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Foreign Investment in the United States

The Issue

Foreign investment in US companies and assets has been controversial since World War I, when national security concerns arose in the United States over foreign investment, particularly from Germany. The focus shifted to Japan in the 1980s, and Congress passed the Exon-Florio Amendment, which gave the president broad powers to block a foreign acquisition of a US company if that transaction threatened to impair US national security. The latest surge of concern focuses on investment from China. The debate intensified in 2005 with the (subsequently withdrawn) bid by the China National Offshore Oil Corporation to buy US oil firm Unocal. The furor within Congress again reached fever pitch in early 2006 when Dubai Ports World bought the port operations of the UK-based Peninsular and Oriental Steam Navigation Company, which would have given Dubai Ports World control of operations at six US ports. Consequent calls for reform of US law have led to some proposals that restrict investment without improving security. Tightening restrictions on foreign investment in the name of national security puts US manufacturing, employment, competitiveness, and innovation at risk. Further, the United States risks alienating its allies, and it could find itself isolated in an increasingly interdependent world. Maintaining an open environment for foreign investment is in itself deeply in the national security interest of the United States.

Essential Reading from the Institute

Working Paper 11-3: Foreign Direct Investment in Times of Crisis [pdf]
by Lauge Skovgaard Poulsen, London School of Economics
and Gary Clyde Hufbauer, Peterson Institute for International Economics
January 2011

Book: Three Threats: An Analytical Framework for the CFIUS Process
Policy Analyses in International Economics No. 89
by Theodore H. Moran
August 2009

Working Paper 08-7: Policy Liberalization and FDI Growth, 1982 to 2006 [pdf]
by Matthew Adler, Peterson Institute
and Gary Clyde Hufbauer, Peterson Institute for International Economics
August 2008

Book: US National Security and Foreign Direct Investment
by Edward M. Graham and David M. Marchick
May 2006

Op-ed: Avoiding Another Dubai
by C. Fred Bergsten, Peterson Institute for International Economics
Op-ed in The Washington Post
February 28, 2006

Op-ed: A Salute to Bush for Standing Against Port Takeover Storm
by Gary Clyde Hufbauer, Peterson Institute for International Economics
Op-ed in the New York Daily News
February 27, 2006

Op-ed: A Misplaced Curb on Investment
by Edward M. Graham, Peterson Institute for International Economics
and David M. Marchick, Covington & Burling
Op-ed in the Financial Times
October 5, 2005

Op-ed: No Reason to Block the Deal
by Edward M. Graham, Peterson Institute for International Economics
Op-ed in the Far Eastern Economic Review
July 2005

Book: Foreign Direct Investment in the United States, 3rd Edition
by Edward M. Graham and Paul R. Krugman
January 1995