Business marshaling opposition to foreign-deal rules changes

This week is a critical time for lobbyists working to overcome growing tension between the administration and members of Congress over changes to the governmental panel that evaluates foreign business deals for national-security risks.

This week is a critical time for lobbyists working to overcome growing tension between the administration and members of Congress over changes to the governmental panel that evaluates foreign business deals for national-security risks.

Lobbyists for top multinationals have been wary of lawmakers claiming more control over the Committee on Foreign Investment in the United States (CFIUS) since Congress started scrutinizing the obscure interagency group more closely this summer. At the time, months of anti-China rhetoric on the Hill erupted into concerns over whether CFIUS would sign off on a Beijing-controlled oil company’s offer to buy Unocal, helping the Chinese gain a handle on worldwide oil reserves.

Senate Banking Committee Chairman Richard Shelby (R-Ala.) asked the Treasury Department, which heads the 12 executive-branch divisions that make up CFIUS, to testify before his committee on the secretive risk-evaluation process. Treasury canceled two dates before agreeing to appear Thursday, leaving a coalition of Washington’s top trade associations to carry the administration’s water and argue against changing CFIUS.

“We wanted to make sure that the business community’s experience with CFIUS was part of the dialogue,” said Todd Malan, president of the Organization for International Investment (OfII). The OfII and 10 other associations, including the Business Roundtable and U.S. Chamber of Commerce, wrote to Shelby and Sen. Paul Sarbanes (D-Md.), the Banking Committee’s top Democrat, urging them not to tinker with the law that empowers CFIUS to stop potentially damaging foreign acquisitions.

“If the United States is viewed as becoming hostile to foreign investment, we put at risk U.S. firms who operate in foreign markets and the 5.3 million jobs in America insourced by foreign companies,” the lobbying groups wrote.

The OfII added the term “insourcing” to the Hill’s lexicon last year as a way to reframe increasingly negative characterizations of free-trade policies related to “outsourcing.”

Bruce Josten, the Chamber’s top lobbyist, objected to the many suggested alterations, including the removal of CFIUS from Treasury’s purview and a proposed amendment by Shelby and Sen. James Inhofe (R-Okla.) that would allow Congress to reject CFIUS approvals.

“It would be a politicization of the process by individual members of Congress who are not going to look at the entirety of the impacts on U.S. capital markets,” Josten said. “Coupled with that, the reality that when you’re looking at billion-dollar mergers, time is money. It gets to be an expensive process.”

But Shelby and other lawmakers seemed unfazed by business objections. Shelby’s concern over Treasury’s absence from his first hearing escalated to frustration when Sarbanes noted some anonymous quotes from an administration official critical of a Government Accountability Office (GAO) report recommending that Congress step up its oversight of CFIUS.

“National security cannot take a back seat to world trade. Everything in America is not for sale,” Shelby said. “I’m very supportive of the president, I trust the president, but we in Congress have a role to play here. I’d never cede all congressional power to the executive, no matter who the president is.”

Treasury spokesman Taylor Griffin reiterated the administration’s strong opposition to changing CFIUS’s current structure, pointing to the five high-level agency officials testifying Thursday as evidence of the issue’s high priority at the White House.

“We believe our first priority should be protecting the national security of the American people,” Griffin said. “An important aspect of national security is having a strong economy,” a strength he said CFIUS currently ensures.

Treasury officials have privately offered to set up confidential briefings with lawmakers to give them a closer look at CFIUS’s internal deliberations, as an alternative to legislating. Business lobbyists want senators to weigh the offer.

“The Treasury offer … would seem to meet the concerns of Shelby and others with regard to CFIUS operations,” said Stephen Canner, vice president at the U.S. Council for International Business. Congressional veto power over national-security evaluations, he said, “is absolutely a bad idea. The law says this is the call of president.”

Chevron’s support of the “buy American” argument in its campaign against the Chinese National Offshore Oil Corp.’s Unocal bid left some lobbyists leery of a possible chilling effect on foreign companies’ interest in doing business in the United States. Several lobbyists invoked the recent French uproar over Pepsico’s potential takeover of Groupe Danone, the prized French-owned yogurt company.

While Pepsico denied it was planning an offer, Danone’s stock price rose along with the rumors, only to dip back after the French government hinted that it would act against the deal to preserve the nation’s proprietary interest. Similarly, Chevron’s congressional allies and other House members disturbed by unchecked Chinese power worked to kill Beijing’s Unocal bid before CFIUS had a chance to examine it.

“If companies have to consider their lobbying strategy when considering whether to buy a company, that’s a whole different ball of wax,” said a lobbyist for one of the trade associations that signed the letter. “If it becomes politicized, a business can try to accomplish on the Hill what it couldn’t accomplish in the marketplace.”

The White House has used its authority to divest an acquired company from its new owner only once, in 1990, according to the GAO report. Four hundred seventy proposed deals have been referred to CFIUS between 1997 and 2004, 451 of which led to successful acquisitions.

Canner, a former staff director of CFIUS in the late 1980s, said the statistics failed to make the GAO’s case for a stricter definition of national-security risks in the context of business ownership.

“You want to maintain flexibility for the president. If you have a bright-line test [to define a risk],” Canner said, “clever people will find a way to work around it.”

In addition to Shelby, Sarbanes and Inhofe, Sen. Evan Bayh (D-Ind.) is an especially active proponent for greater transparency in CFIUS reviews. Bayh acknowledged that foreign interests have used CFIUS’s existence to prevent U.S. companies from making direct investments in their countries, but he predicted that corporate lobbying efforts would be unlikely to dissuade members of both parties from continuing to press for reopening the CFIUS statute.

“The Chamber of Commerce is a patriotic organization. They’ll support reevaluating the process,” Bayh said.

As for the absence of Treasury and other CFIUS member agencies from the Banking hearings, he added: “It indicates to me that maybe they don’t believe their position is sustainable.”