U.S. may strengthen oversight of foreign investments

Inspired by a firestorm of criticism last year over a proposal to allow a United Arab Emirates firm to run terminals at U.S. ports, the House unanimously passed legislation Wednesday granting the government broader powers to review investments by foreign entities.

“This is a bill that ensures national security while encouraging economic development,” said Rep. Carolyn B. Maloney (D-N.Y.), the legislation’s sponsor.

The push for added scrutiny began after the Bush administration decided to allow Dubai Ports World, a state-owned company, to operate terminals at six East Coast ports. Critics, mostly Democrats, said the deal raised serious security issues.

In response, Dubai Ports World abandoned the proposal.

The House bill, which had the support of business leaders, adds investment deals involving domestic security and crucial infrastructures to those that must be reviewed by the government.

It also expands the Committee on Foreign Investment in the United States, which investigates such business deals, naming the secretaries of Homeland Security and Commerce as vice chairmen. The committee includes the heads of 13 other departments and agencies.

Under the legislation, the committee must monitor deals involving power plants, water and roads, and the director of national intelligence must review potential threats to national security.

Currently, the committee has 30 days to review a deal. If it decides to investigate, it has an additional 45 days before it must submit the agreement to the president, who has 15 days to review it.

The bill wouldn’t alter the timeline but would mandate a 45-day investigation for investments by foreign governments. It also would require the committee to notify agencies and Congress when its investigations were completed, including legislators whose districts would be affected.

Business groups such as the U.S. Chamber of Commerce and the Organization for International Investment support the bill. Without it, they worry that government regulators would overreact and impose excessive restrictions on foreign investors in the interest of national security.

“Crimping foreign investment and foreign trade would be a bad deal for California,” said R. Bruce Josten, the chamber’s chief lobbyist.

“These are common-sense reforms that will make sure these deals receive adequate scrutiny,” said Rep. David Dreier (R-San Dimas), noting that 5.3 million Americans are employed by foreign companies such as Toyota, which announced plans this week to build a plant in Tupelo, Miss.

“We must recognize that to close ourselves off to the world economy would be to close ourselves off to the prosperity we have enjoyed as a result of those investments,” Dreier said.

The legislation passed 423 to 0, but its fate is uncertain. Although President Bush has indicated he won’t veto it, similar legislation passed the House last year and stalled in the Senate.

Sen. Christopher J. Dodd (D-Conn.), chairman of the Banking Committee, called for a “balanced approach” to fixing the investigation process and promised to raise the issue in coming weeks.

“We need to recognize the important role foreign investment plays in keeping America’s economy strong,” Dodd said in a statement. “But even more importantly, we must ensure that our national defense and homeland security are fully protected.”

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molly.hennessey-fiske@latimes.com