Late last year, defence and technology group Thales announced that North America had become its biggest market for operations outside of its home country of France. The region’s elevation within its global activities is driven by a focus on expanding in what it identified as a key growth market: the US.

This expansion comes at a time when politicians and some business leaders outside the US are painting the country’s trade and investment policies as a turn to protectionism. They point to tariffs, local-content restrictions and an ever-expanding investment screening regime as evidence of inward-looking economic policy-making and barriers to international business. 

Many of these policies target countries such as China, the US’s geopolitical and economic adversary. But there are concerns these barriers also entangle companies from allies, such as France, who invest heavily in the country. Thales is a prime candidate to test this theory. Its three divisions — defence and security; aerospace and space; and digital identity and security — involve sensitive technologies and industries impacting national security. But North America CEO, Alan Pellegrini, says that based on the firm’s operations across the country, which employs 4300 people across 20 states, “we do not see anything glaring that is prohibited” by trade and investment barriers.

Buy America

Mr Pellegrini takes the example of Thales’s late-2023 acquisition of Californian cyber-security firm Imperva. The Committee on Foreign Investment in the United States (CFIUS) is required to consider the cyber-security implications of transactions before clearing them on national security grounds. Yet Mr Pellegrini says the deal moved through the CFIUS process “quite briskly”. He puts this down in part to Thales having gone through CFIUS’s processes several times before. “We’re investing in a high-tech cyber-security company,” he adds. “The government could have created more concern, but [it didn’t]. And that’s very encouraging.”

Another set of policies that can hinder international competitiveness in the US is the ‘Buy America’ rules that impose local-content requirements on, inter alia, government-related contracts. During their time in the White House, both Donald Trump and Joe Biden issued executive orders that lifted the bar for firms such as Thales that supply the US government. While Mr Pellegrini says this could be an obstacle for foreign firms whose local subsidiaries rely on important products, Thales sidesteps the issue by onshoring more capability to American soil. 

“We don’t really see Buy America as an impediment, [but] it does cause us to invest a bit more,” he says. Mr Pellegrini gives the hypothetical example of Thales’s aerospace division building a new product for the Federal Aviation Administration. “If the basis for that product was a design in France, we would certainly bring that over to the US to build it to comply with Buy America.” 

Election agnostic

With the 2024 election cycle in full swing, and Mr Trump now the clear favourite to become the Republican nominee, some business leaders are grappling with the possibility of a return to the unpredictable decisions and policy-making of the previous administration. Mr Pellegrini concedes there is “perhaps an overarching concern” that such a change could impact FDI. “If more uncertainty and unsettledness in the US government exists, that tends to cause foreign investors to pause a little and want to sort out the landscape,” he says.

However, he believes it is necessary to distinguish between talk and action. “During the last administration, there was a fair amount of uncertainty for a while, and a lot of talk about ‘America first’. At the end of the day, most of us in the foreign investment community continued to invest in the US and nothing radically changed at the foundation of [investment decisions],” he says. “It was more [just] noise in the system.”

Under another possible Trump administration, he suspects “it would be the same”, before adding an important caveat: “But you never know.”

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This article first appeared in the December 2023/January 2024 print edition of fDi Intelligence