Western Europe: Swing of the Pendulum: Investing in the U.S.

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The most important development in international trade for a generation has been the flow of U.S. corporate capital to Europe. From $1.7 billion in 1950, it grew last year to $20 billion. The cash has not only fueled much of the postwar European boom but has created controversy among Europeans, particularly in France, who profess worry about an American economic "takeover."

Now the, flow, if not the furor, is beginning to subside—and the money has started to go the other way. Partly because of balance of payments considerations and partly because European laws and work practices are discouraging some U.S. companies, new U.S. investment in Europe this year will run about 4% under the prevailing $3 billion annual rate, and may slide even farther next year. Meanwhile, the value of European-owned plants and equipment on U.S. soil is rising sharply. The total crept up from $2.2 billion in 1950 to $7 billion last year, will sprint to $10 billion this year. That may be only the beginning. In a recent speech before a group of U.S. bankers, Jacques Maisonrouge, the French-born head of IBM World Trade Corp., echoed the conviction of many businessmen that the U.S.-European-investment "pendulum is now swinging the other way."

Wipe Out. During its first 100 years or so, the U.S. economy was supported by European capital. Europeans bankrolled Thomas Jefferson's Louisiana Purchase ($11 million), and European financiers were principal backers of the railroads and the steel, petroleum, mining, cotton and Southwestern cattle industries. The European stake in the U.S. peaked at $7 billion in 1914, but it took two world wars to all but wipe it out. German plants in the U.S. were confiscated in both world wars. Other Europeans sold off their U.S. holdings to raise cash for their war efforts.

Many factors have influenced the current revival of European investment in the U.S.—and not the least is American encouragement. European businessmen can find a California-development office in Frankfurt or go to Brussels to see representatives from Illinois, Ohio and New York. As part of its program to help offset the continuing outflow of U.S. dollars by increasing foreign investment, the Commerce Department last spring set up an office in Paris.

Still the Biggest. Common Market experience has accustomed many manufacturers to a "multinational" outlook. There is also a weakening of the persistent European notion that U.S. antitrust and securities laws are somehow stacked against foreign operations (they are not). But the main drawing card is that the U.S. market is still the world's biggest and most profitable. Describing his own experience last June, Marcel Bich, whose Bic pen company bought out Waterman Pen Co. in 1959, could hardly contain himself. "The States, it is tough," he declared. "But when it works, it pays!" Bich has long since recouped his $10 million investment in Waterman, last year cleared $6.4 million.

Other Europeans agree. Items:

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