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Analysis: The Chill after the Ports Storm

Council on Foreign Relations

May 23, 2006
Author: Robert McMahon

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.

Read the rest of this article on the cfr.org website.

Copyright 2006 by the Council on Foreign Relations. This material is republished on GlobalSecurity.org with specific permission from the cfr.org. Reprint and republication queries for this article should be directed to cfr.org.