Laissez-Faire

The Dannon yogurt parent company, Group Danone, is essential to France's national interest.

How do I know this? Because the French government has deemed it so, and after all the French government knows better than anyone else what is in its interest. (But do the French know this?) Anyway, the Wall St. Journal:

Earlier this year the French government intervened to block the sale of Groupe Danone, the yogurt maker, as contrary to France's national interest.

It is difficult for us in the US to divine the French mind, but some in Congress are trying.There is a move to micro-manage foreign acquisitions of US firms, emulating the French limiting ours over there, for "critical infrastructure". The WSJ is understandably concerned about a broad definition, which could encompass even Ben & Jerry's ice cream, for example, under food safety.

Well, we might want to let the French have Ben & Jerry's, or even Vermont for that matter, but it's not that simple, and shouldn't be left to Congress to implement yet another law of unintended consequences:

There are already signs that this Congressional sabre-rattling is delaying transactions. Toshiba's proposed friendly takeover of Westinghouse is being held up by the feds. And it is almost certain that a telecommunications deal in the works between French-owned Alcatel and Lucent will come under scrutiny by CFIUS. If the deals are blocked, U.S. shareholders will lose hundreds of millions of dollars in stock appreciation.

What Congress doesn't seem to comprehend is that in a global economy even the term "foreign ownership" is misleading. Some 40% of the shares in Nokia, the Finnish cell-phone maker, is owned by Americans. U.S. shareholders own $2.9 trillion of foreign-company stock, and foreigners own an even greater stake in American businesses. As many Americans are employed by foreign-owned auto manufacturers today as work for General Motors.

Congress is playing a dangerous game here that could do serious harm to America's economic security. At least 5.3 million Americans are directly employed by foreign companies in the U.S., and these jobs pay an average salary of $60,000 -- nearly a third more than the average American salary. This influx of foreign capital is one reason the U.S. economy is strong enough to be able to afford the defense and security spending that allows us to project force around the world and defend the homeland. Driving it away in the name of "national security" would make us less safe.

So Congress, have the sense to let well enough alone under existing law, lest we drive all our allies away.

And take one good thing from the French---a little more laissez-faire.