Americana for Sale - Foreign Investment in the U.S.

It's nothing personal, it's just business.

American CEOs earn the highest executive salaries in the world, but their companies are offshoring jobs overseas for cheaper labor, saying they "have to be more competitive in the global marketplace". But if American wages (as well as regulations and taxes) are supposed to be such a huge disadvantage, then why are so many foreign businesses buying American businesses and paying American employees?

American Standard (based in Piscataway, New Jersey) has a history dating back to the 1800's. It's now principally owned by Sun Capital and Bain Capital. Recently Lixil Corp. (a Japanese company) agreed to pay about $342 million for what is now known as American Standard Brands, the 138-year-old U.S. maker of toilets and bathroom and kitchen fixtures.

In August 2005, in another attempted buyout of a U.S. company, Chinese oil and gas giant CNOOC offered $18.5 billion to buyout the energy firm Unocal (Union Oil Company of California), as a joint bid by Bain Capital. Some U.S. lawmakers said American companies would struggle to compete against China's state-owned and subsidized company, potentially posing national security concerns in the vital energy market. So the largest proposed purchase of a U.S. company by a Chinese one was eventually withdrawn and Chevron's proposal was ultimately successful.

Other notable withdrawn Chinese buyouts of U.S. companies include Qingdao Haier's $2.3 billion proposed buyout of the American icon Maytag in 2005. And there was also China's Superior Aviation's $1.8 billion bid for another American icon, Hawker Beechcraft, headquartered in Wichita, Kansas.

The Committee on Foreign Investment in the United States (CFIUS), a unit of the Treasury Department, is tasked with overseeing these deals, but typically the government is looking for matters of national security --- and it is rare for CFIUS to block deals. During 2011, the most recent year with data available, the CFIUS was notified 111 times of deals that fell under its purview. Of those 111 covered deals, 40 were investigated and just five were withdrawn during that investigation.

Recently China's top pork producer, Shuanghui International, offered to buy the U.S. pork producer Smithfield (valued at about $4.7 billion without debt).  Including the assumed debt, the deal would be the biggest Chinese buyout of a U.S. company ever. The proposed buyout is a new chapter in questions about safety of food and the quality of goods from global companies.

Richard Raymond, former undersecretary of Agriculture for Food Safety (and now a food safety and public health consultant), says "I'm surprised and disappointed. I just hate to see a large American company like that going under foreign ownership. From a safety standpoint, they're still under USDA's Food Safety Inspection Service, so I don't think that's an issue."

Meaning, unless pork is a matter of national security (not considering food safety), the deal to sell Smithfield may go through --- and another American icon becomes a foreign-owned company. As our toilets go, so goes our bacon. Americana is up for sale to the highest bid.

Budweiser is owned by Anheuser-Busch InBev, a Belgian and Brazilian company with headquarters in Leuven, Belgium. Its U.S. operations include a dozen breweries plus hops farms, malt plants, barley elevators and a rice mill.

Alka-Seltzer is owned by Bayer (as in aspirin), a German pharmaceutical company. It operates multiple sites in the United States, for manufacturing, administration, marketing and research and development.

The Good Humor ice cream brand was introduced in Ohio in the 1920s. The product was sold from trucks and grew so popular that it went national within a decade. In 1961, Thomas J. Lipton (as in tea) acquired it. The company's parent, Unilever, a British-Dutch multinational company, merged Good Humor with its other ice cream brands, Breyers, Klondike Bar and Popsicle in 1993. (and is now Good Humor-Breyers)

Perhaps no convenience store chain is better known among Americans than 7-Eleven, originator of the Slurpee and the Big Gulp. It operates more than 7,000 stores throughout the country. It operates nearly twice that many in Japan, home of Seven & I, the Tokyo company that now owns the U.S. chain.

Gerber is one of the best-known makers of baby products in the United States. The company was founded in Michigan in 1927, and its pureed bananas, pacifiers and baby bottles have been flying off U.S. store shelves ever since. In 1994, the company merged with Sandoz Laboratories, which merged with another company in 1996 to form drug-maker Novartis. In 2007, the company sold off Gerber to the Swiss multinational Nestlé (as in chocolate) for $5.5 billion (However, there's still Hershey).

Harvey Firestone founded his tire company in 1900 in Akron, Ohio. Firestone Tire and Rubber hit the big time a few years later when it became the exclusive supplier of tires to Ford Motor, and for decades, it was profitable. The company fell on hard times in 1979 and was sold in 1988 to Bridgestone in Japan. It now operates several businesses as Firestone Diversified Products.

The founding of John Hancock Life Insurance dates back to 1862. Between John Hancock’s 150-year vintage and the founding father who provided its name, anything more "American" would be hard to imagine. However, John Hancock was acquired in 2004 by Manulife Financial, a Canadian insurance company.

Frigidaire was founded in 1918 in Fort Wayne, Ind. The company was owned by General Motors (GM) from 1919 until 1979, when it was sold to White Sewing. Seven years later, White Sewing, along with Frigidaire (as in kitchen appliances) was sold to Electrolux, the Swedish appliance company.

The first Holiday Inn opened in 1952 in Memphis, Tenn. and took its name from the 1942 Bing Crosby film of the same name. In 1988, Holiday Inn was purchased by Bass, a U.K. company -- but today, it's owned by InterContinental Hotels Group, another UK company.

Foreign invertors aren't just buying iconic America companies, but real estate too. The Chrysler Building is one of the landmarks of the Manhattan skyline. Located on 42nd Street and Lexington Avenue, it's New York's third-tallest building and a towering tribute to both Chrysler and the city that it calls home. The Art Deco building has had two foreign owners in the last 11 years. TNW, a German investment group, bought a 75% stake for $300 million in 2001. Seven years later, the Abu Dhabi Investment Council bought it, and now owns 90% of the building --- and Chrysler itself is now a subsidiary of the Italian multinational automaker Fiat.

So far this year, 484 U.S. companies that have been bought by foreign companies worth $43.6 billion. Of those, Chinese companies have bought 10 of those companies worth $10.5 billion.

But if American wages (as well as regulations and taxes) are supposed to be such a huge disadvantage in the global marketplace, then why are so many foreign businesses buying American businesses and paying American employees? Nike pays their workers 20¢ an hour in Vietnam, so why aren't all these foreign investors going to Vietnam instead? And why aren't American business fleeing our shores?

It's not that wages in the U.S. are too high, or that government regulations are too strict, or that corporate taxes are too high. Companies like Walmart pay their employees ("associates") an average of $8.50 an hour, forcing many of their workers to use government programs such as SNAP and Medicaid. Companies such as Nike and Apple use "contract manufactures" in low-wage countries to produce their products. And the "effective" corporate tax rate that most U.S. companies pay is lower than China's. And government regulations are constantly under attack by corporate lobbyists, endangering public safety (products, food, medicine, and the environment --- not to mention all the illegal activities in the financial sector.)

No, it's the major institutional investors --- such as the banks, hedge funds, and the private equity firms, such as Vanguard and Bain Capital --- that puts pressure on these firms to constantly increase their profits...and at any cost to the U.S. government's revenues (in the form of lower taxes), the workers (in the form of lower wages and worker safety), consumer protections (such as for products, food and medicine) and the environment (for clean air and water. Have you seen Beijing's smog lately? Mitt Romney accused Obama of wanting to be more like Europe, when Romney would rather we be more like China.)

In 2011 President Obama approved another free-trade agreement (Trans-Pacific Partnership, pushed by business groups and lobbyists such as the U.S. Chamber of Commerce) with South Korea, Panama and Colombia --- so offshoring (globalization) will continue to escalate. A CRS Report prepared for members and committees of Congress in 2012 says 29% of American jobs are still prone to offshoring to low-wage countries, and include: China, India, the Philippines, Argentina, Brazil, Bulgaria, China, the Czech Republic, Hungary, Jordan, Lithuania, Mexico, Slovenia, Russia, and Ukraine (President Obama is in Africa today). The most recent (and biggest ever) free-trade agreement is currently pending.

Also, thousands of wealthy foreigners have been flocking to America and making business investments here, including in real estate (which has recently helped drive up home values) --- and putting themselves on a path to citizenship in the process. Under the U.S. government's  Immigrant Investor program, foreign investors can get conditional visas that puts them in the front of the line, and allows them and their families to live, work and attend school in the U.S. But to qualify for the visa, they must invest at least $1 million in a new or recently created business, or $500,000 for businesses in rural or high-unemployment areas. In other words, U.S. citizenships are up for sale as well.

So it's not just U.S. politicians that are up for sale to the highest bidder, so is the rest of Americana. It's nothing personal, it's just business. In America, everything has a price. It's called capitalism. It's the American way.

Excerpted from Forbes: For years, economists have been talking about a structural shift in the global economy. In that shift, multinationals would have to choose where to spend their capital and ad budgets. Do you increase spending in the United States, or do you open a new factory and service center in Asia? That question was answered in 2012. For the first time ever, global corporations invested more in emerging markets than the core economies of U.S., Europe and Japan, according to the 2013 World Investment Report. Developing economies absorbed more foreign investment than the developed ones, continuing the trend of cash rich corporations. This growth was driven by foreign investment in the oil and mining industries, as well as in the manufacturing and service industries --- driven by continued investment in lower-income countries such as Cambodia, the Philippines, Myanmar and Viet Nam for labor-intensive jobs. The BRICS countries (Brazil, Russia, India, China and South Africa) continued to be the leading recipients of foreign investment among emerging countries. But the U.S. remains No. 1 for foreign corporate investments. Companies invested over $160 billion in the U.S. last year. In second place was China with $121 billion. Brookings: "By 2020 China’s foreign investment will surpass $1 trillion, of which a good share will flow to the United States." But if American wages (as well as regulations and taxes) are supposed to be such a huge disadvantage, then why are so many foreign businesses buying American businesses and paying American employees? Why don't companies like Nike, Microsoft, Apple and Facebook all move to countries like Cambodia, the Philippines, Myanmar and Viet Nam?