Business Groups Attack ‘America First’ Merger Review Bill

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By Alexei Alexis

Senate legislation to increase scrutiny of mergers proposed by foreign investors faces opposition from the U.S. Chamber of Commerce and free-market think tanks.

The bill (S. 1983), introduced by Sens. Charles Grassley (R-Iowa) and Sherrod Brown (D-Ohio), is aimed at protecting America’s economic interests. But critics say the measure could do the opposite.

The measure would require a review of any foreign investment that would result in foreign control of any U.S. entity worth more than $1 billion. It also would require a review of any transaction by a state-owned enterprise that would result in control of a U.S. entity worth more than $50 million.

“To allow foreign investment to be rejected on an open-ended basis, separate of national security concerns, has the potential to drive valuable foreign investment away from our shores,” John Murphy, the chamber’s senior vice president for international policy, told Bloomberg Law.

The Senate effort reflects increased protectionism in Washington when it comes to foreign investments, particularly from China.

John Berlau, a senior fellow at the Competitive Enterprise Institute, called the legislation a “very harmful” bill that makes President Donald Trump’s criticism of trade deals look moderate.

“I can’t imagine even President Trump supporting this,” he told Bloomberg Law. “I think even he would realize that this would be detrimental to jobs here. This legislation is basically saying that we’d rather have American firms go bankrupt than be rescued by foreign owners.”

Record Foreign Investments

The Cato Institute has similar concerns about the bill, which was introduced on Oct. 18 and is pending before the Senate Finance Committee. Sen. Orrin Hatch (R-Utah), chairman of the committee, wants to carefully review the bill and talk to other members of the panel about how they would like to move forward on the issue, a spokeswoman told Bloomberg Law.

Currently, the Committee on Foreign Investment in the United States, a multi-agency panel headed by the Treasury Department, reviews national security implications of foreign bids for U.S. companies.

The Senate bill would expand scrutiny of such deals, requiring a separate review by the Commerce Department of factors such as whether the transaction serves America’s “long-term strategic economic interests.” The lawmakers cite recent patterns of foreign investment that threaten U.S. jobs and wages. The bill comes after record foreign investments by China in 2016.

“This bill further equips the administration with the ability to fight back against unfair trade barriers to U.S. exports and businesses,” Grassley said in a statement. “Europe, Canada, Australia and China have similar investment screens already in place. The United States shouldn’t be left in the dust. We should follow suit.”

Focus Too Narrow Now

The bill also gives Trump an opportunity to fulfill his pledge to “put a stop to U.S. industry’s being taken advantage of by foreign companies and countries,” Grassley said.

The expanded review processes are necessary because some foreign investments could have negative economic effects in the U.S., although they may not pose national security concerns, a Grassley spokesman told Bloomberg Law. Because CFIUS is narrowly focused on national security matters, that process resulted in only 2.3 percent of all foreign investments being investigated in the U.S. in 2015, he said.

The chamber’s Murphy said the legislation would create an “unnecessary bureaucracy” that could actually harm the U.S. economy.

“Our economy has benefited immensely from the $3 trillion in investments overseas companies have made in the United States — investments that support nearly 7 million good American jobs,” he said.

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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