Fortress America? - Elected officials, terrorism and plain business
Some of our elected officials seem bent on smothering the American-championed ideal of open markets with the fear of terrorism as they rail against the right—as enshrined in global trade rules this country helped write—of certain foreign companies to engage in business in this country in the same manner that we have engaged in global business for more than a century.
Foreign direct investment, or FDI, is a critical factor in every country’s economic health, including America’s. More than just an indication of investor confidence, it is a source of income, technical expertise and jobs. The United States has long been a most favored nation for such investment. At the start of 2004, for example, foreigners owned $2.4 trillion worth of direct investment in the United States. At the same time, U.S. companies owned about $2.7 trillion in investment overseas. At the end of that very year, the U.S. Treasury Department reports, American holdings of foreign securities totaled some $3.8 trillion, up from about $3.2 trillion year-end 2003.
The largest foreign acquisition of a U.S. utility was the $7.7 billion purchase by Germany’s RWE of American Water Works Co. Inc., of Voorhees, N.J., in 2003. Foreign direct investors in U.S. energy markets have increased their share of uranium production in every year since 1999, culminating in a practical monopoly of that industry in the United States, according to the Energy Information Administration of the U.S. Department of Energy. In 2003, foreigners spent $52.6 billion to acquire existing U.S. businesses and $7.7 billion to establish new businesses in the United States, reports the U.S. Department of Commerce’s Bureau of Economic Analysis. And at the start of 2004, total foreign claims on the United States valued $10.5 trillion, exceeding total U.S. claims abroad of $7.9 trillion.
In the face of such robust cross-border business, our elected officials reject a Chinese quest to acquire a U.S. oil company and deny a global company with Middle Eastern investors from operating in the United States. The message is ugly. In The Journal of Commerce, British journalist Bruce Barnard writes that the political furor in the United States over Dubai Ports World’s acquisition of Britain’s Peninsular and Oriental Steam Navigation Co. and its six U.S. port operations has bemused and baffled European policymakers and businessmen. “The overriding sentiment in Europe’s shipping community is one of disbelief at the almost surreal spectacle of Sen. Hillary Clinton entering the fray, pledging to introduce legislation to outlaw the sale of port operations to foreign governments,” Barnard writes.
There is lots of green grass elsewhere. In 2005, for the fourth year in a row, China was the most preferred FDI location worldwide and India rose from third to become the second most likely FDI destination, according to the latest Foreign Direct Investment Confidence Index®, an annual survey of executives from the world’s largest companies, conducted by global management consulting firm A.T. Kearney. At the same time, the United States dropped from second to third most attractive FDI location. Eastern Europe, China and India increasingly are seen as sources of innovation and attractive research and development locations. “As R&D—the least globalized corporate activity—becomes more mobile, North America and Western Europe will be challenged by gradually maturing knowledge centers in the developing world,” the A.T. Kearney report says. Fortress America? We really can’t afford it, Hillary et al.
By Rosalind McLymont
