Investors Could Be Scared Off By a Disclosure Law

THE fate of United States economic growth rests in the hands of Congress as it mulls over a foreign investment disclosure bill. The bill, a descendent of the Bryant amendment that Congress dropped from the omnibus trade bill last year, requires greater disclosure of proprietary information by foreign investors who own a ``significant'' or ``controlling'' interest in a US business. If passed, this legislation would effectively discourage foreign investment in the US and jeopardize American jobs, income, exports, and competitiveness.

Although the disclosure of business information seems innocuous, it could keep foreign investors away from American shores. Since the government does not require American-owned businesses to release the same type of information, such a move would place foreign-owned companies employing American workers at a competitive disadvantage. They would risk disclosing information concerning important innovations, while their competitors the world over could relax and copy their already proven cost-cutting, quality-enhancing procedures.

Despite congressional efforts to preserve confidentiality, the number of groups who would be sanctioned to receive the information is so large that the particulars could easily leak to others. Specifically, the list of groups includes any congressional committee and its staff, hardly a recipe for ensuring confidentiality.

The bill adds a provision, not present in its predecessors, which would all but guarantee a reduction in foreign investment. This provision could make a foreign-owned company that neglects to disclose pertinent information more than once forfeit its relevant US property, if the government believed this action was willful.

Since foreign-owned companies are the only ones subject to the terms of this bill, American-owned companies would likely bypass them when considering joint ventures for fear of disclosure. The Emergency Committee for American Trade, National Foreign Trade Council, US Council for International Business, National Association of Manufacturers, and Business Roundtable confirmed this point in a joint letter to Congress, stating, ``The disclosure provision is discriminatory and could block constructive investments and joint ventures between US and foreign-owned enterprises.''

Foreign investment helps provide jobs and opportunities for Americans that would not be provided otherwise. If Congress enacts legislation discouraging such investment, many of these opportunities would dry up. US affiliates of foreign companies provide annual wages of $80 billion to some 3 million Americans. Foreign-owned companies also account for 20 percent of US exports, yet this bill could penalize them at a time when policymakers are calling for increased exports.

Foreign investment also brings technologies and management techniques that clearly enhance US competitiveness.

Enactment of this bill could invite mirror legislation from our trading partners. Economist Barry Rogstad, president of the American Business Conference, an association of high-growth companies, says, ``The Bryant Bill presents a double threat. At a time when the US relies upon foreign investment, the bill could lessen that investment flow and invite foreign retaliation.''

Those who fear the ``buying up'' of America have overstated the actual amount of foreign investment in the US. Total new foreign investment in 1987 was the equivalent of only 4.5 percent of the nation's gross national product.

No matter how unfounded, fears about foreign investment have motivated legislators to ``do something'' to rectify the situation. Unfortunately, US citizens will pay a high price if Congress thwarts new investment, whether foreign or domestic. Diminished economic growth is a heavy burden for consumers to bear in order to satisfy legislators who want to demonstrate their peculiar version of American patriotism.