Chairman Davidson (R-OH), along with Representatives Barr (R-KY) and Williams (R-TX) represented the Republicans – voicing support for President Trump’s signing of a National Security Presidential Memorandum (NSPM), which aimed to simultaneously promote benign foreign investment and protect American national security from integrity of data threats believed to be posed by nations like China. Chair Davidson also, strangely, attempted to argue that tariffs levied against such countries were an effective device to bolster national security.
Ranking Member Beatty (D-OH), Rep. Liccardo(D-CA), Rep. Kim (D-CA), and Rep. Foster (D-IL) represented the Democratic interest – decrying President Trump’s behaviour in the high-profile TikTok case, and suggesting that more regulations on foreign investment would have major economic downsides.
What the parties could agree on (perhaps facetiously) was the need to keep discussions of foreign investment, regardless of direction, apolitical. What this very agreeable statement turned into, however, was an opportunity to highlight contradictions on the part of either political party. Republicans characterized President Biden’s blocking of the Nippon Steel takeover of U.S. Steel as a political attack, while Democrats deplored Trump for using national security as a bargaining chip in foreign investment negotiations, vis a vis TikTok.
The witnesses called to the hearing, however, did manage to provide a (largely) unbiased picture of the role of foreign investment, both inbound and outbound. The witnesses’ answer to the big question posed above? A resounding no.
In their opening remarks, every witness maintained that foreign investment was a net positive. The general sentiment was that China posed a much smaller foreign investment threat now than 5 years ago. The witnesses also noted that foreign firms often provide more economic benefits to the American labor force than domestic firms (Ex. Nippon Steel). Furthermore, witnesses stated that existing legislation like the bipartisan Corporate Transparency Act (CTA) addressed concerns regarding existing malign investment. Representatives agreed that lighter regulations and a potential ‘fast-track’ to approval for benign investors from allied nations would benefit the economy. Regardless, the Republican contingent was adamant on increased scrutiny on inbound and outbound investment to/from China.
More specifically, Representative Liccardo, who represents the interests of Silicon Valley, expressed concern over bidirectional investment in the technology sector. He advocates faster approval for capital inflows to American firms in emerging technology, particularly in the VC space. Witness Dr. Sarah Bauerle Danzman (Associate Professor of International Studies at Indiana University Bloomington) agreed, emphasizing the necessity for outbound investment in foreign firms – which she argued would help the US move towards the cutting edge of technology innovation.
The trouble with investment regulation in this space, witness Brian Reissaus (Former CFIUS, Senior Advisor for National Security at Freshfields US LLP) mentioned, was the lack of clear definitions of ‘critical technologies’ (widely considered to be semiconductors, quantum computing, and artificial intelligence). Until a rigorous process to create these guidelines and definitions is completed, he continued, expedited pathways for outbound investment in these technologies will not materialize.
In summary, foreign investment is NOT a national security threat – at least not currently. The US should welcome benign foreign investment with open arms and lighten restrictions on outbound investments. As we enter an age of rapid technological innovation, you either keep up or get left behind – an inevitable truth that both sides of the aisle acknowledge.