TEXT OF COMMENTARY
Scott Jagow: Countries like Russia and China have built up huge stacks of money by selling their exports. They’ve started spending that money on Western assets, like oil fields, for example.
This is something the G7 countries will be talking about this coming weekend. It’s a big concern. Commentator David Frum says it’s time for the U.S. to take action.
David Frum: Back in the 1990’s, closed economies worldwide opened themselves up to freer trade. A decade later, many of them have reconsidered. Instead of welcoming private investment from the West, authoritarian regimes like Russia and China are using state investment as a lever against the West.
Their tool is called sovereign funds: vast pools of capital either owned by national governments or under government control. Today, those funds are valued at $2 trillion. If energy prices remain high, they could exceed $11 trillion by 2011.
During the current high-cost energy era, energy producers like Russia accumulated vast foreign-currency reserves. Meanwhile, China is transferring vast sums of money from its central bank into investment funds aimed at securing energy supplies.
Many Western nations are reacting with concern. The current Canadian government is the most market-oriented in two decades. Yet with Chinese state companies nosing around the Alberta oil patch, Ottawa is looking to draw up new rules for foreign government-owned entities.
The European Union has likewise begun to talk about new regulations. Free-trade America needs to exercise the same skepticism as Canada and the European Union.
Current American law protects strategically important companies from foreign purchase. It is time to extend that concern to look not just at the identity of the seller, but at the identity of the buyer.
The United States can continue to roll out the red carpet for individual Chinese, Saudi, or Russian investors. But we should look very hard at buying by the Chinese, Saudi, or Russian state.
Jagow: David Frum is a former speechwriter for President Bush. He’s now a resident scholar at the American Enterprise Institute. In Los Angeles, I’m Scott Jagow. Thanks for listening and enjoy your day.
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