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Economists call foreign investment a necessity
Richmond Times-Dispatch

March 21, 2006

WASHINGTON - In George Washington's hometown of Alexandria, Va., a German firm operates the municipal water supply.

A French company runs the water and sewer plants in rural Reidsville, N.C.

Across Kentucky, electric customers plug into the world's second-largest utility firm, which is based in Germany.

By summer, drivers in Indiana will pay tolls to a Spanish-Australian partnership.




In a global economy, it's hard to "buy American."

Foreigners own significant parts of America's infrastructure - the web of electric and gas lines, telecommunications, water, sewer, roads and other services that make daily living possible. No one knows exactly how much.

Economists say foreign investment in the United States is not only a fact, it's a necessity.

Proponents of foreign ownership point to the 5.3 million Americans who work for foreign firms and are paid nearly $318 billion annually. This is "insourcing" - the opposite of outsourcing U.S. jobs overseas.

If politicians ban or restrict foreign investment, Heritage Foundation's James Carafano said, "They're going to destroy the American economy."

If Congress places higher barriers on foreigners who want to invest in the United States, foreign firms and governments could pull out a large chunk of the $1.5 trillion they now have in American firms, analysts warn.

And, other countries are likely to retaliate by restricting U.S. investments, said Dan Ikenson, a trade-policy analyst at the libertarian Cato Institute.

Already, many Third World countries restrict foreign investment, said Heritage's Carafano. "Do they want us to act like Venezuela?" he said, referring to that country's socialist-leaning government.

A poll by the Organization for International Investment last month found that three-fourths of registered voters believe foreign investment in U.S. companies is beneficial to the American economy.

"This poll shows that Americans are still aware that foreign direct investment - or insourcing - makes an important contribution to the U.S. economy," said Todd Malan, the organization's president. The group represents international companies with U.S. subsidiaries.

The federal Committee on Foreign Investment in the United States is responsible for approving foreign acquisitions, like DP World's port deal. Proponents of foreign investment caution against drastic changes to the agency.

"The system is not failing, it's the best we got," said Cato's Ikenson.

He suggested minor changes in the system to force compliance, set fines and give veto power to the Pentagon and departments of Homeland Security and Justice.

America can have national security and foreign investors, argued Heritage's Carafano.

"It's guns and butter, stupid," he said. "Not guns or butter."


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