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. Last Updated: 07/27/2016

U.S., Foreign Investors Ever More Inseparable

WASHINGTON -- The furor over efforts by an Arab company to buy United States port operations has focused attention on a little noticed economic fact of life: America increasingly is foreign-owned.

From the ritzy Essex House hotel in Manhattan, owned by the Dubai Investment Group, to the nationwide chains of Caribou Coffee and Church's Chicken, owned by another company serving Arab investors, foreigners are buying bigger and bigger chunks of the country.

Statistics show that Arab investments represent only a fraction of the total direct investment in the U.S. by foreigners. European nations accounted for two-thirds of the $1.53 trillion of foreign direct investment, according to figures compiled by the Commerce Department.

A bill by Republican Representative Duncan Hunter would bar foreign ownership of U.S. infrastructure deemed critical to national security.

"To those who say this is protectionism, I say: America is worth protecting," Hunter said.

Opponents say his proposal would mean the sale of billions of dollars of assets now in foreign hands, ultimately hurting the U.S. economy.

"People don't understand how integrated the U.S. economy has become with the global economy, how dependent we have become on other nations," said Clyde Prestowitz, president of the Economic Strategy Institute, a Washington think tank.

For more than a decade, French tire maker Michelin has been the exclusive supplier of tires for NASA's space shuttles. DSM, a Dutch company, makes body armor for U.S. troops, while French-owned Sodexho provides meals for the troops at a number of military installations. Nearly one in five U.S. oil refineries is owned by foreign companies. Foreign companies also have a sizable presence in running power plants, chemical factories and water treatment facilities in the United States.

The current debate centers on direct foreign investment, the most stable type of investment. Yet, the far larger share of foreign investment is in Treasury securities, corporate bonds and stocks.

The U.S. must borrow more than $2 billion per day from foreigners to finance its huge trade deficits. As of January, some $2.19 trillion in Treasury securities were in the hands of central banks, including China and Japan, and private investors abroad.

If foreigners suddenly decided to reduce their holdings of these assets, the dollar could plunge in value, interest rates could soar and stock prices could suffer a big blow.

David Wyss, chief economist at Standard & Poor's in New York, cited the 51 percent share of foreign ownership of the federal government's debt -- and that share is rising.

"That strikes me as scary," Wyss said. "When you make yourself so dependent on inflows of capital from the rest of the world, the question is what happens if the inflows slow down."