DC Trade "Expert": Foreigners should buy all our companies

March 07, 2017

By Michael Stumo, CEO

The old guard free trade establishment is scrambling to counter the more economic nationalist positions of the Trump administration.  Gary Hufbauer does not like Peter Navarro's (Director, White House National Trade Counsel) national security concerns about the trade deficit resulting in other countries buying strategic assets in the US, including the defense industrial base.

Hufbauer was quoted in PoliticoPro stating that the national security argument is "totally overblown."

"Yes, cumulated trade deficits have, as their financial counterpart, foreign ownership of stocks, bonds, buildings and firms. But the U.S. government has ample authority to block foreign ownership of assets that pose a threat to U.S. national security," he said in an email. "Foreign ownership of other assets actually makes foreigners more dependent on the United States rather than the other way around. Historically, foreign-owned firms doing business in the United States pay better wages, do more R&D and investment, and export more than comparable U.S. firms. What's not to like?"

Under his reasoning, we should sell all our companies to China and others.  Because we will all be richer.

Hufbauer handled international policy in the Ford and Carter era, helping build the international trade organizations that are of questionable net benefit today.  The goal of free trade was to achieve free trade, not explicitly to achieve broadly shared prosperity.

He is right that trade deficits cause much more foreign investment in the US, especially from China which accounts for our biggest deficit.  China has used its riches from WTO membership and its resulting trade surplus to build a military to rival ours, to become aggressive in the South and East China Seas, to force technology transfer or steal the tech, etc. Chinese companies, state-influenced and otherwise, are buying more and more US companies and land with the proceeds from the trade imbalance.  

This is not a national security risk?

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