Discussion Topic: Economic Prosperity versus National Security

Background
In some sense, without security, it is difficult to achieve and appreciate other societal objectives. A threat to our collective security arguably warrants sacrifices, which might not be justified in other contexts, until the threat can be resolved or reduced enough for us to pursue other goals. For this reason, national security may at times be treated as a paramount value in discussions about policy choices among arguably competing objectives.

Terrorist organizations and a few sovereign nations are likely to remain significant threats to US security throughout the foreseeable future. As a result, we need to develop a rational framework for making those decisions which require us to weigh the relative value of security against other objectives, such as economic prosperity. The fundamental question we must be able to answer is: How much of an effect on our economic prosperity are we willing to accept in return for an incremental enhancement of our collective security?

To introduce this subject, this module will discuss two areas of domestic economic policy that involve trade-offs between security and prosperity: (1) foreign investment in the United States; and (2) the use of inherently safer technologies (ISTs) in the chemical industry.

Foreign Investment in the United States
Although allowing foreign investment in the U.S. significantly benefits our economy, many Americans believe that foreign ownership of U.S. companies makes us less secure. This negative perception of foreign investment has roots in our history and is manifested in U.S. law. For example, during and shortly after World War I, Congress restricted foreign ownership in the broadcasting, civil aviation, and shipping industries. In the 1970’s, concern over investments from oil-producing nations led to the creation of the Committee on Foreign Investment in the United States (CFIUS). CFIUS is comprised of representatives from twelve agencies of the Executive Branch (including the Departments of Defense, Justice, Homeland Security, and State). It is chaired by the Treasury Department and is responsible for reviewing acquisitions that could potentially threaten U.S. national security interests.

It is worth noting that our economy depends on foreign investment to maintain its growth because we require a steady inflow of foreign capital to offset to the daily gap of $2 billion between domestic savings and domestic investment. In addition, foreign investment creates jobs in the U.S. As a result, our current policy of welcoming foreign investment likely contributes significantly to our economic strength.

Nonetheless, there is a concern that foreign owners are less likely to abide by the spirit of U.S. laws. This concern is heightened when the foreign owner is associated with a foreign government, or when the acquired company interacts with the U.S. national security apparatus or has access to sensitive information.

These issues received substantial attention recently when a foreign-owned company, Dubai Ports World (DPW), attempted to acquire a British firm that was responsible for operating several U.S. ports. Ultimately, in response to political pressure from the Congress, the British company agreed to sell its U.S. port operations to a U.S. owned entity instead of to DPW. It is unclear whether this outcome was rationally based on sound national security considerations, or was a result of other factors influencing the political process.

Inherently Safer Technology
There are more than 15,000 facilities around the world that produce, use, or store toxic chemicals which, if released into the atmosphere, could be lethal to the thousands of people who live in communities near these facilities. In 1984, one of these facilities located in Bhopal, India, accidentally leaked a highly toxic substance (methyl isocyanate) into the atmosphere. The release of this chemical killed approximately 3,800 people and injured some 600,000 others. Although no similar incident has occurred in the U.S., a U.S. Army Surgeon General study estimated that 900,000 to 2.4 million people could be killed or injured as a result of a terrorist attack on a U.S. chemical plant in a densely populated area. The U.S. Department of Justice has concluded that the risk of an attempt to cause such a release is both real and credible.

While toxic chemicals clearly present a risk to our safety, they are also necessary to sustain life in a modern society. These chemicals are essential components of the processes that clean our water, create our pharmaceuticals, and grow our food. In addition, the facilities that produce these chemicals and the industries that use them employ hundreds of thousands of people.

One option for reducing the risk a chemical plant poses to society is to mandate the use of less toxic chemicals that are functionally equivalent to existing ones. These chemicals are generally referred to as “inherently safer technologies (ISTs).” The Government Accountability Office has determined that implementing ISTs “could lessen the consequences of a terrorist attack by reducing the chemical risks present at the facilities, thereby making facilities less attractive targets.” However, Congress has not mandated using ISTs to reduce the threat of a chemical spill. The primary reason for this reluctance seems to be the economic impact that such regulation would have on the industries which produce the chemicals that would be replaced by ISTs.