Balancing Antitrust and National Security Impacts of Foreign Investment in the U.S.

We are in a world where U.S. pursuit of antitrust objectives through a policy of encouraging foreign direct investment is far more complex. On the one hand, public policy toward foreign direct investment increasingly must carefully balance significant tradeoffs: the potential benefits of greater competition with the heightened risks to national security. On the other hand, Washington has been moving in a direction where such tradeoffs are seen as illusory: some U.S. policy makers judge the loss of competition, itself, as constituting a threat to national security. This was largely the case in the 1980s when Japan was in the sights of U.S. international economic policy. Today, however, Washington is dealing with a far more combustible mixture: unlike Japan, a liberal democracy, China is neither liberal nor a democracy. The challenge now before U.S. policy makers is thus how to deal with foreign direct investment from a country that is viewed as presenting a combination of threats to competition and national security. Effectively confronting that challenge requires a new analytical framework that provides a decision-making calculus to maximize the chances of achieving a balance by distinguishing between new domestic entrants versus new foreign entrants.

By Harry G. Broadman^[1]

I. CHANGES IN THE ANTITRUST-FOREIGN INVESTMENT NEXUS

For decades, U.S. policy toward foreign direct investment was one of the most liberal in the world. Indeed, most Presidents, often soon afte