Curbing Foreign Control
Should a foreign company be allowed to acquire an American defense firm? Congress and President Bush are wrestling with that complicated question, which plays off U.S. national security interests against the nation’s free-trade doctrine.
The issue arises in the bid by Thomson-CSF S.A., a French arms maker, to acquire the missile-producing business of LTV Corp. Thomson-CSF is one of the world’s largest military manufacturers. A New York judge who is overseeing LTV’s bankruptcy picked the French company’s bid over an American offer, from Martin Marietta Corp. and Lockheed Corp.
An interagency committee representing the Defense, Commerce, State and Treasury departments is preparing its recommendation for the President concerning the sale. Meanwhile, several bills to block the acquisition by Thomson-CSF are before Congress.
Dallas-based LTV is the nation’s 17th-largest defense contractor. It supplies both the Pentagon and NASA. Among its projects are a planned space station and an Army tactical missile system. Thomson-CSF is 58% owned by the French government. Its record of selling arms to Iraq and a number of other anti-Western countries in the Middle East has raised concerns in the United States.
At a hearing last Thursday, Joseph E. Kelley, director of security and international issues for the General Accounting Office, said he would recommend against the sale because of the danger that sensitive American military information could leak to the French parent company.
In May, the Defense Department notified Thomson-CFS that the Pentagon would insist on a proxy agreement or voting trust--which limits the involvement of French directors on an LTV board--before clearing the sale. Thomson-CFS rejected that demand. However, negotiations are continuing.
Legitimate security concerns cast a long shadow over the proposed sale of LTV. Free-trade supporters might argue that blocking the deal is counter to an open-market policy. But the United States has long had a policy against even the American government owning U.S. defense firms. In the absence of firm safeguards, it makes sense to extend that policy to a foreign government.
