The Federal Election Commission has voted to rethink a question that is being asked increasingly as foreign investment in the United States surges: Should the government continue to allow the U.S. subsidiaries of foreign companies to have a role in U.S. politics?
In a 4 to 1 vote last week, the commission moved to take public comment on the issue of political action committees (PACs). Under current federal rules, foreign-owned companies have the same rights in politics as U.S.-owned ones, giving them freedom to create PACs. Many have.
The vote is the latest murmuring of concern from parts of the bureaucracy that the United States risks losing some of its economic and political sovereignty as foreign holdings mount. To date, however, those who view foreign investment as good, led by the White House, have held the upper hand.
In the 1987-88 election cycle, the National Journal identified 118 PACS set up by companies that had significant foreign ownership, though not necessarily majority control. They contributed about $2.8 million to campaigns for federal offices during that period, about 5 percent of the $56 million contributed by all corporate PACs.
Among the foreign companies whose U.S. subsidiaries sponsored PACs in the 1985-86 period were Carnation Co. of Switzerland, BAT Industries of Britain, Mitsubishi Heavy Industries of Japan, Campeau Corp. of Canada and Toyota Motor Corp. of Japan.
Under federal law, foreign citizens cannot contribute money to U.S. campaigns on the local, state or federal level. However, the law treats the U.S.-incorporated subsidiaries of foreign companies as U.S. entities, giving them the rights that come with that status.
Thus, like U.S.-owned firms, the companies are allowed to organize PACs, pay their overhead and organize fund-raising drives among their employees and shareholders. But the sponsoring firm cannot legally contribute money directly to the funds. Nor can foreign nationals control the funds.
Supporters of the current rules argue that foreign-owned companies are valued members of their communities and have the right to take a role in politics. "If you are incorporated in the United States, you should be treated the same way any corporation in the United States should be treated," said Brad Larschan of the Association for International Investment.
Rights to lobby and have access to Congress and lawyers "are all part of the constitutional blueprint of the United States," Larschan said.
The Bush administration, following the lead of its predecessor in the White House, has favored treating foreign and U.S. companies alike. It contends that the world economy is moving toward integration and that the United States must keep its doors open. This is fundamentally good for national prosperity and will help U.S. companies gain similar access abroad, according to the administration.
So far, it has held the upper hand, pushing back various measures in Congress that it feels would improperly differentiate. But as investment rises -- Commerce Department figures say foreign holdings in the United States exceeded $2 trillion at the end of 1989 -- critics have persisted.
Many of them said they believe the United States is in a crucial economic struggle with foreign competitors and cannot allow them influence over decision-making here. These critics said they worry that heavy PAC contributions would be used against candidates or measures that would strengthen the U.S. economic standing.
Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) wrote the 1974 rule that barred foreign citizens from contributing to U.S. campaigns. Since 1986, he has sponsored legislation that would bar the formation of PACs by companies that are owned 50 percent or more by foreigners.
In a May letter to senators, Bentsen complained of "insidious foreign involvement in our political process." The current approach, he said, "permits foreign companies to buy into our political process by acquiring U.S. subsidiaries and then creates inevitable pressures on employees to use their PAC muscle in ways acceptable to their corporate masters in London or Frankfurt or Tokyo."
The vote at the FEC last Thursday does not commit it to act in any particular way, just to take comment on the issue. Discussion before the vote indicated that the members are by no means united as to what, if any, change is needed.
The move was proposed by vice chairman John Warren McGarry, who noted that the commisson continues to receive requests for clarification of the rules from foreign-owned companies, indicating there is uncertainty.