‘We are in an economic war:’ The White House, Congress considering new oversight of US investment in China
‘We are in an economic war:’ The White House, Congress considering new oversight of US investment in China

‘We are in an economic war:’ The White House, Congress considering new oversight of US investment in China

The bill currently under consideration as part of Congress’s anti-China economic legislation has already been delayed several times by companies’ objections to the extension of public oversight. But some House Democrats are now behind the plan, potentially giving it new momentum. These legislative efforts and discussions in the White House on executive orders have convinced many policy makers and business leaders that extended oversight is inevitable, sooner or later.

“I think it’s a fait accompli,” said Jeffrey Fiedler, a member of the U.S.-China Economic and Security Review Commission, who called for increased supply chain supervision in 2021. report to Congresssaid during a recent panel discussion in the Atlantic Council.

“The question,” he added, “is how comprehensive” supervision will be.

Opponents say the government already has the tools it needs to solve security issues related to outbound investment.

“Congress and the administration should focus on effective implementation” of existing export controls “before passing another,” said John Murphy, senior vice president of the Chamber of Commerce, which has been lobbying Casey and Cornyn’s supply chain bill for over a year.

Efforts to screen US investment in China began before the pandemic. Legislators proposed expanding supply chain supervision in 2018, but ultimately dropped efforts.

The Trump administration took some steps on its own and issued a decree in 2020 banning U.S. investment in more than 30 military-affiliated Chinese firms. It also moved to delist Chinese companies from US stock exchanges if they did not comply with the disclosure requirements, new congress of authorities adopted in 2020.

Biden revised and expanded Trump’s list of blocked military companies with an executive order in June last year. But supervision remains relatively narrow and involves 60-70 Chinese firms, a senior administration official said.

It has the White House and China hawks from Congress to consider broader policies, such as Casey and Cornyn’s bill to set up a federal commission to screen investments in China that could affect critical industries such as health care, energy and defense.

The duo tried to link the legislation to Senate broad anti-China legislation last summer, and to the annual defense spending bill in late fall. But they were rejected each time by the interests of companies and uniformed legislators, who said the bill was too broad and questioned whether the Office of the US Trade Representative, which is supposed to head the commission, had the resources to carry out the reviews.

The outgoing investment provisions “represent a new, expansive political idea that could have significant negative consequences that far exceed national security,” the senator said. Pat Toomey (R-Pa.), The leading Republican on the Senate Banking Committee, who helped keep the language out of Senate legislation last year. “Given this broad impact, the Senate should thoroughly examine this idea and get input on its impact on our national security, consumers and stakeholders before putting it into a larger package.”

But now the House Democrats have taken up the mantle with reps. Rosa DeLauro (Connect.) And Bill Pascrell (NJ) attachment of outgoing investment account to their version of anti-Chinese legislation set to go to a conference committee with the Senate in the coming weeks. Senate sponsors hope lawmakers can agree to keep the provision in the final bill, even if the upper house rejects the rest of the bill. Houses versionwhich is filled with other democratic priorities.

The supply chain screening provision “is about the only good part” of the House bill, Cornyn said in a brief Capitol Hill interview. “We have obviously tried to get some traction before and we have not been able to do that, but I can not think of a better vehicle to do that than a bill focused on China’s competition.”

Although the White House has not itself approved the bill, the Senate duo says the Biden administration has supported the idea of ​​outbound investment screening.

“We have had a good dialogue with members of the administration,” including Trade Minister Gina Raimondo, Deputy Finance Minister Wally Adeyemo and others, Casey said. “So we will continue with that when we go to the next stage.”

At the same time, the Biden administration is discussing whether to act on its own to expand government oversight of U.S. supply chains in China and U.S. banks and funds that invest in or lend to Chinese firms. National Security Adviser Jake Sullivan said last summer that the administration considered ways to crack down on companies to “circumvent” export regulations or help fund China’s “technological capabilities” – discussions, according to the White House, are still ongoing.

“As part of our competition with China, we want to ensure that we have an appropriate set of tools in place to help maintain our technological and competitive advantage,” said the senior administration official. “We have export controls, especially around a number of high-tech technologies and companies. We also have a set of investment restrictions. But the current set of investment restrictions is quite narrow.”

The official declined to elaborate on exactly what steps the White House is considering, but trade veterans who have worked on the issue say the actions fall into two broad categories. One is to increase control over U.S. companies that have supply chains running through China, as the Casey-Cornyn bill aims to do. The second, addressed by the Trump administration in 2018 and 2019would be to expand the supervision of US financial institutions that finance or do business with Chinese companies, especially in the field of cutting-edge technology.

Screening U.S. funding for Chinese companies could be an “easier political sale,” said Clete Willems, a partner at Akin Gump, who served on the National Security Council and National Economic Council during the Trump administration’s debates on the issue.

“Financing Chinese innovation is one thing. Telling U.S. companies that they can not place supply chains in certain countries is another,” he said. “I think it would be better to focus on financing that promotes Chinese innovation. in sensitive technologies, rather than unprecedented supply chain management, which could undermine overall US economic competitiveness. “

The senior official said discussions on a potential executive order are underway, but the timing of any action is still unclear. The finance and trade departments, which would likely have leading roles in any funding restrictions, declined to comment.

Whether the White House takes action with Congress or on its own, it can expect setbacks from corporate America. The department and other business groups argue that the Casey-Cornyn legislation is too broad and would stifle most U.S. companies in China. ONE January report from Rhodium Groupa consulting firm, estimated that 43 percent of U.S. investment would be covered by the bill.

Both senators have signaled that they are open to negotiations in Congress and with the White House on the details of the legislation. But they reject corporate warnings that most or all new U.S. businesses in China could dry up.

“That sounds like a Chicken Little argument to me,” Cornyn said. “My request to them would be to sit down and talk to us and tell us what your concerns are and maybe we can find a common ground. But do not just say to us, ‘No way.’ I think it is a real problem and it must be solved. “

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