As you may have heard, the Trump administration is saying méi mén er! (No way! in Mandarin Chinese) to the proposed sale of MoneyGram to Ant Financial of China. A Reuters report states that “the companies decided to terminate their deal after the Committee on Foreign Investment in the United States (CFIUS) rejected their proposals to mitigate concerns over the safety of data that can be used to identify U.S. citizens.”
“The MoneyGram deal is the latest in a string of Chinese acquisitions of U.S. companies that have failed to clear CFIUS, including the $1.3 billion purchase by China-backed buyout fund Canyon Bridge Capital Partners LLC of U.S. chip maker Lattice Semiconductor Corp” and the extension of a deadline for China Oceanwide Holdings Group Co Ltd (0715.HK) planned takeover of Genworth Financial Inc, a U.S. life insurer.
Moreover, it was just last month that Reuters reported “the U.S. Commerce Department … slapped steep import duties on steel products from Vietnam that originated in China after finding they evaded U.S. anti-dumping and anti-subsidy orders.” The report went on to say that the US was not alone in scrutinizing steel imports from Vietnam which appear to be of Chinese origin. “The decision followed a European Union finding in November that steel shipments from Vietnam into the EU also circumvented tariffs,” the report stated.
Sadly, the sale of one of my favorite startups to a Chinese company was not blocked by the feds. Terrafugia, whose mission it is “to create practical flying cars that enable a new dimension of personal freedom,” is now owned by a Chinese company. Here’s a good example of CFIUS being asleep at the wheel, or rudder, as it were. You may not believe there is a future for Jetson like travel, but I do, especially once the FAA declares limited airspace (500 to 1,000 feet elevation) above freeways and highways for such use except within the flight path of military, emergency, commercial, and private aircraft. So, the only American company in this space and which may represent the next Boeing or Tesla is now owned by a company whose mother country is not an official ally of ours. I suspect there would be greater concern shown toward a proposal by Jerry Jones to sell the Dallas Cowboys to a group led by Vladimir Putin than has been shown toward the sale of a future crown jewel in the aerospace industry.
It’s about time we began protecting US interests beyond growing an economy based on business deals and sale of property to foreign nationals whose mother countries are not official allies of the US. While the short-term benefits of such deals looks attractive, the national security and social ramifications have not been give their due. Why build an economy whose foundation is in part or substantially built on geopolitical quicksand. In other words, if it turns out that sooner or later we have irreconcilable national security issues with the likes of China and Russia, what then? Likewise, for US countries that invest in countries that are not our allies, at a time of war, heaven forbid, how are the respective board of directors to reconcile the differences when so much capital is at risk? Will financial interests or national security interests win out?
I realize that taking this position will make me unpopular in some circles. But please spare me the spurious xenophobic accusations. I have good friends who represent just about every major ethnicity and religious tradition. And with regard to China in particular, I have a beloved niece who is my god-daughter and was born in China. I do not fear or hate any nation and its people although I have a healthy degree of skepticism for the intentions of every foreign nation especially those which have not demonstrated a high regard for such things as universal human rights. I also have a high regard for our national sovereignty and security without which this shining city on the hill would soon follow the way of Rome, a once great nation that left its national security guard down once too often and allowed other cancerous conditions to persist within its borders.
Furthermore, does it make good sense for us, our kids, and grandkids to compete with foreign nationals when buying homes and businesses? Again, don’t get me wrong. While I consider myself a strong patriot, I’m not an ultranationalist. On the contrary, I’m a free market guy who believes that international trade and relations are generally to be promoted as long as they are subordinated to constitutional and national security interests. Nevertheless, I do think it’s high time we have a national conversation about who should own American assets and under what preconditions.
I’m a free market guy who believes that international trade and relations are generally to be promoted as long as they are subordinated to constitutional and national security interests. Nevertheless, I do think it’s high time we have a national conversation about who should own American assets and under what preconditions.
I also think that one of the preconditions should be the foreign buyer and his, her, or its funding sources must originate from a nation which has been officially declared to be an ally of the US by a vote of Congress, not by politically appointed officials at the White House or the State Department. The same standard should apply when issuing visas including student visas. In other words, a favored nation of ours should only be those who have been designated as official allies of ours.
Currently, this situation is a mess. Just try to quickly find a list of our official allies from any federal source including the State Department and the CIA. Does this make any sense at all except to the misguided, historically deprived, borderless one world types?
However, taking a harder stance on international relations is not without some very vexing problems. One of which is that China and Russia are among the nations that hold the highest reserves in what are called rare earth metals. According the US Energy Department, “many of the fastest growing clean energy technologies, from batteries to solar panels to magnets, are made with materials that have unique chemical and physical characteristics, including magnetic, catalytic and luminescent properties. These materials — which include some rare earth elements and are often called critical materials — are essential to the clean energy economy and are at risk for supply disruptions.” The accompanying map shows “countries with significant supplies of rare earth elements, and existing mines, deposits, and occurrences of rare earth elements.” Here’s a report that provides relevant statistics on a percentage basis.
Naturally, this means that any approach to revising our international trade policies and legislation should be done prudently and soberly. After all, the technological tail seems to be wagging the dog, so a swift about-face may have consequences about which the American people and our allies need to be fully informed.
As a business leader, how willing would you be to voluntarily permit one of your chief competitors to buy a portion of your company or a valuable subsidiary of it? Of course most of us with our wits about us would say, nyet! Why should your view, and our national policy, be any different with regard to who we allow to own American assets?
Disclosure: The author is an investor in stocks of companies within the rare earth mining industry.
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