Washington is a city of semi-annual or quadrennial battles, political fights that happen every two to four years. We are enduring one currently on lobbying reform. Trade battles are typical, and repetitive. And so too now are battles over foreign investment. Remember the outrage when the Japanese were on a real estate buying spree in the 80’s? One comedian remarked at the time that we didn’t need to worry about being invaded by the Russians, but rather being evicted by the Japanese. A quaint notion now, but in that day, a thought that evoked the kind of fear that we’re seeing over the ports deal today.
However, way before then, in 1975, during an earlier scare over foreign investment, the Exon-Florio amendment birthed a group that became known as CFIUS, the Committee on Foreign Investment in the US. Chaired by the Secretary of the Treasury, its members now include the Director of the Office of Science and Technology Policy, the Assistant to the President for National Security Affairs, the Assistant to the President for Economic Policy, the Secretaries of Homeland Security, Defense, Commerce, the Attorney General, the Director of the Office of Management and Budget, the U.S. Trade Representative, and the Chairman of the Council of Economic Advisers. In their deliberations, they consult with the CIA, among other agencies. (We sent a letter to Congress renewing our support for this process just last week.)
This group reviewed the Dubai Ports World (DPW) deal and approved it. That’s right — with the Assistant to the President for National Security right there at the table. Subsequent to the fire storm — a fire storm fanned by xenophobes like a certain CNN commentator we know and love — the Administration agreed to an even more detailed investigation of the deal and its national security implications. Remember that DPW would operate a few — 24 of 829 — of the terminals at the ports (in the same way that 80% of our ports are operated by foreign-owned firms), not provide security. Security would continue to be provided by the US Coast Guard, Customs and Border Patrol. Truth being the first casualty of war, facts began to matter less and less as this imbroglio grew. In the face of a withering onslaught of political pressure from a generally uninformed population, on Wednesday the House Appropriations Committee voted 62-2 against the deal. Yesterday, DPW announced that it was throwing in the towel.
As we’ve said in this space many, many times, this is a multi-lateral — not a bi-lateral — world. If we throw up red flags to foreign investment in this country because our base xenophobic instincts win out over our democratic aspirations, ultimately that money will be invested elsewhere around the globe. In short, we lose. According to the Organization for International Investment (OFII), foreign direct investment in the US totals some $5 trillion. So-called “foreign” companies doing business in the US support a payroll of over $300 billion. A recent study by the Center for Automotive Research found that Toyota alone accounts for some 400,000 US jobs. When CFIUS was empaneled, imagine how people felt about Toyota. Had we discouraged Toyota’s expansion here, our country would be less prosperous. It’s that simple. Toyota came, so did Honda, so did Nissan, Subaru, BMW, Mercedes — all because we gave the green light to foreign investment. The green light turned red this week with the death of the DPW deal.
No matter how you feel in your gut about an Arab country (an ally, nonetheless) and American ports, the facts (remember those?) are that this deal had not one thing to do with the security of the US, and had everything to do with fear mongering over foreign direct investment in the US — a game, sadly, as old as the hills.
The real damage here is that ultimately the end of this deal begins a trend that — left unchecked in this global game — will result in a less prosperous country for us all.
UPDATE 3/13/2006 4:42:46 PM: We forgot to include a link to our press release on this matter urging Congress not to alter the CFIUS mechanism.
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