I'm philosophically inclined to support free trade and open borders, within the constraints of national security, so I ordinarily have little use for protectionist barriers to transactions like cross-border mergers. Indeed, given how dependent the US economy is on foreign investment, especially to support our trade and fiscal deficits, this is a particularly bad time for the US to be setting up barriers to such transactions. Yet, I do have a couple of qualms about the pending acquisition of Lucent by Alcatel.
First, Lucent has a ton of classified high technology defense contracts with the Pentagon. Is France a sufficiently reliable ally to entrust those contracts to a French-dominated company in which the French government historically has taken considerable interest? (See this article for info on Alcatel's security relationship with the French government.) It's not really my field, so let's just say I have my doubts. Consider, for example, that:
At present France is the largest European source of technology transfer to China.
As far as the long standing European Union's arms embargo upon China is concerned, the French ambassador also expressed optimism. "As a political matter, there is no reason for the weapons embargo to go on," he said. "We do hope the EU partners decide to lift the embargo." (Link)
And then there's this complaint:
In 1954, US taxpayers were covering 75 percent of the French war in Indochina. Yet France often parlayed US assistance and equipment into financial payoffs. For example, after using a US aircraft carrier earmarked for the war effort in Vietnam to ship and sell fighter jets, the French government had the gall to ask Washington for additional aircraft carriers. There are echoes of this self-serving duplicity in the gathering reports of French complicity in the UN's scandal-plagued Oil for Food Program in Iraq. (Link)
Second, French economic policy lately has been even more nationalist and protectionist than usual. As a result, according to MarketWatch, "the Lucent deal likely will be structured in a way that guarantees it would be seen as French-led merger." The Economist reports:
Mr de Villepin has increasingly sought to protect French companies from foreign takeover bids. In late February the prime minister hastily arranged a merger of two French energy companies in order to pre-empt a bid from an Italian firm. The government has also increased its shareholdings in large companies and designated 11 “strategic sectors” in order to ward off foreign takeover attempts in future.
Worse yet, MarketWatch claims that France has "used its intelligence service to sniff out potential hostile moves from abroad."
Free trade and open borders ought to be a two-way street. This may be an opportune moment to insist that France lower its barriers to foreign acquisitions if it wants its companies to be able to acquire US corporations.
