Sheiks Bearing Gifts

The Arabs are coming! The Arabs are coming! Or are they? No great tide of petrodollars has rolled in yet, and American experts would actually welcome the balance of payments black ink and the economic stimulation such capital might bring (TIME ESSAY, Dec. 16). Nonetheless, at least six bills were introduced, unsuccessfully, during the last Congress in an effort to impede investment by foreign nationals.

Yet new restrictions could have unwanted side effects; for instance, other nations might retaliate by impeding U.S. investments abroad. In any event, a number of such laws and regulations are already in force. The safeguards vary. Some restrict the amount of stock that can be held by foreigners. Ownership of large blocks of shares, of course, does not necessarily give the shareholder control of a corporation's operations. As a result, the law more often limits the degree of management control that aliens can exert in specific industries.

The Government's foremost concern has always been alien involvement in national security. The Atomic Energy Commission, for example, cannot grant licenses to foreigners or foreign-controlled corporations for operating a nuclear reactor or for producing nuclear fuel. The Government also requires security clearance for any contractor or subcontractor dealing in classified projects. All directors and principal officers of a company doing such work must be investigated, and foreigners generally are not granted clearance. In effect, a company involved in sensitive Government business is permitted to have some foreign stockholders, but participation by aliens in management must be kept to an insignificant level.

Not Even One. There are also limitations in the transportation field. No commercial aircraft operating within the U.S. can be registered to foreign nationals. The Civil Aeronautics Board is empowered to veto the acquisition by aliens of more than 10% of the capital or voting stock of any U.S. airline. Similarly, only ships that are American-built, -owned and -registered can be used to transport freight or passengers between points in the U.S.

Since 1927, the FCC has been prohibited from granting broadcast licenses to aliens and foreign-controlled corporations. In this instance, a foreign-run enterprise is defined as any company that is incorporated abroad, is more than 20% foreign-owned or has even one alien as an officer or director.

Slightly less stringent controls affect banking and hydroelectric power. Hydroelectric plants may be developed only by American citizens or corporations. Such companies, if incorporated in the U.S., can be owned by foreigners, however. Foreign-bank subsidiaries in the U.S. are denied membership in the Federal Reserve System and the Federal Deposit Insurance Corporation. Banks incorporated in the U.S., though, can join both federal programs even if they are foreign-owned.

Reciprocal arrangements between the U.S. and another country can ease some restrictions. Publicly owned lands and mineral deposits are available for lease, purchase or exploitation only to citizens or companies that are controlled by Americans. But that rule does not apply to U.S. companies run by nationals of a country that permits comparable American access to its lands or minerals.

No Pounds. There are also numerous financial regulations that would blunt the impact of foreign investment on the U.S. economy. For one thing, U.S. antitrust laws treat foreigners and Americans alike in their restrictions on market control. As for cocktail-party patter about secret takeovers by Arabs, such financial hugger-mugger is unlikely. Present disclosure laws require revelation of the actual owner of holdings of 10% or more in any company whose stock is publicly traded.

Nations that have faced a dollar invasion from America since World War II are watching the new U.S. uneasiness with interest. Most of them have long since adopted firm, sometimes perniciously protectionist legislation. Generally their governments have near-total discretion to veto foreign investments. The Bank of England, for instance, can simply refuse an unwanted alien investor the right to obtain British currency. France requires official authorization for all investments above 1 million francs ($222,000). The only major Western nation with virtually no controls is West Germany. Even after the recent Arab purchase by Kuwaiti interests of 14% of Daimler-Benz AG, there seems to be little chance of a change in the laws.

The U.S. laws, now only slightly more stringent than West Germany's, could grow tougher, whatever economic experts may recommend. Some legislators are sure to offer new restrictions this year. Meanwhile, a law enacted by Congress last year requires a new, comprehensive Government survey of foreign ownership in American enterprises. In response, the Treasury Department has ordered a study that may lead to further federal regulations. The Government could even try to use the hypothetical power of expropriation. Similar action was taken on trading-with-the-enemy grounds against some German companies during World War II. Nowadays, the Supreme Court would almost certainly require a persuasive showing of national need and payment of a fair market price.

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