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June 14, 2006
Inward Investment and National Security: A PR Issue?
I attended a roundtable at the Council on Foreign Relations in New York City yesterday morning. Speakers included former US Government officials such as William Reinsch and Patrick Mulloy and Prof. Ken Lieberthal from University of Michigan Business School.
Key points from the session:
1) The Regulatory Framework--The US was open to foreign investment for the first two hundred years of its history. In 1975, the US Government began to monitor foreign investment. The Exon-Florio Amendment in 1978 allowed Congress to block foreign investment if it compromised national security. The subsequent Byrd-Sarbanes Amendment in 1992 called for a 45 day period of investigation in the event of a foreign government owned entity acquiring a US company. Congress expressly has the right to regulate foreign commerce under the Constitution.
2) The Winners from Global Trade Liberalization -- It turns out that despite job losses in traditional industries (auto, steel), the US share of total manufactured output has risen in the past decade from 22% in 1994 to 24% in 2005. The most important national security policy, according to Prof. Lieberthal, "is for the US to remain competitive in the long run. National security should not be linked to the protection of specific industries."
3) The Real Issue Is China--The speakers contend that there are parallel discussions happening in Washington and Beijing. In Camp A (the hawks) are those who feel that the US and China will inevitably be strong rivals and perhaps enemies. In Camp B (doves) are those who believe we will be economic rivals but can have a constructive relationship. The issue of Chinese purchases of US assets will only accelerate as the Chinese Government is encouraging its companies to go out and become global competitors.
4) The Dubai Ports Deal Failed Because of Inadequate Process and Poor PR-- The U.S. doe not have an accepted definition of national security. The Executive Branch failed to recognize the PR implications of the Dubai deal and also gave Congressional Democrats the opportunity to criticize the poor process (no 45 day review period).
Why does this subject belong in a blog devoted to communications and PR specifically? It does not take a rocket scientist to see that with the large US trade imbalance, huge reserves of dollars are building up in the Middle East and in China. This money will need to be put to work, not just sit in Treasury bills or cash. Chinese companies are distrusted by 55% of American opinion leaders to be reliable acquirers of US companies, according to the Edelman Trust Barometer 2006.
I would wager that a Middle Eastern nation would rate even lower. The American worker needs to be informed about the need for foreign capital, R&D and manufacturing expertise. The foreign companies must do their part to accommodate the US market (or any other local market for that matter). Even if it is not a Chinese custom for the CEO to have much visibility, it is a critical success factor in the US. I was told by one Chinese CEO that tall flowers get cut down in China but as they push out beyond home market, the Chinese CEOs must overcome this reticence. There will also need to be commitment to corporate social responsibility by these foreign players, whether adoption of green sourcing, manufacturing and distribution standards, charitable activities in the community or commitment to a diverse work force. Prejudice is only overcome through education and communication--those of us in PR can really help.
Technorati Tags:
Trade, China, PR, Public Relations
Posted by Edelman at June 14, 2006 4:06 PM
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