During the past 20 years the level of foreign investment in the United States has increased. Foreign-owned assets in the United States, which include holdings of bonds and other securities, were approximately $20 trillion in 2007, having increased from 39 percent of gross domestic product (GDP) in 1988 to 145 percent of GDP in 2007. Within this amount, the value of foreign investors’ direct investment holdings—which are investments of 10 percent or more of the equity ownership in a company— have increased from about 8 percent of GDP in 1988 to more than 17 percent in 2007. In terms of annual flows into the United States, new investments by foreign entities have generally showed an upward trend since 1988, but dropped considerably in 2008 (see fig. 1). As we reported in September 2008, our analysis of the publicly available government sources and private researcher lists identified 48 SWFs across 34 countries from most regions of the world. Of the 48 SWFs we identified, 13 were in the Asia and Pacific region, 10 were located in the Middle East, and the remaining 25 were spread across Africa, North America, South America, the Caribbean, and Europe. Some countries, such as Singapore, the United Arab Emirates, and the Russian Federation, have more than one entity that can be considered a SWF. Some SWFs have existed for many years, but recently a number of new funds have been created. For example, while the Kuwait Investment Authority has existed since 1953 and the Kiribati Revenue Equalization Reserve Fund since 1956, many commodity and trade-exporting countries have set up new SWFs since 2000. In July 2008, for example, Saudi Arabia announced plans to create a new sovereign wealth fund. Although some funds have continued to grow as they have received new capital inflows, the recent financial crisis has led to declines in the value of certain asset holdings of SWFs. Because not all funds publish information on their size and performance, no official estimate of the decline or increase in the overall size of SWFs is available. Some funds that do publish information on the value of their investment portfolios have reported losses in certain types of assets. Even with these losses, some funds are reporting that they have grown in size. For example, the Norwegian Government Pension Fund-Global incurred losses of 23 percent of its value in 2008, including losses on its equity portfolio of about 41 percent. However, the government of Norway reports that the size of the fund increased in 2008 from new capital infusions. Another example is Mubadala Development Company, a SWF of the United Arab Emirates’ Abu Dhabi, which experienced realized and unrealized losses of $5.2 billion in 2008 but also received more than $6.9 billion in contributions from shareholders. Countries with SWFs account for a substantial share of the level of foreign investment in the United States, although only a portion of the investments in the United States made from entities in these countries are made by such funds. As we reported in 2008, the extent of SWF investment within the United States’ data on overall foreign official holdings cannot be identified. In the United States in 2008, entities from countries with SWFs accounted for about 33 percent of foreign portfolio investment holdings— holdings of less than 10 percent of the equity ownership in a company— and more than 16 percent of foreign direct investment holdings (see fig. 2). While most types of investors operating in the United States are not subject to laws that are targeted at foreign investment, investments in some sectors are subject to restriction. Although the United States has an overall policy of openness to foreign investment through policy statements and treaties and international agreements addressing investment, we identified the banking, agriculture, transportation, natural resources and energy, communications, and defense sectors as having federal laws that apply to foreign investment specifically. Banking, agriculture, transportation, natural resources and energy, and communications make up about 20 percent of the U.S. economy in terms of gross output. The sector-specific laws include those that limit the amount of foreign ownership or control allowed or require approval of foreign ownership, laws that restrict activities of foreign-owned firms once the investment is made, and laws that require disclosure of foreign ownership and control. The predominant rationale for these investment laws is protecting national security. In addition to laws specific to certain sectors, some broader federal laws—including national security and general disclosure laws— can affect foreign investors investing in any sector. Lastly, there are state level laws that also target foreign investment, especially in the insurance and real estate sectors. The United States has long been open and receptive toward foreign investment and this openness has been demonstrated by the U.S. government in various statutory frameworks, and policy measures, and in treaties and international agreements addressing investment. For example, a 1977 presidential statement noted that the U.S. policy towards international investment was to neither promote nor discourage investment flows or activities. A 1983 presidential statement noted that direct investment in the United States was welcome if it was responding to market forces. More recently, in 2007 former President George W. Bush issued a policy statement supporting open international investment regimes and stating that the U.S. government unequivocally supports international investment in the United States. The United States also has entered into agreements or treaties with other countries and international organizations that acknowledge its commitment to openness to foreign investment and encourage other countries to also open their economies to investment. According to the Department of State, the United States has entered into bilateral investment treaties (BIT) with 40 countries, seeking to both encourage the adoption of market oriented policies and protect cross-border investments. The provisions of these treaties pledge the United States and the signing country to grant foreign investors the same investment opportunities as enjoyed by domestic investors. The BITs also provide for the right of an investor to submit an investment dispute with the treaty partner’s government to international arbitration. In addition to these treaties, many of the free trade agreements the United States has entered into have provisions that pledge open investment among the signing countries. For example, the North American Free Trade Agreement signed by the United States, Canada, and Mexico has provisions with terms similar to those in the U.S. BITs. Lastly, the United States is also a member of two international organizations—the Organization for Economic and Community Development (OECD) and the World Trade Organisation (WTO)—that advocate open investment related policies, including policies that are transparent and nondiscriminatory. In nine cases, the United States has entered into a BIT or a free trade agreement with countries with SWFs, as shown in table 1. The table shows the SWF countries that have signed investment treaties or entered into free trade agreements with the United States, or are members of OECD and WTO. We did not find examples of federal laws that specifically target SWFs investing in the United States; however some laws specifically target foreign investment, which would include SWFs. While foreign investors appear to face no federal restrictions specifically targeting their ability to invest in many sectors of the U.S. economy, federal laws in several sectors—banking, communications, transportation, natural resources and energy, agriculture, and defense—do contain provisions that either restrict the level of foreign investment, limit the use of a foreign-owned asset, or at least require approval or disclosure of any foreign investments. Banking, communications, transportation, natural resources and energy, and agriculture accounted for about 20 percent of U.S. output in 2007. However, in terms of attracting foreign investment, these sectors accounted for about 28 percent of foreign direct investment holdings in 2007 (see fig. 3). Several U.S. laws specifically affect foreign investment in the United States regardless of the sector, with national security considerations having the largest potential impact. These laws can potentially limit foreign investment directly by preventing planned investments from being carried out, which according to Treasury officials is rare, or indirectly by discouraging investments by foreign investors who either find the process burdensome or believe their chances of success are too low. The Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (Section 721), authorizes the President, following a review by the interagency Committee on Foreign Investment in the United States (CFIUS), to suspend or prohibit a foreign acquisition, merger, or takeover of a U.S. business that is determined to threaten the national security of the United States. The President can do this in cases where there is credible evidence leading him to believe the foreign interest exercising control might take action that threatens to impair national security, and that provisions of law other than Section 721 and the International Emergency Economic Powers Act (IEEPA) do not provide adequate and appropriate authority for the President to protect the national security. CFIUS may also enter into an agreement with, or impose conditions on, parties to mitigate national security risks. Filing a notice of a transaction with CFIUS is voluntary. However, CFIUS can initiate a review unilaterally and can compel the production of necessary information about the terms of any covered transaction. If CFIUS is not satisfied that national security concerns can be mitigated, it can recommend that the President suspend or prohibit such a transaction, and the President may order divestment if the transaction has been completed, regardless of whether a notice was filed. The regulations outlining the review process for CFIUS provide broad authority to review any covered transaction if it is a possible impairment to national security. In addition, IEEPA authorizes the President to prohibit certain transactions or block any property in which any foreign country or foreign national has any interest. It grants the President broad authorities to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States.” Before exercising these authorities, IEEPA requires the President to declare a national emergency. National emergency declarations are governed by the National Emergencies Act. IEEPA sanctions are typically imposed pursuant to an executive order.