In a rare act of bipartisanship, the United States Congress recently passed legislation to encourage more inward foreign direct investment. Democrats and Republicans agree that FDI, or “insourcing,” is important to US jobs and competitiveness. They are right.
But, even as they propose new measures to court foreign investors, many members of Congress in both parties harbor deep concerns about FDI from China, on both national-security and economic grounds. These concerns are unwarranted, and discriminatory policies to restrict such investment are ill-advised.
Not that I expect good economic sense to make an impression on egregious and out-of-date politicians.
The US government already has adequate controls in place to review and block FDI from all countries, including China, that pose anti-competitive and national-security risks. Investments that clear these controls benefit the US economy in numerous ways and should be welcomed.
Foreign-owned firms in the US account for 5% of private-sector employment, 17% of manufacturing jobs, 21% of exports, 14% of research and development, and 17% of corporate-income taxes…
To be sure, the US remains the world’s leading destination for FDI, accounting for 15% of global flows. But its share is declining, while China…has become the second-largest destination…
An increase in FDI outflows is a priority in China for two reasons. First, China has an understandable interest in diversifying its substantial holdings of foreign-exchange reserves away from low-yielding US Treasuries to real productive assets with higher returns. That is why China established its sovereign-wealth fund, China Investment Corporation, and why CIC decision-makers are seeking more FDI opportunities…
Of course, alongside the potential economic benefits of attracting a much larger share of Chinese FDI, legitimate competitive and national-security concerns do need to be addressed…
We have idiots in Congress who think selling copies of Microsoft Office to Chinese companies is a security threat. Well, maybe it is – to China.
Feeding this perception, some members of Congress are now exhorting CFIUS to block CNOOC’s proposed acquisition of Nexen, a Canadian energy company with holdings in the Gulf of Mexico, until China resolves ongoing disputes with the US over preferential government procurement policies and barriers to FDI by US companies in China. Heeding these calls would be a costly mistake that would undermine the objective, non-discriminatory CFIUS process and encourage Chinese companies to look elsewhere at a time when Chinese FDI is poised to explode and the US economy sorely needs the jobs, capital, and trade benefits that it would bring.
Congress is no stranger to costly mistakes. Our history of imperial arrogance, invading nations on behalf of Big Oil and any year’s White House ignoranus-in-residence, has been consistent for all the decades of the Cold War.
That Cold War continues with China the focus of xenophobic politicians and equally ignorant voters who return these economic Sluggos to office.
Turning down an opportunity for economic growth to spite foreign capital – regardless of nation of origin – is about as self-destructive as it gets. Because those investments are going elsewhere to compete with our economy. A double-edged commercial sword.
Eideard 