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Corporate protectionism isn’t as un-American as you think

The 70th Anniversary Of The D-Day Landings Are CommemoratedThe 70th Anniversary Of The D-Day Landings Are Commemorated
Protecting national interests, side by side.Samir Hussein—WireImage

Siemens sweetened its bid for Alstom’s energy units Monday in an effort to finally woo not only the company, but also, more importantly, French officials.

Lawmakers in the European country have been meddling in the deal to get the best outcome for French interests, including promises of jobs, research centers and turbines for nuclear plants.

But the French aren’t the only officials putting pressure on global corporate deals this year.

The U.K. parliament pressured Pfizer for employment promises on top of its $117 billion AstraZeneca bid. And the U.S. has reportedly threatened BNP Paribas with fines as high as $10 billion for business dealings in Iran.

Political interference in business deals is not new. Consider, for example, the European Commission’s vetoing of the Honeywell-GE merger in 2001, or Italian gas-company Enel’s thwarted interest in Suez’s Belgian unit in 2006.

The U.S. likes to think of itself as the bastion of free market capitalism. President Obama has recently touted the nation’s freedom from interference:

“I do not tell the Attorney General how to prosecute cases that have been brought. I have communicated that to President Hollande,” said President Obama in response to French pressure to intervene in U.S. threats to fine BNP Paribas over alleged business dealings in Iran.

“Perhaps it is a different position to those taken in different countries,” he added.

The truth is, meddling isn’t the sole expertise of our European brethren. Dabbling, or whatever euphemism one might prefer, is justified under a series of all-American policies.

The practice of corporate reprimanding started with the Helms-Burton act of 1996. The act gave the U.S. government the freedom to officially punish foreign companies doing business with Cuba, setting the standard that would extend to other country-specific embargoes. These U.S. restrictions ended up extending internationally because of the size and economic might of American industry.

“U.S. has a sense that we are the global policeman,” said Joseph Minarik, the director of research for the Committee for Economic Development. “We have the whistle.”

Despite President Obama’s lofty, high-minded statements that America is the land of free enterprise, our hand has fallen heavily on deals that either threaten U.S. industrial strength or its military capabilities.

This, most famously, happened when state-owned China National Offshore Oil Co., or CNOOC, bid $18.5 billion to buy oil-producer Unocal in 2005. The deal faced fierce political opposition and countless Congressional debates, and lawmakers voiced fear that Chinese ownership of a U.S. oil company would endanger national energy supplies and stymy industrial production.

The protectionism worked. CNOOC dropped its bid, and San Ramon, Calif.-based Chevron paid a discounted $17 billion to win over Unocal. The crown jewel remained stateside.

CNOOC’s response nine years ago: “This political environment has made it very difficult for us to accurately assess our chance of success.”

Despite the American rhetoric of free-wheeling buying and selling, protectionism, whenever it is convenient, appears to be traditional U.S. policy.

“Even a laissez-faire government is going to have a debate about industrial policy if one of its crown jewels is going to be sold to a foreign country,” said Sebastian Mallaby, director of the Maurice R. Greenberg Center for Geoeconomic Studies at the Council on Foreign Relations. “And those motives will vary by political culture.”