Dubai ports world under Exon-Florio: a threat to national security or a tempest in a seaport?

Albany Law Review, Spring, 2007 by Deborah M. Mostaghel

Part VIII concludes that CFIUS review need not be changed. CFIUS must follow its own rules properly, and Congress must play its behind-the-scenes role without political grandstanding. If these recommendations are followed, CFIUS reviews will continue to protect the national economy and security.

II. BACKGROUND--FOREIGN INVESTMENT IN THE UNITED STATES

Foreign investment has played an important role in our economy since the nation's inception. Even though foreign investment has always been seen as necessary, foreign imports have often been perceived as a threat to the U.S. economy. The stock market crash of 1929 led to the passage of the Smoot Hawley Tariff Act of 1930 (Tariff Act), which "set some of the highest rates of tariff duties in the history of the United States." (20) In 1934, Congress amended the Tariff Act to authorize the President, for a period of three years, to enter into trade agreements with foreign nations. (21) The focus under the early Act was on economic protection. For example, section 307 of the Tariff Act was enacted "'to protect domestic producers, production, and workers from the unfair competition which would result from the importation of foreign products produced by forced labor.'" (22)

The focus widened over time to include national security. The President's authorization to enter into trade agreements was extended into the 1950s through various trade and tariff acts, so long as the President's decisions considered national security. (23) The 1954 extension, however, was treated differently than the previous ones. It enabled the President to intervene in trade agreements if the foreign investment would threaten national security not only directly but also by depressing "domestic production needed for projected national defense requirements." (24) The extensions of trade and tariff legislation throughout the later 1950s continued to give the President authority to limit imports when the President believed that these imports would damage national security through curtailing industries vital to the national defense. (25) The Trade Agreements Extension Act of 1958 obligated the Executive to comply whenever a government department or other interested party requested an investigation. (26) If a trade transaction was found to pose a threat to national security, the President may take action to adjust imports "'to a level that will not threaten to impair the national security.'" (27)

The acts of the 1930s through the 1950s generally pertained to products imported into the United States. At first the focus was on the effect of imports on the domestic economy. Later, it included the ability of the domestic economy to meet defense needs. The Trade Expansion Act of 1962 (1962 Trade Act) brought these two strands together, enunciating the philosophy that the Executive "shall 'recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries.'" (28) This Act was considered necessary because the amount of foreign funds invested in the United States had nearly doubled 1950s levels. (29) The Act maintained the Executive's obligation to investigate, vesting it in the Director of the Office of Emergency Planning. (30) The investigative function was later transferred to the Secretary of the Treasury. (31) Investigations continued to be triggered in response to requests from heads of government departments or other interested parties--principally individual domestic industries.