The controversial Dubai port deal has raised concerns about foreigners buying American assets, and not for the first time. Close your eyes and cast your mind back to a bygone era, an ancient time that's difficult for modern man to fathom: 1988. At the time, Japan was an economic juggernaut, swallowing pieces of America like so much maki. Rockefeller Center, Universal Studios, Pebble Beach. "Where will Japan Strike Next?" screamed a typical headline, from Fortune magazine.
We now know that those fears were unfounded. Japan turned out to be a toothless tiger. But in years since, something funny happened, something that doesn't usually make headlines. Other countries have been slowly buying up pieces of America, from American supermarkets owned by the Dutch to American hotels owned by the British. "It's very extensive," says Clyde Prestowitz, president of the Economic Strategy Institute.
Most of these nations are clearly U.S. allies; no one stays up at night worrying about the threat posed by America's biggest foreign investor: Canada. But invariably security concerns do crop up.
"For example, we are dependent on India for much of our software," says Harlan Ullman, a senior advisor at the Center for Strategic and International Studies, a Washington D.C. think tank. "So is that a vulnerability? Is that something we should worry about?"
The answer is not always so simple. Does "national security" mean only protecting against terrorist attacks? Or does it extend to economic and energy security as well?
Some U.S. lawmakers clearly think the answer is yes. They recently squashed China's bid to buy the American oil firm, UNOCAL.
U.S. law prohibits foreigners from owning airlines or TV stations in this country. But any international deal that might pose a security risk is reviewed by an inter-agency panel with the unwieldy acronym of CFIUS-the Committee on Foreign Investment in the United States. One deal that the CFIUS recently approved was allowing a Chinese firm to buy IBM's personal computer business for more than a billion dollars.
It might seem like America is being sold off piece by piece, but some say that is not the case. "The vast majority of foreign purchases in the United States are just pieces of paper," says Douglas Holtz-Eakin, a senior fellow at the Council on Foreign Relations. "They're buying up U.S. Treasury securities. They're not buying actual pieces of America."
True, but those pieces of paper matter. Foreign nations own nearly $2 trillion in U.S. bonds, and that translates into leverage. Some analysts imagine a scenario where China, for instance, uses its leverage to cause real problems in the United States. "The possibility exists that they would get upset with us at some pint and sell dollars," says Clyde Prestowitz. "And if they sold all those dollars right away, the value of the dollar would plummet, interest rates would spike and the U.S. would go into a recession."
That scenario, while unlikely, poses just as much of a national security threat as an Arab company handling security at major American ports, says Prestowitz.
Others, however, say the real problem with keeping vital American assets out of enemy hands is defining the enemy. During WWII and the Cold War, that was fairly simple. Not so in the war on terrorism. "We don't know who the bad guys are, and every time some seemingly good guy tries to buy something of ours we're going to worry there are bad guys behind them," says Holtz-Eakin. "That is part of business as usual in this environment."