Homeland Security Watch

News and analysis of critical issues in homeland security

March 8, 2006

Bill proposes ban on foreign-controlled critical infrastructure

Filed under: Congress and HLS,Infrastructure Protection — by Christian Beckner on March 8, 2006

Rep. Duncan Hunter (R-CA) introduced a bill in the House yesterday, the National Defense Critical Infrastructure Protection Act of 2006 (H.R. 4881), that proposes to “establish requirements for the ownership, management, and operation of critical infrastructure in the United States.”

The full text of the bill is not yet available, but a press release from bill co-sponsor Walter Jones (R-NC) outlines the bill’s provisions:

1. Halt the takeover bid by Dubai Ports World to manage U.S. ports.

2. Require any corporation that owns, manages or operates national defense critical infrastructure to be majority-owned by American citizens.

3. Require that the Secretary of Defense, in consultation with the Secretary of Homeland Security, prepare and maintain a national defense critical infrastructure list.

4. Require the mandatory inspection of all cargo coming into the U.S. by an appropriate officer or employee of the Directorate of Border and Transportation Security or other appropriate entity.

The press release also notes the definition of “critical infrastructure” in this context:

The bill defines “critical infrastructure” as any system or asset – physical or virtual – that is so vital to the United States that the incapacity or destruction of the system or asset would have a debilitating effect on national security, economic security or public health and safety.

This legislation, if it were passed into law, could actually weaken America’s homeland security, in my opinion. I’ve expressed some outstanding concerns about the Dubai ports deal in previous posts, and I think that the government needs to build some strong protections into the deal if it is to go through. But the idea of banning all foreign ownership of U.S. critical infrastructure as a result of this deal is bonkers. The sponsors of this bill are essentially proposing hundreds of billions of dollars of forced divestiture of U.S. assets by foreign companies. For example, I would consider all of the following to be “critical infrastructure”, above and beyond the port terminal assets in question:

  • The U.S.-based petrochemical assets of foreign companies BP, Royal Dutch-Shell, and Citgo;
  • The telecom infrastructures of Deutsche Telekom (T-Mobile) and Vodafone;
  • The financial systems for trading, foreign exchange, etc. of companies like HSBC, UBS, ING, Deutsche Bank;
  • Water treatment facilities operated by companies like Suez Lyonnaise des Eaux;
  • Express air shipping by DHL;
  • U.S. rail lines owned and operated by Canadian National Railways.

These are a few of the more notable examples – I could go on. The bottom line is that foreign companies have invested hundreds of billions of dollars in U.S. infrastructure over the last several decades, and that’s a very good thing – a natural consequence of free market capitalism in a global economy. And these companies have invested substantial sums of money to secure their own assets.

Are the sponsors of this bill really proposing that all of this should be divested? And who’s going to pay for this? Do they really think that there are American companies lining up to buy these assets at fair market value? If not, would the federal government have to play a role in subsidizing the divestment process? That would be a massive waste of homeland security resources, in comparison with direct investments by the government in port and cargo security.

And how would the bill’s sponsors react when foreign countries start retaliating and kicking out American firms that control their critical infrastructures?

The most important factor for security is not the nationality of the company: it’s the question of whether a company is investing appropriately in security and and has people and systems in place to protect their assets. Hopefully the Dubai Ports World controversy will lead to smart legislation that improves our homeland security – but this bill would likely have the opposite effect.

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Comment by William R. Cumming

March 8, 2006 @ 10:26 am

Agree fully with your comment. The failure of so called “Buy-American” efforts document many reasons not to go this route. When CFIUS became law, I strongly urged the White House (President) to delegate the authority newly creaed under the Defense Production Act of 1950, as amended, to the Secretary of the Treasury or Attorney General as opposed to FEMA. FEMA then and now has virtually no in house economic analytic capability and certainly none of the sophistication required for either CFIUS or the proposed legislation. Unfortunately, neither does DHS. I suspect few appointees in DHS even know of the real power in authority delegated to the Secretary DHS by E.O. 12919 (June 1994) by the President under other authority granted to him by the DPA. Principles of resource management have been allowed to be forgotten in the current climate but they in fact are important even as demonstrated by Hurricane Katrina.


Pingback by Homeland Security Watch » Blog Archive » Columnist pans ban on foreign-owned critical infrastructure

March 15, 2006 @ 12:10 am

[…] Anne Applebaum’s column in the Washington Post today echoes my post last week that criticized current legislative proposals to ban foreign ownership of critical infrastructure. Applebaum lists numerous examples of foreign-owned critical infrastructure in the United States, including sanitation systems, highways, refineries, and chemical plants in the piece, to illustrate the depth of what H.R. 4881 is proposing. […]


Pingback by Homeland Security Watch » Blog Archive » Democrats release a homeland security platform

March 29, 2006 @ 4:14 pm

[…] It’s difficult to comment on platitudes; four out of five of these recommendations are directionally correct, but the devil is in the details, and the report does not elaborate on any of these points. The recommendation against outsourcing of national security infrastructure is a crude, kneejerk reaction to the Dubai Ports World episode, which I think is short-sighted for the reasons that I noted in this previous post. […]

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