Think of it this way: Investment in factories, research centers, technology, and infrastructure is the lifeblood of economic growth. These investments are, essentially, “intermediate goods” that enable us to produce the value that creates wealth and higher living standards. The efficiency and resiliency of the U.S. economy depends on these intermediate goods being abundant, high-quality, well- functioning, and cutting-edge. Indeed, the value of tomorrow’s output is sown by today’s investments.

Historically, the United States has attracted enormous amounts of foreign investment to supplement our domestic stock. In fact, no country has been a stronger magnet for foreign direct investment (FDI). More than 26% of the world’s stock of direct investment is parked in U.S. businesses across the economy, from manufacturing to information technology to engineering services.

These majority-owned U.S. affiliates (MOUSAs) of foreign multinational enterprises —to borrow a term from the Bureau of Economic Analysis (BEA), which tracks their performance—have been a blessing to the U.S. economy for many years. Although MOUSAs account for less than 1% of all U.S. businesses with payrolls, they punch well above their weight in terms of their contributions to the U.S. economy. The most recent BEA figures show MOUSAs accounting for 6% of U.S. employment, 7% of private-sector GDP, 15% of all U.S. sales revenue, 15% of U.S. business R&D expenditures, and 24% of U.S. exports.

In the course of doing business, MOUSAs purchased over $3 trillion of inputs and finished products from other U.S. companies, generating $0.62 of supply chain revenues for every dollar of their final sales. By comparison, U.S. businesses, overall, generated only $0.42 of supply chain revenues for every dollar of their final sales. MOUSAs deploy well more than twice as much capital per worker and generate 14% more value added per worker than the U.S. private sector average, which may help explain why they are able to compensate their employees at a 20% premium ($82,643 v. $68,888 per year) over the U.S. private-sector average.

In the manufacturing sector, MOUSAs contribute even more: 22% of jobs; 21% of value-added; one-third of sales revenues; 17% of business R&D; 20% of annual capital expenditures; and ownership of more than one-third of the sector’s capital stock.

Despite their outsized contributions to the U.S. economy, many MOUSAs will be disqualified from participating in the U.S. infrastructure build-out because their products and services may not be considered sufficiently “American,” by the current (and potentially worsening) standards of our protectionist Buy American provisions. This makes no sense given how embedded in their local communities many of these companies have become, employing Americans, paying taxes, anchoring regional economies, sponsoring softball leagues, and supporting local charities.

Worse still, it is cynical and irresponsible for policymakers—under the pretense of patriotism—to deny, for example, an experienced German-headquartered company that excels at producing green energy equipment and has been involved in multiple infrastructure projects in Europe and elsewhere the opportunity to bid on a windfarm project so that the business can be awarded to a less-qualified, less- experienced, but nominally more American company.

What about the world-class companies that produce the equipment and provide the services that are essential to the president’s goal of upgrading seaports and widening shipping channels? The U.S. dredging industry is enfeebled on account of protectionist maritime laws that have sapped their competitiveness and has been unable to keep pace with demand for services for many years. How will we meet the enormous challenge of another $17 billion of (proposed) demand without permitting best-in-class Belgian and Dutch dredges and dredge operators, who have learned to master maritime construction over centuries of battling the encroaching sea, to compete or collaborate in our market? If taxpayers are going to be on the hook for a massive infrastructure bill, at the very least policymakers should be required to ensure those dollars are spent as wisely as possible.

But such fiduciary earnestness has limited appeal in Washington. President Biden issued an executive order in January pledging to tighten Buy American restrictions and close waiver loopholes. The precise changes are due to be published in July. Meanwhile, Senator Sherrod Brown (D-OH), who is co-sponsoring the “Build America, Buy America Act,” which seeks to hermetically seal off infrastructure projects from goods and suppliers deemed insufficiently American, put it this way: “It’s simple: American tax dollars should go toward American-made projects that support American jobs. Period.”

Beyond the immediate costs of precluding MOUSAs (and even entirely U.S. enterprises), whose products contain too much foreign input value, there are troubling long-term implications as well. The United States is competing with the rest of the world to attract investment in high value-added activities. The determinants of investment location decisions are varied, but protectionist tendencies, erratic governance, and an uncertain business climate are likely to deter more than attract investment. In fact, inward investment has been declining since 2015, and the $177 billion that entered in 2020 was the lowest annual inflow since the Great Recession.

To deliver high-quality transportation, communications, energy, and utility infrastructure, Biden’s plan must be amended to welcome participation from the world’s best manufacturers, construction firms, and engineers. That kind of openness—and the infrastructure improvements it delivers—will also serve to keep inward investment flowing.