International Investment Is a Two-Way Street, Even for the United States

President Obama, in announcing his Open Investment Policy in 2011, said:

Investments by foreign-domiciled companies and investors create well-paid jobs, contribute to economic growth, boost productivity, and support American communities… Today, United States subsidiaries of foreign-domiciled companies employ more than 5 million Americans and provide above-average compensation.  These companies invest in innovation here in the United States, spending over $40 billion each year on research and development.  And in many cases the goods and services produced here are sold around the world…

So while it’s clear that President Obama supports investment from abroad into the US, it’s not clear that he understands that international trade and finance is a two-way street.  His surrogates continue to criticize Governor Romney for investing through the Cayman Islands, while he calls for investment in the US from abroad.  Recently, the web site Gawker.com posted private financial and legal documents for Mitt Romney’s international investments.  The media and blogosphere enjoyed another chance to write headlines implying that Romney’s investing abroad via Cayman was tax evasion, and erroneously claiming that bank secrecy is permitted in Cayman.

Lost in all of the headlines were the facts.  Legal documents for investing can be long and complicated, so the public was unable to understand that these prospectuses and financial reports were routine.  Thousands of US pension funds and university endowments join Governor Romney in investing abroad via Cayman without the slightest public objection.  It’s likely the average reader’s own pension fund has a similar file of documents, which they have never read.

What the financial industry in Cayman does is allow international investors to come together to invest in the US without adding another layer of tax.  Each investor is responsible for paying tax in their home country, a process which the Cayman Islands Government assists with by cooperating with tax authorities from other nations and promoting transparent banking.

Global institutional investors, such as pension funds, take comfort that Cayman investment funds are established under internationally recognised legal principles which protect their rights. In addition Cayman is regarded as a well-respected jurisdiction by financial institutions, investors, development banks and government and regulatory agencies.

In Cayman, investors from Asia, the Middle-East, Europe, and the US can form new ventures that invest worldwide, including into the US.  This allows money to flow through the international financial system to the US without a toll charge being added along the way.  Billions of dollars of foreign investment passes through Cayman each year, on its way to the US where it is used to help businesses grow, creating the jobs for Americans the President likes.

In Cayman, we help gather capital from around the world and send it to the US to create jobs and produce goods and services.  We cooperate with governments worldwide to ensure that Cayman cannot be used to evade home country taxes.  If the US wants this investment, it should stop criticizing those who help make it possible.

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