US warns on blocks to foreign takeovers

US warns on blocks to foreign takeovers

By Alan Beattie in Washington

Published: May 4 2008 22:01 | Last updated: May 4 2008 22:01

Rich countries risk stoking protectionism by blocking foreign takeovers on grounds other than national security, a senior White House official has warned.

Dan Price, the international economics official at the White House National Security Council, said the Group of Eight rich countries must “lead by example”. Mr Price, one of the key officials preparing for the July G8 summit in Japan, told the Financial Times that the group should issue “a strong . . . statement on open investment and trade policies”. This should be “aimed not only outward but to the G8 countries themselves”.

His call follows a succession of interventions by rich country governments to block foreign takeovers on grounds of national interest. Japan recently turned down a bid by The Children’s Investment Fund, a UK-based hedge fund, for a bigger stake in the energy company J-Power. Canada blocked the sale of the space robotics and satellite arm of the technology company MacDonald-Dettwiler to Alliant Techsystems of the US. New Zealand prevented a bid by the Canadian state pension company for Auckland airport.

Mr Price defended Washington’s rules scrutinising foreign acquisitions, which were made more precise after the failed 2006 attempt by Dubai Ports World to take control of US port container terminals and other operations.

“Our review of a fraction of transactions is on the narrow grounds of national security,” Mr Price said. “A number of G8 countries review transactions on grounds other than national security. We think that is unhelpful and unproductive.”

A US official said, meanwhile, that “the messaging around the J-Power transaction was not about national security”.

Christopher Padilla, under-secretary for international trade at the US commerce department, said that American businesses increasingly complained about regulations designed to prevent them investing and competing in foreign markets such as China, rather than traditional tariff barriers or currency misalignment. Companies were “worrying more about the long-term effects of China following a Japan-type model of being less welcoming of foreign investment and foreign participation in the economy,” Mr Padilla said.

The US last year launched an “Invest in America” programme to argue that the US remained open to foreign direct investment.