(2 of 2)
On the other hand, foreign nations themselves have not done nearly enough to create a more favorable business climate. Chief deterrent to many U.S. firms has been fear of expropriation; unfavorable exchange regulations and discriminatory tax and labor laws have also discouraged U.S. investors. But when a nation has the right climate for U.S. capital, it reaps a rich harvest. Canada, for example, has drawn a total of $6.5 billion in direct U.S. investment v. Mexico's $485 million largely because it has treated American investors far better than the U.S.'s southern neighbor. Capital-hungry countries can also set up central offices to encourage and facilitate private investment, as The Netherlands has done so successfully, organize development banks and investment corporations to encourage local capital to enter partnerships with U.S. investors. Even state socialism or nationalism need not be a deterrent to private investment. Socialist-minded India, for example, guarantees foreign investors against socialization for a stipulated period, e.g., 25 years for oil companies, arranges in advance for compensation if nationalization comes.
The more U.S. capital that goes abroad, the better are chances for easing the U.S. foreign-aid load. For U.S. business itself, expansion abroad is simply business foresight. Says William Blackie, executive vice president of Caterpillar Tractor Co. "The whole world is starting to consume at an accelerated clip. Americans have to face the possibility of being shut out of foreign markets unless they build plants overseas."