BUYING INTO AMERICA by Martin and Susan Tolchin presents a collection of essays on the nature and implications of foreign acquisitions of U.S. businesses and other inroads made by foreign investors in the U.S. economy. These varied accounts-- essentially well-written and well-researched--warn that the U.S. economy is on the auction block, and that the consequences of foreign ownership are not yet understood or felt.

The essays by themselves do not present a clear case on which to base conclusions, and the Tolchins rightly refrain from making a case against all foreign investment. But they provide much evidence to justify close scrutiny of the bargains being struck at the local, state and federal levels of government with foreign investors. What is best about the Tolchins' approach--that the essays are based on specific events and the circumstances surrounding them- -can also be seen as a limitation.

This structure does not easily lend itself to discerning patterns among the cases presented, or to an inclusive interpretation. A startling discovery presented by the Tolchins concerns the distance to which city and state officials go in attempting to lure foreign investors to their areas. Several chapters are devoted to the "state experience," in which the authors detail the incentives used by states to attract foreign businesses, the demands made by these investors and the records of specific purchases. The Tolchins report that, according to the Congressional Research Service, for every dollar of state funding there was a "foreign direct investment of $667" or that "$60 in state funding would suffice to attract $40,000 in foreign capital, or enough to create one new industrial job." Given this, it is not hard to understand the wave of state and city activity set in motion to attract foreign investment. "By 1986, twenty-nine states had sixty-five field offices throughout the world. Of these, twenty-five states had offices in Asia, twenty-two of them in Tokyo. Illinois runs three offices in Asia--Tokyo, Hong Kong and Shenyang, in China. In all, there are twenty-seven Asia branch offices and twenty-nine in Europe. Three states have field offices in Canada, two in Mexico, one in Brazil, and Ohio plans to open an office in Africa. Investment and export activity takes place at these overseas locations, with a wide disparity among the states in the amounts of money allotted for each activity." The deals struck by state and city officials include far more than just the purchase price.

For instance, the Tolchins tell us that negotiations with Volkswagen over the establishment of a VW Rabbit plant in Pennsylvania resulted in the following concessions: a $40 million loan repayable in 30 years to purchase and build an unfinished former Chrysler plant at an average 4 percent interest rate--but only 1.75 percent for the first 20 years; a $20 million bond issue for a road link between the plant and the state highway; a $10 million state bond issue for a railway spur linking the plant with a main line; a $6 million loan from the Pennsylvania state employees pension fund for 15 years at 8.5 percent; a $3.8 million training program for Volkswagen workers, funded by the federal government but acquired through state efforts; a five-year county property tax abatement worth $200,000; and state designation of the plant site as a foreign trade subzone, bringing down the duty on finished cars to 3 percent. The Tolchins report that the total value of this "incentive" package was, at first appraisal, $51.7 million, 19.6 percent of the full cost of the plant. By the time the returns were in, the figure was $90 million.

The Tolchins also examine the peculiar role that labor unions find themselves in when dealing with new foreign investors and new foreign management. It would appear that companies such as Komatsu Ltd., which established a truck plant in Tennessee, actively sought out a "good business climate," which to the company meant no labor unions. Once the plant was in operation, Komatsu fought to keep unions out by threatening to close it and to lay off temporary workers who had previously indicated support for a union. It is no wonder that so many foreign companies have gone to southern states, where organized labor is weakest, rather than northeastern, industrial states and no wonder, as the Tolchins explain, that state and city officials play down the power of local labor unions to their visitors.

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