WASHINGTON, DC - The Subcommittee on Digital Commerce and Consumer Protection, chaired by Rep. Bob Latta (R-OH), held a hearing today to examine the Committee on Foreign Investments in the United States (CFIUS), whether its process for reviewing investments needs an update, and the Foreign Investment Risk Review and Modernization Act (H.R. 4311).
During his opening remarks, Chairman Latta spoke to the balance CFIUS must strike between supporting investment and strengthening national security, stating, “While more foreign investment in America is generally a good thing when more jobs are created for our citizens, concerns have arisen that some other investments could be the work of foreign governments that want access to advanced U.S. technology or infrastructure…CFIUS is the organization charged with examining who is investing in national security related U.S. companies, and why. Today, we are going to examine whether CFIUS has the proper tools to do that job, what tasks are already assigned to other government bodies-including export control agencies-and what steps are already being taken through regulation to reform CFIUS."
#SubDCCP Chairman Latta listens as witnesses give their opening remarks
Chairman Latta posed the question to Hon. Heath Tarbert, Assistant Secretary, International Markets and Investment Policy, U.S. Department of the Treasury, “How has foreign direct investment in the United States changed since the last time this committee considered CFIUS legislation in 2006?"
In his response, Mr. Tarbert pointed to, “The rise of state-owned enterprises, particularly from certain countries, that are buying strategic assets as part of an industrial plan. In some cases, that industrial plan involves civil-military fusion. There’s an inflow of state-owned enterprise money, that is sort of government-backed money, that are not purely financial investments but are purchasing U.S. businesses with more military and strategic goals in mind."
Mr. Tarbert also pointed to the rise of the digital economy, commenting, “We live in a big data economy now, and so when we’re looking at a particular U.S. company, a health care firm for example, the data on U.S. citizens is much greater than it was ten years ago."
Hon. Richard Ashooh, Assistant Secretary, Export Administration, U.S. Department of Commerce, responded to #SubDCCP Vice Chairman Adam Kinzinger’s (R-IL) question about CFIUS’s ability to keep up with emerging technology concerns by noting, “This is a critical issue for us. We’re spending a great deal of our resources and focus on adapting to the trend you just identified. We have technical advisory committees that include private sector individuals and companies that are those early stage innovators. We are relying on them, in fact, we reorganized them around emerging technologies."
Mr. Clay Lowery, Managing Director, Rock Creek Global Advisors LLC, testified on his views of FIRRMA, commenting, “The United States must address this serious and growing challenge in a comprehensive manner that goes well beyond the scope of this hearing. Such a strategy should certainly include enhancing our military and cyber capabilities, upgrading our export control system, and modernizing CFIUS, among other elements. The FIRRMA bill is one important step… That said, Congress should review and revise the language in the bill to clarify its intent. For instance, the inbound investment provision should make clear that the concern about minority investments in critical technology or critical infrastructure companies is not about the companies per se, but about any critical technology associated with those companies. I also am concerned that the FIRRMA bill appears to exempt CFIUS from judicial review for even procedural matters - potentially limiting due process and review of the government’s actions."
Hon. Kevin Wolf, Partner, Akin Gump Strauss Hauer and Feld LLP, and former Assistant Secretary of Commerce for Export Administration, highlighted how foreign direct investment in the U.S. is vital to the American economy, stating, “The United States has, in fact, been the destination of choice for FDI because of such policies, our rule of law, our economy, and our workforce. Competition to attract FDI, however, has never been stronger and companies have many more options around the world than they once did. Therefore, it is vital to our economic security and prosperity that we continue to take actions to make the United States attractive for investment, including modernizing the CFIUS process."
Ms. Celeste Drake, Trade and Globalization Policy Specialist, AFL-CIO, discussed the organization’s support for the Federal Investment Risk Review Modernization Act (FIRRMA), stating, “Some may wonder why the AFL-CIO has an interest in strengthening the ability of CFIUS to review investments on national security grounds-our interest is two-fold. First, as the representative of America’s working families, we have an interest in CFIUS because CFIUS is a jobs issue. Second, foreign investments to acquire U.S. assets that undermine our national security both weaken our country and weaken our defense industrial base, affecting manufacturing jobs and wages even in the absence of a net economic benefits test. Simply put, we want CFIUS to work because that is what is right for America’s working families. Accordingly, we support FIRRMA as a step toward helping ensure that America’s competitors cannot take advantage of our openness in an attempt to strip the United States of its global economic and security leadership."
Dr. Derek Scissors, Resident Scholar, American Enterprise Institute, looked at CFIUS reform in relation to national security threats from China, commenting, “It is a considerable challenge just to engage in CFIUS reform that better protects national security while not causing economic harm. However, some approaches to CFIUS reform do not seem to take the Chinese threat to national security seriously. There has been discussion of time limits on a reform bill, as if the People’s Republic of China will change its mind about acquiring foreign technology in 2026. Rather than sun-setting CFIUS reform, the emphasis should be on speeding it up, given that technology loss has occurred for many years and the harm to national security is ongoing."
The Majority Memorandum, witness testimony, and an archived webcast are available online HERE.
