Foreign Direct Investment in the U.S. Textile and Apparel Industry (Updated in May 2015)

Foreign direct investment (FDI) is a major format of cross-border capital flow. It occurs when a company based in one country invests in physical productive assets in another country and obtains a controlling interest in the operation (Brookings, 2014).

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Statistics show that in 2013 the total stock of global FDI exceeded $25 trillion, among which around 18.8% ($4.7 trillion) were made by U.S.-based companies. In the meanwhile, the United States is also a major FDI recipient, with the stock of FDI totaled $2.8 trillion by the end of 2013 (CRS, 2015). Europe is both the top destination of US FDI abroad (55.5%) and the largest source of FDI in the U.S. (70.1%).

Although historically developed countries have been the primary source of global FDI, in recent years, developing countries (especially emerging economies such as China) have played an increasing role in global investment. For example, according to a recent study released by the National Committee on US-China Relations, from 2000 to 2014, Chinese firms spent nearly $46 billion on new establishments and acquisitions in the U.S.. This includes Keer Group, a Chinese textile company, which invested $218 million in South Carolina to produce industrial cotton yarn products specifically for the China market.

It should be noted that in the 21st century FDI is considered to be a major driver of international trade. Particularly, a substantial share of international trade today is between parent firms and their foreign affiliates. For example, Statistics show that in 2012 the affiliates of foreign firms in the U.S. exported $334 billion or 21% of total U.S. exports and imported $671 billion or 29% of total U.S. imports. At the same time, U.S. parent companies (i.e. those companies made FDI overseas) exported $738 billion or 47% of total U.S. exports and imported $949 billion.

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The U.S. textile and apparel industry (T&A) has been actively engaged in FDI as well. Data from the Bureau of Economic Analysis (BEA) show that in 2013 U.S. FDI abroad in the T&A industry reached $16.5 billion and FDI inflow reached $13.7 billion. The apparel retail sector (NAICS 448) in particular accounted for 85% of FDI inflow and 51% FDI outflow in the U.S. T&A industry. Interesting enough, data also show that FDI abroad made by the U.S. apparel manufacturers have substantially increased by 85.4% from 2009 to 2013, implying that U.S. apparel manufacturers may accelerate moving factories overseas rather than adding manufacturing capacity in the United States.