‘We’re in an economic war’: White House and Congress weigh new oversight of US investment in China
The bill, currently pending as part of Congress’s anti-China economic legislation, has already been repeatedly delayed by corporate objections to the expansion of government surveillance. But some House Democrats are now behind the plan, which could give it further momentum. These legislative efforts and White House discussions of executive orders have convinced many policymakers and business leaders that expanded surveillance is inevitable, sooner or later.
“I think that’s a done deal,” said Jeffrey Fiedler, a member of the U.S.-China Economic and Security Review Commission, which called for enhanced supply chain oversight in its 2021 report. in Congress at a recent Atlantic Council roundtable.
“The question,” he added, “is what will be the extent” of the surveillance.
Opponents say the government already has the tools it needs to address security concerns related to overseas investment.
“Congress and the administration should focus on effectively implementing ‘existing export controls’ before passing another one,” said John Murphy, senior vice president of the Chamber of Commerce, who has been lobbying against Casey and Cornyn’s supply chain bill for over a year.
The effort to screen US investment in China began before the pandemic. Lawmakers proposed expanding supply chain oversight in 2018, but ultimately abandoned the effort.
The Trump administration has taken action on its own, issuing an executive order in 2020 to ban U.S. investment in more than 30 military-linked Chinese companies. He also moved to remove Chinese companies from US stock exchanges if they failed to comply with disclosure requirements, acting on the new authority passed by Congress in 2020.
Biden revised and expanded the list of military companies blocked by Trump with an executive order last June. But oversight remains relatively tight, involving 60 to 70 Chinese companies, a senior administration official said.
That’s causing the White House and Chinese congressional hawks to consider broader policies, like Casey and Cornyn’s bill to create a federal commission to screen investments in China that could affect critical industries like health, care, and technology. energy and defense.
The duo attempted to tie the legislation to the The Senate’s extensive anti-China legislation last summer, and the annual defense spending bill in late fall. But they were rebuffed each time by business interests and aligned lawmakers, who said the bill was too broad and questioned whether the office of the U.S. Trade Representative, which is supposed to lead the commission, had the resources needed to conduct the reviews.
The foreign investment provisions “represent an expansive new policy idea that could have significant negative ramifications far beyond national security,” the senator said. Pat Toomey (R-Pa.), the Republican lead on the Senate Banking Committee, which helped keep the language out of Senate legislation last year. “Given this broad impact, the Senate should carefully consider this idea and seek input on its impact on our national security, consumers and affected stakeholders before inserting it into a larger package.”
But now House Democrats have picked up the slack, along with Reps. Rosa DeLauro (Connecticut) and Bill Pascrell (NJ) tying the overseas investment bill to their version of the anti-China legislation which is expected 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 balks at the rest of the bill. Home versionwhich is full of other Democratic priorities.
The supply chain screening provision “is about the only good part” of the House bill, Cornyn said in a brief interview on Capitol Hill. “We’ve obviously tried to get some traction before, and we haven’t been able to do that, but I can’t think of a better vehicle to do that than a Chinese competition-focused bill. .”
Although the White House has not endorsed the bill itself, the Senate duo say the Biden administration has backed the idea of outbound investment screening.
“We had a good dialogue with members of the administration,” including Commerce Secretary Gina Raimondo, Deputy Treasury Secretary Wally Adeyemo and others, Casey said. “So we’re going to continue that as we move into the next phase.”
At the same time, the Biden administration is discussing whether to act alone to expand government surveillance of US supply chains in China. and US banks and funds that invest or lend to Chinese companies. National Security Adviser Jake Sullivan said last summer that the administration was considering ways to crack down on companies that “circumvent” export rules or help fund China’s “technological capability” – discussions, according to the White House, are still ongoing.
“As part of our competition with China, we want to ensure that we have the right set of tools to help us maintain our technological and competitive edge,” the senior administration official said. “We have export controls, particularly around a range of technologies and high-tech companies. We also have a set of investment restrictions. But the current set of investment restrictions is quite narrow.
The official declined to detail exactly what steps the White House is considering, but trade veterans who have worked on the matter say the actions fall into two broad categories. One is to increase surveillance of American companies whose supply chains run through China, as the Casey-Cornyn bill seeks to do. The second, considered by the Trump administration in 2018 and 2019would be to expand oversight of U.S. financial institutions that finance or do business with Chinese companies, particularly in high tech.
Filtering U.S. funding for Chinese companies could be a “politically easier sell,” said Clete Willems, an Akin Gump partner who served on the National Security Council and National Economic Council during Trump administration debates. On the question.
“Financing Chinese innovation is one thing. Telling American companies that they cannot place supply chains in certain countries is quite another,” he said. “I think it would be better to focus on financing that fosters Chinese innovation in sensitive technologies, rather than unprecedented supply chain management, which could undermine the overall economic competitiveness of the United States. .”
The senior administration official said discussions about a possible executive order are ongoing, but the timing of any action remains unclear. The Treasury and Commerce Departments, which would likely have a leading role in any funding restrictions, declined to comment.
Whether the White House acts with Congress or alone, it can expect backlash from corporate America. The House and other business groups argue that the Casey-Cornyn legislation is too broad and would stifle most American businesses in China. A January report by the Rhodium Group, an advisory firm, estimated that 43% of U.S. investments would be covered by the bill.
Both senators signaled that they were open to negotiations in Congress and with the White House on the specifics of the legislation. But they dismiss corporate warnings that most or all new US business in China could dry up.
“It sounds like a Chicken Little argument to me,” Cornyn said. “My request would be to sit down and talk to us and tell us what your concerns are, and maybe we can find some common ground. But don’t just tell us, ‘No way.’ I think this is a real problem and needs to be fixed.