The Dubai Ports World controversy has shed light on the tensions between Congress and the executive branch over the appropriate balance between foreign investment and national security. In the past few months, members of Congress have met with international companies, homeland security experts, and administration officials to better understand the process of security reviews of foreign investment in the United States. Congress is intent on changing the process and becoming more involved in it; the challenge ahead is to reform the process in order to minimize the security risks raised by foreign investment without discouraging future investment.
In this Council...
Despite the significant benefits that foreign investment brings to the U.S. economy, a recent poll by the Pew Research Center for the People and the Press found that 53 percent of Americans believe foreign ownership of U.S. companies is “bad for America,” a sentiment that reached a boiling point with the proposed acquisition of the U.S. port operations of P&O Steam Navigation Company by Dubai Ports World (DPW). The DPW case brought to the public’s attention the little-known executive committee charged with reviewing the security risks of foreign investment—the Committee on Foreign Investment in the United States (CFIUS)—and...
Exon-Florio is a unique piece of legislation. It gives the president sweeping authority to block a proposed private sector acquisition on his decision alone; no action by Congress is necessary. No court can review the president’s decision, and there is no statute of limitations, meaning the president could unwind a transaction that was never reviewed by CFIUS years after it closes.
Under the law, the president must base his decisions on national security concerns even though the term “national security” is not defined. Instead, the statute enumerates several factors for the president to consider in making a national security determination,...
During the past five years, a combination of new factors has added to stresses and tensions created in the original 1988 legislation. The new security challenges posed by 9/11 have raised concerns about foreign investments in areas deemed as critical infrastructure and have also heightened public scrutiny of investments from parts of the world that have not made major investments in the United States. Furthermore, the reliance of the United States on capital inflows and the growing capital surpluses of China and countries in the Persian Gulf—not previously major investors in the United States—have combined to create a volatile...
In the wake of the DPW transaction, more than twenty bills were introduced in Congress to reform the CFIUS process, prohibit foreign government ownership in port operations, or prohibit foreign ownership in broad swaths of the U.S. economy. Two bills—one in the House of Representatives, authored by Representatives Roy Blunt (R-MO), Deborah Pryce (R-OH), Carolyn Maloney (D-NY), and Joe Crowley (D-NY), and one in the Senate, authored by Senators Richard Shelby (R-AL) and Paul Sarbanes (D-MD)—recently approved in the House and Senate will form the basis for new legislation if the House and Senate can reconcile the differences...
A small fraction of foreign direct investments in the United States raises genuine concerns regarding national security, thus requiring CFIUS review. As noted earlier, in the past few years, CFIUS has reviewed only forty to sixty-five transactions per year. Nevertheless, congressional pressure to block the DPW transaction and alter Exon-Florio has created the impression abroad that the United States is radically retrenching on its traditionally open investment policy.
Our recent travels in Europe, Asia, and the Middle East have shown us the level of concern felt by foreign investors about the current political environment in the United States. Other countries...
