Don’t Politicize Foreign Direct Investment in 3Com

by on October 26, 2007 · 7 comments

If you we’re offered a pill that would cure a disease that afflicted you or a family member or friend, but the pill wasn’t researched or manufactured in the
U.S., would you still take it? Of course you would. Similarly, when it comes to foreign direct investment, we shouldn’t care whether the money comes from a company based in Canada, Japan, or…China.

A Dubai Ports-like
brouhaha could well be brewing in the IT industry, involving 3Com and
an IT company from China. In September, Boston-based Bain Capital
announced that it had entered into an agreement to purchase 3Com Corporation,
a U.S. seller of network and security products. The purchase would
include a limited financial stake for 3Com’s largest customer, Huawei Technologies Co. Ltd., a private China-based technology company.

Money and capital act a lot like people…they go to where they’re most welcome, and stay where they’re rewarded. This was one of the messages I tried to convey when speaking yesterday at the Heartland Institute‘s Emerging Issues Forum in Chicago.

To make money more welcome in the U.S., but to still be able to review foreign investments for legitimate national security concerns, we have a review process called CFIUS. You don’t have to say "gesundheit" after saying CIFIUS, and don’t be confused by the STD with a similar sounding name. CIFIUS stands for the Committee on Foreign Investment in the United States. President Reagan established this review process to provide a predictable, nonpartisan and depoliticized process. Unfortunately, as Dubai Ports shows, these things can and do get political.

But our country needs foreign money.

According to Senator Bond, who spoke at an event at Heritage earlier this month, foreign direct investment in the U.S. reached $1.7 trillion for 2004 alone, supporting 5.6 million U.S. jobs with $350 billion in wages and compensation. And, BTW – 3Com is bleeding money.

So we need to remove the politics from investment reviews and allow the CFIUS process to run its course. This is the best way to protect our security while still showing investors that the U.S. is open for business. We also don’t want to set a bad precedent to other countries, who might retaliate and limit U.S. business investment options overseas.

Because I was speaking before a group of state legislators, I had to say why state policymakers should care about the CIFIUS process. Here’s why – economic development.

State elected officials have become increasingly active courting foreign governments and investors in an attempt to attract capital and business into their individual states. States are facing competition on a global level and will be hampered by actions by federal officials that discourage investment in the United States.

States are also on a constant quest to attract high-value and high-wage industries, often coming from the technology sector.  Take a look at the Fairfax County Economic Development Authority, which has offices not just in Vienna, VA, but also in Silicon Valley, Bangalore, Frankfurt, London, Seoul and Tel Aviv. If we limit access to capital to help fund and grow our tech industries, we’ll put our states and our country at a huge disadvantage. So let’s hope that there’s no political grandstanding over 3Com and Huawei.

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