Politics

White House Backs Expanding Security Review of Foreign Deals

Sen. Thom Tillis, R-N.C., has concerns that some reviews might hamper legitimate purchases by foreign firms. (Bill Clark/CQ Roll Call)

Pending legislation that would expand the reach of a panel’s national security review of foreign business transactions would not discourage foreign investment in the United States or business deals with U.S. companies, Trump administration officials told a Senate committee Thursday.

Heath P. Tarbert, assistant secretary of the Treasury for International Markets and Investment Policy, said bipartisan legislation by Sens. John Cornyn, R-Texas, and Dianne Feinstein, D-Calif., would strengthen one line of defense against adversarial foreign interests gaining access to sensitive military information or important current and emerging technology.

Under the legislation, the Committee on Foreign Investment in the United States would be able to review business dealings that give a foreign buyer access to cutting-edge technology.

Tarbert appeared before the Senate Banking panel along with Richard E. Ashooh, assistant secretary of Commerce for Export Administration, and Eric D. Chewning, deputy assistant secretary for Manufacturing and Industrial Base Policy under the Defense Department.

The departments of Treasury, Commerce and Defense are on CFIUS, which reviews business acquisitions that give foreign companies or investors ownership or a controlling interest in American firms.

The legislation to protect U.S. know-how comes amid the Trump administration’s campaign to encourage foreign companies to invest in the U.S.

Chewning said the bill “should be considered a whole-of-government response to a critical national security challenge — an insurance policy on the hundreds of billions of dollars per year we invest in our defense industrial base.”

The testimony reflected the Trump administration’s general assessment of the Senate bill and a companion House bill. The White House endorsed the bills Wednesday with a statement urging Congress to pass them.

But Ashooh cautioned against Congress further expanding provisions in the legislation so that CFIUS duplicates some responsibilities now under the Commerce’s export control administration. Ashooh oversees the Commerce agencies responsible for enforcing export controls that limit the transfer or shipment of technology, software or services out of the United States.

“The export control system is flexible and able to address concerns about emerging technologies, and the agencies involved in that process have experience with these issues,″ he said. “CFIUS deals with individual transactions that come before the committee for review.”

Ashooh said the two processes should remain separate.

“It is important that they remain complementary and not overlap unnecessarily, as that has the potential to overburden the CFIUS process and partially duplicate the more comprehensive coverage of technology transfer under the export control system,” he added.

Real estate sales involving land near military bases or other sensitive security-related facilities would also fall under the expanded review.

Sen. Catherine Cortez Masto, D-Nev., said the real estate provision would address concerns that foreign buyers of vacant land near several military installations in her state might be spying on the facilities. Those military bases are in open desert land with no businesses or anything likely to attract buyers, she said.

Tarbert said those land transactions would not trigger a CFIUS review under current law because there was no business acquisition. If there had been a farmer’s market on a site, a review could have been conducted.

Cornyn, who does not sit on the committee, said in his Jan. 18 testimony that he was particularly concerned about Chinese private and state-owned firms acquiring critical cutting edge technology that Beijing could use to boost its commercial and military prowess.

Sen. Thom Tillis, R-N.C., countered that while he understood those concerns he worried that Chinese firms and American firms interested in doing business with each other in areas like financial services or insurance, key industries in North Carolina, might shelve potential deals because of lengthy, costly examinations.

“How do we do that right versus having people say we’re not even going to pursue any discussion with a Chinese firm on this sort of acquisition because we don’t think we could actually get the deal done?” Tillis asked. “We just passed tax reform to stimulate economic activity. We’re clearly making ourselves more attractive to build investment in the United States.”

Tarbert said the goal under the legislation is not to discourage business deals that don’t affect national security.

“Last year, even from a country like China, dozens of transactions were in fact cleared through CFIUS,” he said.

In his testimony, Tarbert noted that foreign investment in the United States was valued at $7.6 trillion in 2016. Nearly 7 million people in America worked for U.S. affiliates of foreign companies in 2015, the most recent year available.

The Senate bill would also create a fund to cover committee operating and investigation expenses.

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