Let's Stay Open for Business



By Steve Forbes

Are we about to cut off or slow down a flow of money that has helped make America the most prosperous country in history?

The U.S. economy has long benefited from foreign direct investment. Dutch capital helped put our young nation on a vigorous growth path when President George Washington took his first oath of office. Scottish trusts were critical in financing America's extraordinary 19th-century railroad boom. In recent times, overseas companies have pumped hundreds of billions of dollars into the U.S.

Much foreign investment here goes straight into the pockets of U.S. workers. American affiliates of foreign companies spend more than $350 billion annually on salaries, working out to an average salary that is $7,000 more per year than the average paid by U.S. companies.

Research and development is also obviously critical to our future, and foreign companies spent over $31 billion on research and development in the U.S. in 2005. That's 13% of all the R&D outlays in the U.S.

Foreigners investing in the U.S. also are more likely to reinvest here, furthering innovation and economic growth. The Congressional Research Service reports that foreign firms in the U.S. reinvested $48.6 billion (45% of their income) back into the U.S. economy in 2004.

Last year alone saw capital inflows of over $183 billion. The overall value of direct foreign investment in the U.S. totals around $2 trillion.

Yet despite these huge benefits to our economy and to millions of American workers, various special interests are threatening to hobble or halt the inflow of this job-creating money. These naysayers raise alarms that foreigners will own critical areas of our economy and have access to sensitive technology. The same naysayers argue that investment vehicles controlled by foreign governments that put money to work in the U.S. will use the money for their own political or foreign policy agendas. Unfortunately, this is often simply a matter of using the investment review process to score political points.

There have been a host of recent investments in the news, ranging from the Bear Sterns deal with China's state owned Citic Securities to Abu Dhabi's investment in Citigroup. The latest example is American-run Bain Capital's effort to purchase 3Com, a Massachusetts company best known for manufacturing components for computer networks. The purchase is being targeted because Bain's minority partner is a Chinese firm called Huawei. But Huawei is already a customer of 3Com, and it would not gain new access to U.S. technology as a result of the sale.

Our security should never be put at risk for the sake of pro-growth foreign investments. But the whole hubbub over foreign investment ignores or obscures this critical fact: We already have in place elaborate safeguards to ensure that foreign investments in the U.S. do not impair our national security.

With bipartisan support, the Committee on Foreign Investment in the U.S. (CFIUS) has been empowered by Congress to conduct thorough reviews of foreign investments. The committee can also make recommendations to the president about actions to be taken to ensure that any acquisition or new facility is consistent with American security considerations.

Congress and the president went a step further in 2006 by empowering CFIUS to revisit -- and potentially overturn -- its decisions if evidence emerges that proper security precautions have not been observed by companies involved in foreign investments. This is a powerful new enforcement mechanism that, with other new reforms, provides greater information to both Congress and investors. We can, therefore, meet safety and national security concerns without discouraging foreign investors from providing opportunities and jobs for American workers.

But the increasing politicization of the review process has already begun to take a toll on the economy. The U.S. share of foreign direct investment globally has gone down, costing us jobs and those critical research and development dollars that make it possible for us to do better in an increasingly competitive world.

America hurts itself by not putting out a welcome mat along with the "Beware of Dog" sign. Throughout our history, foreign investment in this country has fueled economic growth and supported a strong standard of living for millions of Americans. We cannot let politics masquerading as concern for security put up a "Closed for Business" billboard at America's borders.

Mr. Forbes is president and chief executive officer of Forbes Inc. and editor-in-chief of Forbes Magazine.