Prepared Statement of The Honorable Cliff Stearns

CFIUS Reform: H.R. 5337, the Reform of National Security Reviews of Foreign Direct Investments Act

Subcommittee on Commerce, Trade, and Consumer Protection
July 11, 2006

Good afternoon. Our consideration today of HR 5337, the "Reform of National Security Reviews of Foreign Direct Investment Act" is an opportunity for the Committee to exercise its jurisdiction over a bill that has far reaching implications for the economic health and vitality of United States commerce, both domestic and international. Foreign direct investment in the U.S. economy is an essential ingredient in the fuel that powers America's economic engine. Such open investment policy has made the United States a favored destination for foreign direct investment with over $115 billion invested in 2004, supporting over 5 million American jobs found in every state of the union - car manufacturing plants in Ohio, pharmaceutical R&D in New Jersey, or aircraft component production in my home state of Florida. The United States is and hopefully will remain the world's benchmark for open, transparent investment policy that results in better products for consumers, more technological innovation, and a strong and vibrant job market. Moreover, the byproduct of this free and open domestic treatment of foreign investment is that it has tremendous reciprocal benefits in the foreign markets that American companies invest, produce, and sell in. This openness and transparency has enabled American companies to export those principles to the rest of the world, increase prosperity abroad, and in turn, encourage better acceptance and understanding of the American way of life.

The Committee on Foreign Investment in the United States or "CFIUS", as it is more commonly known, has operated for over thirty years as an interagency mechanism designed to flag foreign investment transactions in the United States that could affect our national security. The possibility of a CFIUS review is always a consideration with a foreign investment transaction, and companies generally apply for a review as a matter of good due diligence. Preserving a balanced and transparent CFIUS process is vital to enjoying this open cooperation from companies wishing to invest in the U.S. economy. In practice, CFIUS has operated relatively well, not only empowering the CFIUS committee to scrutinize foreign investment that could have security implications, but also by allowing it to be in a position to counsel companies on how to improve the structure of their transactions to better address national security concerns.

I do, however, believe that the balance that has been struck under the current CFIUS process is capable of being fine tuned. Accordingly, I would like to better understand why the bill designates a permanent CFIUS chair and vice chair and how that new statutory element will help maintain a balanced and collaborative review process. It seems to me that the designation of the Secretary of the Treasury as the as current CFIUS chair through executive order has had a good track record of promoting solid collaboration between the various members of CFIUS. Codifying a chairmanship structure that includes Homeland Security as Vice Chair clearly creates a very strong and broad security component, rather providing a general organizational leadership structure - a structure that has worked well over the years. A chairmanship structure with an extremely broad security portfolio like the Department of Homeland Security COULD have the unintended effect of intimidating legitimate investors from investing their capital in the United States economy; thereby harming our prosperity in the long run. I'd also like to see the chairmanship structure become more transparent and responsive - a proven and effective way to generate substantive collaborative input from all the departments and agencies involved. With this in mind, I'd like to hear panel's thoughts about the idea rotating or changing the leadership structure to better reflect the commercial nature of the transactions subject to CFIUS scrutiny and review, as well as to better balance those issues with the national security focus of the analysis. I think there may be a better way to keep the interagency process balanced, and as a result, further improve the functioning of CFIUS as envisioned by the bill.

In closing, I think HR 5337 is a good bill that would benefit from some relatively minor improvements. As a cosponsor, I support the bill's general approach to facilitate better congressional oversight of the CFIUS process while preserving a balance and transparent review process that avoid politicizing these important issues -- principles that have served the U.S. economy and our world class financial markets extremely well over the years.

Thank you.

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