Will Biden Use Every Tool Against China?

President Biden speaks at a virtual summit with international leaders on climate change from the White House on April 22nd.


Photo:

al drago / pool / shutterstock

President Biden has a powerful weapon with which he can defend himself against Beijing’s attempts to overthrow Washington: the U.S. Foreign Investment Committee, an intermediary body that examines the national security impact of foreign investment in American companies. Though Cfius, as the body is called, has been largely quiet since its inception in 1975, a Trump administration overhaul gave the committee the authority and resources it needed to protect against theft and US innovation and infrastructure to endanger. Foreign investment in American companies can give a backer access to or control of valuable intellectual property, sensitive data, or critical infrastructure. But will the new government take full advantage of Cfius?

In 2018, Congress passed and President Trump signed the Foreign Investment Risk Review (Firrma) Modernization Act to modernize the committee and expand its jurisdiction. Firrma, perhaps the most important bipartisan piece of legislation in the last decade, has won overwhelming support because America’s technological and military advantages have been instrumental in protecting our interests. A threat to these benefits is a threat to the whole country.

The revised CFius has done a lot to protect the US from this risk in the few years after the death of Firrma. Between the entry into force of the new law and January 2021, the committee reviewed cross-border deals worth more than $ 400 billion. In 2020 alone, Cfius reviewed more transactions than any year since 2005. Cfius reviewed five times as many transactions in 2019 as in 2009, and Trump banned more committee-reviewed transactions based on national security risks than all previous presidents combined. According to the law that Cfius created, the President alone has the power to stop any cross-border business.

The then Treasury Secretary Steven Mnuchin led the effective implementation of Firrma as chairman of CFius. While the Treasury Department drafted carefully tailored regulations to guide investors, it spoke to nearly 60 foreign allies about the importance of screening investments for national security risks and called on around four dozen nations to maintain security amid the pandemic. By implementing the new legislation and improving internal business processes, the committee was able to drastically reduce approval times despite the record number of cases. The Treasury Department has also set up a dedicated enforcement team to look for unverified investment deals, particularly venture capital investments that could pose a national security risk.

While many critical questions remain unanswered, the Biden government has taken some steps that signal a readiness to combat the machinations of the Chinese government. The White House organizes allies in unified opposition to Beijing. The government issued a joint statement with Japan highlighting Beijing’s threat to international order and convened a virtual summit with quad nations Australia and India, as well as the US and Japan, to pledge stability in the Indo-Pacific region promote. Mr. Biden’s Commerce Department issued subpoenas to Chinese companies on national security concerns, and the State Department imposed sanctions on 24 Chinese officials in March for undermining Hong Kong’s autonomy. The U.S. Navy has sailed ships across the Taiwan Strait several times since taking office.

Without the effective use of CFius, America and its allies will remain vulnerable to Beijing. The rapid development of technologies in areas such as machine learning, quantum computers, autonomous vehicles, robotics and biotechnology will dramatically affect the way we live. The US must continue to lead in innovation and infrastructure while freeing up foreign capital to fund the next generation of industry-leading companies. The Trump administration gave Mr Biden a powerful tool to do this. The world is watching him use it.

Mr Feddo was Deputy Minister of Finance for Investment Security from 2019 to 21. He is the founder of Rubicon Advisors.

Journal Editorial Report: Paul Gigot interviews General Jack Keane. Image: John Moore / Getty Images

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First published in the April 23, 2021 print edition as “Will Biden Use Any Tool Against Beijing?”.

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