individual firms may not necessarily contribute to the well being of the industry—Adam Smith's notion of the market's invisible hand notwithstanding. What is not clear and needs clarification, however, is when and under what conditions the disconnection takes place.

What makes the task difficult is the absence of an effective mechanism for monitoring, investigating, and approving foreign investments in areas deemed to be of vital importance to national security. There is no agreed-upon definition of key terms such as "strategic technologies," "national security," ''economic security," or even "foreign investment." This definitional confusion and an absence of effective regulatory institutions mean that the U.S. government has no clear-cut policy to anticipate or deal with the effects on U.S. competitiveness.

Concern about the national security implications of Japanese investments prompted the U.S. government to intervene in, and halt, the proposed sale of Fairchild and other U.S. companies. It also led the U.S. Congress, in August 1988, to pass the Exon-Florio amendment to the Defense Production Act, authorizing the president to block foreign investments in strategic industries that might jeopardize U.S. national security. To establish some federal oversight of foreign investments, the president organized the Committee on Foreign Investment in the United States (CFIUS), but many observers question just how effective an agency for oversight CFIUS is. Of over 700 cases of investment reported as of June 1992, CFIUS had chosen to undertake an extensive investigation of only 14, and of the 14, it had forwarded a recommendation to block only one, the proposed acquisition of a U.S. aerospace company by mainland Chinese interests (immediately following the Tiananmen Square incident).

Although the impacts of foreign investment have great potential significance, they are multidimensional and sometimes difficult to predict. One issue is how to demarcate the concept of economic security so as to preclude stretching it beyond recognition. Another set of analytical problems relates to the absence of an accepted methodology for assessing the commercial impacts of technology transfer. These issues lead an observer to ask whether there is a real problem or whether the advantages of foreign investment balance or outweigh the drawbacks.

In looking over the AEA' s list of Japanese investments in the semiconductor industry, it is difficult to tell how many are problematic in terms of serious technology loss. At first glance, one can identify a number of cases of Japanese investments that involved little or no technology transfer: ASCII-Informix, Canon-NeXT, Hitachi-National Advanced Systems, Kyocera-PictureTel, Mitsui Comtek-Raster Graphics, NKK-Silicon Graphics, and Sony-CXC. One can also cite many other cases in which important transfers did take place. The point is that neither the aggregate number of cases nor the aggregate dollar value of Japanese investments can be used as a reliable



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