An estimated 200,000 Americans in New York City alone work for foreign owned companies according to a joint survey conducted by a New York University professor of economics and city officials. The study was presented yesterday to a House Government Operations subcommittee investigating foreign investment.
If the calculations based on questionnaires from 60 percent of all foreign firms in New York City, are correct, six New Yorkers out of a hundred are employed by companies with headquarters overseas.
Sales representatives or bankers account for the preponderance of foreign firms in New York. Japan has more companies and more American employes there than any other country. There also are about 5,000 Japanese business executives working in New York.
Recounting his difficulties in obtaining information about foreign companies, New York University Professor Robert G. Hawkins urged that the U.S. government require more complete data from them as a mean of guarding against economic abuse of foreign investors. While noting that the benefits of foreign investments clearly outweigh the disadvantages, he nevertheless cautioned that takeovers of U.S. business do present a potential threat.
Hawkins cited possible adverse economic consequences that can occur when "an attractive tender offer by a foreign firm catches the U.S. owners unaware and induces them all to sell out at an uneconomic price," or when a takeover reduces competition in the U.S. market without offsetting benefits.
The real danger, he told the subcommittee, lies in the possibility that foreign owned firms in time of national emergency or crisis might refuse to comply with U.S. government directives thus requiring a confiscation and proceeding and delay. He urged careful monitoring and review by the Justice Department before any takeover by foreigners is consummated.
Another study being done by the Institute of Public Administration is on technology transfer, or research and development done by U.S. affiliates of foreign firms and then exported to benefit the parent company. One of the best known cases of technology transfer involved the development of large computer equipment by an IBM employe. IBM refused to develop it and the employe, who left to form his own company, had to turn to Japan for venture capital. Fujitsu bought partial rights to the invention for $40 million and is now benefiting from the sale of this advanced technology outside the United States.
The institute identified only three incidents of technology outflow compared with 21 incidents of foreign technology inflow. The more important threat to the economy, the institute's Eldon E. Sweezy testified, comes when a foreign investor enters the U.S. market with components from the parent firm but does not introduce them to the U.S. affiliate. For example, when a foreign automotive company begins to manufacture in this country but continues to import engines from the parent company, the potential for American jobs is reduced.
The first 1974 benchmark survey of foreign investment in the U.S. revealed that foreigners held $95.4 billion worth of stocks, bonds, certificates of deposit, and government securities. Another $25.1 billion represented direct investment in manufacturing and other industry. By the end of last year investment had risen to $174.3 billion and direct investment to $34.1 billion. In the first half of this year, according to the Bureau of Economic Analysis, foreigners invested $13 billion in securities; $2.1 billion in commerce.
Give the large increase in the past four years, Rep. Benjamin Rosenthal (D-N.Y.) yesterday asked Treasury Secretary W. Michael Blumenthal to delay for a short time the surveys planned for this year in order to review whether the questions will yield enough information. Rosenthal expressed concern that important port-folio areas like non-corporate business interests and limited partnerships particularly in real estate and fractional interests in oil, gas and coal are not now included in the planned surveys in order to economize.