Lawmakers warn on reaction to Dubai deal

WASHINGTON (Reuters) - U.S. lawmakers from both parties warned on Thursday against overreacting to a failed effort by a Dubai company to purchase U.S. port terminals, saying laws that discourage foreign investment in the United States could result.

"If Congress makes it too onerous to invest in this country, why would anyone in their right mind do business here?" said Mike Oxley, chairman of the House of Representatives Financial Services Committee.

"Labor is cheap in China, resources are cheap in South America, markets are huge in Europe," the Ohio Republican told a subcommittee hearing on overhauling the way the U.S. government reviews foreign acquisitions.

House lawmakers are working on legislation to correct flaws in the way foreign takeovers are examined for national security concerns, following the recent uproar over the Bush administration's approval of the state-owned Dubai company's purchase of terminal operations in six U.S. ports. The furor over the acquisition caused the Dubai company to announce last month that it would drop the purchase.

The White House is expected to decide this week whether to approve another Dubai-owned company's $1.24 billion plan to buy Doncasters, a British engineering company with U.S. plants that supply military parts to the Pentagon. The inter-agency Committee on Foreign Investments in the United States (CFIUS) sent its confidential recommendation on the Dubai takeover of Doncasters to Bush on April 13.

The Senate Banking Committee already has produced a bill to make the CFIUS rules on reviews of foreign takeovers more stringent. Rep. Roy Blunt, a Missouri Republican, said on Thursday he would produce a House bill by the end of May.

But comments at the subcommittee hearing, chaired by Ohio Republican Deborah Pryce, suggested the House mood favored something more moderate than the Senate version, which was watered down after protests from the business community.

Oxley said U.S. investment in other countries was at stake, too, and asked members to think about what would happen if China, for example, shut out U.S. companies.