Months after bipartisan outrage erupted over the Dubai Ports World deal, the U.S. Congress is advancing legislation that some believe could chill foreign investment in the country. The most moderate measure, introduced in the House of Representatives earlier this month, would require a seventy-five-day national security investigation of foreign state-owned companies that seek to acquire U.S. assets, beyond the standard thirty-day review. More worrisome to global investors is a U.S. Senate bill that, among other things, would require the Committee on Foreign Investments in the United States (CFIUS) to evaluate foreign investors based on a country ranking system. U.S. and European business executives have sent a letter to Congress warning about moves that could reinforce protectionist urges elsewhere (FT). The independent Power and Interest News Report says U.S. lawmakers must decide "whether to embrace economic nationalism or uphold the free trade principles that they typically champion."
The Bush administration has also urged caution. Assistant Treasury Secretary Clay Lowery told a recent House Financial Services subcommittee meeting that extending time for review of deals with no apparent national security aspect would be wasteful and counterproductive. CFR Senior Fellow Douglas Holtz-Eakin urged legislators in the same hearing to avoid broad references like "economic security" or "critical infrastructure" when defining which transactions should come under review. He warned about the economic backlash from overly restrictive investment reviews. As this cfr.org background Q&A notes, foreign investment plays an important role in the U.S. economy, employing more than five million Americans.
But the concern triggered by announcement of the Dubai Ports World deal to take over six U.S. ports, since withdrawn, is likely to lead to some toughening of U.S. review of foreign-based investors. The mood of Congress was evident this spring when it pressed the State Department to drop plans to use computers purchased from a Chinese manufacturer for classified work. A bipartisan group appointed by Congress, the United States-China Economic and Security Review Commission, warned that it could be possible for the Chinese government to infiltrate computers to gain access to U.S. intelligence (NYT). The computer maker, Lenovo, acquired IBM's personal computer business last year in a transaction approved by CFIUS after the company agreed to added security measures. Interestingly, lawmakers raised little concern (Reuters) about a separate deal involving a United Arab Emirates-based company, Dubai International Capital, when it purchased a British arms maker involved in producing U.S. military aircraft and tanks.
CFIUS is now reviewing an agreement by Toshiba Corp to buy Westinghouse, the U.S. subsidiary of British Nuclear Fuels. The agency is also expected to review (Reuters) the purchase of Lucent Technologies by France's Alcatel. The next debate on CFIUS reform is set for May 24 in the House Homeland Security Committee.