June 26, 2006

The President of the United States of America

The White House

Washington, D.C. 20500

Dear Mr. President:

The President’s Export Council (PEC) is deeply concerned about recent events which have the potential to jeopardize America’s leadership as a champion of open and global foreign investment. The Dubai Ports World controversy, and the subsequent rush in Congress to change the CFIUS review process through hurried legislation, have drawn concerned attention to U.S. foreign investment policies. We are concerned about the direction of the current debate because we firmly believe that America is well-served by a foreign investment approval process that recognizes national security interests; is fair, objective, not overly burdensome; and promotes the spirit of free trade.

With its mandate of promoting U.S. export trade, the PEC understands that the global marketplace is a two-way street. Only if the United States keeps its markets open to foreign goods and services will export markets remain open to U.S. trade. The same logic applies for investment. In a competitive world economy, U.S.-owned companies must be able to make investments abroad to keep pace. We cannot afford to wall off our economy, lest others be persuaded to follow our example, especially in a time when the U.S. is urging other countries in the WTO to liberalize their markets for U.S. goods and services.

The United States must not discourage legitimate inward investment. According to the Department of Commerce, total accumulated foreign direct investment (FDI) in the United States in 2004 was $2.7 trillion at today’s market value, representing about 10 percent of the total current market value of all publicly traded firms. This FDI contributes significantly to U.S. jobs: 5.3 million U.S. workers are directly employed by U.S. affiliates of international companies. These companies pay good wages, averaging close to $60,000 annually, and account for more than 21 percent of total U.S. exports. Our economy and export trade would not be nearly as robust without the participation of foreign investors.

The PEC applauds the Administration’s strong position in defense of foreign investment policies that keep both our national security and our national economy strong. It is disappointing that misinformed speculation and unfounded fears with respect to the Dubai Ports World transaction led to threats in Congress to legislatively circumvent the CFIUS review process by prohibiting certain foreign investments outright. Such suggestions are widely noted abroad and have the potential to discourage investments from valued U.S. trading partners, a situation that ultimately will hurt U.S. interests.

For these reasons, the PEC joins with leading U.S. industry groups to warn against policy changes that would significantly hinder foreign investment. On March 13, 2006, eight major trade associations[i] outlined seven principles to guide proposals to modify the U.S. national security review process. They are worth repeating:

Principle 1: It is appropriate for foreign investment in the United States that might affect U.S. national security to be subject to special review by the President and Executive Branch government agencies that are designated.

Principle 2: The national security investment review process must be objective, fact-based and analytically rigorous.

Principle 3: The national security investment review process must be focused on national security issues.

Principle 4: The national security investment review process must promote the full use of sensitive and classified information, including protecting the confidential information of the parties from public disclosure.

Principle 5: The national security investment review process must operate on a case-by-case basis and be sufficiently flexible to cover new national security issues as they arise.

Principle 6: The national security investment review process must operate in a timely manner.

Principle 7: The national security investment review process must not become a substitute for other more targeted and effective tools to protect U.S. national security.

The PEC encourages the Administration to engage with Congress to discuss the various legislative proposals impacting foreign investment and the CFIUS process. Congress should avoid proposals to ban foreign investment in "critical infrastructure," as that would punish foreign-owned companies that have contributed greatly to enhancing the basic infrastructure of the U.S. economy. Congress should also refrain from imposing an overly burdensome review process that is not objective or fact-based. An interagency group, led by the Department of the Treasury and including representatives from the Defense, State, Commerce, Justice and Homeland Security Departments and the White House, is an appropriate forum for the security review, as it combines needed expertise with the ability to deal with sensitive and classified information in a timely manner.

It is important that the national security review process for inward foreign investment not be decided by political calculation, but be based on fair, objective criteria that uphold America’s longstanding commitment to open markets while, at the same time, maintaining national security.

If we allow ill-informed protectionist measures to impede foreign investment, then our economy and national security will undoubtedly suffer. The members of the PEC feel it is imperative to avoid a rush to make major changes to a foreign investment review process and we urge the Administration to convey these views to the Congress.

Sincerely,

J.W. Marriott, Jr.

Chairman