Foreign Investment

The 1988 Exon-Florio Amendment to the Defense Production Act allows the U.S. government, in the interest of national security, to review and even block foreign buyouts of U.S. companies. The law's requirement of "credible evidence" of a threat to national security has been rarely applied, the President having stopped only one of over 700 foreign investments reviewed under the provision. This testimony discusses the (1) kinds of difficulties experienced by the interagency Committee on Foreign Investment in the United States in applying the law in its analyses of specific investments; (2) government's limited ability to ensure that U.S. firms acquired by foreign companies continue to produce defense-related goods; (3) broader public policy questions raised by foreign investments in key U.S. industries; and (4) increasing use of international partnership arrangements, in addition to direct equity investments, in U.S. high-tech sectors.