under the supervision of Joseph F. Cherry III, with contributions by Erik A. Kasari, Edward J. Kozerka, Nicole Donegan, and Ronald McNeil. The survey on U.S. affiliate operations was conducted under the supervision of David H. Galler, with contributions by Juris E. Abolins, Chester C. Braham, Constance C. Deve, Beverly A. Feeser? Vincent Goins, Earl F. Holmes, Lonnie Hunter, Betty Jones, Carol Lefkowitz, Edna Ludden, Gregory McCormick, Sidney Moskowitz, Clarence D. Smith, Marie P. Smith, John R. Starnes, Kimyetta Whitehead, Demetria Williams, and Dorrett Williams. The estimates of U.S.-affiliate gross product were prepared by Ned G. Howenstine, Jeffrey H. Lowe, and Dale P. Shannon. Computer programming for data estimation and the generation of data tables was provided by Arnold Gilbert, Angela M. Roberts, Peter Bowman, and Suet Ng.