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Foreign Investment and U.S. National Security

by Jonathan Masters
September 27, 2013

A cleaner wipes the glass door of a Huawei office in Wuhan, Hubei province (Courtesy Reuters). A cleaner wipes the glass door of a Huawei office in Wuhan, Hubei province (Courtesy Reuters).


The United States is both the world’s largest foreign direct investor and the largest beneficiary of foreign direct investment (FDI). But like every sovereign country, it has sought to temper its embrace of open markets with the protection of national security interests. Achieving this balance, which has shifted over time, has meant placing certain limitations on overseas investment in strategically sensitive sectors of the U.S. economy.

The Committee on Foreign Investment in the United States was established in 1975 to review acquisitions of U.S. firms by foreign entities that could erode national security. Recent political opposition to some high-profile foreign investment activity, including the 2006 Dubai Ports World controversy, has fed a perception among some that the United States has stepped back from its open-door policies. The federal government, however, reviews only a small fraction of the hundreds of annual foreign acquisitions, and it blocks transactions in only the rarest of cases. In a record-setting deal, CFIUS approved the sale of Smithfield Foods to Shuanghui International Holdings Ltd. in September 2013, the largest Chinese purchase of a U.S. company in history.

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