Foreign Investment:

Analyzing National Security-Related Investments Under the Exon-Florio Provision

T-GGD-92-49: Published: Jun 4, 1992. Publicly Released: Jun 4, 1992.

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GAO discussed the administration's national security reviews of proposed foreign acquisitions. GAO noted that: (1) the Interagency Committee on Foreign Investment in the United States (CFIUS) develops information, on a case-by-case basis, about each proposed foreign investment to determine the existence of a threat to national security; (2) even when it has identified an investment's link to national security, CFIUS has experienced difficulty in applying the authorizing legislation for blocking such investments; (3) problems in defining national security, applying a credible evidence criterion, and the inadequate protection provided by other laws have exacerbated the process; (4) the President has blocked an investment in only 1 of over 700 cases that CFIUS has considered; (5) CFIUS believes that it does not have the authority or capacity to monitor or enforce assurances that foreign investors maintain production and research in the United States; (6) CFIUS is not set up to examine such related issues as the preservation of certain industries and technologies for U.S. ownership, why U.S. companies are not pursuing certain high-technology sectors, the extent and direction of technology flows resulting from foreign acquisitions, and the erosion of U.S. leadership in defense technology; and (7) CFIUS lacks detailed knowledge of international partnerships involving technology transfers similar to those possible under foreign direct investments.

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