I am glad that you raised this issue. It sounds to me like one of those times when the cure being proposed is far worse than the disease. Of course what is at stake are the basic principles of property rights and the freedom to contract.

 

The United States has been telling China and the rest of the world that the road to a better life is based on freedom, which includes free markets. We say if you want your people to have nice homes, support their kids, eradicate disease and enjoy life, be like us. Allow free markets to operate in your countries.

 

China has made tremendous moves in that direction. They have opened up large parts of their economy. Day after day, millions of Chinese people have worked hard and been productive. As a result, Americans have enjoyed inexpensive clothes, stereos, appliances, etc. Americans have also purchased Chinese companies, set up factories in China.

 

What message does it send to China and the rest of the world if America now says, all the stuff we have been telling you about free trade, property rights, and the right to contract--it only applies if it benefits us. If the Chinese have earned a lot of dollars from supplying Americans with quality products, they should be able to purchase the shares of American companies, if the current shareholders are willing to sell their shares. That is what a free market is all about. People are free to voluntarily reach economic agreements.

 

We went through this during the 1980s, but then everyone was concerned that the Japanese were buying up America. These things come and go. In another decade of two there will probably be another country, which will fill this spot (India?). Ultimately, I think America's interests are served by a freer, more economically integrated China. If the Chinese own a large amount of American assets, would they want to do damage to America, or would the Chinese have an interest in a strong and healthy America?

 

It is also important to remember that no matter who owns a company, that company must follow the laws of the country in which it is operating. It is not as if the Chinese could buy Unocal and then operate contrary to US law. Further, if Unocal owns real estate and physical assets in the US, it can not pack them up and take them away. To me, the hysteria does not make much sense.

 

I will mention one caveat to my comments. I think there could be a valid concern if the business possesses national security secrets. For example, there may be a valid national security concerns over the foreign control of a defense contractor. But, I do not think that Unocal fits in this category.

 

Well, I have gone on for a bit, what are your thoughts?