DEFENSE OR OPULENCE?________ TRADE AND SECURITY IN THE 1990s Brian McCartan T,he Iraqi invasion of Kuwait and the subsequent deployment of U.S. military forces in the Gulf ignited a debate about the degree to which the attack posed a threat to U.S. interests and security. At the heart of this debate was the question of whether the loss of access and control of an economic good—oil—constituted a national security threat, apart from purely military and political considerations. Some charged that the United States should not do battle with Iraq in the name of cheap oil, while others countered that the United States could not afford to let rich oil deposits fall into unfriendly hands. Determining the kinds ofeconomic activity that fall within the realm of national security not only dictates a nation's military deployments, as in the case of the Iraqi invasion, but also impacts its trade policy, prescribing the extent to which it will restrict trade and investment in the name of national security. The United States traditionally has limited the restrictions it applies to trade and foreign investment for national security reasons largely to a "no trading with the enemy" policy, which has prohibited many exports to communist countries since World War II. However, national security restrictions now threaten to become more prevalent with regard to U.S. Brian McCartan is an international economist with the Office of the Assistant Secretary for International Affairs, the Department of the Treasury. He was previously a senior analyst at the Center for Defense Information, specializing in the economic aspects of national security. The views expressed in this article are solely those of the author and do not represent those of the U.S. government. 133 134 SAISREVIEW imports and foreign investment. The idea oferecting peacetime trade and investment barriers to protect "vital" industries has gained new currency. The debate about restricting investment and imports on security grounds, however, has centered on the wisdom of enacting a "defense industrial policy" and has ignored in large part the critical role played by differing perceptions of what constitutes national security. This article will discuss the origins and application of U.S. security restrictions on imports and investment, and it will also analyze the underlying conceptions of national security from which such restrictions spring. To resolve the tension between its commitment to free trade and its concerns about national security, the United States must not only scrutinize its trade and investment policy, but also reexamine how widely it casts the net of national security over economic activity. Shifting Security Concerns Despite the thaw in East-West relations and the accompanying relaxation in the U.S. military posture, the pressure to erect national security barriers to trade and investment persists. In an unprecedented move in February 1990, for example, the Bush administration ordered the Chinese government's CATIC company to divest itself of its recent acquisition of MAMCO, a Seattle-based aerospace firm, because of national security concerns. Similarly, Congress has continued to initiate and fund programs to shelter industries deemed important to national security from imports and foreign investment. Several factors explain the persistence of this issue after the collapse of the Berlin Wall. The manufacturing base that sustains U.S. military power has become increasingly dependent on foreign suppliers. Now, as never before, U.S. weapons makers rely on imports of both raw materials and high-technology components for U.S. weapon systems. The causes ofthis are complex and controversial, but the growing dependence has unquestionably alarmed many policymakers. The government has issued more than a dozen reports on the subject since 1986. The erosion ofU.S. dominance in high-technology industries has bred concern that the United States may surrender its monopoly on sophisticated weapons technology, which has given its soldiers a fighting edge on the battlefield. Expanding foreign investment in the United States has stirred nationalist sentiments and triggered calls for investment barriers. Moreover, many ofthe most attractive opportunities for foreign investors are in so-called "vital" or "strategic" industries, primarily in high-technology sectors such as electronics. TRADE AND SECURITY IN THE 1990s 135 The staggering changes in Eastern Europe and the Soviet Union...