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The Pluses and Minuses of Foreign Investment in the United States
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12514 |
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Section : |
CURRENT ISSUES
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7 / 1987 |
3,565 Words |
| Author
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Wiliam C. Freund
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When the giant Japanese semiconductor firm Fujitsu announced plans to pay $220 million to acquire 80 percent of Fairchild Semiconductor, Commerce Secretary Malcolm Baldrige and Defense Secretary Caspar Weinberger appealed to the president to stop the deal. They argued that we should not allow the Japanese to take over an essential American defense facility and make ourselves dependent on the goodwill of a foreign nation. Lost in the rhetoric was the fact that Fairchild was already owned by Schlumberger Limited, a French company. Apparently, Americans are more sensitive to Japanese than European ownership. The Fairchild merger was called off.
The shoe was on the other foot when the U.S. oil giant Amoco recently bid for ownership of Dome Petroleum, a Canadian oil company. Canadians are no less emotional when it comes to foreigners buying their companies. There was much debate about whether Canadian oil companies as big as Dome should be allowed on the international auction block. The issue became highly political when the liberal party campaigned for a Canadian rather than foreign takeover of Dome. American capital was put on notice that it was not welcome.
International buyouts are becoming commonplace. In the decades from the 1950s through the 1970s, acquisitions were mostly by U.S. companies expanding abroad and becoming multinational. Again, the shoe is on the other foot, with foreigners keeping the investment pot boiling here.
Recent examples of foreign acquisitions in the United States include the $2.8 billion cash purchase of Celanese by the German chemical giant Hoechst, the $1.3 billion takeover of Big Three Industries by France's L'Aire Liquide, and the $240 million buyout of Dunlop Tire Corporation by Japan's Sumitomo Rubber Industries.
Foreign firms are on a U.S. buying spree for a variety of reasons. With the dollar down sharply in foreign markets, foreigners can buy U.S. companies at discount prices. Foreign firms like the stability and growth prospects of business in America. They look at the huge size of out market and want to participate in it. And often they seek to gain a foothold in the domestic market to avoid being shut out by a rising pitch of protectionist laws.
There is another reason for proliferating international ownership. It may sound trite, but the world is shrinking. From auto companies to Wall Street bankers, products and services are increasingly marketed worldwide. And with international marketing comes overseas ownership of properties and production facilities.
A walk down Main Street
When World War II ended, American firms embarked on a vigorous campaign to eradicate artificial geographic borders limiting the market for their products and services. We spoke longingly of "one world." To a remarkable degree, U.S. industries were successful in penetrating foreign markets. U.S.-owned factories overseas are less visible than retail banks and brokers. A walk down Main Street in most European cities - from Frankfurt to Zurich to London - brings into view many American banks and brokers, from Chase to Citicorp, from Bache to Merrill Lynch.
At the end of 1985, Americans owned more than $822
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