[Congressional Record Volume 152, Number 94 (Tuesday, July 18, 2006)]
[Extensions of Remarks]
[Pages E1435-E1436]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                 CFIUS

                                 ______
                                 

                         HON. MICHAEL G. OXLEY

                                of ohio

                    in the house of representatives

                         Tuesday, July 18, 2006

  Mr. OXLEY. Mr. Speaker, recognizing the importance of America's 
longstanding free trade policies and the many benefits of direct 
foreign investment in our country, I commend to the attention of my 
colleagues this excellent Wall Street Journal piece by Douglas Holtz-
Eakin.
  Mr. Holtz-Eakin rightly notes that congressional overreaction in the 
area of CFIUS reform would do great harm to our economy and result in 
protectionist retaliation by our trading partners.

             [From the Wall Street Journal, Jul. 13, 2006]

                           You Can't Be CFIUS

                        (By Douglas Holtz-Eakin)

       The ongoing legislative effort to reform the Committee on 
     Foreign Investment in the United States (CFIUS) has suddenly 
     been put on the fast track. In particular, Senate Banking 
     Committee Chairman Richard Shelby is asking for unanimous 
     consent by the full Senate to vote on his bill with no debate 
     over whether key provisions are in the national interest. 
     Unfortunately, there is a big downside risk in precipitous 
     action.
       Earlier this year, international investors looked askance 
     when an acquisition--the purchase by Dubai Ports World (DPW) 
     of Peninsular and Oriental Steam Navigation Company (P&O)--
     dissolved into political controversy because the deal 
     included terminal operations at a number of U.S. ports. Yet 
     even though this impasse came on the heels of heavy-handed 
     congressional interference in Chinese National Offshore Oil 
     Corporation's proposed purchase of American oil company 
     Unocal, hope remained that this was all a brief departure 
     from the U.S. tradition of open international investment.
       Hope took a hit in the solar plexus last month during the 
     Senate debate over the U.S.-Oman free trade agreement. Sen. 
     Byron Dorgan objected to an obscure provision covering 
     ``land-side aspects of port activities,'' arguing that it 
     would obligate the U.S. to turn over to Omani interests the 
     same kind of port operations that were disputed in the DPW 
     affair. The Oman agreement ultimately was approved by the 
     Senate. But the eagerness of politicians to play the DPW card 
     bodes ill for the future.
       Congress may not appreciate what is at stake. Far from 
     being in continuous conflict, open capital markets and 
     national security support one another. A strong economy is

[[Page E1436]]

     part of national security, and among developed economies 
     the U.S. has experienced uniquely strong productivity 
     growth in the past decade, A key ingredient for this 
     success has been openness to global trade in goods, 
     services and capital. Currently, U.S. subsidiaries of 
     international companies have over five million employees 
     and pay compensation of over $300 billion each year, or 
     about $60,000 per employee. The vast bulk of these 
     investments have come from countries belonging to the OECD 
     (over 90%) and a small minority is undertaken by firms 
     with government control.


         Congressional meddling will retard foreign investment

       Transactions do arise (and have arisen) in which security 
     consideration overwhelm their financial desirability. To 
     date, the CFIUS process has worked well to support well-
     functioning, open capital markets with specific carve-outs 
     for transactions that pose a national security threat. CFIUS 
     did its security job, but it failed miserably in other 
     respects. Congress, which created the security-screening 
     authority with the Exon-Florio legislation nearly two decades 
     ago, was left too much in the dark. Suspicious of security 
     gaps and frustrated by its inability to exercise appropriate 
     oversight, Congress has seized the opportunity to revisit the 
     entire issue.
       And therein lies a danger. While global investors watch 
     nervously, the Senate has raised the specter of wholesale 
     politicization of investment approvals--requiring notices to 
     governors and congressional delegations of proposed purchases 
     in their states; ranking countries by their cooperation in 
     the war on terror and nuclear nonproliferation and basing the 
     severity of security reviews on these published rankings; 
     adding bureaucratic delays for investments that don't raise 
     security concerns; and drawing Congress into the middle of 
     the review process. The potential for damage to the U.S. 
     investment climate is quite real.
       More productive would be to drop the legislative approach 
     entirely. After all, what is the rush? Once our genuine 
     national interests are clarified, the president can take 
     advantage of Treasury Secretary Hank Paulson's 30 years of 
     experience in cross-border transactions and issue an improved 
     executive order revising the marching orders for CFIUS to 
     include greater transparency, improved cooperation with 
     Congress and improved monitoring of compliance. The Treasury 
     has already appointed a new deputy assistant secretary 
     position devoted to CFIUS reviews.
       It is important to eliminate any lingering threat of 
     politically driven reviews that will boomerang and directly 
     hurt U.S. global investments. The greatest danger lies in 
     other countries using recent U.S. missteps as a pretext for 
     protectionist rules draped in the guise of national security. 
     Press reports indicate that China will tighten screening of 
     deals, and impose new curbs oil foreign acquisitions by 
     setting up a ministry-level committee to review controlling 
     stakes in strategic industries including steel and the 
     manufacturing of equipment for shipbuilding and power 
     generation. A trend toward restricted capital markets would 
     greatly damage the global economy, especially at a time when 
     multilateral trade liberalization is losing steam. It would 
     also directly hurt U.S. interests. To reduce this danger we 
     need presidential leadership, and no more interference by 
     Congress.
       Mr. Holtz-Eakin, director of the Maurice R. Greenberg 
     Center for Geoeconomic Studies at the Council on Foreign 
     Relations, was chief economist of the president's Council of 
     Economic Advisers from 2001 to 2002.

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