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Moore Special Tool Deal Collapse Highlights Security Concerns

February 21, 1991

WASHINGTON (AP) _ Renewed concerns about shipping U.S. technology abroad are starting to affect business and could bolster efforts to reinstate a law that allows the president to nix deals for national security reasons.

The decision by Japanese-based Fanuc Ltd. to back out of a partial buy-out of Moore Special Tool Inc. amid congressional opposition to the deal is the latest evidence of the trend, experts and officials said Wednesday.

Last month the Bush administration was reportedly ready to approve the deal, which would have given Fanuc a 40 percent share of the only American company that makes precision machine tools used in making atomic weapons.

Last year, when a branch of the Chinese government proposed buying a U.S. aerospace company, the Bush administration invoked its authority to block a foreign takeover for national security reasons.

But Fanuc abruptly backed down on Tuesday, citing congressional opposition to the deal as a key reason. The announcement came three weeks after a bipartisan group of lawmakers wrote President Bush urging him to block the Fanuc deal because it poses ″an unacceptable security risk to U.S. nuclear weapons production capability.″

Moore, based in Bridgeport Conn., is struggling financially. It will remain afloat despite the failure to get a capital infusion through Fanuc, according to company attorney Seth Brody. But Brody said Wednesday that Moore will put off for now any thoughts of seeking financial partnership and will be forced to delay the expansion and modernization that the Fanuc deal would have financed.

″The company will take a longer period of time to achieve its long-term goals,″ Brody said.

Congress this year had more than mere letter-writing power over the Fanuc deal. The 1988 Exon-Florio law giving the President power to block foreign takeovers because of national security lapsed last year. Congress is about to begin the debate over reinstating that law.

According to one congressional staffer who spoke on condition of anonymity, Fanuc may have been concerned over whether the deal would have to remain in limbo for months while Congress debated Exon-Florio.

The House Subcommittee on Commerce, Consumer Protection and Competitiveness next week begins debate on Exon-Florio and will look into ways the federal government can help Moore find a U.S.-based investor.

″Failure to help Moore could mean that our government will either be forced to help some other U.S. company develop the capability Moore already has, or to develop inside the government the ability to manufacture according to Moore’s specifications,″ said Rep. Cardiss Collins, D-Ill., who chairs the panel. ″Neither of these options are attractive.″

The business impact of security concerns affects the export of U.S.-made products as well as the foreign purchase of American companies.

Moore not only was seeking foreign investment, it also depends on export sales for much of its income. Brody said that dependence will increase amid the domestic recession.

The Senate on Wednesday approved reauthorization of the Export Administration Act, a measure that streamlines regulations governing the export of U.S. technology. The measure is a virtual rerun of a bill that President Bush vetoed last year.

But the House may give the measure closer scrutiny only a year after it favored easing export restrictions to help the limping domestic economy. The movement to ease restrictions followed the thawing of the Cold War. A perceived worsening of conditions in the Soviet Bloc, along with the Gulf war, could be factors in this year’s debate.

″Iraq complicates this,″ said Rep. Barney Frank, D-Mass., one of those who pushed for an easing of export restrictions. ″Many of us were critical of the East-West trade restrictions ... With Iraq, people are going to be careful over the idea that just because its not going to Russia doesn’t mean you send it.″

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