Three Threats: An Analytical Framework for the CFIUS Process (Policy Analyses in International Economics)

Foreign direct investment is a vital part of the US economy, but it periodically raises public and congressional alarms. Under what conditions might a foreign acquisition of a US company constitute a genuine national security threat to the United States? What kinds of risks and threats should CFIUS (Committee on Foreign Investment in the United States) analysts, strategists, and congressional overseers be prepared to identify and deal with? To tackle this problem strategically, Three Threats classifies the potential threats into three distinct categories. The first category of threat is the potential for US dependency upon a foreign-controlled supplier who provides goods or services essential to both the US economy and the operation of the defense industrial base. The second category of threat is a proposed acquisition that would allow transfer of technology or other expertise to a foreign-controlled entity. In turn, this technology might be deployed by the entity or its government in a manner harmful to US national interests. The third category of threat is a proposed acquisition that would allow insertion of potential capability for infiltration, surveillance, or sabotage--via a human agent or nonhuman agent-- into the provision of goods or services crucial to the functioning of the US economy, including defense industrial activity. This book looks at real-life cases and concludes with a critical examination of analytical tools that might aid CFIUS deliberations, namely, the Herfindahl-Hirschman concentration index as used in antitrust cases and strategic trade theory.