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ABSTRACT
The United States has been one of the world's premier destinations for inward foreign direct investment (IFDI) since the 1970s, yet research remains limited on the origins of the domestic institutions that govern IFDI flows. This article focuses on the Committee on Foreign Investment in the United States (CFIUS), an executive body created in 1975 ostensibly to stand sentry on the US's ‘open’ investment door. Previous accounts have explained CFIUS's origins in terms of an inter-branch conflict between an ‘internationalist’ Executive and a ‘protectionist’ Congress, but these accounts are far from comprehensive. Based on new archival evidence as well as a broad review of congressional-hearing transcripts, government reports and trade publications, this article finds that existing analyses underestimate the influence of internationally oriented segments of capital, overlook the emergence of key conflicts within the Executive and disregard the specific economic ideas that motivated policy-makers to establish CFIUS and later reform it. These findings buttress the article's conclusion that CFIUS represents not merely a generic case of inter-branch conflict, but a concrete case of neoliberal state-building.
Acknowledgments
Earlier versions of this article were presented at the Annual Meetings of the International Studies Association, the Social Science History Association and the American Sociological Association. I thank Rogers Brubaker, Richard Lachmann Ho-Fung Hung, Josh Sadlier and the anonymous RIPE reviewers for their valuable comments and suggestions. Any errors are of course my own.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1. Gerald R. Ford: ‘Statement on Signing the Foreign Investment Study Act of 1974’, 28 October 1974.
2. Since the reforms of 2007, CFIUS has become more accountable to Congress. A US appellate court decision in 2014 may also open certain aspects of the CFIUS review process to judicial review.
3. My account of the years 1973–1975 is based primarily on files – some only recently declassified – gathered at the Nixon and Ford presidential libraries and the US National Archives between 2012 and 2014. The key files – none of which were consulted in previous accounts – consisted of internal correspondence, policy briefs and meeting minutes maintained by CIEP staffers and senior officials in both administrations. Between 1985 and 1990, political contestation centered on the legislative arena; I thus reviewed all relevant congressional hearing transcripts, official reports and contemporary press accounts from these years. Internal Reagan administration files still remain mostly inaccessible and await further research.
4. 1990 proved to be the highwater mark for voluntary notification; between the years 1991 and 2005, CFIUS received 72 annual notifications on average and conducted 45-day investigations on less than 1%.
5. There has recently been a noteworthy increase in the number of CFIUS investigations and restrictions involving state-owned enterprises, particularly from China. But this in many ways accords with the prevailing neoliberal policy consensus. After all, investments that bear the taint of foreign government influence or control are potentially ‘market distorting’.
6. Outside the United States, there is a large literature on the politics of IFDI restrictions in developing countries, the relationship between institutions and aggregate IFDI flows, and the dramatic expansion in the use of bilateral investment treaties. For a review, see Pandya (Citation2016).
7. Memo, Flanigan to Nixon, ‘International Investment Reform’; 29 April 1974. FO 4-3 Box 33White House Special Files, Subject Files: Confidential Files, 1969–1974; Nixon Library. .
8. Kang mentions, but does not analyze the significance of, divisions ‘even in the ideologically pro-market administration of Ronald Reagan’. Moreover, Kang claims that there was ‘little support or opposition’ to the Exon-Florio Amendment from organized interest groups, though this is not supported by the evidence available in the congressional record (Kang Citation1997, 320, 325).
9. Memo, Gunning to Tabor; 14 August 1973; folder FO 4-3 International Investments; Box 49; White House Central Files, Subject Files Foreign Affairs; Nixon Library. The memo's author, David M. Gunning, was replaced as task force director the following month. This may explain why the issue was never revisited.
10. Memo, Shepard through Cavonough to Rumsfeld. ‘Re: Arab Investment in the U.S’; 4 February 1975; folder Investment, Foreign (1); Box 73; Seidman Files, Office of Economic Affairs, 1974–1977; Ford Library.
11. US Congress. House. Committee on Foreign Affairs. Foreign Investment in the United States: Hearings before the Subcommittee on Foreign Economic Policy, Committee on Foreign Affairs. 93rd Cong., first session, 29 January 1974, 79–80.
12. US Congress. Senate. Committee on Banking, Housing and Urban Affairs. Foreign Investment in the United States, Part I: Hearings before the Subcommittee on International Finance of the Committee on Banking, Housing and Urban Affairs. 93rd Cong., second session, 23 January 1974, 61–62.
13. ‘Draft Policy Statement with Respect to Foreign Direct Investment in the U.S’; 3 December 1973; folder Ex FO 4-3 International Investments; Box 49; Subject Files: FO Foreign Affairs; Nixon.
14. ‘U.S. Policy and Objectives on International Investment’; 22 May 1974; folder FG 6-20 CIEP, 1971-74; Box 17; Subject Files: Confidential Files, 1969–1974; Nixon.
15. Memo, Enders to Bennett; 21 January 1975; folder CFIUS Early Days, 1975; Box 1; CIEP Files, 1978–1979; General Records of the Department of the Treasury (RG 56); National Archives, College Park.
16. Memo, Bennett to Simon 24 February 1975; folder CFIUS Early Days, 1975; Box 1; CIEP Files; Treasury (RG 56); National Archives.
17. ‘Minutes of Feb 24, 1975 Meeting to Discuss Policy Re Foreign Direct Investment in the U.S.’ folder CFIUS Early Days; Box 1; CIEP Files; Treasury (RG 56); National Archives.
18. House. Committee on Government Operations. The Operations of Federal Agencies in Monitoring, Reporting on, and Analyzing Foreign Investments in the United States, Part 3: Hearings before a Subcommittee of the Committee on Government Operations, 96th Cong., first session, 20 July 1979, 321.
19. ‘Guidelines for Committee on Foreign Investment in the United States’; 20 October 1975; folder: CFIUS 9/75-7/76; Box 115; Seidman Files; Ford.
20. House. Committee on Banking, Finance and Urban Affairs. Defense Production Act: Hearings before the Committee on Banking, Finance and Urban Affairs. 102nd Cong., first session, 12 June 1991, 110.
21. ‘Review of Thomson Corporation of America's Acquisition of Wilcox Electric, Inc’; 16 September 16, 1987; folder CFIUS (6 of 6); Box 1; Michael Mussa Files; Reagan.
22. House. Committee on Energy and Commerce. Trade and Competitiveness, Part II: Hearings before the Subcommittee on Commerce, Consumer Protection, and Competitiveness of the Committee on Energy and Commerce. 100th Cong., first session, 5, 10, 11 March 1987, 406–407.
23. Senate. Committee on Commerce, Science, and Transportation. Acquisitions by Foreign Companies: Hearing before the Committee on Commerce, Science, and Transportation. 100th Cong., first session, 10 June 1987, 80.
24. Senate. Committee on Commerce, Science, and Transportation. Acquisitions by Foreign Companies, 10 June 1987, 9. p 9.
25. Congressional Record, Daily Edition, 10 July 1987 S 9696.
26. ‘Compromise Seen in Foreign Takeover Provisions of Trade” Inside US Trade, 12 February 1988, 9–10.
27. Senate. Committee on Commerce, Science, and Transportation. Federal Collection of Information on Foreign Investment in the U.S.: Hearing before the Committee on Commerce, Science, and Transportation. 100th Cong., first session, 24 March 1988, 25.
28. ‘Agency on Foreign Takeovers Wielding Power’ Martin Tolchin. New York Times. 23 April 1989.
29. Senate. Committee on Commerce, Science, and Transportation. Foreign Acquisition of Semi-Gas Systems: Hearings before the Subcommittee on Science, Technology, and Space of the Committee on Commerce, Science, and Transportation. 101st Cong., second session, 10 October 1990, 12.
30. ‘Foreign Investment: Analyzing National Security Concerns.’ United States General Accounting Office. March 1990, p 19.
31. House. Committee on Energy and Commerce. Foreign investment in the United States: Hearings before the Subcommittee on Commerce, Consumer Protection, and Competitiveness of the Committee on Energy and Commerce. 101st Cong., second session, 12 June and 31 July 1990, 172.
32. House. Committee on Energy and Commerce. National Security Takeover and Technology Preservation: Hearings before the Subcommittee on Commerce, Consumer Protection, and Competitiveness of the Committee on Energy and Commerce. 102nd Cong., First session, 26 February and 12 June 1991, 44, 63.
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Matthew J. Baltz
Matthew J. Baltz received his Ph.D. in sociology from the University of California, Los Angeles and is now assistant professor of sociology at Bucknell University. His work has appeared in Theory and Society and focuses on the politics of state building, institutional change, nationalism and development.