Scrutiny of foreign deals urged

Lawmakers would improve screening of purchases of U.S. firms by overseas investors


WASHINGTON -- President Bush is coming under growing pressure to toughen the government's scrutiny of future transactions, as the furor continues over an Arab firm's purchase of some U.S. port operations, including in Baltimore.

Lawmakers in both parties are advancing proposals that would overhaul the way the government screens acquisitions of U.S. firms by foreign investors. Among the changes being considered: barring foreign purchases of critical U.S. infrastructure and giving Congress power to veto deals it believes might weaken national security.

For now, Bush, as president, has the authority to rule on foreign investment matters. But the backlash against the Dubai Ports World deal could give momentum to efforts that would, for the first time, give Congress a hand in making those decisions.

At the same time, a debate is brewing over how to balance U.S. dependence on foreign investment against the national security risks that have taken on greater urgency since the Sept. 11 attacks.

Yesterday, lawmakers said reform of the review process was needed.

The problem is "the committee that conducts the review is weighed toward the Treasury Department," said Sen. Susan M. Collins, a Maine Republican who is chairwoman of the Senate Homeland Security Committee.

Collins and Sen. Patty Murray, a Washington Democrat, will make a fresh push today for their legislation aimed at improving the security of unchecked cargo containers that enter U.S. ports.

"I think we need to scrap the committee, start again, constitute it within the Department of Homeland Security," said Collins, who spoke on ABC's This Week. "The process now is deeply flawed."

Rep. Duncan Hunter, a California Republican and chairman of the House Armed Services Committee, said on This Week that he wants to scuttle the Dubai deal and then require foreign governments to divest from critical U.S. installations unless they pass a review by the departments of defense and homeland security.

Democratic Sen. Evan Bayh of Indiana, a potential 2008 presidential candidate, wants to require a high-level intelligence assessment of any foreign purchase of a U.S. firm. He would also force the president to inform members of Congress, state officials and the public of any such deal, lifting the secrecy that cloaks the process.

"Up until now, it's been too much of the free-trade agenda and not enough of our nation's national security interests," Bayh said.

Bayh and others contend that the case of Dubai Ports World - the government-owned firm whose purchase of British-owned Peninsular & Oriental Steam Navigation Co. would allow it to operate at six U.S. ports - shows that the arcane, closed-door process by which the government reviews such deals is broken.

National security concerns are swept under the rug, these critics allege, in the interests of smoothing the path for commerce. But senior lawmakers in both parties want assessments of potential threats to weigh more heavily in the reviews.

Defenders of the current system warn that U.S. economic and foreign policy interests would suffer if Congress makes it more difficult for such transactions to go through. They argue that the process has successfully identified and resolved national security problems, and that changing the rules - by lengthening audits, giving security officials a larger role, or divulging proposed business transactions to Congress - would reduce crucial foreign investment in the U.S. economy.

The conflict has sparked an intense lobbying effort by business groups and multinational firms, which fear that any changes could hurt their bottom lines.

"We're active," said Stephen Canner of the U.S. Council for International Business, a coalition of major U.S. corporations. "This is going to become an important issue for business."

The intensity of the outcry over the DP World deal has prodded the Bush administration to acknowledge problems with the system, and commit to working with Congress to fix it.

But Bush is unlikely to embrace sweeping changes that give Congress more input, substantially slow the process, or interfere with his power to have the last word on foreign investment.

Administration officials "want to communicate better with Congress and make sure that they have full confidence in the process," said Tony Fratto, a Treasury Department spokesman who declined to comment on any specific proposals. "Balancing that is that there are responsibilities that the executive carries out, and we need to be respectful of that."

As recently as last fall, top officials defended the reviews and resisted efforts to change them.

The port debate is "a blessing in disguise, because what it means now is that Congress is going to rewrite this law. It's clear that [Bush administration officials] realize that they're going to get reform, whether they want it or not," said Patrick A. Mulloy, a Clinton administration trade official and former congressional aide who helped craft the current law.

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