Image: EA-18G Growler
Paul Farley  /  U.S. Navy
EA-18G Growlers like this one are tested at the Navy base in Oregon near where a Chinese firm intended to buy wind turbine farms.
updated 9/28/2012 4:45:52 PM ET 2012-09-28T20:45:52

Citing national security risks, President Barack Obama on Friday blocked a Chinese company from owning four wind farm projects in northern Oregon near a Navy base where the U.S. military flies unmanned drones and electronic-warfare planes on training missions.

It was the first time in 22 years that a U.S. president has blocked such a foreign business deal.

Obama's decision was likely to be another irritant in the increasingly tense economic relationship between the U.S. and China. It also comes against an election-year backdrop of intense criticism from Republican presidential challenger Mitt Romney, who accuses Obama of not being tough enough with China.

In his decision, Obama ordered Ralls Corp., a company owned by Chinese nationals, to divest its interest in the wind farms it purchased earlier this year near the Naval Weapons Systems Training Facility in Boardman, Ore.

The case reached the president's desk after the Committee on Foreign Investments in the United States, known as CFIUS, determined there was no way to address the national security risks posed by the Chinese company's purchases. Only the president has final authority to prohibit a transaction.

The administration would not say what risks the wind farm purchases presented. The Treasury Department said CFIUS made its recommendation to Obama after receiving an analysis of the potential threats from the Office of the Director of National Intelligence.

The military has acknowledged that it used the Oregon Naval facility to test unmanned drones and the EA-18G "Growler." The electronic warfare aircraft accompanies U.S. fighter bombers on missions and protectively jams enemy radar, destroying them with missiles along the way.

At the Oregon site, the planes fly as low as 200 feet and nearly 300 miles per hour.

The last time a president used the law to block a transaction was 1990, when President George H.W. Bush voided the sale of Mamco Manufacturing to a Chinese agency.

In 2006, President George W. Bush approved a CFIUS case involving the merger of Alcatel and Lucent Technologies.

The Treasury Department said in a statement that Obama's decision is specific to this transaction and does not set a precedent for other foreign direct investment in the U.S. by China or any other country.

China's trade advantage over the U.S. has emerged as a key issue in the final weeks of the presidential campaign. Romney accuses Obama of failing to stand up to Beijing, while the president criticizes the GOP nominee for investing part of his personal fortune in China and outsourcing jobs there while he ran the private equity firm Bain Capital.

Both campaigns are running ads on China in battleground states, especially Ohio, where workers in the manufacturing industry have been hard-hit by outsourcing.

Obama, in an interview Wednesday with The Plain Dealer of Cleveland, said the U.S. must push hard against Beijing but "not go out of our way to embarrass" China.

"We're not interested in triggering an all-out trade war that would damage both economies," Obama said.

The president has the power to void foreign transactions under the Defense Production Act. It authorizes the president to suspend or prohibit certain acquisitions of U.S. businesses if there is credible evidence that the foreign purchaser might take action that threatens to impair national security.

CFIUS is chaired by the treasury secretary. The secretaries of state, defense, commerce, energy and homeland security are also on the committee. The director of national intelligence is a non-voting member.

Earlier this month, Ralls sued the national security panel, alleging CFIUS exceeded its authority when it ordered the company to cease operations and withdraw from the wind-farm developments it bought. Ralls asked for a restraining order and a preliminary injunction to allow construction at the wind farms to continue. The firm said it would lose the chance for a $25 million investment tax if the farms were not operable by Dec. 31.

But Ralls dropped the lawsuit this week after CFIUS allowed the firm to resume some pre-construction work.

Ralls' legal team includes Paul Clement and Viet Dinh, two top law veterans of President George W. Bush's administration. Both men were key players in Bush's aggressive national security operation.

Clement, who was solicitor-general and argued administration positions before the Supreme Court, has since opposed the Obama administration's health care plan and defended the Defense of Marriage Act before the top court.

Dinh, a former assistant attorney general who was the main architect of the Bush administration's anti-terror USA Patriot Act, has lately served as a director and legal adviser to Rupert Murdoch's News Corporation.

A second Chinese firm stymied by CFIUS urged U.S. authorizes this week to investigate their firm to quell fears of ties to China's military. Huawei Technologies Ltd. announced in early September that it would unwind its purchase of U.S.-based computer firm 3Leaf Systems after the deal was rejected by CFIUS.

Huawei, one of the world's largest producers of computer network switching gear, has repeatedly struggled to convince U.S. authorities that they can be trusted to oversee sensitive technology sometimes used in national security work.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Can Obama save jobs by taking aim at China?

  1. Closed captioning of: Can Obama save jobs by taking aim at China?

    >>> head of the united steel workers union says millions of jobs are at risk because of china 's trade policies. president's new move in especially swing states like ohio ?

    >> i think it is extraordinarily important because it demonstrates this president's focused on creating jobs. and you can't keep american jobs here when you have unfair competition by countries like china . i think this demonstrates the difference between barack obama 's approach to creating jobs and let them go bankrupt approach of mitt romney .

    >> well, obviously the romney campaign has a very different view of what their message is and they have a new ad out. let me play a little clip of that.

    >> my plan is to help the middle class . trade has to work for america. that means crack down on cheaters like china . it means open up new markets. next, got to balance the budget. you've got to cut the deficit. you've got to stop spending more money than we take in.

    >> is that a strong message, rich?

    >> sure. but let me go back to the issue about the auto industry . first of all, we own a significant part of gm. and gm's stock price has to get to $54 a share to break even , which it will never do. when part of the solyndra issue, putting aside the politics of it, part of the real solyndra issue was that the chinese were dumping cells on the u.s. market and the administration did nothing back in those days. it's interesting, i think, to everybody that here we are 50 days out and suddenly the administration is deciding to start to talk about trade policy while he's in ohio . that's one of the advantages of being an incumbent.

    >> do you think that's a stronger message than, hey, we saved the auto industry , you're still working?

    >> it is if you're a union worker, not so much if you're a delphi worker and you lost your job and your pension. clearly that's aimed at the base union vote. i think for them, it is. i'm not sure how much it helps everybody else . there was a big piece in "the washington post " yesterday about how ever chevy volt that gm builds loses $59,000. i'm not an economist so i don't know how you do the evaluation. but there is a lot to be said about how you negotiate your way through these kinds of things and try to blame it on somebody zble else.

    >> is is there a strong counterargument and is it going to resonate?

    >> i think there is. this administration stepped in forcefully, saved the auto industry . and as joe biden said, the bumper sticker auto to be " general motors is alive and bin laden is dead." you can get hung up in all the calculations by the economists. but we do have a vibrant, growing automobile industry that's serving american consumers. and this president has taken steps in the past with the wto to stop unfair trading by the chinese, unfair practices by the chinese. by the way, mitt romney won't fill in the blanks. what are his specific -- i heard him say he was going to balance the budget. what are these tax loopholes he's going to plug? is the middle class going to lose their deduction for mortgage interest? we don't know because his plan is a mystery. this president's acting while mitt romney is theorizing about what might or might not work.

    >> if we're going to go talking points, let me say the administration has had 3 1/2 years to fix all these things and what we know is that the president may be a good guy but i'm not sure that he's very experienced. i'm not sure he's very good at this. and i think it is clear that what he's doing in ohio today is purely for politics, not for economics.

    >> rich, the obama campaign is out with a new ad that argues that we know mitt romney 's track record, particularly when it comes to something like the issue of china . take a look.

    >> romney 's companies were called pioneers and shipping u.s. manufacturing jobs overseas. he invested in firms that specialized in relocating jobs to low-wage countries like china . even today, part of romney 's fortune is invested in china . romney 's never stood up to china . all he's done is send them our jobs.

    >> rich, it does appear when you look at the polls the president is closing the gap.

    >> there are people who are going to vote for obama anyway. i think what this is going to come down to over the next 50 days, i watched the discussion earlier with mckinnon and the other folks, is that people are going to say, enough already about what you did, what you didn't do, whether it's obama or romney at bain. what are you going to do and, frankly, dick, neither side has been very specific about what they have planned for the next 12, 18, 24, 36 months.

    >> and what we've heard from the romney campaign is they're going to spend this next week and the weeks following to really hone in on this five-point plan that mitt romney says he has to turn around the economy. how specific do you think barack obama needs to get about going forward?

    >> before we get to that, the best news i've gotten this morning is rich said he would probably not vote for obama . i think the polls are shifting dramatically.

    >> you sense a wavering there?

    >> i sense a wavering, probably. so i'm feeling better about this campaign already. but i think the romney campaign can't get too specific when they do, they trip over what they said six months ago or a year ago. i think barack obama has a record of creating 2.5 million, 3 million, 4 million new jobs --

    >> somewhere in there.

    >> -- mainly in the private sector. somewhere in there. but millions of jobs, are we there yet, no? but all mitt romney is proposing is going back to the failed policies of george w. bush . barack obama is proposing going forward with a plan that is working and mitt romney has not shoun shown any reason to change horses midstream.

    >> guys, thank you for the insights and for the laughter as well. thank you both.


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