WSJ.COM/DealJournal, October 4, 2007, 1:05 pm:
U.S. voters are getting increasingly nervous about free trade, reports this most recent edition of the WSJ-NBC News Poll. Here’s another reason for them to pay notice.
It turns out 2007 is shaping up as the most-active year for foreign acquisitions into the U.S. since 1990, according to recently released statistics from Thomson Financial. Seventeen years ago, there were jitters about Japanese buyers scooping up American icons from Rockefeller Center to Columbia Pictures.
Today, the list of buyers is incredibly diverse, with English, Russian, German, Chinese and Finnish companies getting into the mix.
In all, foreign buyers were responsible for more than 21% of U.S. acquisitions this year, a total of $275 billion of the record-setting $1.3 trillion in overall deals. Since 1990 — when the foreign buyers accounted for 28% of the M&A world — the percentage has fluctuated largely in the teens. See what effects this has had in New England, via this Boston Globe story.
There are a series of mixed political and economic messages in these numbers: The first is that the weakening U.S. dollar is creating a ripe opportunity for buyers around the world. The past week alone, for instance, has seen Canada’s TD Bank spend $8.5 billion on Commerce Bank and Finland’s Nokia Oyj buy digital map maker firm Navteq Corp. for roughly $8 billion.
Is this good or bad for the U.S. economy? There’s a thesis in this question. We’ll try to sum it up in two paragraphs.
It’s positive in that American companies continue to attract the best capital from around the world. This preumably keeps the American economy in its dynamic state, which is essential to overall growth and wealth creation. Want to see what happens when global capital dries up? Take a look at Asia after the currency crisis about 10 years ago.
Yet there’s understandably a worry underneath these investments. From a political standpoint, might a backlash against investments into the U.S. push the U.S. government to install its own trade roadblocks — thus blocking off U.S. capital from foreign markets? Even more important is the dilemma of our own economic habits: Are our trade imbalances so great that we’ve set up the seeds for our own cherry-picking?