President Bush yesterday signed a new executive order on foreign investment that gives the Treasury secretary, instead of the president, key power to authorize or reject purchases of U.S. companies by foreign buyers.
The president said the order bolsters recently passed legislation by ensuring the Treasury-led Committee on Foreign Investment in the United States (CFIUS) "will review carefully the national security concerns, if any, raised by certain foreign investments into the United States."
At the same time, Mr. Bush said, the order recognizes "that our openness is vital to our prosperity and security."
Homeland Security Secretary Michael Chertoff said his agency is "happy with the final order."
"I think it creates a process that will achieve the dual objectives of promoting investment but making sure we don't compromise our national security," Mr. Chertoff said from Switzerland.
The legislation and order are a result of a bid in 2006 by United Arabs Emirates-based Dubai Ports World to take over operation of six U.S. ports.
CFIUS approved the purchase but it later was canceled under pressure from Congress over concerns that terrorists might infiltrate U.S. ports through the company. Critics questioned the deal because two of the September 11, 2001, hijackers were UAE nationals, and the Persian Gulf state was used as a financial base for al Qaeda.
Rep. Carolyn B. Maloney, New York Democrat and a key sponsor of the CFIUS-reform law, called the new order a positive step.
"I remain confident that the Treasury Department intends to follow the law as I wrote it, and have received assurances that the department is already adhering to the new reforms," she said.
The order outlines more clearly the role of the director of national intelligence (DNI) in providing CFIUS with threat assessments posed by a foreign purchase and adds a requirement for the DNI to assess "potential consequences" of a foreign deal involving a U.S. company.
However, a comparison of the new order with a draft order from October — which was opposed by U.S. national security officials — shows that CFIUS will continue to be dominated by pro-business elements of the government.
As late as last month, national security officials from the Homeland Security, Justice and Defense departments expressed concern the order was being co-opted by pro-business officials at Treasury, Commerce and other trade agencies.
A memorandum from the three national security agencies obtained by The Washington Times called for tightening the draft order's national security provisions to "accurately reflect pro-security interests."
The final order released by the White House yesterday removed a provision that would have required the committee to "monitor the effects of foreign investment in the United States."
One new authority in the order is a provision strengthening so-called "mitigation agreements" between companies. The agreements are designed to reduce the national security risks as a condition for committee or presidential approval.
The order states that companies involved in a U.S.-foreign transaction "in extraordinary circumstances" can be required to state they will comply with a mitigation agreement.
CFIUS currently is reviewing a proposed merger between the telecommunications equipment manufacturer 3Com and China's Huawei Technology, a company linked in the past to illegal international activities, including violations of U.N. sanctions on Iraq and industrial espionage against U.S. and Japanese firms.
U.S. officials said a review by the DNI's office determined the Huawei purchase, through the Boston-based Bain Capital Partners, would undermine U.S. national security.
3Com manufacturers computer intrusion-detection equipment used by the Pentagon, whose networks are a frequent target of Chinese military computer attacks.
Treasury Secretary Henry M. Paulson Jr. recused himself from CFIUS' 3Com-Huawei review because his former company, Goldman Sachs, is a paid adviser to 3Com.