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CFIUS AND THE ROLE OF FOREIGN DIRECT

INVESTMENT IN THE UNITED STATES

HEARING

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC AND INTERNATIONAL 

MONETARY POLICY, TRADE, AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 27, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–89

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

CAMPBELL, JOHN, California 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE, AND

TECHNOLOGY

DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair 

JAMES A. LEACH, Iowa 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

MARK R. KENNEDY, Minnesota 

KATHERINE HARRIS, Florida 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

CAROLYN B. MALONEY, New York 

BERNARD SANDERS, Vermont 

MELVIN L. WATT, North Carolina 

MAXINE WATERS, California 

BARBARA LEE, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

LUIS V. GUTIERREZ, Illinois 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

JOSEPH CROWLEY, New York 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

April 27, 2006 ................................................................................................... 1

Appendix: 

April 27, 2006 ................................................................................................... 37

WITNESSES 

THURSDAY, APRIL 27, 2006

Anderson, Jeffrey M., Executive Director, Virginia Economic Development 

Partnership ........................................................................................................... 12

Evans, Donald L., Chief Executive Officer, The Financial Services Forum ....... 8

Tarullo, Daniel K., Professor of Law, Georgetown University Law Center ........ 13

Vikner, Paul L., President and CEO, Mack Trucks, Inc. ..................................... 10

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 38

Anderson, Jeffrey M. ........................................................................................ 40

Evans, Donald L. .............................................................................................. 50

Tarullo, Daniel K. ............................................................................................. 56

Vikner, Paul L. ................................................................................................. 71

(1)

CFIUS AND THE ROLE OF FOREIGN DIRECT 

INVESTMENT IN THE UNITED STATES 

Thursday, April 27, 2006

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON DOMESTIC AND

INTERNATIONAL MONETARY POLICY, TRADE, AND TECHNOLOGY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 11:02 a.m., in room 

2128, Rayburn House Office Building, Hon. Deborah Pryce [chairwoman of the subcommittee] presiding. 

Present: Representatives Baker, Pryce of Ohio, Kelly, Manzullo, 

Neugebauer, McHenry, Waters, Maloney, Sherman, Crowley, Bean, 

Wasserman-Schultz, and Blunt. 

Ex officio present: Representatives Oxley and Frank. 

Chairwoman PRYCE. The Subcommittee on Domestic and International Monetary Policy, Trade, and Technology is now called to 

order. This is a hearing on CFIUS and the Role of Foreign Direct 

Investment in the United States. I’ll begin with my opening statement, and then we’ll use the Greenspan rule, which we’re going to 

have to soon rename. And I’ll allow Mrs. Maloney and our two 

chairmen to give opening statements. 

I’m very pleased to welcome all of you here today. I’d like to 

thank our witnesses once again, and I appreciate the opportunity 

to discuss with you the CFIUS process and the role of foreign investments in the United States. 

Over the last few years, we have heard much on the CFIUS process, and some transactions that have given pause to many Americans. Since 9/11, Congress has taken a strong position on the importance of national security by strengthening our ports of entry, 

increasing benefits for our men and women in uniform, and protecting our troops to ensure that our country remains safe. 

In a post-9/11 world, Congress operates under heightened awareness when it comes to all aspects of national security. National security, however, is not mutually exclusive of economic security and 

trade. While strengthening our security, we have also continued 

our work to strengthen our relationships and open markets with 

nations abroad, nations like India and China. These countries have 

a growing appetite for foreign goods and products, American products, and American investment. 

In the late 1990’s, China began loosening its regulations on companies wanting to invest and build. India, a country whose economy is reportedly growing at 8 percent a year, had started to open 

2

its markets to foreign investment after years of negotiations. American companies, brand names that we all recognize, like Nike and 

Budweiser, have grown exponentially because of these markets 

opening up, and growing American companies means a growing job 

force here at home. 

At a time when the rest of the world is moving forward, some 

here in Congress are talking of taking a step back. Congress has 

no greater obligation than to protect our homeland. Our national 

security is paramount above all else, but we cannot let our national 

security concerns morph into economic protectionism that views 

foreign investment as inherently bad. I’m concerned that 

Congress’s quick and politically heated reaction to a disappointing 

misstep by our Administration will lead to a decrease in international trade and foreign investment. 

In Ohio, we have seen the benefits of welcoming companies like 

Siemens, Sodexho, Honda, Lexus, Nexus, and many other global 

companies. Honda of American Manufacturing, a U.S. subsidiary of 

the Japanese-based Honda Motor Corporation, has become the 

largest auto producer in Ohio. Honda began United States production in 1979, initially investing $35 million in Marysville, Ohio. 

Honda announced a new $123 million paint facility in Marysville, 

and to date, has invested $6.3 billion in my State. 

Honda’s North American plants purchased more than $6.5 billion 

in parts from 150 Ohio suppliers in 2005 alone. In 2004, Honda 

produced nearly 645,000 Accords, Civics, Elements, and Acuras in 

its Ohio facilities. It employs 8,500 people in my district alone. 

That is one good example of foreign investment in this country. 

When a foreign company looks to invest in the United States, 

they are looking to grow their business, and that equals growing 

jobs in this country. A Wall Street Journal report on April 21st 

said that in an annual report on its survey of multinational corporations, the U.S. Department of Commerce said foreign firms 

other than banks doing business in the United States employed 

nearly 5.1 million employees in 2004, slightly less than 1 of every 

20 workers in our private sector. 

Since the Dubai Ports transaction, the posturing of some of those 

in our government has been to limit the role of foreign investment. 

Legislation has been passed and discussions in the press have led 

to a backlash in markets from Russia, China, India, and Mexico. 

India has just lowered investment retentions. Now they’ve voted to 

raise them again. The U.S. Chamber of Commerce recently noted 

that the Mexican Senate approved legislation that would create 

longer review periods, or that would bar foreign investment in specific sectors, such as transportation and telecommunications. 

In Russia, President Putin has also proposed to limit foreign investment in key sectors, and there has been an explicit link to U.S. 

actions made by the economy minister as a justification for these 

new limits. 

This issue of reforming CFIUS has the potential to undercut the 

United States’ longstanding support for capital market access and 

free movement of capital. We must continue to focus our efforts on 

securing our Nation while remaining committed to free trade as 

one of the greatest engines of prosperity. 

3

In recent weeks, Treasury has made strides in Congressional notification of pending deals that could potentially affect national security, but a wake-up call is simply not enough. More still needs 

to be done to ensure that a Dubai Ports World situation does not 

happen again. 

When questions of national security or foreign government ownership arise, accountability is clearly needed. Clear standards of 

Congressional notification need to be set, and the President should 

remain the final judge for the most consequential deals. 

This subcommittee has oversight of CFIUS. We have already 

held one hearing prior to today, and will continue to assess the 

process as we work on both sides of the aisle to draft legislation 

to reform the process of CFIUS with greater accountability. We 

want the American people to have more information about oversight and protections that are in place to determine if foreign investment is in the best interest of the United States’ national security. CFIUS is in place to evaluate these risks, and my subcommittee is exercising its oversight of this process. 

In a world entwined by global companies, it’s important that we 

continue to protect U.S. national and economic security while promoting foreign investment. This issue touches every American who 

wants to know that each day, they wake up safe. 

I look forward to hearing our witnesses’ testimony, and I yield 

back the balance of my time and recognize my good friend, the gentlewoman from New York, Mrs. Maloney. 

Mrs. MALONEY. And I thank the gentlelady for yielding and for 

her leadership on this and on so many issues, and for working constructively with all members of the committee, including Democrats, for steps forward in safety and soundness in our financial 

markets. I would also like to welcome all the panelists, particularly 

former Secretary of Commerce Evans. We worked together on the 

census, the accurate count, and other areas. It’s good to see you 

again. 

I would just like to say very briefly, while the immediate pressure to resolve the Dubai Ports fiasco has been lessened, we simply 

cannot pretend that the episode did not happen, or ignore the very 

real possibility that it could happen again. The task of this subcommittee, as I see it, is to develop not only sound oversight, but 

sound reform legislation that encourages foreign investment in the 

United States without putting our national security at risk or upsetting our capital markets. 

Toward this end, I have introduced H.R. 4915, the CFIUS Reform Act, together with Ranking Members Frank and Gutierrez, 

and in a bipartisan show of support, with Representative Shays. 

We have many co-sponsors. I believe our bill is a moderate and balanced reform proposal that should be supported by industry. In 

fact, some members of industry have contacted my office already in 

support of it. Its provisions are based in large part on recommendations made by the General Accounting Office in a report they 

issued before—and I want to emphasize that this report came out 

before the Dubai Ports World crisis and before Dubai Ports World 

became a household word. 

In their timely report, GAO found serious problems with the Administration’s management of the Committee on Foreign InvestVerDate 0ct 09 2002 11:54 Dec 04, 2006 Jkt 003540 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\DOCS\HBA117.190 HFIN PsN: TERRIE
4

ment, CFIUS, and I believe it’s time that we enact the simple reforms that they recommended. Some of the key elements of the 

CFIUS Reform Act are, first, ensuring adequate scrutiny of transactions that are most likely to raise national security concerns, 

such as those involving companies owned by foreign governments, 

while preserving a timely review process for cases that are of less 

concern. 

Second, increasing the transparency of CFIUS operations without 

endangering the proprietary business information, our national security information. And third, ensuring that CFIUS adequately 

monitors transactions that either have been withdrawn from 

CFIUS or are subject to assurance agreements. 

I look forward to working with the chairwoman and my other colleagues in a bipartisan manner to develop legislation to reform the 

CFIUS process, and I very much look forward to the testimony 

today. I yield back the balance of my time. 

Chairwoman PRYCE. Thank you, Mrs. Maloney. We’re waiting for 

Chairman Oxley. Let me just say that without objection, all members’ statements will be made part of the record. But we’ll go to 

Mr. Frank, if you don’t object. 

Mr. FRANK. Thank you, Madam Chairwoman. I appreciate you 

calling this hearing, and I know it’s going to lead to a markup, and 

I am pleased that this is one of those issues in which we are proceeding on a bipartisan basis. And I will express in advance my regret that your side will probably get attacked in a Wall Street 

Journal editorial for our being collaborative in this. But hey, you 

take the good with the bad in our business. And I’m not sure from 

my standpoint that we’re being attacked by the Wall Street Journal 

falls along that particular spectrum. 

But I think we do recognize that foreign direct investment in 

particular is very important to our economy. And again, I say ‘‘direct investment.’’ We are not talking here about simply investing 

in financial instruments. That doesn’t get into this process. We are 

talking about foreign companies investing in real economic activity 

in our country. And there has been, I think, a history of people 

being too nervous about that. 

I remember, having been here for a long time, when people were 

very upset that the Japanese were buying up these valuable assets. 

And they bought Rockefeller Center and Pebble Beach, and got one 

of the worst financial self-inflicted hosings in the history of the 

world. And it always seemed to me excessive to worry that the Japanese were somehow going to airlift Rockefeller Center to Tokyo. 

And in fact, Americans benefitted from that. 

So we ought to be very clear, there’s a lot of controversy about 

international economic activity. I understand that. And there were 

problems with buy-outs and mergers, and there were problems, in 

my judgment, with working people not being treated fairly. 

But on the question of foreign direct investment, there shouldn’t 

be any controversy. It’s a good thing, in general. It is bringing real 

resources into real economic activity, and I don’t want to see it unduly hindered. 

And I have to say—and this may be outside of the parameters 

of our bipartisanship—one of the things that troubles me, frankly, 

is the fact that the Bush Administration messing up the Dubai 

5

Ports issue could lead us to make changes beyond what is necessary in the law. 

Now, we have different views of the competence of this Administration, obviously. But I think—look, we went through this with 

Hurricane Katrina, and we’re going through it now. I do think people on my side have to be aware of the danger that we will overreact that every time this Administration messes something up, 

people say, ‘‘Well, we’ve got to change the law.’’ Frankly, I have a 

better solution, which would, of course, be to change the Administration. 

But leaving aside that, which isn’t going to happen for a while, 

it is not always the case that because something was handled 

badly, the law is at fault. In this case, I think, frankly, the law was 

better than the way it was administered. That does not mean that 

there shouldn’t be changes. 

The gentlewoman from New York and I have talked, and she has 

legislation, and we talked about the GAO. Yes, I think there are 

ways that we can improve the process. I do not think this is a case 

where drastic change is needed. It is certainly not the case where 

we want to have this thing be more politicized. 

Let me say at the beginning, any suggestion that we should get 

early advance notice, we and the Congress, of particular transactions on a confidential basis seems to me an invitation to greatly 

expand the law of insider trading abuses. I cannot think that it is 

useful for large numbers of Members of Congress and our staffs to 

be given confidential information about impending financial transactions. Let me be very clear. In this case, I don’t want to know. 

I do want rules that would say that if there are, in fact, things 

that are likely to be a problem, in that case, we may want to know. 

I do think it is reasonable to differentiate between foreign governments and legitimate foreign enterprises which are non-governmental. That doesn’t mean everything that the government does is 

bad. It means that it’s logical to have a different set of rules apply. 

The rule ought to be that we welcome foreign direct investment, 

but we should also recognize that there is a category of exceptions, 

both with regard to who the purchaser would be, or the investor, 

and with regard to what the function should be that should require 

some heightened sensitivity. And that’s our job is to improve that 

part of the process without putting any obstacles in the way. 

I think there was an agreement—well, the analysis leading up to 

the agreement may differ. I think there was agreement among us—

and that’s the way we want to go—that we want to make it less 

likely that there will be problems in the future. In this case, by the 

way, it seems to me the problem could have been solved by someone in this Administration saying, ‘‘Probably not a good idea for 

Dubai to buy the ports at this point. Why don’t you go buy some 

movie theaters or a chain of restaurants or something else?’’ 

I think we can make it less likely that we will have this kind 

of mistake without making the kind of excessive changes that 

would interfere with something which is essentially positive, and 

that is foreign direct investment. Thank you, Madam Chairwoman. 

Chairwoman PRYCE. Thank you, Mr. Frank. Chairman Oxley is 

not here yet, and he does have an opening statement. But I think 

6

we will proceed and circle back. Oh, here he is. Well, that’s very 

good timing. Are you ready to be recognized, Mr. Chairman? 

The CHAIRMAN. I am, Madam Chairwoman. 

Chairwoman PRYCE. Chairman Oxley is recognized. 

The CHAIRMAN. That’s ominous. All the members know that this 

time of year we have visiting school kids from all over the country, 

and I just happened to have one from my district, so— 

Mr. FRANK. Will the gentleman yield? 

The CHAIRMAN. I’d be glad to yield to my friend from Massachusetts. 

Mr. FRANK. I just want to say for someone not running for reelection, to see a school group is real dedication. 

The CHAIRMAN. Above and beyond, yes. 

[Laughter] 

The CHAIRMAN. I also found out that I was the only one standing 

between them and lunch. 

Thank you, Madam Chairwoman, and thank you for holding this 

important hearing. You’ve been a leader in the effort to ensure that 

the American economy will have the needed investment muscle to 

continue its expansion and job creation, while not impairing national security, and we all appreciate your efforts. 

The debate earlier this year about CFIUS was all about a single 

transaction that clearly could have been handled better. Congress 

and the Administration need to work out a better way for Congress 

to carry out the necessary oversight of that process. 

However, the basic process works well in that it has done a good 

job of screening takeover proposals from foreign companies for 

American companies. I can think of quite a number of times that 

the process has stopped the deals that shouldn’t go through and approved the ones that should, sometimes doing so with appropriate 

modifications to protect against the loss of a defense industrial 

base or a critical technology. 

The results have been, in a nutshell, spectacular. U.S. subsidiaries of foreign-owned companies employ over 5 million Americans. 

The average salary for those workers is a healthy $60,000, and a 

third of those jobs are in manufacturing. In a time when we worry 

about our balance of trade, it’s important to remember that more 

than 20 percent of U.S. exports are produced by U.S. subsidiaries 

of foreign companies. Even the phrase, ‘‘foreign company’’ is something of a misnomer. In our increasingly global financial economy, 

citizens of the United States invest heavily in the equities of socalled foreign companies, owning $2.9 trillion worth of those stocks. 

Nokia, the Finnish telecommunications company, is 40 percent 

American-owned. Twelve percent of Swedish automobile and construction equipment manufacturer Volvo is owned by Americans, 

either through direct stock ownership or mutual funds, and one of 

its 10 largest investors is a U.S. funds manager. 

Though these firms are based overseas, Americans holding an 

ownership stake in these and other similar companies directly benefit from foreign investment in the United States. It’s not even just 

manufacturing and service industry jobs that are in-sourced. A lot 

of the profits from these U.S. subsidiaries are reinvested here in 

the United States in new plant and equipment and in research and 

development. 

7

The Swiss firm Navartis, in fact, has its worldwide research and 

development headquartered in Massachusetts. Panasonic was able 

to develop the plasma television sets we all know that we need so 

we can better watch golf and baseball after buying a U.S. company 

that developed a technology but couldn’t find financing here to refinance breakthrough. That was a great breakthrough—high definition television and those kind of screens. I’m sure the former Secretary of Commerce agrees with that. 

It’s been a decade since the terms ‘‘foreign’’ and ‘‘domestic’’ were 

distinct, and we need to update our thinking to match our modern 

global economy. While the benefits of foreign direct investment 

should be apparent to all, and are probably in every Congressional 

district in the country in some shape or form, the downsides of 

erecting a protectionist wall cannot be overstated. 

If Congress makes it too onerous to invest in this country, why 

would anyone in their right mind do business here? Labor is cheap 

in China. Resources are cheap in South America. Markets are huge 

in Europe. Already with the talk of making investment here more 

difficult, the parliaments of Russia, India, Mexico, and elsewhere 

have begun debating new retaliatory moves. There are a number 

of countries ready to use this issue as a reason to make their own 

markets harder to crack for Americans. 

An incorrect move right now would be a particular setback when 

China is beginning to open up to foreign investments. The door to 

China is open to European manufacturers and financial institutions, but not to U.S. firms. I think we can all imagine the consequences. 

Madam Chairwoman, I just returned from a trip with the Speaker to India and to Vietnam, and I was struck by the changes—I 

didn’t know what to expect in Vietnam, but I was struck by the 

changes that have taken place there since the war. And they have 

rejected the old eastern European style economy that they had for 

10 or so years, and have moved to a market-based economy that 

has produced immense growth in that part of the world, and they 

desperately want to have permanent normal trade relations with 

the United States and to join the WTO. That’s how much the world 

has changed. Just 30 short years ago, we were killing each other 

in the rice paddies of Vietnam. It’s an amazing, amazing change. 

I think we can all take a deep breath before we decide to legislate things that might feel good, but actually do real damage to the 

country that we live in, that we will leave to our children. If America is to stay strong, we need the opportunities and challenges that 

foreign investment brings. We can protect our national security by 

constant vigilance, but we cannot protect it if we lack the economic 

prosperity that allows us for that protection. 

With that, Madam Chairwoman, and with my sincere welcome to 

our distinguished panel, I yield back. 

Chairwoman PRYCE. Thank you, Mr. Chairman. And it is an 

honor to have you gentlemen here with us today. And without objection, your written statements will be made part of the record. 

Each of you will be recognized for 5 minutes to summarize your 

testimony. And I will begin with introductions. 

Don Evans, it’s great to see you. Former Secretary of the Department of Commerce and current CEO of the Financial Services 

8

Forum. The Financial Services Forum is an association comprising 

the chief executive officers of 20 of the largest financial institutions 

doing business in the United States. The Forum works to promote 

policies that enhance savings and investment in the United States, 

and that ensure an open, competitive, and sound global financial 

services marketplace. Welcome. 

Mr. Paul Vikner, president and chief executive officer of Mack 

Trucks. Mack is a member of the Volvo Group, a publicly-held company headquartered in Gothenburg, Sweden. Today, Mack is one of 

North America’s largest producers of heavy-duty trucks, and Mack 

vehicles are sold and serviced in more than 45 countries worldwide. 

Welcome. 

Jeffrey Anderson is the executive director of Virginia’s Economic 

Development Partnership. The VEDP identifies and markets to 

companies worldwide seeking to expand or relocate business facilities. In addition, VEDP promotes the export of Virginia products 

and services through its International Trade Division. In 2004, the 

organization accounted for the announcement of more than 45,000 

new jobs for Virginians, and nearly $3.5 billion in new capital investment. Welcome. 

And Daniel Tarullo—is that the correct—all right—is a professor 

at Georgetown University, teaching in the area of international 

economic regulation, international law, and banking law. Prior to 

his work with the University, Professor Tarullo worked in the Clinton Administration as an assistant to the President for International Economic Policies. We welcome all of the witnesses, and 

look forward to your summaries. And without objections, your 

statements will be made a part of the record, and we will proceed 

with testimony from Secretary Evans. 

STATEMENT OF DONALD L. EVANS, CHIEF EXECUTIVE 

OFFICER, THE FINANCIAL SERVICES FORUM 

Mr. EVANS. Thank you very much, Madam Chairwoman. I’m absolutely delighted to be here. And Ranking Member Maloney, I’m 

just delighted to see you. As I look all the way across the top row, 

I see friends that I made while I was here as Secretary of Commerce, and every one of you, I was able to work together with on 

various projects. I think we did some constructive things while I 

was here, and I thank you for your support. 

I particularly like the spirit of bipartisanship on this specific 

issue. I’ve only heard one mild partisan remark since I’ve been here 

today, something about changing the Administration. Other than 

that, it seems like a very bipartisan kind of effort under way. 

Let me proceed with my written testimony. Madam Chairwoman, 

I’m here as chief executive officer of the Financial Services Forum, 

which is an association comprising the chief executive officers of 20 

of the largest and most diversified financial institutions with operations in the United States. The members of the Forum share 

Congress’s commitment to national security. Our industry is deeply 

aware of the serious threats faced by our Nation and the need for 

Congress to consider all aspects of national security in its decisionmaking. 

We fully support the President’s authority to suspend or prohibit 

any foreign acquisition, merger, or takeover of a U.S. corporation 

9

that is determined to threaten the national security of the United 

States. We also believe strongly that protecting U.S. national security and advancing U.S. global economic leadership are compatible 

and reinforceable goals. We cannot achieve one without pursuing 

the other. In today’s interconnected world, the health and future of 

the U.S. economy and American jobs rests on open markets and the 

free flow of capital. 

Indeed, a new poll released today by the Financial Services 

Forum shows that Americans value the benefits of foreign investment when they have the facts. When the interviewer explained 

that 5.3 million jobs were provided by foreign investment, and that 

those jobs paid more than the average, 52 percent said they had 

a more favorable view of foreign investment. Of those that initially 

had an unfavorable view of foreign investment, one in three, or 34 

percent, said that they had a more favorable view after hearing the 

economic benefits. Given the importance of foreign investment to 

the U.S. economy, any changes to the CFIUS process should result 

from a thoughtful, considered, and fact-based assessment. 

I’d like to mention four points which we believe should guide 

Congressional consideration of reforms to the CFIUS process. 

First, the vast majority of foreign acquisitions have no bearing 

on U.S. national security. Rather, they play a positive role and 

make significant and increasing contributions to our economy by 

creating millions of jobs by American workers and for American 

workers and enhancing our competitive position in the global marketplace. 

Second, successive Administrations of both political parties have 

for decades worked aggressively to establish a global rules-based 

system founded upon the principles of open investment and free 

trade. This continuity in policy has enabled America to prosper, assert a leadership role in the global economy, and to advance our 

broader foreign policy and strategic interests. 

Third, the existing CFIUS process is fully capable of identifying 

and dealing with potential threats to our national security, although we recognize that the process has some shortcomings, particularly with regard to communications with Congress, and that 

some reform may be warranted. Existing law provides the President with sufficient authority to block any foreign acquisition or 

mitigate related national security concerns. 

Finally, it is instructive that upon establishing CFIUS, Congress 

wisely chose to insulate it from political influence. And by imposing 

strict confidentiality requirements, Congress explicitly recognized 

the sensitivity of the data relative to such transactions from a national security standpoint, as well as a commercial standpoint. The 

rationale supporting both decisions is as valid today as it was 2 

decades ago. 

We support more open communications between the Administration and Congress regarding the CFIUS process. We are, however, 

very concerned about proposals that would give Congress unprecedented new power to delay or overturn decisions by CFIUS. 

We are also troubled by proposals that would discourage foreign 

investment by requiring lengthy review periods, or proposals that, 

while intended to elevate national security scrutiny of foreign investments, might well prompt decisionmakers to disapprove meriVerDate 0ct 09 2002 11:54 Dec 04, 2006 Jkt 003540 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 F:\DOCS\HBA117.190 HFIN PsN: TERRIE
10

torious investments that do not pose genuine national security 

threats. 

Of particular concern are proposals that would provide for Congressional override of a Presidential decision regarding foreign investment, increase required time periods for review and investigation, require unprecedented notification to Congress and State officials, expand the scope of CFIUS to include notions of economic security, summarily deny foreign acquisitions or ownership, management or operation of U.S. critical infrastructure, and require a 45-

day investigation for acquisitions of U.S. companies by state-owned 

entities. 

Madam Chairwoman, as reform alternatives are further deliberated, we urge Congress to take a thoughtful and measured approach, ever mindful of the critical importance to America and to 

the world of thriving global trading relationships. We urge Congress to keep America’s markets open, even as it protects America’s 

security. Protecting national security and promoting foreign investment and free trade are not mutually exclusive. We can, and must, 

do both. 

Thank you for the opportunity to appear before your committee. 

[The prepared statement of Mr. Evans can be found on page 50 

of the appendix.] 

Chairwoman PRYCE. Thank you very much, Mr. Secretary. Now 

we’ll hear from Mr. Vikner. 

STATEMENT OF PAUL L. VIKNER, PRESIDENT AND CEO, MACK 

TRUCKS, INC. 

Mr. VIKNER. Good morning, Madam Chairwoman, ranking members, and other members of the committee. My name is Paul 

Vikner. I am the president and CEO of Mack Trucks, Incorporated, 

and a member of the Group Executive Committee of the overall 

Volvo Group around the world. Volvo is Mack’s parent company, 

and they are a member of OFII, and they’re headquartered in 

Gothenburg, Sweden. 

First, I should note that neither Mack nor Volvo has ever been 

through a CFIUS review, so I have no personal experience of the 

process. Moreover, on behalf of myself and the thousands of proud 

Americans and their families who work for Mack, we fully support 

appropriate and thorough oversight of foreign investment to ensure 

the security of our Nation and its people. But at the same time, we 

also recognize the need to establish the right balance between managing national security risks and preserving the benefits of an open 

investment policy to the United States and its people. 

My goal today is to share Mack’s experience with the benefits of 

foreign direct investment, or what we call in-sourcing, to provide 

you with the perspective of a global corporation like Volvo, that is 

routinely evaluating where in the world it should invest its capital. 

Since 1900, 105 years, the Mack name has become something 

that stands for strength, and is one of the leading brands in the 

overall truck market here in the States and around the world. And 

we use a phrase that we use quite a bit, ‘‘It’s built like a Mack 

truck.’’ And it’s become part of the language, I think, that many of 

us use, and we are very proud of that. 

11

We are also one of North America’s largest producers of heavyduty trucks. We are the leader in construction, refuse, and the regional hauling segments of the industry, and we are the number 

one exporter of heavy trucks from our plants in North America to 

other world markets. 

However, in the last 20 years, the truck industry has gone 

through some dramatic changes that have impacted the cost of developing and manufacturing products both around the world and 

here in the United States. And these costs are driven by the needs 

of an increasingly demanding client base, and by ever more stringent factors coming in the form of movements of various technologies around the world. 

Ultimately, this has meant that a regional truck maker like 

Mack could not compete, and in fact, could probably not survive, 

only as a regional truck maker here with most of our business in 

the States. 

In 2001, Mack was bought by Volvo, a global leader in capital 

equipment and commercial transportation products, with annual 

North American sales of approximately $8 billion, the Volvo 

Group’s operations employ about 12,000 people in 19 States. With 

the Volvo Group support, Mack manufacturing operations in Pennsylvania and Virginia have been upgraded not just in terms of productivity and output, but also in terms of environmental responsibility and workplace safety. 

Our ability to serve customers through our distributor network, 

which also employs tens of thousands of people, has also been improved, and the Volvo Group’s investment in Mack has made possible the most extensive, rapid, and broadest product renewal of 

Mack products that we ever received in our 105-year history. 

Now let me mention one specific investment by the Volvo Group in the United States. It’s the $150 million transformation of our engine and transmission plant in western Maryland. And thanks to 

that commitment, the facility will provide Mack and Volvo trucks 

and other Volvo products in North America clean diesel engines 

that meet some of the strictest environmental standards in the 

world, all assembled by Americans here in the United States. And 

this investment could have been made, frankly, in other places 

around the world, but Volvo decided to invest in Hagerstown based 

upon, among other factors, the welcoming environment for international investment in the United States. 

Our experience at Mack is by no means different from any other 

companies, and in my written testimony I note many ways that foreign direct investment is improving the employment, economic, and 

investment situation across the United States. Also in my written 

testimony, I note results from the annual CEO Survey conducted 

by OFII regarding competitiveness in the United States as a location for business investment. 

For the sake of time, I will just point out that that survey, I feel, 

is a very important set of information, and I’m sure that OFII will 

be glad to share it with the members if asked. 

In conclusion, I want to reiterate that the commitment of resources by our parent company is a major reason that Mack is able 

to compete not only in the United States, but around the world. I 

also want to again emphasize that both Mack and the Volvo Group 

12

are fully committed to the concept that national security is any nation’s first priority. But we also believe that a balance can be 

struck between those concerns and the economic value of open investment policy without raising unnecessary barriers to foreign investment. 

I thank you, Madam Chairwoman, for the opportunity to appear 

before the committee today. 

[The prepared statement of Mr. Vikner can be found on page 71 

of the appendix.] 

Chairwoman PRYCE. Thank you very much for your testimony. 

Mr. Anderson. 

STATEMENT OF JEFFREY M. ANDERSON, EXECUTIVE DIRECTOR, VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP 

Mr. ANDERSON. Good morning, Madam Chairwoman and ranking 

members. I’m Jeff Anderson. I’m the executive director of Virginia 

Economic Development Partnership, and I’m here today representing the Commonwealth of Virginia, and to briefly describe 

our focus on foreign investment in Virginia. We are the lead agency 

within the State of Virginia to drive investment and expansion of 

businesses across the Commonwealth. We are here to promote the 

positive business environment and the ability to grow businesses 

here in Virginia. 

In 1607, an English venture known as the Virginia Company established a colony in Jamestown. Almost 400 years later, that investment has become the Commonwealth of Virginia. We believe 

today, 400 years later, that Virginia is the place for foreign investment in the United States. We currently have 145,000 people employed in the State of Virginia by companies that are foreignowned. The Virginia Development Economic Partnership has 

tracked the investments of those companies since 1980. In the last 

26 years, 62,000 jobs have been created, and $9 billion of capital 

has been invested. 

One of the main selling points for Virginia is that we offer a competitive operating cost here in the United States. Virginia has become a business climate that is advantageous to all companies, foreign and domestic. 

In 1968, Virginia became one of the first States to open up foreign offices to attract business capital from foreign markets. We 

initially opened up in Brussels, and subsequently moved our European base of operation to Frankfurt. In addition to our European 

operations, we have offices in Japan, South Korea, and Hong Kong. 

In addition, we have trade offices in Mexico and Brazil. 

Companies have a choice in making location decisions. Transparent business regulations and open legal systems in the United 

States give Virginia a tremendous competitive advantage in the 

international marketplace. Competition is global, not just with 

competing States. Recently, we have competed with Asia, Latin 

America, and Europe for new jobs and new opportunities in Virginia. 

I’d like to briefly go through two of the companies that are 

headquartered in Virginia that are foreign-owned. One is Infineon. 

Currently, Infineon employs 2,275 people in Henrico County, just 

outside of Richmond. They started off with an initial investment in 

13

1996. In 2004, they announced a billion-dollar expansion of that 

plan, and subsequently will have 2,900 people employed in Henrico 

County. 

The key point I’d like to make is that because of that Infineon 

investment in Henrico County, another 85 companies have located 

in Virginia to be suppliers and servicers of Infineon. 

The other company I’d like to speak to is Maersk. In 2004, 

Maersk announced that they were going to be opening up a terminal in Portsmouth as a part of the Hampton Roads complex. 

They will be spending a half a billion dollars to open up that port, 

which will give us a 50 percent increase in capacity in addition to 

the Virginia Port Authority operation already existing there. 

This is critically important to Virginia, because one of our key 

competitive advantages in the global marketplace is that we are 

the global logistics choice for the East Coast. With our deep water 

ports, our Virginia port operations, the Maersk terminal that is 

coming on line, our nine airports, one of which, Dulles Airport, is 

clearly international, our two major rail carriers, and our six interstate highway systems, we can and will use that foreign investment to both import and export goods and draw businesses into 

Virginia. 

As we look forward, and as we look at Virginia’s positioning, we 

know that this increase in foreign investment is going to continue. 

As we look at our pipeline today, we have opportunities that cut 

across medical, energy, building supplies, food products, and plastic 

industries. These companies are looking at Virginia and will be investing in Virginia because of the competitive nature and the open 

market in which we exist. Our people can respond to the challenge. 

We take technology and we deploy it in the most productive way 

on the globe. 

In conclusion, the one thing I’d like to point out in my written 

testimony, we have listed some sample companies across the major 

industries in Virginia. Those companies are critical to our infrastructure and critical to our growth strategy. 

Madam Chairwoman, thank you for calling me here today and let 

me explain our foreign investment strategy. And we hope that as 

you move forward with your regulation that you’ll consider that 

and make the regulations specific to the needs of our security while 

still considering our need to grow our economy. Thank you. 

[The prepared statement of Mr. Anderson can be found on page 

40 of the appendix.] 

Chairwoman PRYCE. Thank you very much. 

Professor Tarullo. 

STATEMENT OF DANIEL K. TARULLO, PROFESSOR OF LAW, 

GEORGETOWN UNIVERSITY LAW CENTER 

Mr. TARULLO. Thank you, Madam Chairwoman, Mrs. Maloney, 

and members of the committee. 

It goes without saying that there is nothing more important than 

Congress assuring that the laws that it has passed to protect the 

American people are being administered in an effective fashion. I 

think our presence here today is a reflection of the fact that, right 

now, a broad segment of the Congress does not have that level of 

confidence in the way in which Exon-Florio is being administered 

14

by the Administration—the DP World incident being the obvious 

manifestation of that lack of confidence. 

The sensitivities around this process have only increased, as the 

Chair suggested, since September 11th, when the increased emphasis on homeland security, as opposed to the traditional concerns of 

national security abroad, has been added and emphasized in the 

CFIUS process, among others. But as you consider how to shape 

or change this process so as better to effect your own intentions, 

I would urge you to keep in mind what I think is a simple but fundamental starting point for designing the legislative and administrative processes. 

The resources of the CFIUS member agencies involved in the investment review process should be deployed to maximize the benefits for U.S. national security resulting from their activities. Now 

it seems very simple. Concentrate your resources on proposed acquisitions where the fact of foreign investment is going to raise real 

national security concerns. 

There is a risk—many of you have already alluded to it—that 

overreaction, whether administrative or legislative, can produce 

counterproductive results rather than productive results, results 

that actually diminish the national security rather than enhance it. 

For example, to the degree that career government employees are 

spending more and more of their time initiating investigations in 

order to protect themselves from scrutiny later on, they will be 

spending less time investigating the kinds of transactions that 

raise real national security concerns. 

The three gentlemen to my right have been emphasizing the importance of foreign investment. Explicit in Secretary Evans’ testimony, implicit in the other two gentlemen’s testimony, is a concern 

that casting too broad a net may serve as a disincentive to the foreign investment which can be extraordinarily helpful in the growth 

of the American economy. 

I think, in fact, there need not be a trade-off here. Once you have 

decided on the national security standard that you want the Administration to implement, and once we acknowledge that there are 

limited resources to do any task that you set for the Administration, having CFIUS and its member agencies concentrate on the 

real national security concerns will mean that they will not spend 

their time in areas that simply discourage foreign investment, 

delay foreign investment, or have unnecessary effects on the kind 

of foreign investment that we want to encourage in the United 

States. 

In general, then, effectively using CFIUS agency resources in 

pursuit of national security aims should be congruent with the aim 

of avoiding costly disruption of inward investment flows. 

Now, as you go forward, you have multiple tools available to you. 

I recognize that you all know that. Obviously, you can legislate, 

and it feels to me as though there is legislation coming down the 

pike here. But you have other tools available as well. 

I think that the mere fact, Madam Chairwoman, that you’ve held 

hearings, that your counterparts on the other side of the Hill have 

had hearings, has already had an effect. You have within your 

province the capacity to have later hearings, to call senior Administration officials up to meet with you to explain their plans for 

15

change, to require some sort of follow-up. There are a variety of 

methods available to you to move the Administration to the point 

where you again have confidence in their administration of the 

Exon-Florio Act. 

I included in my testimony a number of areas in which I think 

there is a need for change, whether effected administratively or 

through legislation. And I hope that the members of the committee 

will pursue those areas. 

But as you go forward, I again urge you to keep in mind that the 

changes you will make legislatively will have a life well beyond the 

period it takes to turn Administration policies and practices 

around, and this is not necessarily something that you want to 

enact so as to encumber the process indefinitely. 

Thank you for your attention. 

[The prepared statement of Mr. Tarullo can be found on page 56 

of the appendix.] 

Chairwoman PRYCE. Thank you all very, very much. I believe 

that we have an opportunity here, as well as an obligation, an obligation to make sure that we protect our country and our infrastructure, and we secure America. But we also have an opportunity to 

take a good hard look at this CFIUS process, see if it’s an old process, see if it is efficient in today’s world, see if it can be changed. 

And if any of you have comments as to how we can make it better, 

I’d be very happy to hear those. 

One thing I’d like someone to address. Perhaps Secretary Evans, 

you would maybe know more about this than the others. But these 

time frames that we deal with seem very arbitrary to me. And how 

were they arrived at, and are they useful? Should they be that 

straightforward and arbitrary, whether it’s 15 or 45 or 30? Is that 

something that we should take a look at? 

Mr. EVANS. Madam Chairwoman, I’m going to say certainly it’s 

something that you ought to take a look at. My own judgment is, 

having been involved in the process while I was here for 4 years, 

is that the time line worked rather well. 

And I think what you have to keep in mind is, let’s just say for 

a moment that I’m a CEO of a foreign-owned company, and I’m 

considering an acquisition in the United States. Well, the first 

thing I’m going to do is I’m going to bring my team in, and I’m 

going to ask them what does it take to make an acquisition in the 

United States, and particularly if it may have some national security-related kind of issues. And what they’re going to tell me is that 

well, there’s the CFIUS process that is in place in the United 

States, and so, you know, you’re going to need to make sure that 

you can meet all the requirements within that process, and this acquisition will not in any way impact the national security of America. 

And so what happens is that lawyers that will be hired will sit 

down and talk to some 200-plus professionals who work for the 

United States Government in the CFIUS process well before a time 

clock ever begins. There are days and days—I don’t know how 

many it might be, but it can be 30 or 60 or 90—where there’s a 

lot of discussion before this mandatory 30-day time clock begins. 

16

And so it’s in that early stage there’s a lot of facts on the table, 

a lot of discussion about what’s going to kind of be acceptable and 

what won’t be acceptable before the review period even begins. 

And the review period, although it can start some say before you 

have an actual transaction to present, it typically won’t start until 

an actual transaction has been agreed to. And it’s in that time 

frame that it gets very sensitive with respect to the threat of proprietary confidential information getting out into the public domain. Because two parties have an agreement, and they’re getting 

ready to go through this national security process which, justifiably 

so, rightly so, was designed to protect the confidentiality of the information for security purposes and commercial issues. 

And so if you extend those 30-day, 30-day, 15-day periods too 

long, as a CEO of a company that’s thinking about making an acquisition, well, wait a minute. I mean, I may be comfortable with 

kind of having myself exposed for the time periods of 30 days and 

30 and 15, but I’m not sure how comfortable I am as people begin 

to kind of extend it beyond and beyond and beyond, particularly 

if—and I think there should be—some form of further notification 

to Congress of some sort in the process that does not exist today. 

And I think you’ve got to be pretty narrow and pretty careful with 

that. 

But, you know, I think that kind of the time lines that were laid 

out 2 decades ago are really pretty healthy time lines once you consider the fact there’s a lot of work that happens before you ever 

start the clock. And quite frankly, I think that 30-day period, that 

initial one, is an investigation period. It’s not a kind of general review kind of period. 

Chairwoman PRYCE. My time has expired. Do any of the other 

panelists disagree with that? 

Mr. TARULLO. No, Madam Chairwoman. I would just add that if 

you look at the Omnibus Trade Act of 1988 of which Exon-Florio 

was a part, 15-day multiples were the order of the day. There’s 

something slightly arbitrary about it. But then again, you have to 

pick some time period, and that was the period that was chosen, 

with some, as I recall—I happened to be working in the Senate at 

the time—there was some thought about exactly what the Secretary just said, how you would get the time frame long enough to 

make a decent decision without encumbering foreign investment. 

Chairwoman PRYCE. And those 15-day pieces still work 30 years 

later in this marketplace. 

Mr. TARULLO. Well, the Secretary alluded to a very important 

part of the CFIUS process, which is that frequently there is consultation before a notification is formally made. And in a smaller 

range of cases, the notification will be withdrawn, and the deal 

redone in order to address national security problems, and then 

refiled. So in fact, the committee does often take longer than 30 

days, but it is not done within that formal, running clock period. 

Chairwoman PRYCE. Thank you. My time has expired. Mrs. 

Maloney? 

Mrs. MALONEY. Thank you. In the current CFIUS process, if the 

review panel determines that a business deal impacts on national 

security, then you have the 45-day longer period to review. And 

what happened with Dubai is that the committee determined that 

17

selling 20 of our ports, including some of our largest in New York 

City and New Jersey, to a foreign-owned entity did not impact our 

national security. And I think that the American public really disagreed that it did not impact our national security. 

So I would like all of the panelists, if they could discuss how they 

think national security interest should be defined in the CFIUS 

process. And I would like to quote from the GAO report in 2005 on 

the Exon-Florio report on this particular issue. And I quote, ‘‘The 

manner in which the committee implements Exon-Florio may limit 

its effectiveness because, number one, Treasury in its role as chair 

has narrowly defined what constitutes a threat to national security. 

And secondly, the committee is reluctant to initiate a 45-day investigation because of a perceived negative impact on foreign investment and a conflict with the U.S. open investment policy.’’ 

As a result of the narrow definition now in CFIUS, some issues 

that Defense, Homeland Security, and Justice officials have important national security implications such as security of supply, 

which is, I think, a very important issue, security of supply in our 

own country, may not be addressed. And I would like people to 

comment on really the GAO’s comments on this and what you 

think should be the definition of national security that would then 

initiate this further review. I think that most Americans would 

think that selling 20 ports would be a national security concern. 

I open it up to anyone. Mr. Tarullo, would you like to start? 

Mr. TARULLO. Well, Mrs. Maloney, obviously, I don’t have the inside knowledge, and I guess none of us do, which is part of the 

problem with the oversight function. I would just say the following. 

I think to a considerable extent, the—I’ll say two things. One, the 

definition of national security, although it matters, is always going 

to be sufficiently broad, I think, that when a CFIUS review process 

identifies something that might be considered a problem, that definition will cover it. 

And that, I think, takes us back again to the confidence that you 

have in how it’s being administered right now. The absence of judicial review means that something can simply be passed through if 

it’s not considered to be a national security problem; again, no matter what the definition says. 

So I come back to this point of whether the confidence exists between the Congress and the Administration that their interpretation and their implementation of the law accords with what your 

intentions are. 

The second thing I would say—I was in the Executive Branch. 

I worked in the Congress. There was something—I thought the 

GAO report was a very good report and extremely helpful in a lot 

of ways. And like you, some of the issues about not monitoring 

agreements were troubling and well-raised. 

But there’s one thing that did strike me as a little bit out of accord with my experience in the government, which is that if the 

Secretary of Defense or the Secretary of State or the Attorney General thought that there was a problem with a transaction, it doesn’t 

strike me as too likely that an office director at Treasury would 

say, ‘‘Let’s go full speed ahead.’’ 

Now, something else may be going on here. But I just— 

18

Mrs. MALONEY. If I could, let the former commissioner of Commerce comment. And also, there was a concern raised by some of 

my colleagues that on this CFIUS review panel, there was no one 

from national defense. The NID director was not on it, or no one 

was on this review panel from Homeland Security. And in a post9/11 world, there is a deep concern. 

And I would say that most Americans in the Administration and 

out of the Administration would think that the selling of ports to 

a foreign government, 20 ports, would be a national security concern, therefore triggering the 45-day review. So there’s a concern 

that I’ve heard from my constituents in a non-partisan way that, 

you know, how in the world can you make a determination in a 

CFIUS review panel that it was not a national concern? 

So my question is do you think someone from national security 

or maybe Homeland Security—well, the floor is yours. 

Mr. EVANS. You know, quickly, I would say that this is a post9/11 world, and so that certainly has to be factored into this whole 

process. There’s no question about that. And I think it already has 

been to some degree. Because when you look at what’s happened 

in the last 4 years, I know there has been 3 times the number of 

cases that have been looked at and reviewed than the previous decade. So I know there has been some expansion of thinking as to 

what all really should be reviewed and looked at. 

The other thing I would say about my own personal experience 

is when they get into the investigation process, there is a very spirited debate. I must tell you that, as Secretary, I was always informed as to what the progress was with any case that was in the 

investigation stage. 

My then-deputy, now Secretary Sam Bodman, always kept me informed as to what his views were and what was going on and what 

our point of view was. And I can assure you that there was a very, 

very spirited debate that was taking place during that process. I 

can also assure you that I don’t know any American, particularly 

any of the 200-plus career professionals who are involved in the 

process, who would want to be there putting their stamp on something that they would be approving that they would think in any 

way would jeopardize the national security of this country. 

Now, to your specific point as to who ought to be there at the 

lead or at the table, I mean, certainly any department that has 

much more responsibility over the national security, homeland security of the country should be at the table. In fact, the process is 

set up so that they can lead it. The Treasury Secretary, or the Department, is just kind of the coordinator, and they have to look at 

the specific case and say, ‘‘Well, that should be led by the Department of Defense,’’ or ‘‘That ought to be led by Homeland Security,’’ 

or ‘‘That ought to be led by the Department of Labor,’’ or whomever 

it is. 

And so it’s something certainly to look at, if, in fact, some of the 

right players were not at the table. But I can assure you my experience was through the process, not only was this a lot of front-end 

activity, but in the investigation process, there was a lot of spirited 

debate that, you know, I’ve heard feedback on throughout the process. 

19

The CHAIRMAN. [presiding] The gentleman’s time has expired. 

The Chair will now ask unanimous consent that the gentleman 

from Missouri be recognized, the majority whip who has been active in this issue, and is actually—he’s on leave from this committee. Without objection, the gentleman from Missouri is recognized for 5 minutes. 

Mr. BLUNT. I thank the chairman. I apologize to the panel for not 

being here to hear the testimony, though I had a chance to read 

the testimony last evening that was submitted by three of you. And 

I’m going to have brief questions for three of you, and then I’ll look 

at the testimony that was presented that I hadn’t seen, and we 

may have a written question or two on that. But again, I apologize 

for getting caught up and not being able to be over here when your 

testimony was issued. 

Certainly in a post-9/11 world, as I just heard the Secretary say, 

we have concerns that we didn’t once have on national security 

issues. But in a global economy, we have concerns that a decade 

ago we wouldn’t have had that those things continue to work right 

as well. 

So Mr. Evans, first I’d like to—I know as Secretary of Commerce, 

you did so much work with financial institutions and investors both 

here and foreign investment. What do you see is the impact of this 

process if it gets too onerous, and where would you give me a couple of guidelines that would be the place we’d want to be careful 

not to go in terms of disclosing too much information about an existing opportunity that’s out there, or how much time it takes to 

get that procedure completed before you really begin to drive away 

the opportunity for that investment to be made? 

Mr. EVANS. If you go too far with it, you clearly run the risk of 

beginning to chill foreign investment coming into this country. If 

you go—if you put up non-tariff barriers here in this country, then 

other countries will begin to think about their own non-tariff barriers. So all of a sudden, not only do you have the free flow of capital and open market into the United States, you begin to restrict 

opening up markets and open markets and the free flow of capital 

for other investment opportunities in other parts of the world for 

American investors, you know, which is obviously a very big issue 

when we think about here in America, we’ve got 5 percent of the 

people, and 95 percent of the people live outside of the borders of 

the United States. 

So one of our major thrusts for Administration after Administration in the past number of decades has been to open up markets 

for our own foreign direct investment in other parts of the world, 

so there winds up being some kind of quid pro quo, you know. If 

you’re going to really freeze your own markets or put up trade barriers for our investors coming into your country, we’re going to do 

the same thing for your investors coming into our country. 

And so I think that’s, you know, a very serious economic consideration that you have to think through. I think there are ways—

my judgment is there are ways—to make reasonable kinds of 

changes within the CFIUS process that I think will address some 

of the concerns that Congress understandably has, particularly in 

the area of notification, without threatening the freezing of foreign 

investments coming into America. 

20

But it’s a big—you know, we’ve got to be careful, because we’re 

in a period that people are talking about are we going to retreat 

within our own borders and be protectionists and isolationists here 

in this country, or are we going to open ourselves up and engage 

the global economy? 

And so any signals that we send out there that no, we really 

want to—you know, we’re going to put up some barriers and protect ourselves and isolate ourselves, I think that runs the risk of 

doing some pretty serious damage to the long-term growth of our 

economy. Our economy cannot grow at its full potential if we put 

up barriers which will result in other barriers to us going into 

other parts of the world. 

Mr. BLUNT. It seems to me also that there appears to be some 

receptivity toward us looking at government-controlled entities in 

a different way than we do entities that aren’t government-controlled. Do you have a response to that at all? 

Mr. EVANS. No, I don’t. I really don’t. I mean, maybe there’s 

some further scrutiny that’s needed there, but I don’t—I’m not 

sure. We’ve got to be very careful. 

First of all, I know a very small percentage of the foreign ownership in this country right now is foreign governments. It’s 2 percent. So it’s a very tiny piece of it. And if the will of the Congress 

is maybe we need to look at that a little closer, well, you know, I 

think that’s something that we can—that maybe one can think 

about. But I wouldn’t be one that had a lot of serious concern about 

that. 

Can I make one other statement, though? I think my friend here 

on my left, Paul, who was talking about Mack Truck—let me tell 

you one of the other things you lose when you start putting up 

these barriers. Volvo, who bought Mack Truck, they have recognition as one of the safest manufacturers of automobiles and vehicles 

in the world. I’ve been to their plant. They’ve got a safety record 

that is second to none. 

So that intellectual knowledge comes into our own country, is 

part of Mack Truck. And all of a sudden, you know, Mack trucks 

are maybe safer. They’re built well, and everybody thinks, ‘‘Built 

like a Mack Truck.’’ But, you know, you get the advantage of having that intellectual capacity from other countries, and all of a sudden, we have safer vehicles on the road here in America because 

of that, which is one of the other benefits of engaging in trade globally. 

Mr. BLUNT. Well, let’s go to Mr. Vikner, then. I know you are on 

the Global Management Team for Volvo, Mr. Vikner. Maybe just 

your sense of the global perception of the United States right now 

as a place to invest money? Whatever you’re hearing from people 

who have traditionally been investing about their future plans? 

Any insight you can give us there? 

Mr. VIKNER. Well, the United States is certainly one of the most 

important markets in the world. And I think any true global player 

in the kind of equipment business that we are in is becoming increasingly aware—you know, we are becoming increasingly aware 

now that you have to be a player in all of the major markets of 

the world in order to be competitive in any of the one market of 

the world. 

21

So in other words, with what’s going on with technology development, with the emissions issues, with regulations, it isn’t just a 

matter of whether a company like Mack can survive without foreign investment. We frankly can’t. You know, you have to be part 

of a global manufacturer in order to be competitive, even in our 

own market. 

And one of my concerns is is that if we do not allow this to continue to take place in many of the markets similar to the truck 

business, not only will the United States miss out on opportunities, 

but I think it will even weaken the companies that are in this 

country if we cannot become part of a global organization. 

Technology is changing investments. And diesel engine technology is costing billions and billions and billions of dollars. And 

in order for us to be competitive even in the United States, we have 

to be part of a global organization to do that. 

Mr. BLUNT. Thank you. Mr. Tarullo, I know you’ve had a lot of 

experience working with foreign companies. What kind of burdens 

could we put here that would be the most onerous, the things that 

we should be the most thoughtful about as we look at this process? 

I think it goes without saying that the process is going to change 

in some way. So how do we—what do we really need to be thoughtful—most thoughtful about in terms of not turning away these investments? Which, when we do that, we reduce the value of American assets, American stockholders’ portfolios and pension plans 

and other things, and we don’t want to do that. 

Mr. TARULLO. Thank you, Congressman. It seems to me that 

what you want to do is to give the maximum assurance to foreign 

acquirers who are not going to raise national security problems 

that they are not going to have their acquisitions delayed. They are 

not going to have their acquisitions subject to a politicized debate 

just because they’re a foreign owner rather than a domestic owner, 

but that instead, they are going to be able to move forward. 

And I think, in accordance with my principle that we all want 

to focus the CFIUS resources on the acquisitions that could raise 

real threats, the best thing the Congress, the Administration can 

do is to make sure the resources are focused there, and to the degree possible, allow other investors to know that they’re not going 

to have to wait 90 days because they’re acquiring an ice cream 

company somewhere, that they’re not going to have to think that 

this is another layer of review no matter what issues are raised. 

I think what you want to do is get to the point where a small 

segment of foreign acquisitions is understood to need to go through 

this process, but that most potential foreign acquirers are told by 

their advisors and attorneys, ‘‘You don’t have any problem with 

Exon-Florio. You’ll be able to just go ahead and do your Hart-ScottRedino filing and make the acquisition.’’ 

Mr. BLUNT. And you may have covered this in your testimony, 

but in doing that, do we need to be particularly thoughtful if we 

went that direction about how we define critical infrastructure, and 

then how we define whether or not it takes experience in the field 

or something running these facilities other places? Or what would 

you— 

Mr. TARULLO. Congressman, again, I think it is going to be very 

hard—and this is true with so much legislation. It is very difficult 

22

to write a standard which clearly embraces everything you want to 

embrace without embracing a whole lot more. And that is why 

there has to be this sense of back and forth and trust between the 

Congress and whoever’s administering the law. 

So it seems to me that ideally, the situation is one in which the 

CFIUS agencies can make a judgment whether here, (A) the critical infrastructure is genuinely critical and (B), the fact of foreign 

ownership presents a real national security risk, but not to get 

such a broad definition that these men and women who work at 

the CFIUS agencies are spending hours and hours and hours pursuing acquisitions where, in the end, they’re going to say, ‘‘No, 

there are no real issues here at all.’’ Because every hour spent 

doing that is an hour not spent looking at the troublesome cases 

or surveying the area to make sure there hasn’t been an acquisition that hasn’t been notified. 

Mr. BLUNT. Mr. Chairman, if I have the time for one last question, I’d just like to ask our friend from Virginia. I know you spend 

your time, obviously, on economic development. I think it ought to 

be in Missouri if it can. You think it should be in Virginia if it can. 

In all of those discussions you’re having all the time, what do we 

need to be thoughtful about here so that we don’t do the best possible economic development plan for Canada? 

Mr. ANDERSON. I think, Congressman, that several of the points 

that have been made and I think I’d just like to reinforce is as companies look, and as we have a kind of dialogue today with companies who are looking at investing in Virginia, the one thing they 

want to be assured of is that the major benefit that they have, 

which is the access to our work force and our work force’s ability 

to integrate their technologies and move them to the next level, 

isn’t in any way deterred. 

The reason companies are investing in the United States is because of our work force and the ability to move that capital and 

that intellectual property into enhanced products. Anything we do 

that deters from that will push people into other markets, such as 

Canada and other places. Because at the end of the day, our free 

flow of ideas, our free flow of management, our free flow of intellectual property is what makes us different and allows us to compete. 

Mr. BLUNT. Thank you, Mr. Anderson, and thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. The gentleman from New York. Mr. Crowley? 

Mr. CROWLEY. Thank you, Mr. Chairman. Thank you to all of the 

panelists. I, too, was not here for all of the testimony, but I have 

your written testimony and I’ll go through it. 

I have two questions while I have you here, though, to both Secretary Evans and to Professor Tarullo initially, and that is in regard to the monitoring of the mitigation agreements that are entered into by CFIUS with certain foreign investment companies. 

The GAO has indicated that these agreements are ofttimes entered 

into in a manner that makes it difficult, to say the least, maybe, 

or at worst, unenforceable, that these agreements are unenforceable the way in which they’re written. I was wondering if either 

one of you can give comment on the issue and suggest remedies 

that we could look into in terms of addressing it. 

23

For example, should CFIUS have an annual review? Should 

there be a mechanism for CFIUS to overturn a decision based on 

failure to comply with the mitigation agreement? And if that’s the 

case, how would we go about implementing that? 

Mr. TARULLO. Congressman, I had the same reaction you did to 

the GAO report on this point. It is one of a number of areas in 

which you need assurance, the American people need assurance, 

and we may need some change. It seems to me that without trying 

to micro-manage the process, what you should be asking for is a 

system that monitors assurance agreements in a systematic fashion. And that means having an agency, an individual in that agency with clear responsibility. If everybody has responsibility, nobody 

has responsibility. It needs to be focused in a single office, and 

there needs to be a system which is tracked by Treasury, as the 

chair of CFIUS, to assure that they are getting regular reports 

from the agencies that are assigned to do this monitoring. 

You raise a second point as to whether the discovery of a failure 

to comply should trigger some new review or investigation. And I 

would say absolutely, at least on an informal level. That is, if something has not been complied with, then, at the very least, you need 

an inquiry, an investigation, a report to the other people at CFIUS. 

How much beyond that would probably depend on the seriousness 

of the breach. 

Mr. CROWLEY. Secretary Evans? 

Mr. EVANS. Yes, thanks. You know, I would associate myself with 

those same comments. I think the one thing that I would say is you 

do have to be very, very careful how it is structured and how the 

annual review might be structured. You don’t want to put a company in the position of making what they consider is a long-term 

investment with the uncertainty that somebody may come along a 

year from now and take that away from them. You’ve got to make 

sure that it’s not in any way politicized. You’ve got to make sure 

it stays within the professional—the career professionals. You’ve 

got to make sure that it’s, you know, very, very clear language 

about what would constitute some sort of violation. 

Because if I’m going to invest shareholder capital in something, 

and somebody tells me, ‘‘Well, they’re going to come look at you 

every 15 minutes, or every year or something,’’ I’d say, ‘‘Wait a 

minute. This is a 10-year commitment I’m making.’’ 

And so I want to know what it might be that would cause somebody that I don’t know, I’ve never met, maybe somebody new next 

year, who might arbitrarily say, ‘‘Sorry. You don’t meet the requirements.’’ 

Mr. CROWLEY. But recognizing your reservation, you do recognize 

as well that there is an issue here in terms of the compliance, or 

that these ancillary agreements that are entered into, or side 

agreements, are not necessarily—don’t necessarily have the teeth 

that one would expect it would have, given the circumstances that 

called for the sidebar in the first place. I mean, obviously, the reason why they called for it is because somebody has put a red flag 

up and said, ‘‘There are some issues here that we need you to address on the side. You’re going to get the deal, but you need to have 

it addressed.’’

24

So your concern is that it’s politicized in some way outside of the 

CFIUS process. Is that what you’re suggesting? 

Mr. EVANS. Yes. I associated my remarks with what the professor said. I agree with him totally. You do have to have some 

kind of follow-up. You can’t just ignore it. ‘‘Oh, yes. Well, let’s trust 

them and they’ll be fine, and don’t worry about it.’’ I mean, there 

has to be something, but it sure better be clear. 

Mr. CROWLEY. I appreciate that. Okay. This is to all the panelists. And again, I know that I have limited time, but if someone 

would comment on it. I’m eager to continue foreign investment. I’m 

from New York City. I understand the significance of it. 

But I’m worried about the politics, as you are, Secretary Evans, 

entering too deeply into the CFIUS process. This Congress needs 

to be—I think Congress, this and others, needs to be notified about 

the actions of CFIUS, and this Administration, I believe, personally 

speaking, has been MIA there. But I don’t believe we should have 

any final say or veto over the CFIUS process either. 

How would you recommend we draft language to provide Congress with the knowledge about the CFIUS process we need to 

have careful oversight of without allowing us to get too bogged 

down, as what was described, in the politics that really shouldn’t 

be on our plate? 

Mr. EVANS. Congressman, I think just—generally speaking, I 

think that I agree that Congress has oversight responsibilities of 

this. I agree they should be notified in a timely way. I think you 

have to stay pretty narrow, though, as to how Congress is notified 

or who is notified. I mean, I see leadership being notified. I see 

chairmen of certain committees being notified. 

But the idea that you might notify every office up here on the 

Hill would trouble me. Because as was determined 2 decades ago 

when this was first—2-and-a-half decades ago when this was first 

put in place, I think they recognized the importance, the confidentiality of the information from a commercial standpoint, from a national security standpoint. And I think—again, I’m trying to put 

myself in the shoes of a CEO—if I’ve got a transaction going 

through this process, and it’s got proprietary information on it, and 

somebody tells me that, ‘‘You know what? They’re going to tell everybody in Congress exactly what’s going on here,’’ I’m going to 

worry a lot about just the potential of that information getting out 

in the public domain. 

The CHAIRMAN. The gentleman’s time has expired. The gentleman from Illinois. 

Mr. MANZULLO. Thank you, Mr. Chairman. The Congressional 

district that I represent has been a huge beneficiary of foreign direct investigation. And FDI is aimed in large part on manufacturing facilities. And as American companies have left, the European companies have come back and recaptured the factories that 

the grandfathers left Europe to come to the United States to establish. And we have an Israeli company that bought out Ingersoll, a 

cutting tool division. That’s 600 jobs. An Italian company bought 

Ingersoll, a machine tool division. That’s 300 jobs. A Japanese company saved the last sewing machine company in the United States, 

Union Specialties. 

25

And through our Congressional district, we found that the Europeans and the Asians are very good Americans, because they want 

to source American parts to put into the final product that they 

make, because they realize it’s important that people have jobs in 

order to buy the products that they make. 

And so we are very indebted to foreign direct investment, and 

want to do everything possible in order to not only keep it, but increase it. 

My concern really is paired within an article in the New York 

Times of February 24th that deals with state-owned enterprises 

that don’t have to show profit. They could come in and muscle their 

way through, buy an industry just to gain market share, and not 

have to worry about the rules of capitalism, the rules of fair play 

that are attached to 99.9 percent of the rest of the companies of 

the world. 

The article talks about the fact that this is the acquisition price 

of DP. It also reflects the advantage that a number of the fastestgrowing companies enjoy their government’s deep pockets. DP 

World paid about 20 percent more than analysts thought the company was worth. Publicly-traded companies that were potential bidders were scared off long before DP World’s final offer. I think 

that’s extremely scary, especially with a Chinese state-owned enterprise. 

And the question becomes should the CFIUS process reflect some 

type of an economic determinism that state-owned enterprises 

would use that thwart the ability of companies that operate on a 

free enterprise system? 

Secretary Evans, you’ve got that frown on your face. 

Mr. EVANS. No, no. I just say listen, I share your concern. I 

think, you know, as I traveled the world and talked about open-end 

trade, I always talked about a level playing field and how important that is. We’ve all got to play by, basically, the same rules. And 

that’s what you’re talking about, that state-owned enterprises often 

have a competitive advantage, an unfair advantage, because they 

don’t have to worry about paying back the money, or they’ve got 

a lot of advantages that the private companies do not have. 

I guess my question, Congressman, would be is this the right 

place to deal with that? 

Mr. MANZULLO. I don’t know. I’m raising it, because it’s obviously 

an issue of economic security. 

Mr. EVANS. I understand the issue totally, and I agree with you 

that we’ve got to level the playing field. We’ve got to look very hard 

at this. Are American companies competing with state-owned enterprises that come in here to acquire assets? I think that’s something that needs to be addressed. It seems to me that this process 

itself is more focused on national security-related issues, and 

whether or not you introduce this at a more level playing field economic issue into the process. I just must admit to you I haven’t 

thought through it. 

Mr. MANZULLO. I guess the broader issue would be the definition 

of national security. For example, a foreign company coming in a 

state-owned enterprise and buying a company that produces a precious metal. Somewhere along the line, there could be national security interests on it. 

26

Mr. EVANS. I wouldn’t—you know, if it falls into the definition 

of a national security-related issue, then I could sure see how you 

would want to take a hard look at it. 

Mr. MANZULLO. Does anyone else want to comment on that? Professor? 

Mr. TARULLO. Thank you, Congressman. I agree with Secretary 

Evans for an additional reason, which is my experience in the Executive Branch that the more tasks you gave to a single group, an 

interagency committee, or a review group, the less likely it was 

they were going to do any of them well. And I think— 

Mr. MANZULLO. Well, then, don’t give them anything on that theory. 

Mr. TARULLO. Well, no. If you give them— 

Mr. MANZULLO. I mean, that’s the bureaucrat’s theory on how to 

get away from doing anything. 

Mr. TARULLO. No. If you give them a task, and you say, ‘‘This 

is what we expect you to do. And we want you to focus in on it, 

and we want you to expend your resources in an efficient way,’’ 

then I think you’re more likely to get that result. And here, I agree 

with both parts of what Secretary Evans said. I agree both that it 

is probably not a good idea to get this into the CFIUS committee, 

because it begins to diffuse their consideration of things. And secondly, it is an issue that deserves some attention, deserves some 

attention by the Administration, by this committee. 

Myself, I would think that we are probably at the stage where 

we need to gather more information about how much is going on, 

what are the case studies, what might we fear in the future, as opposed to being ready to legislate. 

But I don’t mean at all to disagree with your identification of an 

issue. It’s just that my instinct is that we’re probably not ready to 

legislate. And even if we were, we probably don’t want to load on 

that kind of economic issue onto a— 

Mr. MANZULLO. The reason I raise that is that perhaps something could be done before they buy the field that we’re trying to 

level. It’s just a thought. 

The CHAIRMAN. The gentleman’s time has expired. The 

gentlelady from Illinois, Ms. Bean. 

Ms. BEAN. Thank you, Mr. Chairman. I’d like to ask the panel—

and thank you for being here today. There’s a movement to include 

critical infrastructure into the CFIUS decision-making process. 

How would you go about defining this in a way that would include 

non-traditional potential targets of security threats without being 

overly broad? 

Mr. EVANS. All I would say is I would do it very carefully. That’s 

how I would do it. I think you’ve got to be very, very careful not 

to expand it too broadly, back again to what the professor said earlier. I mean, you’ve got a limited number of resources that are 

going to kind of evaluate these cases. And the broader you make 

it, all of a sudden, you have so many cases that none of them are 

being handled in really a thoughtful, thorough, comprehensive kind 

of way. 

So I would be very, very careful as to how broad and how—I 

mean, one can dream pretty broad if they want to. And myself, if 

it’s been operating for 26 years or so, or Exon-Florio has been, and 

27

it seems like it’s worked pretty well for 26 years. Are there some 

things that need to be changed in a post-9/11 world? You bet. Expand it a little bit? Maybe so. But I would be very, very careful not 

to reach too broadly. 

Mr. TARULLO. If I may, Congresswoman. I have a slightly different view, but not a radically different one. I think there’s a distinction between how broadly you define something like critical infrastructure so that the CFIUS and the President can get at it if 

they need to. They can get at that deal, on the one hand. And, on 

the other hand, whether a broad definition forces CFIUS to do a 

whole lot of work in a whole lot of cases where it’s not necessary. 

I think it’s perfectly okay for you to include in legislation a definition that is broad enough so that when it’s necessary, the President can take action that he needs to take. I just think what you 

don’t want to do—and I know you’re not suggesting it. What you 

don’t want to do is to define infrastructure, and then say, ‘‘And 

every time anyone is going to purchase any infrastructure, we need 

to have a full-blown investigation.’’ 

Ms. BEAN. Thank you. I yield back. 

The CHAIRMAN. The gentlelady yields back. The gentleman from 

California? 

Mr. SHERMAN. Thank you, Mr. Chairman. This hearing grows 

out of the failed trade policies of the United States. We have such 

a huge trade deficit that we have to somehow pay the world in a 

piece of ourselves. IOU’s, or pieces of our infrastructure, pieces of 

our companies, some $800 billion a year. 

It also grows out of our failure to do anything to fight for shipping jobs. We have turned over to the rest of the world all the jobs 

available in shipping, even though a huge portion of that shipping 

is bringing goods to the United States, usually coming here as a 

result of our failed trade policies. And, of course, with losing controlling of shipping, we’ve now given away our ports. 

I think we owe a special debt of gratitude to the UAE taking this 

to the ultimate extreme, and having a country with very questionable security and very questionable policies when it comes to terror 

actually try to control our ports directly. And by putting this to the 

extreme, it’s shown a spotlight on the overall failures. 

Now, among the problems with the UAE, the fact that this is a 

country that’s had telethons on its television where its president 

rallies its people to contribute to Hamas and other terrorist groups. 

I’d like to know whether this was taken into account by anyone 

when they looked at this UAE purchase. I realize we don’t have the 

Administration before us here, but perhaps one of you gentlemen 

has some insight into how CFIUS made the most infamous of its 

decisions in its history. 

Mr. EVANS. Congressman, I guess all I would say is I think—to 

that question is I think the Congress was very wise 26 years ago 

when they designed this as a confidential process, which means 

just that. It’s confidential. 

Mr. SHERMAN. Well, are the criteria confidential? 

Mr. EVANS. Well, what they considered, or what they discussed, 

or what was talked about within the review of this, over 200 professionals that deal with this within the Administration, I just 

don’t have knowledge to what— 

28

Mr. SHERMAN. You can wrap language like ‘‘200 professionals’’ 

around it if you want to candy-coat it, but this is one of the 

stupidest decisions made by an Administration that has some other 

examples. But this one took the cake. 

So you don’t know whether the criteria for making the decision 

would include whether the host country of the company, or in this 

case, the owners of the company, had supported terrorism. We just 

don’t know whether that’s one of the criteria that— 

Mr. EVANS. I’m not in the process, no, Congressman. Sorry. 

Mr. SHERMAN. Well, you’re right to point out that it is Congress’s 

obligation. And for us not to have specified in statute that a country’s record in fighting terrorism would be a very important factor, 

especially when we’re looking, as in the UAE case, not in it being 

the host country, but it being the owner of the company, the ultimate owner and the supporter of terrorism is the same entity. And 

for that not to be a statutorily required consideration shows a failure of us to realize how blind and almost deliberately obtuse the 

Administration could be. And given their capacity for that, we 

ought to fix it. I yield back. 

The CHAIRMAN. The gentleman yields back. The gentlelady from 

Florida? 

Ms. WASSERMAN-SCHULTZ. Thank you, Mr. Chairman. I guess 

what I’d like to get a sense from you on is do you feel that there 

are significant differences in the incentives of foreign governments 

and their investment versus foreign companies? And in terms of 

those incentives, are those differences significant enough to warrant a separate process, perhaps, for review, one that might preclude foreign governments from, say, owning port terminals or 

other critical infrastructure? 

And I know you were just expressing concern about how you define critical infrastructure. But it seems to me that there is quite 

a bit of difference between foreign investment and foreign government investment in terms of ownership and management of critical—or involvement in critical infrastructure. So if you could address that. 

Mr. TARULLO. Sure, I’ll try. A couple of things, Congressman. 

First, I think that as I said earlier, the larger issue of the potential 

distortion of economic costs that government-owned enterprises has 

is an important thing for the committee to consider and for the Administration to consider as a matter of economic policy going forward. That’s number one. 

Number two, I do think that there is a class of cases involving 

foreign government ownership that would set off, or should set off, 

a kind of alarm bell that wouldn’t be set off purely because it was 

a foreign company. 

Just an example from the past, there is certainly a possibility 

that industrial espionage efforts are made easier when you have a 

foreign government entity that has relationships with other parts 

of its government. I don’t know that that—I don’t think that’s true 

in every case by a long shot. And as I said earlier, I think we’re 

just getting to the point where we’re seeing a trajectory now of potentially wider foreign government company acquisitions in the 

United States. 

29

So my present view would be that I would hope CFIUS is considering that sort of issue. And I know, at least when I was in the 

government, that the espionage issue was something that people 

worried about. I would hope they’re considering that and other 

kinds of issues now. 

And getting back both to your concern and Congressman Sherman’s concern, there is every—you have every right and responsibility in the world to ask the Administration to explain to you what 

its criteria for decisions are, what kinds of things affect their decisionmaking. Asking for—I know you’re not doing this, but asking 

for business proprietary information, that’s a whole different issue. 

But asking them to come up two or three or four times a year and 

say, ‘‘Here are the kinds of cases affecting homeland security we’ve 

had, here are the sorts of issues that have been raised, here are 

the kinds of things we’ve taken into account, and here’s why we’ve 

made the kinds of decisions that we have,’’—if GAO can do it, and 

they do in their reports, I don’t quite understand why the Administration can’t do it. 

Ms. WASSERMAN-SCHULTZ. It would seem to me that even if you 

didn’t reform significantly the CFIUS process, that when it came 

to foreign government investment, that you could adapt the process 

for a greater degree of scrutiny with foreign government-owned— 

Mr. TARULLO. I would hope and expect that the people in CFIUS 

have enough acquired expertise and experience that when a particular kind of foreign government investment, for example, comes 

along, it sets off another set of questions that they ask. And for 

that matter, there are going to be other classes of acquisitions, 

even by non-governmental foreign corporations based on history, 

experience, and the like that set off those kinds of questions. 

Mr. EVANS. I would not—you know, what I would say is I certainly would not want any foreign entity of any sort to have in 

their hands any information that would threaten the national security of this country. And so I don’t care if it’s a private company 

or a foreign government. I don’t want any information that threatens the national security of this country getting into their hands. 

Now, having said that, I do recognize that foreign governments 

are—they’re political is what they are. And they’re not accountable 

to shareholders to create value. You know, they’re political organizations. And so, you know, should that be thought about as it’s 

going through the process? Well, yes, it probably should. 

But I think the criteria is, you know, we don’t want any information getting into the hands of any foreign company or government 

that would threaten the national security of the country. 

Ms. WASSERMAN-SCHULTZ. But see, that’s why I don’t understand 

why the alarm bells weren’t set off with the Administration when 

it came to the DPW deal. Because, you know, we’re talking about 

a foreign government-owned corporation that would have leased, 

owned, and operated these port terminals in major ports, and have 

intimate knowledge of our port security. And so if that’s not potentially compromising national security, I don’t know what is. 

And I realize my time has expired, Mr. Chairman. But in closing, 

if any of the panelists could just address whether you think we 

need to change the law to do what Mr. Tarullo described, or whether that’s something that we could trust would be done internally. 

30

Mr. EVANS. Well, I think it’s—you know, look, I don’t think I’ve 

got enough, really, of the facts to make a recommendation to you. 

I’m sorry, Congresswoman. I understand your concern. It is political. Whether or not you need to have a separate kind of criteria 

for foreign-owned government acquisition and just foreign company, I’m not prepared to make a recommendation to you. Sorry. 

The CHAIRMAN. The gentlelady’s time has expired. Let me—Professor Tarullo, you talk about trying to define—within the CFIUS 

process, to define the real threats. And hindsight really is 20/20 in 

this business. But if you look at the facts of the Dubai Ports issue, 

not looking back, but looking at the process and the way it went 

through, here was a port—first of all, there was a lot of misinformation out there that somehow this foreign government was 

going to control the port. And that was put forth by a lot of partisan folks who didn’t really know the facts. 

Secondly, that the CFIUS process had worked extremely well on 

a number of fronts. And part of the strength of the CFIUS process 

is that you don’t have a bunch of politicians sitting around making 

those kinds of decisions. 

So it comes down to—well, let me ask you this. Does it appear 

to you on the surface that there was—that the CFIUS process 

broke down in this particular case? 

Mr. TARULLO. Mr. Chairman, I honestly don’t feel I have enough 

information to answer that question. I do know that the process of 

the Administration communicating with this committee, its counterpart on the other side of the Hill, and the American people 

broke down rather badly. And I do get the impression, based on the 

widespread view in Washington that senior Treasury and Administration and White House people were not even informed that this 

was happening, I get a sense that there was an internal breakdown 

in exercising judgment and oversight. But I feel as though I really 

don’t have enough facts to make a decision on the merits, as it 

were. 

And of course, that is the problem that you all face. If you’re not 

getting enough information in an appropriate form to reassure you 

that the right kinds of things are being taken into account and the 

right kinds of decisions made, then it leads to the situation we 

have today. 

The CHAIRMAN. Let me ask the panel, there are proposals out 

there, for example, that would identify critical infrastructure. The 

chairman of the Armed Services Committee, for example, is looking 

at legislation that would apply a rather broad definition to critical 

infrastructure as it relates to foreign investment. 

How would we—if we wanted to, how would we go about trying 

to define what is really critical infrastructure, or indeed, what is 

not critical infrastructure? Is the auto industry in Ohio, Honda of 

America, that employs 60,000 Ohioans, is that a critical infrastructure? I would suspect that if you ask the auto industry, they would 

say they’re part of the critical infrastructure. And if you ask my 

constituents who drive those automobiles, they’d say, ‘‘Yes, that’s 

part of the critical infrastructure.’’ 

If we get into this definition game, I don’t know where we end 

up. I have some fears of where we’re going to end up, which would 

basically include virtually everything under that critical infrastrucVerDate 0ct 09 2002 11:54 Dec 04, 2006 Jkt 003540 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 F:\DOCS\HBA117.190 HFIN PsN: TERRIE
31

ture, and would essentially have a dampening effect, if not a totally 

negative effect, on foreign investment in the first place. I’d appreciate, Mr. Secretary, your comments. 

Mr. EVANS. Well, Mr. Chairman, I just agree with you. I don’t 

know where it goes. And I think you really run the risk of sending 

a very, very chilling message to potential investors around the 

world. Because I don’t know where—is it the food chain? Is it those 

who build the highways? Is it automobile companies? Is it banks? 

Is it—I mean, you can go a lot of places that cover the lion’s share 

of this economy and somehow tie it back to critical infrastructure. 

Or economic security. I’ve heard people even talk about well, just 

if it, you know, affects the economic security of this country, you 

know, then it may fall into that category. 

So I just think it’s something you’re going to have to be very, 

very careful with. Because if it gets defined too broadly, too large, 

then all of that’s just going to have a chilling effect of foreign—or 

it’s looking for places to send capital. 

Look, it’s all about a free flow of capital, open markets, and creating a friendly environment for that capital to come here to America and create jobs. And if you start sending the message out there 

that, ‘‘Well, we’re not sure how much we want your capital to invest in contractors that build highways, or food manufacturers, or 

automobile companies.’’ I mean, you know, it sends a very strong 

protectionist, isolationist message to those outside of America, in 

my judgment. 

The CHAIRMAN. Thank you. Mr. Vikner, I would assume if you 

would ask the folks that build those excellent Mack trucks if 

they’re part of the critical infrastructure, I would guess it would be 

about 100 percent; would it not? 

Mr. VIKNER. I would guess so, yes. I think the trucking industry 

is certainly a very, very important part of the economic fabric of 

this country. 

The CHAIRMAN. Mr. Anderson, in Virginia, can you identify any 

major manufacturers or any major companies that would not be 

part of the critical infrastructure? 

Mr. ANDERSON. Not if you’re employed by them. 

The CHAIRMAN. Very good. You wouldn’t want to tell the Governor that, ‘‘You have some components that are not part of the 

critical infrastructure,’’ would you? 

Mr. ANDERSON. No, sir. 

The CHAIRMAN. Professor, do you have a take on that? 

Mr. TARULLO. Only this, Mr. Chairman, that as I said a few moments ago, I think it’s important to draw a distinction between giving CFIUS and the President the power to act where necessary, 

and throwing the net so broadly where they have to act, that you’re 

creating all the problems that I think your questions bring out. I 

think we absolutely want to be assured that the President, where 

necessary, can take action that will protect things like our cyber infrastructure, things like the payment system in the United States. 

Obviously, things like the ports. That’s come up already. But I 

think you can do that without forcing everybody to say, ‘‘Any time 

you buy anything, you’re engaged in the critical infrastructure.’’ 

You know, if you recall, Congressman, what happened 18 years 

ago with Exon-Florio. Initially, the first few years, there were perVerDate 0ct 09 2002 11:54 Dec 04, 2006 Jkt 003540 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 F:\DOCS\HBA117.190 HFIN PsN: TERRIE
32

haps 4- or 500 filings, notifications a year, because no one was 

quite sure what it meant. And then CFIUS went to work, and by 

1994/1995, during the period where I was in government, the filings had declined to about 50 or 60 a year. And the reason was 

that people understood that yes, these are the sorts of issues that 

are raised. 

And I would think with critical infrastructure, the same thing 

could happen. Initially, yes, you may have some uncertainty. But 

if people are doing their job, and they’re honing in on what really 

matters, then you can avoid the parade of horribles of everything 

being critical infrastructure and everybody filing, while still making sure that CFIUS is doing what this Congress wants it to do, 

which is to protect the Nation’s critical infrastructure. 

The CHAIRMAN. But it would be our role, actually, to define critical infrastructure. If we allow bureaucrats to define critical infrastructure, we really—it seems to me we haven’t done our jobs, have 

we? 

Mr. TARULLO. Well, as with all legislating, it’s—you know, as a 

law professor, this is what we do every day as we try to hone in 

on the problems in legislating, and then administering under that 

legislation. Because one wants to write a standard or write a law 

broad enough to potentially capture all the conduct you may want 

to prevent or punish, but at the same time, you recognize that by 

drawing it that way, you may pull in a lot of other things as well. 

That’s when we rely on the discretion of the people who administer 

the law, whether it’s courts or police officers or administrative 

agencies. 

And here, I think what we should be looking for is to define critical infrastructure broadly enough so they can take action, not to 

define it so that they have to start an investigation every time 

something is arguably included, but to say, ‘‘Look, we want you focused on the critical infrastructure of this country. We want you 

to do an investigation where you see a real national security 

threat.’’ And then we do have to have an iterative process that 

helps people understand what in particular circumstances is or is 

not critical. 

So I don’t think you’re at all abdicating your responsibility by 

having a fairly general definition. And so long as that definition 

doesn’t do anything more than empower the President, that it 

doesn’t require all the kinds of things that Secretary Evans worries 

about, then I think you’re okay. 

The CHAIRMAN. Well, Professor, the first thing that I would do 

if I was to introduce a bill under Title I would be to apply the Hippocratic Oath to every congressman and senator. 

Mr. TARULLO. That’s your province, Mr. Chairman. That’s not my 

province. 

The CHAIRMAN. I understand. And by the way, the Hill’s Angels 

defeated the Georgetown law faculty, the Hoya Lawyas, in basketball once again. 

Mr. TARULLO. I was out of town, Mr. Chairman. Had I been 

there, the outcome, I’m sure, would have been different. 

The CHAIRMAN. Well, I wasn’t available that night either, and I 

can make the same argument. 

Mr. TARULLO. So we both might have fouled out. 

33

The CHAIRMAN. That was a live pair. Let me— 

Mr. CROWLEY. Mr. Chairman, would you yield for just a moment? 

The CHAIRMAN. Oh, the gentleman from New York. 

Mr. CROWLEY. Was that the Hippocratic Oath or the Hypocrite 

Oath? 

The CHAIRMAN. I beg your pardon. 

Mr. CROWLEY. I’m sorry. 

The CHAIRMAN. The Banking Committee, our counterpart in the 

other body, which we can now call the Senate, by the way, has 

passed legislation dealing with the CFIUS process. I’m wondering 

if any of you gentlemen have had an opportunity to take a look at 

that and critique the approach that the Banking Committee has 

taken. Do we have any volunteers? I know it happened rather 

quickly, but I just wondered if there was any— 

Mr. EVANS. Yes, why not? I guess an observation that I would 

make, Mr. Chairman, is kind of an extended time line. And not 

only extended time line, it seems like to me a time line that would 

push many more of the cases into the investigation phase, as opposed to cutting that off earlier. Some of that would be because of 

the expanded definition of critical infrastructure. 

But I just—you know, if you take the time line and you move it 

from 90 days to 115 days, then certainly, that has some sort of 

chilling effect on the investment. I don’t know how much, but some. 

And I think if you also make the requirement such that more of 

the cases will move into this 45-day investigation period, then I believe that that has some chilling effect on the process as well. 

And I don’t know the language specifically, but I think it also—

one other aspect I’m concerned about is the requirement of the secretaries to sign/certify every case. I think there may be some level 

the deputy can designate it, and another level the secretary can 

designate it to the deputy. Or that’s what we’d like to see anyway. 

If you’re requiring the Secretary to sign every case, then, you 

know, I’m not sure you’re running into more kind of obstacles of 

slowing down the process. 

I know when I was involved in it, I knew what was going on. 

And I had an active discussion with the deputy as the process proceeded, but he certainly had my authority to sign off on it. 

The CHAIRMAN. But that was—that procedure, though, was really unique to Commerce in that case. Each department has different 

culture and procedures. That’s correct, right? 

Mr. EVANS. Well, I don’t know how unique it was. I mean, certainly, we had a very—you know, we had a partnership relationship, and so I knew what was going on all the time. I mean— 

The CHAIRMAN. But there was nothing structured. 

Mr. EVANS. Nothing structured. 

The CHAIRMAN. Right. Professor, do you have any comment on 

that, on the general question on the Senate bill? 

Mr. TARULLO. Not in general, Congressman. I think there are 

some things in there that probably raise some questions, and some 

other things, such as tracking and withdrawn notifications, that 

are probably a good idea. 

The CHAIRMAN. Let me yield to my friend from New York, because we’ve got to close down. 

34

Mr. CROWLEY. Yes. Mr. Chairman, thank you for the moment. 

Professor, could you comment on the ranking that is offered in the 

Senate bill in terms of ranking countries in numerical? And as 

well, if you could, former Secretary Evans, respond to my question 

in regards to notification of Congress without over-politicizing, how 

would you recommend that, if you can answer that as well? 

Mr. TARULLO. With respect to the country groupings, Congressman, again, this is probably coming more from my instinct as 

someone who used to be in the White House than as someone outside right now. But my reaction is, frankly, the following. That it 

better be the case that CFIUS members have something of a predisposition based on the country from which the investment is coming, a predisposition in the following sense, a predisposition that 

this is a country which should raise particular kinds of concerns 

because of things going on in that country. 

How productive it is formally to go through a process of putting 

people in categories, and then you say, ‘‘Well, jeepers, has this 

country changed? Do we need to now change the category?’’ I’m a 

little bit more skeptical about the utility of that. It strikes me as 

the sort of thing, frankly, where if trust in the Administration has 

really fallen, you might be—you know, people have an instinct to 

push them in that direction. But I would hope that you could have 

a process whereby that was more an informal part of what they 

did. 

With respect to Congressional notification, as you can tell from 

my written testimony and from what I’ve said here today, I do 

think that Congress and the American people need to have a better 

sense of how the Administration is approaching its implementation 

of Exon-Florio, that as I said earlier, if GAO can do it, they can 

do it too. 

On pending cases, as Congressman Frank said at the beginning 

of the hearing, at some level, I’m not sure how much Congress 

should want. I don’t know that Congress should want a notification 

made to CFIUS and immediately reported to the Congress. 

Again, it seems to me that the better outcome, if you could 

achieve it—if you could achieve it, and I don’t know if you can. But 

the better outcome would be that the Administration, whoever’s in 

the White House, the Administration exercises its judgment to 

know when it needs to consult with, to mention, to notify Congress 

of something of a decision, for example, that they’re about to make. 

But regularizing it, having every notification come up here, that 

does seem to me to put you in a position that, number one, you 

may not want to be in collectively, and, number two, to raise much 

greater prospects of the information getting out and being used for 

commercial purposes or to politicize things, with the chilling effect 

that Secretary Evans referred to. 

So again, I can’t say with confidence how much you should require, how much you should rely on the Administration. But I 

think what one really wants to bear in mind is we don’t want to 

politicize the process, and we don’t want to get to the point where 

every CFIUS notification is becoming a public issue. That’s not 

where any of us wants to be. 

The CHAIRMAN. The gentleman’s time has expired. The 

gentlelady, briefly. 

35

Mrs. MALONEY. Yes. Although there is a concern about having a 

definition of what is infrastructure, there is no question or debate 

that selling 20 ports was infrastructure. And I want to be associated with Mr. Manzullo on the other side of the aisle, his comments on foreign-owned government subsidizing, outbidding, and 

really, American companies not being able to compete against them 

in that respect. 

So the other item that many people have raised today is judgment, of making the proper decision. And my question to you, since 

this is a security issue, should we include on the CFIUS panel the 

director of national intelligence? 

The President reorganized our government in response to 9/11 

for the first time in 47 years, since 1947. And I certainly supported 

his efforts in reorganizing the intelligence system, which many people feel was the problem that led to 9/11. And why shouldn’t we—

shouldn’t we have someone from the intelligence community whose 

job it is as our national security be part of this review panel? And 

I’d like to hear your comments on that. 

Mr. TARULLO. Not a problem from my point of view. 

Mr. EVANS. Yes. I mean, I don’t think I have—I don’t know all 

the facts, but I don’t think I have a problem with that either. I 

mean, you know, certainly, it gets back to the Congressman’s question about ranking of countries, and do you want to rank them in 

some kind of way. What you want to have about them is intelligence and what’s going on in those countries. And so it seems like 

to me that somebody from the intelligence community should be 

sitting at the table. 

The CHAIRMAN. The Chair wants to thank all of the panelists 

today. It’s been an excellent discussion of give and take. With that, 

the committee stands adjourned. 

[Whereupon, at 12:59 p.m., the subcommittee was adjourned.] 

(37)

A P P E N D I X

April 27, 2006

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