Summary: Japan, France, Germany, and the United Kingdom have the authority to block investments for national security reasons, as does the United States. In recent years, however, these five countries have rarely invoked this authority. Some of these countries have established processes for reviewing foreign investment for national security concerns. U.S. defense industry officials said that they had not pursued defense-related direct investment in Japan, France, Germany, or the United Kingdom because of economic factors, such as the size of the defense markets in these nations, as well as informal barriers, such as domestic company ownership structures. Most countries offer investment incentives, but U.S. defense industry officials did not cite them as a major inducement to invest. U.S. defense industry officials said that they were pursuing access to overseas defense markets through strategies other than foreign direct investment. For example, U.S. defense firms either licensed technology to Japanese companies or made direct sales to Japan. In the three European countries, U.S. companies formed partnerships to compete for projects.
