Page 259 - Invited Paper Session (IPS) - Volume 1

IPS152 Ryan N.
While most holding company MOUSAs (489 of 652, or 75 percent) host
pass-through equity, SPEs in the United States, in general, are unlikely to do
so. Of 4,653 SPEs identified, only 437 have pass-through equity. This absence
of pass-through equity may indicate that SPEs in the United States are used
for purposes other than pass-through equity and that because the United
States is not a “country of convenience,” foreign MNEs are likely using other
countries for pass-through activities.

4. Discussion and Conclusion
This paper represents a first attempt to identify and analyze SPEs in U.S.
direct investment statistics using the TFSPE’s definition. This paper shows that
SPEs play a much larger role in U.S. direct investment abroad than in foreign
direct investment in the United States. SPEs—particularly nonresident SPEs—
host a large amount of pass-through capital that moves from the parent
company through an intermediary country before reaching the country where
economic production occurs. The large overlap between SPEs and pass-
through equity in the U.S. direct investment data is an indication that the SPE
criteria developed by TFSPE will be useful in isolating SPEs in international
investment statistics and that by identifying SPEs—particularly in “countries of
convenience”—most pass-through activity will be identified as well. Additional
work to fit the TFSPE’s definition of SPEs to BEA microdata will allow BEA to
further refine this identification. In particular, understanding which real estate
affiliates in the United States are truly SPEs will provide clarity about the role
of U.S.-resident SPEs in inward direct investment.
In addition to gaining a clearer understanding of the role of SPEs in such
pass-through relationships, this paper outlines progress toward a framework
for “pushing down” the U.S. direct investment position past SPEs to operating
units and providing a clearer picture of how U.S. direct investment abroad
relates to economic production in foreign countries. Future research will be
able to study the distribution of U.S. direct investment after the elimination of
pass-through.

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