Tax Notes (April 2009).
The last two decades have witnessed two significant economic developments that are often linked in the popular imagination: the rapid increase of the foreign activities of American multinational firms and rising levels of economic insecurity, particularly among workers in certain sectors. The underlying trends of concern are summarized in Figure 1. First, the value of the claims held by U.S. multinational firms abroad is depicted by the direct investment position line that reached nearly $3 trillion by 2007. Notably, the direct investment position has more than tripled since 1997. The rise in the net income abroad of U.S. multinationals is even more dramatic, reaching $350 billion in 2007. At the same time, domestic employment in manufacturing has undergone an equally dramatic set of changes with employment declining in a rapid fashion, particularly after 1997, just as U.S. multinational firms were rapidly increasing their foreign activities. It is unsurprising that those phenomena have become linked in the popular imagination such that foreign activity would appear to be displacing domestic activity.