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LGST 219 - Class 21 Notes

LGST 219 - Class 21 Notes - CLASS 21(Nov 28 Foreign Direct...

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CLASS 21 (Nov. 28): Foreign Direct Investment FDI cont. 1] 1994 we had a switch in policy towards FDI with the establishment of NAFTA. a. For the most part we had maximum integration, but there were a few exceptions. (a.i) Mexicans and Canadians in the area of culture (a.ii) They feared losing national identity by being inundated with American culture. (a.iii) U.S. is more concerned with National Security. 2] Compared to other countries, the U.S. is very investor friendly because it's stable. We respect rule of law. We're the only country in the world to have such an ancient constitution. We still have a constitution from 1789. a. The U.S. respects the rule of law. b. We are an island of capitalism and free enterprise. 3] There is no national corporation law in the U.S. Every single state has its own state law. Since we're used to dealing with corporations from different states, it's no big deal to us to deal with foreign corporations. 4] Prior to 9/11 the position of the U.S. was that it's good to have all this investment come in because: (a.i) Foreign nations will be friendly to us (a.ii) Foreign capital is beneficial (a.iii) More employment in the US (a.iv) We gain leverage over other countries. 5] So the U.S. became a mecca for foreign investment. 6] Then things started to change. a. We had the 9/11 incident which made everyone nervous. b. BCCI scandal - bank that came in the U.S. and was fraudulent and illicit. In the case of BCCI in the 80s it was connected to drug smuggling and international terrorism. 7] U.S. grew suspicious of foreign banks. FDI threatens national security . There was a push to monitor when foreigners invest in U.S. banks. 8] We have legislation designed to really scrutinize investments coming in. Some worried about this because it discourages foreign investment in general due to bureaucratic hurdles.
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a. People believed that the strong desire to invest in the U.S. would make them willing to overcome the barriers, but this wasn’t true. 9] Trade bill of 1988 included the Exon Florio amendment was supposed to screen and block investments that constitute a threat. a. If the executive branch says that your investment is a threat to national security, you cannot challenge it in court. b. The judges will say that we cannot make rulings that overturn decisions of the executive so the judiciary stays out of these decisions.
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