Foreign Direct Investment Has Long Been A Subject Of Sensitivity Around The World

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Foreign direct investment has long been a subject of sensitivity around the world (Moran 2012). As the largest investor and the largest recipient of foreign direct investment, the Unites States has important economic, political, and social interests in the development of international regulations regarding direct investment (Jackson, 2013). As a sovereign state, the United States has sought to curb its embraces of open markets and free capital flows with protection of national security interests. In this section, I will first introduce the Organisation for Economic Cooperation and Development’s (OECD) basic statement of foreign investment, and then turn to the discussion of U.S. policies on foreign direct investment. This section ends with…show more content…
Countries agreed on three principles that govern national policies for foreign direct investment: (1) transparency and predictability; (2) proportionality; and (3) accountability. Proportionality refers to the concept that restrictions on foreign investment should be no greater than is needed to protect national security (Jackson, 2013). The three principles announced by the OECD are an important milestone in the way to open markets and free capital movement. However, the OECD arrangement allows some exceptions when it comes to national security. The right to protect essential security interests of the state, as an exception to treaty commitments, has been well established in treaty practice (Jackson, 2013). One of the treatment exceptions is “critical infrastructure”, which countries define in various ways. For example, the United States defines “critical infrastructure” as “systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on national security.” Germany defines it as “organizations and facilities of major importance to the community whose failure or impairment would cause a sustained shortage of supplies, significant disruptions to public order or other dramatic consequences.” (OECD, 2008) Economists call for a consistent definition of “critical
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