Foreign direct investment screening and congressional backlash politics in the United States

Abstract

This article examines a particular instance of backlash against economic globalisation – the screening of foreign direct investment in the United States. Although most foreign direct investment is welcome in the United States, specific transactions have aroused suspicion and triggered political backlash by Congress. In fact, successive episodes have reshaped the institutions through which the United States screens foreign direct investment. The recent emergence of China as a foreign investor has posed new political challenges and led to further restrictions. This article explores the circumstances that make congressional backlash to Chinese foreign direct investment more likely, or to use the language of Alter and Zürn in this Special Issue, the ‘triggers’ of congressional backlash. Our findings highlight several patterns, notably that domestic political motives are strongly associated with congressional backlash and that generally the members instigating it do not represent the district in which the investment is located.

Behind the screen: Understanding national support for a foreign investment screening mechanism in the European Union

“…4; Frye & Pinto, 2009 ). Similarly, Canes-Wrone et al ( 2020 ) show that opposition to specific transactions often originate from a district different from the one in which the investment is located, suggesting commercial motives behind FDI scrutiny. Support for stricter FDI screening can also be shaped by institutional factors.…”

“…Support for stricter FDI screening can also be shaped by institutional factors. Especially in federal or quasi-federal systems, which level of government possesses the authority over the regulation of inward FDI often allows different interests to prevail in the decision-making process (Canes-Wrone et al, 2020 ). A recent study by Bauerle Danzman and Meunier ( 2021 ) examines how the COVID-19 pandemic has accelerated the strengthening of ISMs in OECD countries.…”

“…In the United States, the investment review process involving the CFIUS was strengthened in 2007 through the Foreign Investment and National Security Act (FINSA) after one of the first investment attempts by a Chinese company in the U.S., the failed 2005 CNOOC acquisition of Unocal (Jackson, 2020 ). The scope of this review process was broadened and strengthened again in 2018 through the rare bipartisan Foreign Investment Risk Review Modernization Act (FIRRMA) (Canes-Wrone et al, 2020 ). In Canada, the 1985 Investment Canada Act (ICA), whose purpose is to screen foreign investments that may threaten national security, was amended in 2013, notably to extend the timeline for review and to potentially restrict investment by state-owned enterprises.…”

Conceptualising backlash politics: Introduction to a special issue on backlash politics in comparison

“…Brandice Canes-Wrone, Lauren Mattioli and Sophie Meunier’s (2020) article Foreign Direct Investment Screening and Congressional Backlash Politics in the United States examines a particular instance that they consider to be part of a backlash against economic globalisation – the screening of foreign direct investment (FDI) in the United States. Although most FDI is welcome, some proposed deals have incited suspicion and triggered a backlash in Congress against the very procedures that let economic openness happen.…”

Theorising backlash politics: Conclusion to a special issue on backlash politics in comparison

“…Certain backlash contributors are ‘organic’, such as security concerns and changes in global supply chains, but other contributors are generated by domestic politics. Because factors unrelated to the local situation contribute to the backlash politics, whether the locality is highly unionised does not matter, and Congressmen whose districts are not directly affected can be the drivers of backlash politics (Canes-Wrone et al, 2020).…”