Posted on 09/29/2007 9:47:30 AM PDT by 1rudeboy
China bids for firm that makes "intrusion prevention" technology for the Department of Defense.
THE CHINESE ANNOUNCED on Saturday that they would be buying into the company that provides the Pentagon with technology to prevent cyber-attacks--of the sort the Chinese launched a few weeks ago. Why worry? We are all free traders now, according the president and his secretary of the Treasury--all except misguided Democrats, trade unions, displaced workers, and those who worry about our national security.
True, free trade is great--when dealing with other parties who are in it for the same thing--to make money. But that ain't the name of the game these days. Now we have a company that must answer to the Chinese government picking up a piece of an American company, 3Com, that--get this--makes "intrusion prevention" technology that helps the Defense Department, among other clients, protect itself from hackers.
True, the Chinese company, Huawei Technologies, will be a minority shareholder. But it--and one must assume any Chinese government official who asks for Huawei's cooperation--will have access to the books, financial records and any other company documents that they might find useful. Remember: The Pentagon is convinced that the Chinese Peoples' Liberation Army hackers were the perpetrators of a massive cyber-attack on it just a few weeks ago.
So never mind that Bryan Whitman, a Pentagon spokesman, told the Financial Times that he is "not aware of any concern" over the acquisition. Or that there is big money in this for 3Com shareholders, who are being offered a 44 percent premium over the share price set in the market--which only proves how really, really interested in 3Com's technology Huawei and its partner, Bain Capital, are.
Or that the Committee on Foreign Investment (Cifus) will review the deal. It is already leaking that it would be satisfied if the deal is drawn so that Huawei agrees, cross its heart and hope to die, to limit its access to certain technologies. And rest assured that Cifus will hear soothing words from Citibank, UBS, HSBC, and ABN Amro, who are putting the debt financing package together--oh yes, along with Bank of China.
One can only hope that Treasury Secretary Hank Paulson reads up on his Adam Smith, no protectionist he. Smith warned that when national security is at stake, free trade takes a distant second place as a national priority. The great Scot is, as usual, as relevant to our day as he was when he wrote The Wealth of Nations 230 years ago.
Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).
For your list, if you are the one with it . . . .
“What? Me worry?” — Alfred E. Newman
Thanks. Waiting for the WSJ to come out and cheerlead this one.
-- Vladimir Ilyich Lenin
Do you have a Duncan Hunter ping list? I’d really like some agitation on this issue.
I've read the Wealth of Nations twice now, and I've yet to figure out why so many pure 'free trade' advocates are unfamiliar with his work.
I do indeed
3Com has been reselling Huwei equipment for years (specifically routers) which is a direct reverse engineer of Cisco gear.
The ONLY thing 3Com has ever had to offer is "cheap", nothing else.
I know many recent ex-military...and they tell me it's "all Cisco"...to include Firewalls, IDS, IPS.
Bush has already sold our border security to the Slave Labor Lobby, why not 3Com?
Dubai Ports World redux.
As I recall, following that debacle, Duncan Hunter, Peter King and other congresspersons were going to look into the protocol of CFIUS, to obtain more congressional oversight.
The CFIUS was the group that rushed the DPW, rubber-stamping all the way and was going to be a “done deal” with none the wiser.
It looks as though they are operating in exactly the same fashion in this instance. However, I just now found an article that updates their procedure, will post separately.
It appears congresspersons are the ones to contact in this matter.
I don’t see this as a DPW redux at all.
http://china-netinvestor.blogspot.com/2005/06/ciscos-china-plans.html
Meaning that, in this case you have a foreign firm purchasing a stake in a U.S. computer firm whose products may be used in a national security capacity . . . whereas the DPW deal was a foreign firm selling its leases to operate some cranes and warehouses to another foreign firm.
Post-FINSA Coordination of Antitrust, CFIUS Practitioners
Once upon a time, mention of the federal agency CFIUS -- pronounced siphius -- conjured head-scratching, and possibly images of a certain Greek mythical figure eternally pushing a boulder up a hill.
In recent years, however, the Committee on Foreign Investment in the United States (CFIUS) has been catapulted into the spotlight. The 32-year-old committee and the president together are statutorily authorized to review and ultimately block mergers and acquisitions between foreign entities and U.S. firms if those transactions threaten U.S. national security. And in the wake of the Sept. 11 terrorist attacks, the once-sleepy committee has grown increasingly aggressive about scrutinizing deals with national security implications.
Now, President George W. Bush has signed into law the Foreign Investment and National Security Act of 2007 (FINSA),[FOOTNOTE 1] which further enhances CFIUS's powers and strengthens congressional oversight.
*snip*
Prompted by concerns about foreign acquisition of certain kinds of U.S. firms, CFIUS was established first by executive order in 1975[FOOTNOTE 2] and then codified by the Exon-Florio Amendment 13 years later.[FOOTNOTE 3] The committee is comprised of the heads of various Executive Branch agencies and offices, including (when FINSA takes effect) the departments of Homeland Security, Commerce, Defense, Energy and Labor; and is chaired by the secretary of the Treasury. The committee's purpose, as outlined by FINSA, is to safeguard national security without unnecessarily discouraging foreign investment. To accomplish this, Exon-Florio and its regulations authorize CFIUS to review and investigate, and the president to suspend, prohibit, or "seek appropriate relief" in connection with, transactions in which a foreign entity acquires control over a U.S. entity and the acquisition threatens national security.[FOOTNOTE 4]
Despite these broad powers, the CFIUS remained an obscure body for the first roughly two-and-a-half decades of its existence. And then a few high-profile transactions pulled the committee out of its shell -- in particular, when the United Arab Emirates-owned company Dubai Ports World (DPW) tried to buy six U.S. port facilities in 2006. The CFIUS opted not to investigate the deal, and the subsequent prospect of Arab ownership of U.S. port facilities sparked outrage and alarm. Members of Congress called for the deal to be blocked. "We need to have American ports in the hands of and operated by Americans," one representative insisted at the time.[FOOTNOTE 5] DPW divested its U.S. port facilities. In the meantime, however, critics of the transaction vilified CFIUS for its passive approach to the transaction.
The next year -- and in direct response to the DPW deal -- Congress passed FINSA and President Bush signed it into law on July 26, 2007.
*snip*
Knowing that you supported the DPW deal, I think it’s kinda funny that you’re concerned re this.
In general, it is the same, in regard to sacrificing national security at the altar of global trade.
Maybe “protectionism” is not entirely a bad idea.
Nice. I was afraid you were going to blame NAFTA.
IF it comes back, does anyone think this is a virus? because I do not know......yet.....
Please see my comment #15. I’m not prone to knee-jerk reactions.
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