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SUMMARYThe article considers the hypothesis that the timing and distinctive provisions of the EEC and EFTA disturbed relative earning rates, P, and thus influenced the location of U. S. direct investments. Statistically significant results are obtained with Pt‐1, P, and Pt+1 for investment in both unions, suggesting that adequate levels of return were associated with the structural transatlantic relocation of capital. However, the evidence contradicts the claims that investors were motivated by profit differentials in a short‐run sense, or that relative earnings pre‐destined the investment location.An additional test finds great similarities in the time pattern of U. S. investment in the EEC and EFTA. Moreover, the outcry about the American investment invasion overlooked an actual reversal of the preferential view of Europe relative to the rest of the world around 1960.Thus, artificial trade distortions introduced by the EEC and EFTA apparently have been insignificant in global business strategies that regard Europe as a homogeneous technological‐industrial complex and a unified market.