Regulation of Foreign Direct Investment in the United States Defense Industry

Hanson, Mark L. | January 1, 1989

From 1973 to 1986, the amount of foreign capital invested in the United States increased tenfold. In 1973, the amount of foreign direct investment in the United States was $ 20.556 billion. By 1986, that figure had increased to $ 209.329 billion. Clearly, foreign capital has become a necessary element for the economic growth of the United States and has contributed significantly to the development of the nation. This Comment examines the adequacy of the existing restrictions upon foreign investment in industries holding defense contracts or having access to national security information. After first presenting the reasons underlying the United States commitment to an open investment policy, the existing framework of regulations which apply to investors in any area of the United States economy will be reviewed. An examination of the regulations specifically applicable to investors in the defense industry will follow. Next, the actual operation of the regulatory framework during Fujitsu’s attempt to acquire Fairchild Semiconductor Corporation will be considered. Finally, this Comment will analyze the most recent legislative actions to limit foreign investment on a national security basis and will conclude that in implementing the recently enacted Exon Amendment, the United States government must act with restraint and apply its authority to limit only those investments which threaten national security without permitting that authority to become a tool to protect domestic businesses and industries from foreign competition.