The New Protectionists

Artigo no Opinion Journal

What's especially dangerous here is that we're seeing the re-emergence of the "national security" protectionists. They were last seen in the late 1980s, when Japan in particular was the target of a political foreign-investment panic. The Japanese were buying Pebble Beach and Rockefeller Center, and so America was soon going to be a colony of Tokyo. A Japanese bid for Fairchild Semiconductor of Silicon Valley was seen as a threat to American defense. Those fears seem laughable now. But here we go again, with new targets of anxiety.###

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In recent weeks Members of Congress have suggested that the foreign-ownership ban should apply to: roads, telecommunications, airlines, broadcasting, shipping, technology firms, water facilities, buildings, real estate, and even U.S. Treasury securities. If this keeps up, we'll soon arrive at France, where even food and music are "protected" from foreign influences as a matter of national survival.

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Another term for this foreign investment is "insourcing." Foreign capital creates wealth and jobs here, rather than in India, China or Japan. Thanks to net foreign investment, about one-in-twelve American manufacturing workers are now employed by a foreign-owned firm. Toyota recently invested $800 million in a new plant in San Antonio that will employ 2,000 workers.

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More broadly, U.S. economic and defense security are intertwined. Imagine the threat to American well being if investment capital were trying to flee the U.S. because it believed opportunities were better elsewhere. Meanwhile, the interdependence that comes with foreign investment also gives those investors a stake in both American success and security. Are the Gulf emirates more, or less, reliable as U.S. allies because they invest their petrodollars in American assets? We'd say more. And, of course, foreigners who invest in the U.S. also help finance the military that keeps us safe.

The Dubai episode has been a debacle of the first order, and while the Beltway is toting up winners and losers, the rest of the world is shaking its head and wondering what's going on. The world's largest economy and its ostensible political leader seems to be sneering at the very foreign investment that has been crucial to its prosperity. Let's hope it was a momentary hallucination, and not the start of a larger protectionist binge.