Opinion

The Great Debate

The mysterious agency that can block a global merger

When Smithfield Foods CEO Larry Pope appears before the Senate Agriculture Committee this week, senators will likely grill him on whether U.S. consumers will be harmed by the proposed $4.7 billion sale to the Chinese firm Shuanghui. Some members of Congress have suggested the deal could hurt the U.S. food supply, even though the meat will be exported.

It seems probable that the deal will go through, but one hurdle is that it must receive approval from the little-known Committee on Foreign Investment in the United States (CFIUS). As foreign investment rises CFIUS, the federal committee created by President Ford that is barely known outside Beltway and M&A circles, will only become more central to investment by foreign firms. CFIUS’s opaque rules will reach even further into deals from candy companies to technology portals.

For the past few years, international interest in American companies has risen dramatically. Dealmakers in China, Russia, Japan, Europe and elsewhere are snatching up U.S. firms, real estate and other assets. In 2013, the U.S. claimed first place on the Foreign Direct Investment Confidence Index after dropping to fourth last year. And as the global economy continues to recover, overseas investors will be spending more cash on mergers and acquisitions — from New York to Houston.

CFIUS reviews are also on the rise. According to CFIUS’s Annual Report to Congress, the number of notices increased from 65 in 2009 to 111 in 2011, though this was in part a function of the recession. The number of CFIUS investigations has risen from 6 in 2007 to 40 in 2011. These inquiries into more concerning transactions are supposed to last 45 days, but some go on for months. Asia is particularly sensitive. Since 2007, CFIUS reviews of deals involving Chinese firms have tripled. Reviews of Japanese firms have increased sevenfold.

Despite this boom, CFIUS divulges little guidance or know-how to lawyers and companies navigating the regulatory swamp. No opinion is ever explained. Neither is inaction. And companies can’t challenge a CFIUS decision. That may have been understandable when foreign investments were limited and Cold-War-era concerns were at work. Even though there are still serious national security issues, now that global business currents are inextricably tied to the U.S. economy, the committee’s unwieldy structure and lack of transparency threaten to harm U.S. business interests by delaying deals and holding back investors from bidding, which lowers U.S. investment dollars.

from Jack Shafer:

Edward Snowden and the selective targeting of leaks

Edward Snowden's expansive disclosures to the Guardian and the Washington Post about various National Security Agency (NSA) surveillance programs have only two corollaries in contemporary history—the classified cache Bradley Manning allegedly released to WikiLeaks a few years ago and Daniel Ellsberg's dissemination of the voluminous Pentagon Papers to the New York Times and other newspapers in 1971.

Leakers like Snowden, Manning and Ellsberg don't merely risk being called narcissists, traitors or mental cases for having liberated state secrets for public scrutiny. They absolutely guarantee it. In the last two days, the New York Times'David Brooks, Politico's Roger Simon, the Washington Post's Richard Cohen and others have vilified Snowden for revealing the government's aggressive spying on its own citizens, calling him self-indulgent, a loser and a narcissist.

Yet even as the insults pile up and the amateur psychoanalysis intensifies, keep in mind that Snowden’s leak has more in common with the standard Washington leak than should make the likes of Brooks, Simon and Cohen comfortable. Without defending Snowden for breaking his vow to safeguard secrets, he's only done in the macro what the national security establishment does in the micro every day of the week to manage, manipulate and influence ongoing policy debates. Keeping the policy leak separate from the heretic leak is crucial to understanding how these stories play out in the press.

Building America’s secret surveillance state

ILLUSTRATION: Matt Mahurin

“God we trust,” goes an old National Security Agency joke.  “All others we monitor.

Given the revelations last week about the NSA’s domestic spying activities, the saying seems more prophecy than humor.

First, the Guardian reported details on a domestic telephone dragnet in which Verizon was forced to give the NSA details about all domestic, and even local, telephone calls. Then the Guardian and the Washington Post revealed another massive NSA surveillance program, called Prism, that required the country’s major Internet companies to secretly pass along data including email, photos, videos, chat services, file transfers, stored data, log-ins and video conferencing.

Prying open drone secrets

A federal appeals court rebuffed the Obama administration’s drone policy on Friday, ruling that the CIA stretched its considerable secrecy powers “too far.”  The stinging decision may be the biggest news in the war on terror that you’ve never heard about.

The ruling lays down a key marker for a significant shift in counterterrorism policy. Under President Barack Obama, the United States has moved from detaining suspected terrorists to killing many of them in targeted attacks. There were 10 times as many drone deaths in 2010 as 2004, according to the Counterterrorism Strategy Initiative.  This is why there are now fewer pressing questions about detention or Guantanamo, a vestige of post-September 11 battles. The United States hardly ever captures any new terror suspects.

The politicians and the chattering class, however, have been slow to recognize  this shift.

Can Romney put foreign policy in play?

This piece was updated after GOP presidential nominee Mitt Romney’s major foreign policy address on Monday. It reflects Romney’s remarks.

In the first foreign policy speech following his momentum-gaining debate against President Barack Obama, GOP presidential nominee Mitt Romney expanded on his vision of an “American century,” a view he tied to the legacy of leaders like General George Marshall as he outlined a muscular, moral U.S. foreign policy with American exceptionalism at its core.

Romney aimed to distinguish his world view from the president’s, as he has in far-lower-profile foreign policy speeches, promising to “change course” in the Middle East by helping to provide arms to Syrian rebels and talking and acting even tougher on Iran.

Obama’s first foreign policy blunder

This is an excerpt from The Emergency State: America’s Pursuit of Absolute Security at All Costs, published recently by Penguin Press.

The defining mistake of Obama’s first-term foreign policy was his decision to escalate American military operations in Afghanistan. There were 35,000 American troops in Afghanistan when Obama was inaugurated. By the summer of 2011 there were roughly 100,000. The main national security rationale for their presence was to prevent the Taliban from regaining sufficient strength to invite Al Qaeda back to the Afghan training camps and sanctuaries they had operated from before 9/11. But since early 2002, seven years before Obama became president, Al Qaeda and Osama bin Laden himself — until he was tracked down and killed by U.S. commandos in May 2011 — had been based in Pakistan, under the protection of a Pakistani army that continues to receive billions of dollars in American military aid.

Long before his presidential bid, Obama had called for an increased American military effort in Afghanistan. He repeated that position frequently during the 2008 campaign. Obama’s strong opposition to the Iraq War led many supporters to imagine that he rejected the idea of defending America against terrorism by waging conventional military conflicts in distant Islamic lands. Some of the more philosophical passages in Obama’s autobiographical books, writings, and speeches elaborating on his opposition to the Iraq War fed that misimpression.

from Ian Bremmer:

The secret to China’s boom: state capitalism

By Ian Bremmer
The views expressed are his own.

One of the biggest changes we’ve seen in the world since the 2008 financial crisis can be summed up in one sentence: Security is no longer the primary driver of geopolitical developments; economics is. Think about this in terms of the United States and its shifting place as the superpower of the world. Since World War II, the U.S.’s highly developed Department of Defense has ensured the security of the country and indeed, much of the free world. The private sector was, well, the private sector. In a free market economy, companies manage their own affairs, perhaps with government regulation, but not with government direction. More than sixty years on, perhaps that’s why our military is the most technologically advanced in the world while our domestic economy fails to create enough jobs and opportunities for the U.S. population.

Contrast the U.S. and its free market economy with China’s system.  For years now, that country has experienced double digit growth. Many observers would say that China’s embrace of capitalism since 1978, and especially since joining the World Trade Organization in 2001, has been responsible for its boom. They would be mostly wrong. In fact, a new study prepared for the U.S. government says it’s not capitalism that’s powering China, but state capitalism -- China’s massive, centrally directed industrial policy, where the government positions huge amounts of capital and labor in economic sectors it intends to nurture. The study, prepared by consultants Capital Trade for the U.S.-China Economic and Security Review Commission, reads in part:

In a world in which central planning has been so utterly discredited, it would be natural to conclude that the Chinese government and, by extension, the Chinese Communist Party have been abandoning the institutions associated with the communist economic system, such as reliance on state‐owned enterprises (SOEs), as fast as possible. Such conclusion would be wrong.

U.S. military power: When is enough enough?

– Bernd Debusmann is a Reuters columnist. The opinions expressed are his own. —

The numbers tell the story of a superpower addicted to overwhelming military might: the United States accounts for five percent of the world’s population, around 23 percent of its economic output and more than 40 percent of its military spending. America spends as much on its soldiers and weapons as the next 18 countries put together.

Why such a huge margin? The question is rarely asked although there is spirited debate over specific big-ticket weapons systems whose conception dates back to the days when the United States was not the only superpower and large-scale conventional war against the other superpower, the Soviet Union, was an ever-present possibility. Those days are over.

The Underwear Bomber and the war of ideas

- Bernd Debusmann is a Reuters columnist. The opinions expressed are his own -

Who is winning the war of ideas between the West and al Qaeda’s hate-driven version of  Islam?

It is a question that merits asking again after a  23-year-old Western-educated Nigerian of privileged background, Umar Farouk Abdulmutallab, attempted to murder almost 300 people by bringing down a Detroit-bound airliner on Christmas Day with  explosives sewn into the crotch of his underpants.

The administration of President Barack Obama, averse to the bellicose language of George W. Bush, has virtually dropped the  phrase “war of ideas.” But that doesn’t mean it has ended. Or that Obama’s plea, in his Cairo speech this summer, for a new  beginning between the United States and Muslims around the world  has swayed the disciples of Osama bin Laden, whose 1998 fatwa  (religious ruling) against “Jews and Crusaders” remains the  extremists’ guiding principle.

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