The Senate Banking Committee explored how to oppose China’s threat to America’s national and economic security Wednesday.
A Treasury official offered further insight into the Biden administration’s exploration of a possible outbound U.S. investment review process during a Senate Banking Committee hearing Wednesday.
The United States currently lacks an outbound investment review process, which has meant that sophisticated and sensitive technology has been handed over to many of the U.S.’s geopolitical rivals, including China. With economic competition between the U.S. and China heating up, the administration and policymakers on Capitol Hill are both pursuing strategies to put a review process in place to safeguard key technology.
“What the administration is looking to do here, and actively assessing, is establishing a program that gets at U.S. investment money, and the know-how and the expertise that goes with that money, into sectors of concern and countries of concern in a narrow and targeted way that gets at investments that would develop technologies that would be used from a military or intelligence way against the United States,” said Assistant Secretary for Investment Review Paul Rosen.
Rosen currently manages the government’s review of foreign investment in the United States through the Committee on Foreign Investment in the United States (CFIUS). CFIUS has played a critical role in preventing foreign countries from accessing and exploiting America’s sensitive technologies, infrastructure, data and other assets through inbound investment since 1975.
But outbound investment is unaddressed.
“We currently assess that we don’t have an effective tool to target the money and sophistication with know-how that goes into this sensitive and most critical technologies into countries of concern,” Rosen said.
Without this proposed outbound investment review, “I think we risk a gap in terms of some of our national security concerns,” Rosen said.
Reports have suggested that the White House may issue an executive order this summer that will restrict outbound investments in China’s defense industry, and Sens. Sherrod Brown (D-Ohio), Bob Casey (D-Pa.) and John Cornyn (R-Texas) are currently working on similar legislation.
In his opening remarks, Sen. Sherrod Brown (D-Ohio) contextualized what America stands to lose if it fails yet again to understand the threat China poses to its national and economic security.
“For far too long, our policy around China catered to multinational corporations, and failed working families. It devastated local communities, and it eroded our manufacturing base and national competitiveness,” Brown said.
Indeed, between 2001 and 2018 alone, America lost more than 3.7 million jobs to the trade deficit with China, and the bulk of those losses were in manufacturing. But the impact of China’s entrance into the World Trade Organization (WTO) in 2001 extends beyond job loss. Low-wage labor in China has driven down pay for workers in U.S. manufacturing and “reduced the bargaining power of similar, non-college-educated workers throughout the economy,” an Economic Policy Institute report finds.
“Since NAFTA’s enactment in 1994 and China’s entry into the WTO, Ohio has lost over 276,000 manufacturing jobs. That’s over a quarter million Ohioans who once had a good paying job—often with the top-notch benefits that come with a union card—suddenly finding themselves out of a job. If often takes a decade or more for families and communities to recover from that kind of loss. It devastated industrial communities in Ohio and around the country. And it helped build up the Chinese military.”