Rattling the Protectionist Sabers

Billions for U.S. high-tech, not a penny for foreign companies; that's the message Congress has included in several technology-related bills now working their way up the Hill.

But that kind of discrimination against foreign companies with U.S. operations could severely undercut U.S. competitiveness and economic strength, say a coalition of lobbying groups now working to head off the bills.

Discrimination "would have negative effects on business operating in the United States and on the U.S. economy," according to a July 22 letter sent by 14 industry groups to Commerce Secretary Ron Brown.

"For U.S. companies to compete and sell products in the global marketplace, they must have access to the world's most competitive technologies, parts, supplies and materials," said the letter, signed by such Washington, D.C.-based groups as the National Coalition for Advanced Manufacturing, the American Electronics Association and the Electronic Industries Association.

The discrimination, dubbed Conditional National Treatment, is designed to support government-sponsored industrial policy and also pressure foreign governments to lift restrictions on U.S.-owned companies, said Cynthia Beltz, an analyst at the Washington-based American Enterprise Institute.

Foreign-owned companies are critical to U.S. economic strength, said industry officials. For example: About 400 foreign-owned companies based in the United States accounted for $11 billion in research-and-development spending, and carried out 15 percent of the nation's manufacturing-related research and development work, said Richard Florida, a management professor at Carnegie Mellon University in Philadelphia.

Foreign direct investment in the United States rose to $68 billion in 1989, but collapsed to $3.4 billion in 1992 because of the international recession and increased investment in Asia. Investment in the U.S. rose again in 1993 to $32 billion.

The steady infusion of foreign capital, technology and expertise "translates into a tremendous competitive advantage" for the United States, Florida said.

The pending measures opposed by the industry groups are included in several bills that urge or contain different rules for U.S. companies and for foreign companies. The measures expand the routine practice of sheltering military data from foreign companies and the fostering the procurement of U.S. goods, to the denial of information, grants or subsidies to foreign-owned research or manufacturing firms.

The leading example of the new policy is an amendment sponsored by Michigan Democrat Rep. John Dingell and New York Democrat Rep. Thomas Manton. The measure is included in the House version of the 1994 Competitiveness Act, and is intended to ensure technology-development funds go towards U.S.-owned companies.

In their effort to derail these measures, industry officials have won some support from the Clinton administration. Ellen Frost, counselor at the Office of the U.S. Trade Representative, said the administration is urging the Manton amendment be dropped, adding, "We do support an open investment climate. We consider [free] trade and investment to be increasingly inseparable."

The issue is growing in importance, partly because of ambitious government efforts to foster development of advanced technology.

Also, the efforts to restrict aid to U.S. companies can help open foreign markets, said Clyde Prestowitz, president of the Washington, D.C.-based Economic Strategy Institute. Foreign countries already favor home-grown industries and act to restrain overseas investment by U.S. corporations, while foreign companies sometimes use predatory tactics to dominate industries in the United States, he said.

Without some economic tools, such as the Manton amendment, diplomatic and legal efforts to roll back such practices are unlikely to succeed, he said.

But Florida said the tilt by the Congress against foreign investment, dubbed the "crowbar approach," by opponents, is contrary to the new General Agreement on Tariffs and Trade being considered by the Senate, and comes as Japan opens up its economy to foreign investment.

A paper prepared by the 14 industry groups said the measures would hurt technology companies such as Philips Electronics North America Corp., a Dutch-owned firm which employs 30,000 people in the United States and is among the top 50 U.S. manufacturers. So would Munich-based Siemens GmbH, which employs 45,000 people in the United States.

Also, the congressional measures would hinder international technology-sharing, undermining foreign firms based in the United States as well as U.S. firms, said the paper. For example, IBM Corp. "is dependent on cooperative arrangements in dozens of technical areas to gain access to foreign technology," according to the industry paper.

The global marketplace demands rapid sharing of technology and large-scale, international industrial alliances, said the paper. "Government programs that force [U.S.] companies to source or manufacture in a fashion that ignores these new realities... impairs the ability of companies to keep pace with their competition."