As U.S. Clears Chinese Pork Deal on Security, Economic Concerns LingerThe powerful U.S. committee that reviewed and cleared the deal focuses almost exclusively on threats to U.S. national security, but some critics say the economic questions are thornier when it comes to major Chinese investments in the U.S.
When it comes to the threats of denying pork to the U.S., spiriting away meat-processing technology in a way that could harm Americans, or committing espionage or sabotage, the Smithfield deal is of little concern, most experts on international deals agree.
Still, U.S. critics say unfettered investment by China can bring financial risks to American companies and the national economy at large.
The American Iron & Steel Institute, an industry group representing North American steelmakers, has repeatedly asked Washington to scrutinize the investments of Chinese rivals, which it says are directed and subsidized by the Chinese government.
Other U.S. companies say they face barriers to doing business in China and so shouldn’t have to face Chinese competitors at home.
Officials in Beijing point out that they have already allowed U.S. companies to invest tens of billions of dollars in China, and some officials have complained about the transparency of the U.S. review process.
The U.S. in China in July rekindled long-dormant talks on a bilateral investment treaty that may allay some concerns about international deals. Broad economic shifts such as China’s resurgence have repeatedly led to jitters about acquisitions from abroad.
President Gerald Ford created the Committee on Foreign Investment in the U.S., which reviews certain proposed foreign purchases of U.S. companies, at a time when Americans faced a shopping spree on the part of oil-rich Arab nations.
Concerns about Japan’s surge in the 1980s led to further changes in the committee. Now the focus is on China, as well as on some other developing economies.
Some U.S. business leaders say Chinese ownership of Smithfield or other companies could facilitate the rapid transfer of technology and meticulously honed industry techniques to an emerging economic superpower.
To address these concerns, the congressionally authorized U.S.-China Economic and Security Review Commission last year recommended that Washington include a “net economic benefit test” in the approval of international deals.
Canada’s equivalent of the CFIUS review process already weighs several economic factors in its deliberations, and “it hasn’t worked badly” for Canada, said Theodore Moran, an expert on foreign investment at Georgetown University and the Peterson Institute for International Economics.
Still, Mr. Moran said Thursday at a Peterson Institute seminar that he wouldn’t endorse such a program, since it would necessarily involve government officials in Washington determining the economic benefits of mergers and acquisitions.
In any case, many economists say the economic benefits of incoming foreign direct investment, usually accompanied by higher-paying jobs, outweigh the disadvantages.
Some countries, including Australia, have looked more broadly at the “national interest” when approving international deals.
For a country dependent on natural resources, the “national interest” test might lead officials to reject a foreign commodities producer if they thought the company had no intention of developing the project.
Controversial Chinese investments may eventually lead to changes in the U.S. review process.
Sen. Debbie Stabenow (D., Mich.), who leads the Senate Agriculture Committee, criticized the food-safety records of Chinese companies during the Smithfield review.
She said this month her committee will “continue examining the effectiveness of the review process for acquisitions such as this and take steps as needed to protect American interests in future transactions.”
wsj.com
When it comes to the threats of denying pork to the U.S., spiriting away meat-processing technology in a way that could harm Americans, or committing espionage or sabotage, the Smithfield deal is of little concern, most experts on international deals agree.
Still, U.S. critics say unfettered investment by China can bring financial risks to American companies and the national economy at large.
The American Iron & Steel Institute, an industry group representing North American steelmakers, has repeatedly asked Washington to scrutinize the investments of Chinese rivals, which it says are directed and subsidized by the Chinese government.
Other U.S. companies say they face barriers to doing business in China and so shouldn’t have to face Chinese competitors at home.
Officials in Beijing point out that they have already allowed U.S. companies to invest tens of billions of dollars in China, and some officials have complained about the transparency of the U.S. review process.
The U.S. in China in July rekindled long-dormant talks on a bilateral investment treaty that may allay some concerns about international deals. Broad economic shifts such as China’s resurgence have repeatedly led to jitters about acquisitions from abroad.
President Gerald Ford created the Committee on Foreign Investment in the U.S., which reviews certain proposed foreign purchases of U.S. companies, at a time when Americans faced a shopping spree on the part of oil-rich Arab nations.
Concerns about Japan’s surge in the 1980s led to further changes in the committee. Now the focus is on China, as well as on some other developing economies.
Some U.S. business leaders say Chinese ownership of Smithfield or other companies could facilitate the rapid transfer of technology and meticulously honed industry techniques to an emerging economic superpower.
To address these concerns, the congressionally authorized U.S.-China Economic and Security Review Commission last year recommended that Washington include a “net economic benefit test” in the approval of international deals.
Canada’s equivalent of the CFIUS review process already weighs several economic factors in its deliberations, and “it hasn’t worked badly” for Canada, said Theodore Moran, an expert on foreign investment at Georgetown University and the Peterson Institute for International Economics.
Still, Mr. Moran said Thursday at a Peterson Institute seminar that he wouldn’t endorse such a program, since it would necessarily involve government officials in Washington determining the economic benefits of mergers and acquisitions.
In any case, many economists say the economic benefits of incoming foreign direct investment, usually accompanied by higher-paying jobs, outweigh the disadvantages.
Some countries, including Australia, have looked more broadly at the “national interest” when approving international deals.
For a country dependent on natural resources, the “national interest” test might lead officials to reject a foreign commodities producer if they thought the company had no intention of developing the project.
Controversial Chinese investments may eventually lead to changes in the U.S. review process.
Sen. Debbie Stabenow (D., Mich.), who leads the Senate Agriculture Committee, criticized the food-safety records of Chinese companies during the Smithfield review.
She said this month her committee will “continue examining the effectiveness of the review process for acquisitions such as this and take steps as needed to protect American interests in future transactions.”
wsj.com
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