The Buying of America

...The corporations argued that their takeover was "inimical to the national interest," but the courts, in general, have upheld foreign concerns' rights to compete equally with American firms...

...In 1972, direct foreign investment in the United States was $14.4 billion, whereas U.S...

...But since control depends on the degree to which ownership is dispersed, it is possible to control a concern by owning much less than twenty-five per cent of its stock...

...The Commerce Department, for example, runs a bureau which sponsors "Invest in the U.S.A...

...land parcels and small businesses...

...Ultimately, therefore, fear of retaliation is the Administration's trump card, and the best immediate guarantee of the free trade system...

...Representative John Moss, California Democrat, has introduced a measure designed to prevent foreign acquisition of U.S...

...The Administration has been gearing up for a fight on free trade and foreign investment...

...Not surprisingly, each of the three foreign investment bills in Congress has been proposed by legislators in whose districts or states foreign investment, and especially tender offer takeovers, are a volatile issue...

...The "invasion" of foreign investment has generated a barrage of Congressional speeches, hearings, and bills warning of the dangers of rapidly increasing "alien" investment in the United States...

...energy and defense-related industries...

...In a tender offer takeover—which has often been used by domestic conglomerates to absorb smaller, independent firms—a prospective buyer, in this case a foreign concern, offers to purchase shares of stock of a company at higher than market value...

...While the White House fights for an open door policy, however, officials of the Administration's National Oceanic and Atmospheric Administration (NOAA) have already begun to clamp down on Japanese takeovers of America's subsidized commercial fishing fleets...

...direct investment abroad, it defines ownership as control of more than ten per cent...

...Congressional aides predict that the current debate will at least result in better reporting and disclosure requirements and probable passage of the Inouye proposal for a benchmark study...

...In 1914, it amounted to about $1.3 billion, a far more significant factor in the domestic economy then than now, given the size of the gross national product at that time...

...they are beginning to buy America...

...Moss represents the home district of the Signal Companies, Inc., which unsuccessfully resisted a tender offer takeover...

...transactions so far, Arab governments have favored real estate ventures...

...Even before the recent oil price increases in the Middle East, former Commerce Secretary Peter Peterson estimated that Arab oil producers could hold dollar surpluses of $300 billion by 1980, of which $180 billion might be controlled by Saudi Arabia alone...

...Though such a study will undoubtedly reveal that foreign enterprises are far more involved in the U.S...

...According to a recent report by the U.S...

...Since most of the interest in foreign investment has focused on U.S...

...All of the hearings so far have pointed up the woeful inadequacy of information currently available...

...land and firms is caused by racism toward the new investors...

...Of 129 investments made during 1973, Japan was responsible for forty-five, followed by Canada with twenty-two...

...second, the information collected is designed to compute the U.S...

...While the benefits for the United States of such a plan are evident, what the Arabs stand to gain is less clear, since they can always turn off the oil tap if recipient nations confiscate their investments...

...While Nixon Administration policy has recommended even-handed treatment of foreign and domestic investment, it has in several ways encouraged foreign investment in the United States as a means of Judith Miller is The Progressive's Washington correspondent...

...If the rate of growth in foreign investment were to continue for any length of time, Congressmen and economists agree, the implication for the American economy would be staggering...

...Although existing law restricts foreign investment in certain sectors which relate to national defense—coastal and freshwater shipping, domestic radio communications, atomic energy, domestic air transport, and Federal mineral lands—Moss's bill would prohibit foreign ownership of more than ten per cent of the stock of any U.S...

...In a recent announcement in The Federal Register, NOAA instituted a review system of all acquisition bids as a result of fears that foreign-controlled firms would fish at American taxpayers' expense and ship their catch to their home countries...

...More important than the shift in the recipients of foreign capital is the change in the origin of that capital...

...seminars, aimed at advising foreigners on how they, too, can own a stake in America...

...In the last two years, foreign bids to acquire the Signal Companies, Inc...

...In addition, fourteen states maintain offices overseas to solicit foreign capital...

...Moreover, if such transfers of wealth were to continue, it is estimated that seventy per cent of the world's monetary reserves would eventually be held by Arab oil producers...

...Some thought has already been given to bringing American dollars back to the United States through Arab investment...

...A shift in the economic sectors that attract foreign capital has accompanied the expansion...

...And in special hearings held by Senator Daniel Inouye, Hawaii Democrat, on foreign investment in his state (which has seen a $200-$300 million influx of Japanese capital in the last four years), George Kanahele, the former state economic development director, testified that if Europeans rather than Japanese were buying Hawaiian hotels and golf courses, there would be no outcry...

...Chamber of Commerce's Task Force on Foreign Investment in the United States, Japan's investment growth has outstripped that of traditional investors in the United States—the United Kingdom, Canada, and West Germany...

...economy than previously estimated, Administration officials point out that whatever the true level of foreign investment in America may be, it is less than one-sixth of what America owns abroad...

...The current anxiety seems to stem from a dramatic increase in the rate of growth of foreign investment in the last eighteen months, a change in the nationality of the investors, and the use of particularly visible techniques to acquire American-controlled firms...

...In 1962, thirty-eight per cent of foreign direct investment in the United States was in manufacturing...

...He recommended that the developed Western nations consider the establishment of a new international investment institution—a kind of "multi-national joint venture"— with participation in management by both investor and recipient nations...

...The hysteria, however, has been in inverse relation to the reliability of available information...

...In their limited U.S...

...Despite the demagoguery fostered by this emotional issue, the Government does not have enough solid data about the nature and extent of direct foreign investment to assess accurately its impact on the American economy...

...strengthening America's balance of trade...

...Ironically, some who favor free trade oppose the Inouye study, arguing that more reliable information about the extent of foreign investment in the United States would only play into the hands of those who wish to restrict foreign investment here...

...The Conference Board conservatively estimates the growth in foreign investment during 1973 at $3 billion and predicts that the upsurge will continue this year...

...investment abroad, only sketchy survey figures are kept on foreign holdings here...

...For this purpose, the Commerce Department defines foreign-owned firms as those in which foreign companies control more than twenty-five per cent...

...Mack trucks), Texasgulf, Inc., and the Ronson Corporation have all generated resistance that led to court fights...

...Even in 1972, Japan accounted for more than a third of all new direct investment...

...Congressmen, economists, and private businessmen concede that much of the anxiety about foreign ownership of U.S...

...Recipients, argued Shultz, must receive some assurance that investments will not be erratic or managed for political purposes...

...Historically, direct foreign investment has played an important role in fostering the economic development of the United States...

...direct investment abroad was $94 billion...

...During the Washington Energy Conference in February, Treasury Secretary George Shultz floated a proposal that went almost unnoticed in the brouhaha over French "obstinacy...

...Since direct foreign investment is not a new phenomenon, since it has been encouraged on state and Federal levels for at least a decade, and since it is not especially significant compared to America's holdings abroad, other factors presumably account for the sudden burst of entrepreneurial ¦ patriotism emanating from the grass roots and echoed in Congress...

...Recently, however, Congress has begun to show concern that other nations are no longer merely buying American...

...Rumors of massive Japanese land purchases in America's corn belt, of quick and dirty corporate takeovers by Arab governments, appear in newspapers and on television newscasts...

...White House Assistant Peter Flanigan, who runs a special task force on foreign investment, has testified at Congressional hearings about the benefits of direct foreign investment in the United States: a positive short-run balance of payments, lower unemployment, and an input of foreign technology...

...By 1972, petroleum became the second top recipient, surpassing insurance and finance...

...If the United States bars or restricts foreign investment at home, other nations will inevitably follow suit...

...The tender offer "fad," as it is called by Commerce Department economists, has been prompted by high corporate profits and a depressed stock market...

...Chamber of Commerce official Thomas Farmer testified before a House Foreign Affairs subcommittee that "adverse reactions to foreign investment often stem from expected political or psychological perceptions such as xenophobia, ethnic resentment, and, in some extreme cases, racism...

...economy arouses Congressional concern The Buying of America JUDITH MILLER For the last twenty-five years, the United States has been including the rest of the world in its investment portfolio...

...Some Congressional nerves are obviously jangled by the prospects of billions of dollars of untraceable oil dollar investment in U.S...

...Nelson Stitt, Director of the U.S.-Japan Trade Council, phrased it more delicately in his testimony before Senator Stevenson's subcommittee: "Japanese investors tend to be more visible than their counterparts from other countries...

...The Arab investor, on the other hand, would receive Western management skills and confidence "that his investments are secure from political action by recipients...

...A Joint Economic Committee panel recently recommended that Arabs be encouraged to invest in oil "downstream" operations—refining and ancillary production...

...Although Commerce will not issue its new figures on the amount of the foreign investments until later this month, the National Conference Board, a nonprofit research organization, reported in February that the strong surge of foreign investment in 1972 continued during 1973, despite the strengthening of the dollar (which increases the cost of investments to foreigners...

...The one measure which has support from both the Administration, which firmly opposes passage of further restrictions, and legislators who believe that some kind of additional controls are necessary, is a bill offered by Senator Inouye, which calls for a $2 million "benchmark" study of foreign investment in the United States, in order to collect data needed to evaluate the effect on the economy and to formulate a coherent investment policy...

...According to Commerce officials, these figures sorely underestimate the actual level of foreign investment: First, all estimates are based on book value, a historical rather than actual value of investment...

...The company being bought may attempt to convince its shareholders not to sell their stock or, failing this, may fight the action in court...

...Some foreign corporations have operated in the United States for such a long time that Americans are astounded to discover that products presumed to be as American as apple pie— like Good Humor ice cream, Stouffer's frozen food, Orange Crush soda pop, Nabisco cookies, and California's Paul Masson wines—are all produced by foreign-controlled corporations...

...By 1971, manufacturing accounted for almost fifty per cent...

...Foreign direct investment in the United States is tiny when compared to the extent and concentration of American investments abroad...

...energy or defense-related industry...

...Overshadowing the investment potential of these nations, however, are the dollar surpluses being amassed by Middle Eastern oil producers...

...Another irritant triggering American xenophobia is the increasing reliance on a particular style of foreign investment—the tender offer takeover...

...The Kuwaitis, for example, have recently purchased an entire island off the coast of South Carolina...

...The three Congressional hearings held so far have reflected widespread apprehension about the enormous economic and political power the Arab states could wield through their "petro-dollars...

...When Commerce compiles comparable statistics on U.S...

...balance of payments, rather than to reflect investment details...

...In 1962, less than twenty per cent of foreign capital was in petroleum...

...Representative John Dent, Pennsylvania Democrat, whose proposed ban on foreign ownership of more than five per cent of any American corporation's voting stock is the most restrictive measure yet offered, is reportedly concerned about Japanese acquisitions of steel in his state and about the takeover of the Ronson Corporation...

...As Senator Adlai Stevenson III, Illinois Democrat, noted at recent hearings held by his Subcommittee on International Finance, the $300 billion surplus is equal to more than twenty times the value of General Motors, as defined by recent New York Stock Exchange figures...