Order would ease foreign business security
A draft presidential order on foreign investment in U.S. companies would limit government security reviews and give more power to such pro-business agencies as the Treasury Department, The Washington Times has learned.
The draft order is opposed by the Defense, Justice and Homeland Security departments as contrary to the intent of a law created in response to the uproar that killed a bid by a United Arab Emirates company to operate several U.S. ports.
A memorandum submitted to Treasury by the opposing departments stated that the new legislation is “security focused” but that the draft executive order for the restructuring of the Committee on Foreign Investment in the United States (CFIUS) does not give their three agencies a formal leading role in conducting reviews or investigations.
According to a national security official involved in the debate, “under the proposed order, Treasury will reserve to itself the final power to approve or disapprove foreign acquisitions and mergers.”
The national security official said the memorandum from the three security agencies is a consensus position that includes a list of 11 issues and recommendations that should be added to the executive order to “accurately reflect pro-security interests.”
Copies of the draft presidential order and the memorandum outlining the three agencies’ concerns were obtained by The Times.
The presidential order would provide implementing rules for the Foreign Investment and National Security Act of 2007, which President Bush signed July 26. The law was to go into effect on Oct. 24, but enactment has been delayed by debate over the order, which the president must sign.
The reform legislation grew out of last year’s failed bid by Dubai Ports World to take over operations at six major U.S. ports. The Treasury-led CFIUS initially approved the deal, but it was canceled under pressure from Congress over concerns that terrorists could infiltrate U.S. ports. The law was passed with bipartisan support to tighten security reviews.
In the past, U.S. security agencies in CFIUS could mandate that a foreign purchase of a U.S. company be restricted through a written “mitigation agreement.” Such agreements have put limits on foreign nationals holding director positions of U.S. subsidiaries, required vetting of foreign employees and put limits on access to sensitive U.S. technology.
“That executive order rejects the submissions of security agencies and makes potential mitigation agreements subservient to the CFIUS chairman, who represents trade agencies that have a much more liberal view of what should be permitted,” the official said.
Mr. Bush defended the scuttled Dubai Ports World deal, and critics say he has used enabling regulations to counteract the intent of laws he signed but did not support while Congress debated them.
Among the legal details that give greater authority to Treasury, Commerce and other pro-business agencies, the draft order would give the Treasury secretary the “sole authority” to act on behalf of the CFIUS as its chairman, including issuing regulations to implement the reform legislation, although consultation would be required.
Among the other issues outlined were questions on how Treasury picks an agency to lead a foreignpurchase review, final authority over agreements that are required to prevent the loss of technology to a foreign company as a condition of the foreign purchase and monitoring final mitigation agreements.
The agencies also identified weaknesses in the legal requirement for threat assessments to be done by the Office of the Director of National Intelligence (DNI). The memorandum said the DNI is limited to assessing threats posed by a foreign purchase. Any government agency should be allowed to produce other risk assessments that include reviews of “vulnerabilities” and “consequences” likely to result from a foreign purchase, the agencies stated.
White House spokesman Tony Fratto at first denied that the new executive order would limit the authority of U.S. security agencies. However, when asked to comment on the specific language of the draft order, Mr. Fratto declined to comment, saying he could not talk about internal government discussions.
“The CFIUS committee always works by consensus,” Mr. Fratto said. “If there is no consensus, the matter then goes to the president.”