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Tuesday, August 31, 2010

U.S. Trade Deficit and the Impact of Changing Oil Prices

James K. Jackson
Specialist in International Trade and Finance

Petroleum prices rose sharply in the first half of 2008, at one time reaching more than $140 per barrel of crude oil. After July 2008, however, petroleum prices and import volumes fell at a historically rapid pace; in January 2009, prices of crude oil fell below $40 per barrel. Since then, crude oil prices have nearly doubled, while the average monthly volume of imports of energy related petroleum products has fallen nearly 10% year over year. Despite the drop in the volume of crude oil imports, the rise in the cost of energy imports through 2009 and early 2010 could add more than $100 billion to the nation's trade deficit in 2010 over that experienced in 2009. Should the U.S. economic recovery continue in the second half of 2010, it could increase both the volume of energy imports and the price of those imports. This report provides an estimate of the initial impact of the changing oil prices on the nation's merchandise trade deficit.


Date of Report: August 19, 2010
Number of Pages: 11
Order Number: RS22204
Price: $29.95

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Friday, August 27, 2010

The G-20 and International Economic Cooperation: Background and Implications for Congress

Rebecca M. Nelson
Analyst in International Trade and Finance

The G-20 is an international forum for discussing and coordinating economic policies. The members of the G-20 include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union. 

Background:
The G-20 was established in the wake of the Asian financial crisis in the late 1990s to allow major advanced and emerging-market countries to coordinate economic policies. Until 2008, G-20 meetings were held at the finance minister level, and remained a less prominent forum than the G-7, which held meetings at the leader level (summits). With the onset of the global financial crisis, the G-7 leaders decided to convene the G-20 leaders to discuss and coordinate policy responses to the crisis. 

To date, the G-20 leaders have held four summits: November 2008 in Washington, DC; April 2009 in London; September 2009 in Pittsburgh; and June 2010 in Toronto. The G-20 leaders have agreed that the G-20 is now the premier forum for international economic coordination, effectively supplanting the G-7's role as such. 

Commitments:
Over the course of the four G-20 summits held to date, the G-20 leaders have made commitments on a variety of issue areas. In the United States, implementing some of these commitments would require legislation. Issues that are likely to influence future policy debates and/or the legislative agenda include: a new international framework to monitor and coordinate economic policies, aimed at correcting global imbalances and promoting economic growth; financial regulatory reform and harmonization; voting reform at the IMF; increased funding of multilateral development banks (MDBs); concluding the WTO Doha multilateral trade negotiations; and elimination of fossil fuel subsidies. 

Discussions at the Toronto summit in June 2010 were largely a continuation of previous summits, There is some anticipation for more ambitious discussions at the next G-20 summit, scheduled for Seoul, South Korea in November 2010. 

Effectiveness of the G-20:
As the G-20 adapts to its new role as the premier forum for international cooperation, the effectiveness of the G-20 moving forward is being debated. Some anticipate that the G-20 will be an effective steering body in the global economy, pointing to its success in coordinating countries and international organizations at the height of the financial crisis. Others are more pessimistic about the G-20's effectiveness in future summits, suggesting that the G-20 as a group is too heterogeneous to achieve real coordination. Still others suggest a middle ground, that the G-20 will be effective in some instances but not others. For example, they argue the G-20 could be an effective body in times of economic duress, when countries view cooperation as critical, but less effective when the economy is strong and the need for cooperation feels less pressing. Likewise, it is suggested that the G-20 will be effective at facilitating economic coordination over some issues, such as monetary policy where finance ministers largely exercise autonomous control. At the same time, the G-20 could find it more difficult to coordinate in other areas, such as fiscal policies, where implementation of commitments depends on a number of actors, including national legislatures in many countries
.


Date of Report: August 10, 2010
Number of Pages: 28
Order Number: R40977
Price: $29.95

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Thursday, August 26, 2010

The G-20 and International Economic Cooperation: Background and Implications for Congress

Rebecca M. Nelson
Analyst in International Trade and Finance

The G-20 is an international forum for discussing and coordinating economic policies. The members of the G-20 include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union. 

Background:
The G-20 was established in the wake of the Asian financial crisis in the late 1990s to allow major advanced and emerging-market countries to coordinate economic policies. Until 2008, G-20 meetings were held at the finance minister level, and remained a less prominent forum than the G-7, which held meetings at the leader level (summits). With the onset of the global financial crisis, the G-7 leaders decided to convene the G-20 leaders to discuss and coordinate policy responses to the crisis. 

To date, the G-20 leaders have held four summits: November 2008 in Washington, DC; April 2009 in London; September 2009 in Pittsburgh; and June 2010 in Toronto. The G-20 leaders have agreed that the G-20 is now the premier forum for international economic coordination, effectively supplanting the G-7's role as such. 

Commitments:
Over the course of the four G-20 summits held to date, the G-20 leaders have made commitments on a variety of issue areas. In the United States, implementing some of these commitments would require legislation. Issues that are likely to influence future policy debates and/or the legislative agenda include: a new international framework to monitor and coordinate economic policies, aimed at correcting global imbalances and promoting economic growth; financial regulatory reform and harmonization; voting reform at the IMF; increased funding of multilateral development banks (MDBs); concluding the WTO Doha multilateral trade negotiations; and elimination of fossil fuel subsidies. 

Discussions at the Toronto summit in June 2010 were largely a continuation of previous summits, There is some anticipation for more ambitious discussions at the next G-20 summit, scheduled for Seoul, South Korea in November 2010. 

Effectiveness of the G-20:
As the G-20 adapts to its new role as the premier forum for international cooperation, the effectiveness of the G-20 moving forward is being debated. Some anticipate that the G-20 will be an effective steering body in the global economy, pointing to its success in coordinating countries and international organizations at the height of the financial crisis. Others are more pessimistic about the G-20's effectiveness in future summits, suggesting that the G-20 as a group is too heterogeneous to achieve real coordination. Still others suggest a middle ground, that the G-20 will be effective in some instances but not others. For example, they argue the G-20 could be an effective body in times of economic duress, when countries view cooperation as critical, but less effective when the economy is strong and the need for cooperation feels less pressing. Likewise, it is suggested that the G-20 will be effective at facilitating economic coordination over some issues, such as monetary policy where finance ministers largely exercise autonomous control. At the same time, the G-20 could find it more difficult to coordinate in other areas, such as fiscal policies, where implementation of commitments depends on a number of actors, including national legislatures in many countries.


Date of Report: August 10, 2010
Number of Pages: 28
Order Number: R40977
Price: $29.95

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Sunday, August 22, 2010

The United States as a Net Debtor Nation: Overview of the International Investment Position

James K. Jackson
Specialist in International Trade and Finance


The international investment position of the United States is an annual measure of the assets Americans own abroad and the assets foreigners own in the United States. The net position, or the difference between the two, sometimes is referred to as a measure of U.S. international indebtedness. This designation is not strictly correct, because the net international investment position reveals the difference between the total assets Americans own abroad and the total amount of assets foreigners own in the United States. These assets generate flows of capital into and out of the economy that have important implications for the value of the dollar in international exchange markets. Some Members of Congress and some in the public have expressed concerns about the U.S. net international investment position because of the role foreign investors are playing in U.S. capital markets and the potential for large outflows of income and services payments. Some observers also argue that the U.S. reliance on foreign capital inflows places the economy in a vulnerable position.


Date of Report: July 28, 2010
Number of Pages: 19
Order Number: RL32964
Price: $29.95

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Thursday, August 19, 2010

EU-U.S. Economic Ties: Framework, Scope, and Magnitude

William H. Cooper
Specialist in International Trade and Finance


The United States and the European Union (EU) economic relationship is the largest in the world—and it is growing. The modern U.S.-European economic relationship has evolved since World War II, broadening as the six-member European Community expanded into the present 27- member European Union. The ties have also become more complex and interdependent, covering a growing number and type of trade and financial activities. 

In 2009, $1,252.0 billion flowed between the United States and the EU on the current account, the most comprehensive measure of U.S. trade flows. The EU as a unit is the largest merchandise trading partner of the United States. In 2009, the EU accounted for $220.6 billion of total U.S. exports (or 20.8%) and for $281.8 billion of total U.S. imports (or 18.1%) for a U.S. trade deficit of $73.2 billion. The EU is also the largest U.S. trade partner when trade in services is added to trade in merchandise, accounting for $173.5 billion (or 34.5% of the total in U.S. services exports) and $134.8billion (or 36.4% of total U.S. services imports) in 2009. In addition, in 2009, a net $114.1 billion flowed from U.S. residents to EU countries into direct investments, while a net $82.7 billion flowed from EU residents to direct investments in the United States. 

Policy disputes arise between the United States and the EU generating tensions which sometimes lead to bilateral trade disputes. Yet, in spite of these disputes, the U.S.-EU economic relationship remains dynamic. It is a relationship that is likely to grow in importance assuming the trends toward globalization and the enlargement of the EU continue, forcing more trade and investment barriers to fall. Economists indicate that an expanded relationship would bring economic benefits to both sides in the form of wider choices of goods and services and greater investment opportunities. 

But increasing economic interdependence brings challenges as well as benefits. As the U.S. and EU economies continue to integrate, some sectors or firms will "lose out" to increased competition and will resist the forces of change. Greater economic integration also challenges long-held notions of "sovereignty," as national or regional policies have extraterritorial impact. Similarly, accepted understanding of "competition," "markets," and other economic concepts are tested as national borders dissolve with closer integration of economies. 

U.S. and EU policymakers are likely to face the task of how to manage the increasingly complex bilateral economic relationship in ways that maximize benefits and keep frictions to a minimum, including developing new frameworks. For Members during the 111th Congress, it could mean weighing the benefits of greater economic integration against the costs to constituents in the context of overall U.S. national interests.



Date of Report: July 26, 2010
Number of Pages: 11
Order Number: RL30608
Price: $29.95

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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Monday, August 16, 2010

The Committee on Foreign Investment in the United States (CFIUS)

James K. Jackson
Specialist in International Trade and Finance


The Committee on Foreign Investment in the United States (CFIUS) is comprised of 9 members, two ex officio members, and other members as appointed by the President representing major departments and agencies within the federal Executive Branch. While the group generally has operated in relative obscurity, the proposed acquisition of commercial operations at six U.S. ports by Dubai Ports World in 2006 placed the group's operations under intense scrutiny by Members of Congress and the public. Prompted by this case, some Members of the 109th and 110th Congresses questioned the ability of Congress to exercise its oversight responsibilities given the general view that CFIUS's operations lack transparency. Other Members revisited concerns about the linkage between national security and the role of foreign investment in the U.S. economy. Some Members of Congress and others argued that the nation's security and economic concerns have changed since the September 11, 2001, terrorist attacks and that these concerns were not being reflected sufficiently in the Committee's deliberations. In addition, anecdotal evidence seemed to indicate that the CFIUS process was not market neutral. Instead, a CFIUS investigation of an investment transaction may have been perceived by some firms and by some in the financial markets as a negative factor that added to uncertainty and may have spurred firms to engage in behavior that may not have been optimal for the economy as a whole. 

In the first session of the 110th Congress, the House and Senate adopted S. 1610, the Foreign Investment and National Security Act of 2007. On July 11, 2007, the measure was sent to President Bush, who signed it on July 26, 2007. It is designated as P.L. 110-49. On January 23, 2008, President Bush issued Executive Order 13456 implementing the law. The Executive Order also established some caveats that may affect the way in which the law is implemented. These caveats stipulate that the President will provide information that is required under the law as long as it is "consistent" with the President's authority "to (i) conduct the foreign affairs of the United States; (ii) withhold information the disclosure of which could impair the foreign relations, the national security, the deliberative processes of the Executive, or the performance of the Executive's constitutional duties; (iii) recommend for congressional consideration such measures as the President may judge necessary and expedient; and (iv) supervise the unitary executive branch." Despite the relatively recent passage of the amendments, some Members of Congress and others have questioned the performance of CFIUS and the way the Committee reviews cases involving foreign governments, particularly with the emergence of direct investments through sovereign wealth funds (SWFs). There have been few policy statements by the Obama Administration in order to assess its approach to foreign direct investment, but the Administration seems supportive of a free flow of direct investment
.


Date of Report: July 29, 2010
Number of Pages: 24
Order Number: RL33388
Price: $29.95

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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Friday, August 13, 2010

EU-U.S. Economic Ties: Framework, Scope, and Magnitude

William H. Cooper
Specialist in International Trade and Finance


The United States and the European Union (EU) economic relationship is the largest in the world—and it is growing. The modern U.S.-European economic relationship has evolved since World War II, broadening as the six-member European Community expanded into the present 27- member European Union. The ties have also become more complex and interdependent, covering a growing number and type of trade and financial activities. 

In 2008, $1,571.2 billion flowed between the United States and the EU on the current account, the most comprehensive measure of U.S. trade flows. The EU as a unit is the largest merchandise trading partner of the United States. In 2008, the EU accounted for $274.5 billion of total U.S. exports (or 21.1%) and for $367.9 billion of total U.S. imports (or 17.5%) for a U.S. trade deficit of $93.4 billion. The EU is also the largest U.S. trade partner when trade in services is added to trade in merchandise, accounting for $198.3 billion (or 36.4% of the total in U.S. services exports) and $152.1 billion (or 37.6% of total U.S. services imports) in 2008. In addition, in 2009, a net $148.2 billion flowed from U.S. residents to EU countries into direct investments, while a net $82.7 billion flowed from EU residents to direct investments in the United States. 

Policy disputes arise between the United States and the EU generating tensions which sometimes lead to bilateral trade disputes. Yet, in spite of these disputes, the U.S.-EU economic relationship remains dynamic. It is a relationship that is likely to grow in importance assuming the trends toward globalization and the enlargement of the EU continue, forcing more trade and investment barriers to fall. Economists indicate that an expanded relationship would bring economic benefits to both sides in the form of wider choices of goods and services and greater investment opportunities. 

But increasing economic interdependence brings challenges as well as benefits. As the U.S. and EU economies continue to integrate, some sectors or firms will "lose out" to increased competition and will resist the forces of change. Greater economic integration also challenges long-held notions of "sovereignty," as national or regional policies have extraterritorial impact. Similarly, accepted understanding of "competition," "markets," and other economic concepts are tested as national borders dissolve with closer integration of economies. 

U.S. and EU policymakers are likely to face the task of how to manage the increasingly complex bilateral economic relationship in ways that maximize benefits and keep frictions to a minimum, including developing new frameworks. For Members during the 111th Congress, it could mean weighing the benefits of greater economic integration against the costs to constituents in the context of overall U.S. national interests
.


Date of Report: June 30, 2010
Number of Pages: 11
Order Number: RL30608
Price: $29.95

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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Monday, August 9, 2010

U.S. Direct Investment Abroad: Trends and Current Issues

James K. Jackson
Specialist in International Trade and Finance


The United States is the largest investor abroad and the largest recipient of direct investment in the world. For some Americans, the national gains attributed to investing overseas are offset by such perceived losses as displaced U.S. workers and lower wages. Some observers believe U.S. firms invest abroad to avoid U.S. labor unions or high U.S. wages, however, 70% of U.S. foreign direct investment is concentrated in high income developed countries. Even more striking is the fact that the share of investment going to developing countries has fallen in recent years. Most economists conclude that direct investment abroad does not lead to fewer jobs or lower incomes overall for Americans and that the majority of jobs lost among U.S. manufacturing firms over the past decade reflect a broad restructuring of U.S. manufacturing industries.


Date of Report: July 28, 2010
Number of Pages: 10
Order Number: RS21118
Price: $29.95

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The OECD Initiative on Tax Havens

James K. Jackson
Specialist in International Trade and Finance


Since the 1990s, the Organization for Economic Cooperation and Development (OECD), under the direction of its member countries, has spearheaded an international agreement to outlaw crimes of bribery, and it continues to coordinate efforts aimed at reducing the occurrence of money laundering, corruption, and tax havens. Also, the OECD is a pivotal player in promoting corporate codes of conduct that attempt to develop a set of standards for multinational firms that can be applied across national borders. The OECD's work on tax havens, which initially focused on improving transparency and exchange of information for tax purposes, has evolved into a global initiative to implement standards in these areas and is carried out through the Global Forum on Transparency and Exchange of Information for Tax Purposes, which has more than 90 member countries/jurisdictions. On May 4, 2009, President Obama outlined his Administration's policy to "crack down on illegal tax evasion" and to close loopholes. In the 111th Congress, companion legislation was introduced in the House (H.R. 1265) and the Senate (S. 506) to restrict the use of tax havens. Some estimates indicate that tax havens cost the United States $100 billion each year in lost tax revenues (The Christian Science Monitor, Tax Havens in U.S. Cross Hairs, by David R. Francis, June 9, 2008).


Date of Report: July 29, 2010
Number of Pages: 17
Order Number: R40114
Price: $29.95

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To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Foreign Direct Investment in the United States: An Economic Analysis

James K. Jackson
Specialist in International Trade and Finance


Foreign direct investment in the United States declined sharply after 2000, when a record $300 billion was invested in U.S. businesses and real estate. [Note: The United States defines foreign direct investment as the ownership or control, directly or indirectly, by one foreign person (individual, branch, partnership, association, government, etc.) of 10% or more of the voting securities of an incorporated U.S. business enterprise or an equivalent interest in an unincorporated U.S. business enterprise. 15 CFR § 806.15 (a)(1).] In 2008, according to Department of Commerce data, foreigners invested $325 billion. Foreign direct investments are highly sought after by many state and local governments that are struggling to create additional jobs in their localities. While some in Congress encourage such investment to offset the perceived negative economic effects of U.S. firms investing abroad, others are concerned about foreign acquisitions of U.S. firms that are considered essential to U.S. national and economic security.


Date of Report: July 28, 2010
Number of Pages: 9
Order Number: RS21857
Price: $29.95

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Wednesday, August 4, 2010

U.S. International Trade: Trends and Forecasts


Dick K. Nanto
Specialist in Industry and Trade

J. Michael Donnelly
Information Research Specialist


The U.S. trade deficit had been decreasing through June 2009 because of the global financial crisis but since February 2010 has begun to increase again. The financial crisis caused U.S. imports to drop faster than U.S. exports. The global simultaneous recession, however, implies that exporting countries cannot rely on increased foreign demand to make up for slack demand at home. Even though U.S. imports have been down considerably from 2008, companies competing with imports still face diminishing demand as the domestic economy has been slow to recover from the recession. These conditions imply that the political forces to protect domestic industry from imports are likely to intensify both in the United States and abroad.

In 2009, the trade deficit in goods reached $506.9 billion on a balance of payments (BoP) basis, less than the $834.7 in 2008 and $823.2 billion in 2007. The 2009 deficit on merchandise trade with China was $227 billion (Census basis), with the European Union was $61.1 billion, with Canada was $21.6 billion, with Japan was $44.7 billion, with Mexico was $47.8 billion, and with the Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan) moved from a deficit of $5.5 billion in 2007 to a surplus of $2.2 billion in 2008 and a surplus again in 2009 of $3.5 billion. Imports of goods of $1,575.4 billion decreased by $564.1 billion, 26.4% over 2008. Exports of goods of $1,068.5 billion fell by $236.4 billion, 18.1%. The overall merchandise trade deficit for 2009 improved, or decreased in size, by $327.7 billion, or roughly 39%. In the fourth quarter of 2008, as the U.S. recession worsened, imports declined faster than exports resulting in monthly trade deficits declining from August 2008 through February 2009. In 2009 goods imports reached their lowest recent level in May, at $120.7 billion but generally have been rising since then. In 2009 goods exports fluctuated near $84 billion through May when they began to increase at about $2 billion monthly, reaching $107.2 billion in May 2010.

Trade deficits are a concern for Congress because they may generate trade friction and pressures for the government to do more to open foreign markets, to shield U.S. producers from foreign competition, or to assist U.S. industries to become more competitive. Overall U.S. trade deficits reflect excess spending (a shortage of savings) in the domestic economy and a reliance on capital imports to finance that shortfall. Capital inflows serve to offset the outflow of dollars used to pay for imports. Movements in the exchange rate help to balance trade. The rising trade deficit (when not matched by capital inflows) places downward pressure on the value of the dollar, which, in turn, helps to shrink the deficit by making U.S. exports cheaper and imports more expensive. Central banks in countries such as China, however, have intervened in foreign exchange markets to keep the value of their currencies from rising too fast. Bills in the 111th Congress relating to trade include H.R. 3012/S. 2821, H.R. 496/S. 1466, H.R. 1875, S. 3103, S. 3134, S. 1254, S. 1027, H.R. 2378, H.Res. 934, H.Res. 987, and H.Res. 1124.

The balance on current account includes merchandise trade plus trade in services and unilateral transfers. In 2009, the deficit on current account fell to $378.4 billion from $668.9 billion in 2008 and $718.1 billion in 2007. IHS Global Insight forecasts a higher deficit on current account for 2010, at $552.2 billion, and 2011, at $625.9 billion. In trade in advanced technology products, the U.S. balance improved from a deficit of $61 billion in 2008 to $56 billion in 2009. In trade in motor vehicles and parts, the $73.4 billion U.S. deficit in 2009 was mainly with Japan, Mexico, and Germany
.


Date of Report: July 13, 2010
Number of Pages: 41
Order Number: RL33577
Price: $29.95



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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

The Committee on Foreign Investment in the United States (CFIUS)


James K. Jackson
Specialist in International Trade and Finance


The Committee on Foreign Investment in the United States (CFIUS) is comprised of 9 members, two ex officio members, and other members as appointed by the President representing major departments and agencies within the federal Executive Branch. While the group generally has operated in relative obscurity, the proposed acquisition of commercial operations at six U.S. ports by Dubai Ports World in 2006 placed the group's operations under intense scrutiny by Members of Congress and the public. Prompted by this case, some Members of the 109th and 110th Congresses questioned the ability of Congress to exercise its oversight responsibilities given the general view that CFIUS's operations lack transparency. Other Members revisited concerns about the linkage between national security and the role of foreign investment in the U.S. economy. Some Members of Congress and others argued that the nation's security and economic concerns have changed since the September 11, 2001, terrorist attacks and that these concerns were not being reflected sufficiently in the Committee's deliberations. In addition, anecdotal evidence seemed to indicate that the CFIUS process was not market neutral. Instead, a CFIUS investigation of an investment transaction may have been perceived by some firms and by some in the financial markets as a negative factor that added to uncertainty and may have spurred firms to engage in behavior that may not have been optimal for the economy as a whole.

In the first session of the 110th Congress, the House and Senate adopted S. 1610, the Foreign Investment and National Security Act of 2007. On July 11, 2007, the measure was sent to President Bush, who signed it on July 26, 2007. It is designated as P.L. 110-49. On January 23, 2008, President Bush issued Executive Order 13456 implementing the law. The Executive Order also established some caveats that may affect the way in which the law is implemented. These caveats stipulate that the President will provide information that is required under the law as long as it is "consistent" with the President's authority "to (i) conduct the foreign affairs of the United States; (ii) withhold information the disclosure of which could impair the foreign relations, the national security, the deliberative processes of the Executive, or the performance of the Executive's constitutional duties; (iii) recommend for congressional consideration such measures as the President may judge necessary and expedient; and (iv) supervise the unitary executive branch." Despite the relatively recent passage of the amendments, Members of Congress and others have questioned the performance of CFIUS and the way the Committee reviews cases involving foreign governments, particularly with the emergence of direct investments through sovereign wealth funds (SWFs). There have been few policy statements by the Obama Administration to assess its approach to foreign direct investment, but the Administration seems to supportive of a free flow of direct investment.



Date of Report: July 19, 2010
Number of Pages: 24
Order Number: RL33388
Price: $29.95


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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Tuesday, August 3, 2010

The Exon-Florio National Security Test for Foreign Investment


James K. Jackson
Specialist in International Trade and Finance


The Exon-Florio provision grants the President the authority to block proposed or pending foreign acquisitions of "persons engaged in interstate commerce in the United States" that threaten to impair the national security. This provision came under intense scrutiny with the proposed acquisitions in 2006 of major operations in six major U.S. ports by Dubai Ports World and of Unocal by the China National Offshore Oil Corporation (CNOOC). The debate that followed reignited long-standing differences among Members of Congress and between the Congress and the administration over the role foreign acquisitions play in U.S. national security. The public debate underscored the differences between U.S. policy, which is to actively promote internationally the national treatment of foreign firms, and the concerns of some over the way this policy applies to companies that are owned by foreign governments that have unlimited access to the Nation's industrial base. Much of this debate focused on the activities of a relatively obscure committee, the Committee on Foreign Investment in the United States (CFIUS) and the Exon- Florio provision, which gives the President broad powers to block certain types of foreign investment.

In the first session of the 110th Congress, Congresswoman Maloney introduced H.R. 556, the National Security Foreign Investment Reform and Strengthened Transparency Act of 2007, on January 18, 2007. The measure was approved by the House Financial Services Committee on February 13, 2007, with amendments, and was approved with amendments by the full House on February 28, 2007, by a vote of 423 to 0. On June 13, 2007, Senator Dodd introduced S. 1610, the Foreign Investment and National Security Act of 2007. On June 29, 2007, the Senate adopted S. 1610 in lieu of H.R. 556 by unanimous consent. On July 11, 2007, the House accepted the Senate's version of H.R. 556 by a vote of 370-45 and sent the measure to the President, who signed it on July 26, 2007. It is designated as P.L. 110-49.

On January 23, 2008, President Bush issued Executive Order 13456 implementing the law. The Executive Order also establishes some caveats that may affect the way in which the law is implemented. These caveats stipulate that the President will provide information that is required under the law as long as it is "consistent" with the President's (1) authority to conduct the foreign affairs of the United States; (2) authority to withhold information that would impair the foreign relations, the national security, the deliberative processes of the Executive, or the performance of the Executive's constitutional duties; or (3) ability to supervise the unitary executive branch. Despite the recent changes to the Exon-Florio process, some Members are questioning the way in which the changes in the law are being interpreted by the administration and the way in which the law is being used to address cases involving foreign governments, particularly with the emergence of direct investments through sovereign wealth funds (SWFs)
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Date of Report: July 19, 2010
Number of Pages: 24
Order Number: RL33312
Price: $29.95


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