Vanderbilt Journal of Transnational Law

First Page



Negative opinions about the expansion of direct foreign participation in the American economy have ranged from xenophobic fears of a foreign economic takeover of the United States to more responsible concerns for the possible need to inhibit foreign penetration of certain critical industries and raw material sectors. These fears and negative reactions have been exacerbated by a paucity of available information to verify or rebut them. A number of congressional committees, therefore, have responded by scheduling investigatory hearings on foreign direct investment, while several members of Congress recently have sponsored legislation in this area. Senator Daniel Inouye (D-Hawaii), has introduced legislation calling for a massive two-year study of foreign direct investment in the United States to gain the information necessary to formulate a "coherent national policy" toward the inflow of such capital. More directly, however, Representatives John Dent (D-Pa.) and John Moss, (D-Calif.) have sponsored bills in Congress that would sharply limit future foreign direct investment by restricting foreign acquisition of existing American corporate stock.

This sharp increase in foreign direct investment in the United States, together with the negative reactions among responsible men in the press and government, has posed the difficult and complex question whether it is in the best economic and political interests of the United States to maintain its present policy of allowing a largely unrestricted inflow of foreign direct investment. This Note examines this question in light of the three congressional bills previously mentioned and offers recommendations for a desirable course for United States policy. Part II treats United States trade and investment policy and the statutes regulating foreign direct investment. A comparison of American practice and policy with that of other comparably industrialized nations comprises the third part of this Note. Part IV examines in depth the reasons for the recent growth in foreign direct investment in the United States and its present and prospective nature and extent. Part V concludes with an analysis--built upon the observations in the earlier sections of the Note--of the political and economic repercussions in the United States caused by the entry of foreign direct investment, and suggests conclusions for appropriate United States policy.