Xenophobia's Threat to Prosperity
Citigroup employs 300,000 people in 100 countries. We are a guest in every one of those countries. We've bought companies in many of them and, with a few notable exceptions during periods of war and revolution, we've been welcomed with great hospitality everywhere for over a century -- just as the United States has welcomed many companies based in other countries. I sincerely hope things stay that way.
But that could prove a challenge in the current political environment. There are now upward of 30 proposals in Congress to make changes in the Committee on Foreign Investment in the United States (CFIUS), a little-known body that has the authority to suspend or prohibit any acquisition, merger or takeover of a U.S. corporation that is deemed to threaten national security. The committee, made up of representatives from a dozen federal agencies, has recently come under intense scrutiny, even though it has not allowed a single breach of national security since it was established in 1988.
Some of the proposals would place new and potentially damaging restrictions on foreign investment in the United States. Legitimate national security concerns are one thing, but introducing overt political considerations into decisions regarding the allocation of capital has the potential to undermine investor confidence -- both domestic and foreign -- in U.S. markets and to jeopardize the continued vibrancy, depth and liquidity of those markets.
Like the investments made overseas by Citigroup, IBM, General Electric and countless other U.S.-based global firms, investment in the United States by companies based outside this country is essential for job creation and innovation. The same is true of individual and institutional investors in the United States and in other countries. U.S. assets owned by individuals or companies outside the United States total about $11.5 trillion. These investors have helped to finance the housing boom in the United States and have contributed significantly to the rise in home values and ownership. They bought nearly $227 billion of U.S. agency debt in 2005, and they currently hold more than $900 billion of such debt.
Non-U.S. companies established in the United States support nearly 5.3 million jobs in this country, spread throughout all 50 states. Put another way, 4.7 percent of Americans holding private-sector jobs are employed by companies based outside the United States. These employees receive compensation totaling $318 billion annually, and their numbers are growing rapidly. Indeed, the very presence of these companies in the United States creates a multiplier effect throughout local and national economies -- including tax revenue -- that benefits all Americans.
In an increasingly global economy, labels such as "foreign" and "domestic" have become less relevant. Many non-U.S. multinational firms have moved their U.S. personnel into senior global positions. For instance, many chief executives of U.S. subsidiaries, most of whom are American citizens, have gone on to become CEOs of the global company, including Don Shepard of Aegon, Don Robert of Experian, Marjorie Scardino of Pearson and Klaus Kleinfeld of Siemens.
At the same time, many companies based outside the United States have moved senior managers with global responsibility for an entire business unit or function to the United States. The leadership role played by the employees of these companies, and their operations, benefit the U.S. economy and must be taken into account when balancing the value conferred by non-U.S. companies against notions of national interest.
I respectfully urge Congress to take only those actions that will enhance the security review process for foreign investment in the United States, and to avoid endorsing proposals that could undermine America's support for access to capital markets and the free movement of capital. We must avoid measures taken in the name of national security that are isolationist and xenophobic, and could have the effect of choking off vital investments in America. Such a path could threaten job creation in the United States, impede American economic growth and jeopardize U.S. efforts to open foreign markets for American companies, consumers and investors. Any changes to the CFIUS process should result from an informed, sober and fact-based assessment of all of our interests.
Genuine threats to U.S. national security must be met with resolve and purpose -- no deal can be worth the safety of our citizens. But at the same time, challenges to U.S. economic success must be met with the same commitment to international leadership and engagement that has for decades contributed to increasing prosperity in this country and throughout the world. This is not a choice between protecting vital national interests and building a more prosperous future. These two goals are vitally important, but they are also compatible, and Americans will hold their leaders accountable for working to achieve both of them.
The writer is CEO of Citigroup Inc.