Congress Set to Tighten Scrutiny of Foreign Deals

WASHINGTON – More than a year after Dubai Ports World sparked a big political fight on Capitol Hill, the Democratic-led Congress is close to winding up action on legislation that tightens U.S. scrutiny of foreign investments.

In an era of high partisanship, action on the bill, which is expected to win final approval today, shows Democrats and Republicans can work together on an issue of wide concern to many U.S. businesses. The legislation tightens the federal regimen for reviewing deals and provides for greater scrutiny of transactions led by foreign government-controlled entities.

It also makes the once-shadowy U.S. review process more transparent. Business ultimately embraced the changes as a way to allay concerns abroad that the U.S. had become a riskier destination for foreign capital following the DP World debacle.

"It's important for Congress to show that we haven't decided to secede from the world," House Financial Services Chairman Barney Frank said. The Massachusetts Democrat worked closely on the legislation with former Commerce Secretary Donald Evans, a close friend of President Bush who is now head of the Financial Services Forum, the influential trade group. "We're hanging out the welcome sign for foreign investment," Mr. Frank said.

But while the measure has moved through Congress with wide bipartisan support, enactment of the bill won't do much to stem concern among some Americans about globalization. Those worries stoked opposition to Mr. Bush's proposed immigration overhaul, which would have provided a pathway to citizenship for millions of undocumented workers in the U.S.

The concerns have cast doubt on the fate of free-trade deals coveted by the White House. And they are almost certain to touch off a fresh fight over foreign investment, especially if a U.S. company of strategic significance, such as an energy or transportation firm, is the target of an unwanted offer from abroad.

"In any contested takeover, this card would be played," said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, recalling a 2005 fight in Congress over a Chinese government-owned company's attempted acquisition of a U.S. oil company.

The legislation was launched after DP World, owned by the government of Dubai, in the United Arab Emirates, moved to acquire control of several U.S. port operations, as part of a global deal. After conducting a standard 30-day review, the Bush administration approved the acquisition. But lawmakers in both parties raised alarms at the notion of giving an Arab company a foothold in U.S. port operations. Amid the hue and cry, DP World agreed to sell off its U.S. holdings.

In one response to the administration's handling of DP World, the legislation requires the government to conduct an extended, 45-day probe of most deals involving foreign government-owned companies. The legislation also requires greater disclosure to Congress of the operations of the Committee on Foreign Investment in the U.S., the government panel that reviews the security aspects of overseas deals.

The House and Senate approved broadly similar bills earlier this year. But in an effort to speed action, the House decided against pursuing negotiations with the Senate on a compromise package. Instead, the House yesterday took up the Senate measure, formally debating the bill but deferring a final vote until today, in part because inclement weather delayed the return of some lawmakers to Washington. Final House approval of the bill would send the measure to the White House for the president's expected signature.

Among other provisions, the legislation requires senior-level approval of all deals and carves a formal role for the intelligence community in investment reviews. The measure also expands the range of transactions subject to potential review, requiring consideration of deals involving critical infrastructure, such as power plants and toll roads.