Foreign Investment, Some Clarity Please

By April 28, 2008Technology, Trade

An op-ed in The Asian Wall Street Journal on the Committee on Foreign Investment in the United States, or CFIUS, which reviews foreign acquisition of more than 10 percent of a U.S. company, generally. Joshua Trevino of the Heartland Institute’s Information Technology and Telecom News reports the system is clunky and may harm the economy.

By introducing an element of unpredictability into those capital flows, CFIUS does more harm than good. And this comes at a time when the U.S. economy is slowing and needs all the help it can get.

The number of “obvious” cases ripe for rejection – Iran buying centrifuges, for instance – is exceedingly rare. Among other reasons, this is because most of America’s post-Cold War state enemies are too poor to buy important U.S. assets. So CFIUS does most of its work on “marginal” cases where there might be some grounds for concern but the potential threat to security interests isn’t clear.

A reformed CFIUS would restrict itself to the scrutiny of deals involving actual enemies of the U.S. – for example, states on America’s list of terror sponsors. Barring that, it would subject itself to judicial appeal.

The burden is on CFIUS to prove its activities are in the interest of national security, not protectionism, Trevino writes.

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