Foreign Investment: Aspects of the U.S.-Japan Relationship

Published by the Government Accountability Office on 1990-07-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                      2       1
              United   States   General   Accaunting   Office

              Fact Sheet for the Chairman,
GiO           Committee on Commerce, Science, and
              Transportation, U.S. Senate

July   1990
              Aspects of the U.S.-
              Japan Relationship

               RESTRIcTE;D --Not    to be released outside      the
               General Accountiug Oftice unless specifwally
               apgmved by the Offke of Congressional                      .
United States
General Accounting  Office
Washington, D.C. 20548

National Security and
International Affairs Division

B-2345 11

July 31, 1990

The Honorable Ernest F. Hollings
Chairman, Committee on Commerce, Science,
   and Transportation
[Jnited States Senate

Dear Mr. Chairman:

In response to your request, we are providing information on (1) the
extent and sectoral composition of -Japanese investment in the United
States and U.S. investment in Japan, (2) the forms of Japanese direct
investment in the IJnited States, and (3) barriers to 1J.S.investment in

Foreign investment includes (1) foreign direct investment, defined as
purchases of 10 percent or more of a firm’s equity, (2) “portfolio”
investments, defined as other purchases of equity or private sector
bonds, (3) purchases of government securities, and (4) financial assets
(such as U.S. banks’ borrowing from *Japan and dapanese deposits in the
1Tnited States).

Japanese investments in the United States during 1980-1988 increased
faster than U.S. investments in Japan, with the result that total Japa-
nese investments in the IJnited States exceeded total 1J.S.investments in
.Japan by $128.5 billion at the end of 1988. Japan made direct invest
ments in the United States amounting to $21.7 billion in 1988, while LJ.S.
direct investment in .Japan was $2.2 billion. More than half of each
country’s cumulative direct investment in the other was in two sec-
tors-wholesale    trade and manufacturing. Appendix I provides details
on the extent and sectoral composition of Japanese investment in the
lJnited States and IIS. investment in .Japan.

Most Japanese direct, investments are in the form of majority ownership
investments, rather than joint ventures or minority ownership. Distin-
guishing whether Japanese investments are in sales or production facili-
ties is difficult, because official Commerce Department statistics do not
always separate these types of investments. Appendix II describes the
forms of *Japanese invt%ment in the LJnited States in greater detail.

Japanese barriers to I I .S. investment tend to be informal, systemic bar-
riers, such as long-term supply relationships, a complex distribution
system, and close ties between government and industry. Appendix III

Page 1                                    GAO/NSIAD+O-203FS   Foreign   Investment
Page 3   GAO/NSIAB!B%203FS   Foreign   Investment
Figure 1.5: Total Assets of Japanese Affiliates in the                       12
     IJnited States
Figure 1.6: Total Assets of U.S. Affiliates in Japan                         13
Figure 1.7: Total Employment by Japanese Affiliates in                        14
     the United States
Figure 1.8: Total Employment by U.S. Affiliates in Japan                      15
Figure 11.1:Forms of .Japanese Foreign Direct Investment                      17
     in 1J.S.Manufacturing


FDI        Foreign Direct Investment

Page 5                                  GAO/NSIAD90203FS   Foreign   Investment
                                            Appendix I
                                            The Extent of Japanese Investment       in the
                                            United States and U.S. Investment      in Japan

Figure 1.1: Japanese Investment Position
in the United States (Based on Balance of
                                            300     Dollars   in billions
Payments   Statlstlcs)


                                             Note   ‘Other” Includes fowgn   offlclai assets I” the United States and U S llabilltles to Japanese Inter
                                             Sources Bureau of Economic Analysts. Commerce Department, Congressional            Research Serwce statls-
                                             tics from Treasury Department data

                                             the same time period, L.S. direct investment in Japan, although repre-
                                             senting a smaller percentage of total investment, grew from $7.9 billion
                                             to $16.9 billion (16.4 percent to 10.8 percent of total investment). Figure
                                             I.2 shows the size of these different components for the years 1984 to

                                             In 1988 almost half of ,Japan’s $47 billion foreign direct investment (FDI)
 Direct Investment                           was invested in the 1Jnited States, while less than one-eighth of U.S. FDI
                                             was invested in Japan (see tables I.2 and 1.3). The share of Japanese FDI
                                             invested in the ITnited States grew from 33.1 percent in Japan’s fiscal
                                             year 1984 to 46.2 percent in fiscal year 1988 (the Japanese fiscal year
                                             runs from April 1 to March 31). Similarly, the share of all IJ.S. direct

                                             Page 7                                                      GAO/NSIAD-90.203FS        Foreign   Investment
                                            Appendix I
                                            The Extent of Japanese Investment ia the
                                            United States and U.S. Investment in Japan

Table 1.3: U.S. Foreign Direct Investment
(Measured   r Yearly Flows)                 Dollars   in millions
                                                                                           Total         In Japan         Percent in Japan
                                            I 984                                         $4,277              $275                          64
                                            1985                                          18,268              1,310                          72
                                            19sS                                          30,052              2.226                          74
                                            1987                                         -48,183              3,199                          6.6
                                            1988                                          18917               2 197                         11 6

                                            Source Commerce Department

                                            The economic significance of foreign direct investment in the United
Sectors of Investment                       States can be measured in several ways. We used three types of statis-
                                            tics: (1) balance of payments data, which measure cumulative net cap-
                                            ital flows into and out of the United States, (2) data on total assets of
                                            affiliates that show the value of U.S. businesses, except banking, in
                                            which the foreign investor has an equity share of at least 10 percent,
                                            and (3) total employment of these affiliates.’

                                            These statistics indicate that the Japanese position in the [Jnited States
                                            has increased substantially. Balance of payments capital flows statistics
                                            indicate that the Japanese FDI position more than tripled between 1984
                                            and 1988. Assets of Japanese-affiliated businesses increased fivefold
                                            between 1983 and 1987. while their employment increased by more than
                                            70 percent.

                                            While not on the same scale, U.S. investment in Japan also increased
                                            during these periods. Capital flows and affiliates’ assets statistics both
                                            show that the US. foreign direct investment position in Japan more
                                            than doubled. However, employment by US. affiliates in .Japan grew by
                                            only 10 percent between 1983 and 1987.

Foreign Direct Investment                   Between 1984 and 1988. the Japanese FDI position in the United States
Position                                    more than tripled, from $16 billion to $53.4 billion. The top three sec-
                                            tors, in order, continued to be wholesale trade, manufacturing, and real
                                            estate, although there were some significant changes in shares (see fig.

                                            ‘For R morr complete dlscusswn of FDI data, SW Foreign Investment. Federal Data Collection on
                                            Foregn Investment in the I.mtcd State\ (GAO/NSIAD-90.25BR,      Ott 3, 1989)

                                             Page 9                                                GAO/ NSIAD-90.203FS    Foreign   Investment
                                              Appendix 1
                                              The Extent of Japanese Investment         in the
                                              IJnitcd States and U.S. Investment      in Japan

Figure 1.4: U.S. FDI Position in Japan (Top
Three Industries) (Based   on Balance   of
                                              60      Dollars in billions
Payments Stat~stlcsi





                                               1994                          1985                1966                1987                    1966

                                                      v          Total FDI position
                                                      - - - -    Manufacturing
                                                      -          Wholesale trade
                                                      n n n n    Petroleum
                                              Source Bureau of Economic Analysts Commerce Department

Assets of Affiliates                           Assets of Japanese affiliates in the United States increased fivefold,
                                               from $38.9 billion in 1983 to $195.8 billion in 1987,? the most recent
                                               year for which these data are available. The sectors with the largest
                                               asset value, according to this measure, were finance (except banking),
                                               wholesale trade, and manufacturing. In 1983, finance (except banking),
                                               accounted for 6.9 percent of all Japanese affiliates’ assets in the United
                                               States; this sector grew to 60.7 percent in 1987. Wholesale trade
                                               acc*ounted for 64.3 percent in 1983 and 23.2 percent in 1987, while man-
                                               ufacturing accounted for 16.5 percent in 1983 and 7.5 percent in 1987.
                                               The large increase in the finance (except banking) category was due in
                                               part to .Japanese acquisitions of minority interests in a few U.S. finance
                                               companies with very large assets.

                                                                                                        GAO/NSIAlXW203FS    Foreign   Investment
                                              Appendix I
                                              The Extent of Japanese Investment in the
                                              United States and U.S. Investment in Japan

Figure 1.6: Total Assets of U.S. Affiliates
in Japan (Top Three Industries)
                                              200      Dollars in billions











                                                1963                         1984                      1965                 1966                     1997

                                                       -          Total assets
                                                       - - - -    Manufacturing
                                                       -          Petoleum
                                                       n n n n    Finance, insurance and real estate
                                              Source Bureau of Economic Analysts Commerce Department

Employment by Affiliates                      Employment by Japanese affiliates in the IJnited States Increased by 73
                                              percent, to 284,600, betwer,n 1983 and 1987. At the same time, employ-
                                              ment by U.S. affiliates in *Japan increased by 10 percent, to 345,500.

                                              The top three industries, by .Japanese affiliates’ employment, were
                                              wholesale trade, manufacturing, and finance (except banking) (see fig.
                                              1.7). The share of wholcsalr) trade dropped from 44.8 percent in 1983 to
                                              38.1 percent in 1987; manufacturing dropped from 32.2 percent to
                                              28.7 percent in 1987, while finance (except banking) increased from
                                              1.5 percent to 15.4 percent

                                              Page 13                                                         GAO/NSIAb90-203FS    Foreign   Investment
                                             Appendix I
                                             The Extent of Japanese Investment in the
                                             United States and U.S. Investment in Japan

Figure 1.8. Total Employment by U.S.
Affiliates in Japan (Top Three Industries)
                                             400     Employment in thousands






                                                      -               Total
                                                      -- - -          Manufacturing
                                                      -               Wholesale trade
                                                      n n mm          Finance. ins.uranOeand real estate
                                             Source Bureau of Economic Analysts Commerce Department

                                              Page 15                                                         GAO/NSIAW90-203FS   Foreign   Investment
                                             Appendix II
                                             Forms of Japanese        lnvestmems in thr
                                             United States

Figure 11.1:Forms of Japanese Foreign
Direct Investment in U.S. Manufacturing

                                                                                          Majority   ownership/new         venture

                                                                                          Majority   ownership/acquired         business

                                             investment in the United St.ates is in sales activities and how much is in
                                             production activities.

                                             Commerce data show that m 1987, businesses in wholesale trade
                                             accounted for 78./T perwnt of total sales by .Japanese affiliates, while
                                             those classified as goods produwrs madc 12.7 percent of sales. Service
                                             industries accounted for the remaining 8.8 percent of salts.

Table 11.1:Sales by Industry    - Nonbank
U.S. Affiliates With Ultimate   Beneficial   Dollars    in mullions
Owners in Japan, 1987
                                                                                                         Sales              Percent ortotal
                                             Wholesale        trade                                  $141,448                               785
                                             Other                                                      38.678                              21 5
                                             of which     ooods                                         22.855                               127
                                             serwces                                                    15,823                                88
                                             All lndustrles                                            180.126                             1000

                                             Page 17                                        MO/NSIAW3@203W                Foreign    Investment
Appendix IIl
Barriers to U.S. Investment   in Japan

1.National security: arms; gunpowder; atomic energy; aircraft; and
space development;

2.Maintenance of public order and protection of safety of the general
public: narcotic manufacturing; vaccine manufacturing; and security
guard services; and

3,Protection of domestic industries: agriculture; forestry and fisheries;
petroleum refining and marketing; leather and leather product manufac-
turing; and mining.

Before 1980, according to this State Department study, foreign invest-
ment in these areas was prohibited. Investment is now allowed, but
investment and ownership may be limited under the present law. U.S.
investment has taken place in these sectors (particularly in the petro-
leum industry), but, according to the State Department report, the cri-
teria for defining and controlling these sectors remain unclear because
they are not made public.

Page 19                                  GAO/NSIAU90-203FS   Foreign   Investment
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Appendix IV

Major Contributors to This Fact Sheet

                        Curtis F. Turnbow, Assistant Director
National Security and   Virginia Hughes, Project Manager
International Affairs   Rqjiv Chawla, Evaluator
Division, Washington,

(4835.37)               Page 20                                 GAO/NSIAD-SO-PO3FS   Foreign   Investment
Appendix III

Barriers to U.S. Investment in Japan

                Informal barriers are generally considered to be the main reason I1.S.
                investors have difficulties investing in Japan. .Japanese business culture
                and practices entail significant differences from those in the 1Jnited
                States and, therefore, result in informal barriers for foreign invest,ors.
                These informal barriers include a business environment in which ,Japa-
                nese companies are rarely sold; there are virtually no hostile takeovers;
                and cross-shareholding among allied companies lea\,es a low percentage
                of companies’ common stock available for sale on the st,ock market. In
                addition, Japan’s long-term supplier relat,ionships, close ties between
                government and industry, and complex distribution system are consid-
                ered imposing barriers. particularly to start-up investments.

                Inadequate protection for companies’ patents, trademarks, and industry
                secrets due to incffc>ctive registration and legal protection are regarded
                as an investment barrier and can also alter the types of’ foreign invest-
                ments that go into .Japan. And, the slowness of the registration process
                (with some issuanccls of patents taking 10 yc‘ars or longer after filing)
                and the availability of the application to the public. I,re;rt,e disincentives
                to invest.

                A 1989 Treasury Department study listing l’ormal investment restric-
                tions in the Group of Seven’ countries concluded that Japan has liberal-
                ized its investment climate by changing or relaxing its legal and
                regulatory requirements. This study also not,ed 1hat informal barriers
                still exist, and these can be potentially formidable. ‘I’hr>heinformal bar-
                riers to investment (noted earlier) were discussed dllting the recent IJ.S.-
                Japan talks on trade and investment. :

                Although Japan has liberalized its investment c+rnat C. certain formal
                restrictions remain on foreign direct investment. Similar to other coun-
                tries, including the LJnited States, Japan limits foreign direct investment
                in particular industries. According to a 1988 Stat.e Department report,
                Investment Climate Statement for .Japan, thr>scli ndustric~s inc*lude the

                Page 18
Appendix II

Forms of Japanese Investments in the
United States

                        There has been concern over the form that Japanese FM in the ([nited
                        States may taktx. One aspect of this concern is that foreign inter&s may
                        gain control ovw a large valnc of assets through minority ownership in
                        a ,joint venture. A scc,ond aspect is the extent to which such investment,s
                        arc’ in the form of saks activities. whirh may primarily sell imported
                        goods, as opposc~l to prodnction facilities, which provide employment
                        and add to domclst ic, production,

                        Availablr data intltcztc that about 82 percent of ,lapanese IIII in 1J.S.
                        manrtfactrlring. b(,i SYW 1980 and 1989. was through majority owner-
                        ship. C’ommc~rccda! a show that 78 percent of the 1987 sales of .Japancse
                        affiliat cs in 1ht, I ‘nttcd States were made by businesses classified as
                        wholesale 1radcs I’llt> classification, however, is based on the dominant
                        activity- of the tnlsmcsss,and many of these businesses may have signifi-
                        caltt production ac~tivitics.
                                             ~ .~__
                         It is difficult to tktc~rmmc the number of .Japanese investments in the
Joint Ventures           1Inited States that ;IW @int ventures. According to a Commerce Depart-
                         mc>ntofficial. t IriB~~~~oblc~is mainly one of definition. For example, a
                        ,joint vuitiur (‘ati I>(*a business agreement that specifies 5Cpcrcent own-
                         erslCp for hot h l)artics or a 90/l 0-percent division. Furthermore, there
                         may be agrccmc~tu~ whc,rcby onr’ partner provides capital or technology
                         but is not invol\,c4 111nranagcrial decisions.

                        Ikausc of this d~~l‘~nitionalproblem, WVdivided the types of .Japancse
                        invc,stmcnt in I ~.S.tnanut’act~~rin~ into four broad categories: minorit?
                        owncrshil), 5O-p~~~~~n1  ownership, majority ownership in a new venture,
                        and majority o~\norshiJ) in an acquired business.

                        Figl1t.c Il. 1 sho\vs t 1Iat Xl .7 percent of all .Japanese investments in Ir.S.
                        manrllacturing I,(\1IVWII 1980 and 1989 was through majority ownership
                        of &her a ncn or ;I n ac,quircd business: 10.9 percent was through
                        minori(y own(A~il~; and 7.3 l)crcent was through a !?(I-percent

                        Many .Japancsc~;~t’filialc~sin the [*nited States perform both sales and
-_ .-.       in Sales   produc?ion optutions. An affiliate, for c,xamplc. may have 60 percent of
Subsidiaries and        its sales in M’~~IJ~~s;II~~ trade and 30 percent in manufacturing. In such
Production Facilities   c'usw, Conunc~tu~Dc~p;rrtment investment statistics would classify the
                        entire‘ a~not~tlt 01’tlit’cLc,tinvcstmcxnt as “wholesale trade.” the dominant
                        acti\,ity. It is. tlrc*rc~t’c~rc~.
                                                        tlifficrllt to dctcrminc how much .Japancse

                        Page to                                      GAO/NSlAD-90.203FS   Foreign   Investment
                                           Appendix 1
                                           The Extent of Japanese Investment in the
                                           United States and U.S. Investment in Japan

Figure 1.7: Total Employment by
Japanese Affiliates in the United States
                                           400   Employment In Ihousands
(Top Three Industries)

                                                 -          Total
                                                 ----       Wholesale trade
                                                 -          Manufacturing
                                                 n Hn   n   Finance, except banking
                                           Source Bureau of Econom!c Analyws, Commerce Department

                                           The top three industries, measured by employment by U.S. affiliates in
                                           Japan, were manufacturing, wholesale trade, and finance, insurance,
                                           and real estate (see fig. 1.8). The share for manufacturing dropped
                                           slightly, from 69.9 percent in 1983 to 64.4 percent in 1987, while whole-
                                           sale trade and finance, insurance, and real estate each increased about
                                           1 percent:)

                                           “According to a Commerce Department official, statistics used to determine the amount of employ
                                           ment include I!.S. affiliates that have minority ownership in Japanese companies.

                                            Page 14                                               GAO/NSIAB90-203FS       Foreign   Investment
                                             Appendix I
                                             The Extent of Japanese Investment in the
                                             IJnitcd States and U.S. Investment in Japan

Figure 1.5: Total Assets of Japanese
Affiliates in the United States (Top Three   200    Dollars in billions









                                                1963                          1964           1965                  1966                    1967

                                                       -           Total assets
                                                       - - - -     Finance, excepr banking
                                                       -           Wholesale trade
                                                       n   . . .   Manufacturing
                                             Source Bureau of Economic Analysts, Commerce Department

                                             Between 1983 and 1987, total assets of 1J.S.affiliates in Japan doubled,
                                             from $52.5 billion to $106 billion, and were mostly in the manufacturing,
                                             petroleum, and finance, insurance, and real estate sectors in Japan.
                                             Figure I.6 shows that the share of total assets in manufacturing was
                                             50.7 percent in 1983 and 49.7 percent in 1987. The share of petroleum
                                             declined from 33.1 percent in 1983 to 18.8 percent in 1987, while the
                                             share of finance, insurance, and real estate increased from 6.3 percent in
                                             1983 to 16.3 percent in 1987.

                                              Page 12                                               GAO/NSIAD.90-203FS    Foreign   Investment
                                                  Appendix I
                                                  The Extent of Japanese Investment in the
                                                  United States and U.S. Investment in Japan

Figure 1.3: Japanese FDI Position in the
United States (Top Three Industries)
                                                  60          Dollars   In billions
(Based   on Balance   of Payments   Statlstlcs)







                                                  15                                                                           I-IL-l.---
                                                  ,.     aIIIII---CL---------

                                                       1904                            1965                     1966                        1987                          1966

                                                              -            Total FDI posltian
                                                              - - - -      Wholesale trade
                                                              -            Manufacturing
                                                              . a..        Real estate
                                                  Source Bureau of Economic Analysis, Commerce Department

                                                  The U.S. FDI position in Japan more than doubled, from $7.9 billion to
                                                  $16.9 billion, between 1984 and 1988. Figure I.4 shows that the largest
                                                  sectors for U.S. investors in Japan are manufacturing, wholesale trade,
                                                  and petroleum. Manufacturing, as a percentage of US. foreign direct
                                                  investment in Japan. decreased from 51.9 percent in 1984 to 46.7 per-
                                                  cent in 1988. Wholesale trade grew from a 15.2 percent share in 1984 to
                                                  a 20.7 percent share in 1988. Petroleum investments dropped from a
                                                  26.6 percent share in 1984 to a 20.7 percent share in 1988.

                                                  Page 10                                                              GAO/NSIAlMO-203FS           Foreign        Investment
                                          Appendix I
                                          The Extent of Japanese Investment in the
                                          United States and U.S. Investment in Japan

Figure 1.2: U.S. Investment Position in
Japan (Based on Balance of Payments
                                          300     Dollars in billions

                                                              1965        1966       1997     1966

                                                             U.S. claims reported by U.S. banks
                                                             U.S. claims reported by nonbanking concerns
                                                             Direct imestment
                                                             U.S. official reserve assets

                                          Note “Other” mcludes bonds corporate stocks and U S government assets (other than offlclal
                                          K!sewe assets)
                                          Source Bureau of Economic Analysts Commerce Department

                                          investment  abroad that went into *Japan grew from 6.4 percent in 1984
                                          to 11.6 percent in 1988

Table 1.2: Japanese Foreign Direct
investment (Measured in Yearly Flows)      Dollars   I” mullions
                                                                                                                             In the         Percent in the
                                                                                                      Total          United States          United States
                                           1984                                                   $10,155                    $3,360                      33 1
                                           1985                                                      12,217                     5,395                    44.2
                                           1986                                                      22,320                  10,165                      45 5
                                           1987                                                      33.364                  14.704                      44 1
                                           1988                                                      47,022                  21,701                      46 2

                                           Source Japan Economic lnslttuti         based on Japan Ministry of Finance data

                                           Pa@? 8                                                             GAO/NSIADW203FS           Foreign   Investment
Appendix I

The Extent of Jamnese Investment in the
United States and U.S. Investment in Japan

                                          The 1r.S. net investment position with .Japan has changed dramatically
                                          since 1980, as shown in table I. 1, In 1980. l~.S. investment in .Japan was
                                          $37.4 billion, while .Jal~ncse investment in thr 1Tnited States \\‘iLs
                                          $36.3 billion. By 1988. ITS. invcst,ment in *Japan had more than quadrll-
                                          pled-to $156.3 billion-while      .Japanese investment. in the linited
                                          States had increased eightfold-to     $284.8 billion-leaving   the 1‘5 with
                                          a negative net investment position of $128.5 billion.

Table 1.1: U.S. Net Investment Position
With Japan, Based on Balance of
Payments Statistics                                                         Japanese                   U.S.
                                                                          investment      investment     in   Net U.S. investment
                                                                 in the United States                         position with Japan
                                          1980                                   $353              $374                       $2 1
                                          1981                                    447                  430                   -17
                                          1982                                    434                  448                     14
                                          1983                                    501                  484                   -17
                                          1984                                    676                  483                  -193
                                          1985                                   101 1                 56 1                 -450
                                          1986                                   1562                  91 9                 -643
                                          1987                                   1977              1134                     -843
                                          1988                                   2848              1563                    -1285

                                          All types of Japamv invcstmcnts in the ITnitcd States increased during
Types of Japanese                         the period 1984-1988. 1Iowcver. there were major changes in the shares
Investments in the                        of the types of invtlst ruclnt (see fig. I. 1). Thv direct investment share of
United States                             .Jal)anese invcstmclnt in t hc I Tnited States declined from 23.7 percent in
                                           1984 to 18.7 percent in 1988. .Japancsr investments in I’S, Trxxsw~
                                          sccuritics also dcclinc~d, from 58.6 pvrccnt, in 1984 to 32 percent in 1988.
                                          The share of .Japan(~ invvstmcnt placed in 1-S. corporate stocks and
                                          bonds. howcvcr. inc~rvascd from 6.2 percvjt to 17.2 percent during the
                                          same lx’riod. .Japan‘s “otlrc~‘” invest,ments. consisting mainly of .Jal);l-
                                          nose financial assets tIc~pclsit,cdlvith Americxn banks. grclw from an
                                           1 1.5 percent sharc~in 19X-l to 32.1 percent in 1988.

                                          The types of lY.S. invcastrrrc,ntin .Japan also changed bcltwccn 1984 and
Types of U.S.                             1988. I1.S. claims +:lillst .Japan reported by 1Y.S.banks accounted for
Investment in Japan                       $32.9 billion in 1981 and by 1988 had increased to S 135.5 billion
                                          (6X. 1 percent and 8li.7 pclrccnt c)f’total inxvstmclnt, rrspectivcQ). During

                                          Page 6

Letter                                                                                                               1

Appendix I                                                                                                         6
The Extent of              Types of .Japanesc In\ wtmcnts in the I‘nitcd States
                           Types of’ 1T.S.Inrwtnrc~nt in .Japan
Japanese Investment        Direct Investment
in the United States       ScYtol3   of   InvcstIllc~tll

and U.S. Investment in
Appendix II                                                                                                    lfi

Forms of Japanese          .Joint Ventuws                                                                      Ifi
                           Investments in Saks Subsidiaries and Production                                     I(i
Investments in the              Facilities
United States
Appendix III                                                                                                   18
Barriers to U.S.
Investment in Japan
Appendix IV                                                                                                    20
Major Contributors    to   h’ational Security antI lntt~rnational Affairs Division.                            ‘0
                                 Washington, D.(’
This Fact Sheet
Tables                     ‘l’ablc I. 1: 1l.S. Net In\,cst ment Position With *Japan, Hased                          (i
                                 on 13alance 0I’ Paynit~nts Statistics
                           ‘I’abk 1.2: .JaJ~nesc~Foreign Diwct Inwstment                                        8
                           Table 1.3: I’.S. I~‘orc~ignDirwt Investment                                          9
                           TabIt, II. 1: Sales by Industry - Konbank 1I.S. Affiliates                          17
                                 With I~ltimatc~ llt~ncficial O~vncrs in .Japan, 1987

Figures                    Figure I. 1: .Japancw Invcstmcnt Position in the 1Tnitcd                                  7
                           Figure 1.2: 1T.S.Invcstmcnt Position in .Japan                                           8
                           Figure 1.3: .Japancw H)I I’osition in the lrnitcd States                                10
                           Figure 1.4: CM. FI)I I’osition in .Jal~n                                                11

                           Page 4                                      GAOiNSIAD-90.203FS   Foreign   Investmrnt

provides a discussion of such informal barriers and a listing of the prin-
cipal industries where formal barriers exist.

In developing this fact sheet, we compiled data from the Departments of
Commerce, State, and the Treasury, the 1J.S.Trade Representative, and
t,he Japan Economic Institute. We performed our work between
November 1989 and March 1990. As you requested, we did not obtain
official agency comments on this report. Unless you publicly announce
its contents earlier, no further distribution of this report will be made
until 30 days from its issue date. At that time, we will send copies to
other interested congressional committees and to the cognizant execu-
tive agencies. We will also provide copies to others upon request. Ma@-
contributors to this fact sheet are listed in appendix IV. If you have any
questions, I can be rtkached on (202) 2754812.

Sincerely yours,

Allan I. Mendelowitz, Director
Trade, Energy, and Finance Issues

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