The lucrative new tax breaks and other incentives for advanced manufacturing signed into law by President Biden appear to be reshaping foreign direct investment in the American economy, according to a White House analysis, with more A large portion of spending on new and expanded businesses is shifting to the factory sector.
Data covering the first months following the enactment of those two pieces of the agenda show that a key measure of foreign investment fell slightly from 2021 to 2022, after adjusting for inflation.
The numbers suggest that, in the first months after the bills were signed, the hundreds of billions of taxpayer dollars that Mr. Biden is directing at manufacturing did not increase the total amount of foreign direct investment in the economy. Instead, the laws governing foreign investment appear to have shifted.
A new review of the White House Council of Economic Advisers shows the composition of so-called capacity-enhancing spending on new structures or expansion of existing ones to quickly move toward factories, in line with one of Mr. Biden’s top economic goals.
The analysis shows that two-thirds of foreign direct investment, excluding corporate acquisitions, will be in manufacturing by 2022. That is more than double the average share from 2014 to 2021.
The surge is relatively small in the context of the overall economy. But administration officials called it an encouraging sign that multinational companies are being lured to America by Mr. Biden’s industrial policy agenda. Over the past year, the analysis notes, construction spending on new manufacturing facilities in the United States has increased significantly faster than in England, Europe or other wealthy Group of 7 countries.
Administration officials said a Commerce Department survey of new foreign investment suggests that investors pouring money into American factories are largely concentrated in the United Kingdom and continental Europe, along with Canada, Japan and South Korea. Half of 1 percent of the investment appears to be related to China.
That foreign investment flows largely into computer and electronics manufacturing, particularly semiconductors, which is at the center of a bipartisan industrial policy bill that Mr. Biden signed into law in the summer of 2022. Also signed by Mr. .Biden introduced a climate, health and tax bill later that summer that included big new subsidies for the production of renewable energy technology.
Since those laws were signed, companies have announced new investment plans in the United States. The administration credited them with more than $500 billion. These include semiconductor plants in Arizona, advanced battery facilities in Georgia and many others. Many of the announced projects are from foreign companies, such as Taiwan’s TSMC.
Administration officials say that shifting investment toward the factory sector — even if the overall level of investment is unchanged — could cause positive spillovers for the economy. The White House analysis cited higher wages in manufacturing jobs and potential increases in productivity from foreign companies sharing knowledge with existing domestic manufacturers.
“Foreign direct investment in manufacturing not only helps us develop this critical sector in the main focal areas of Bidenomics, such as semiconductors and clean energy,” said Jared Bernstein, who heads the Council of Economic Advisers . “It also allows us to learn important production lessons from international companies in these and other areas.”