About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (April 8, 2024)

handle is hein.crs/goveoxx0001 and id is 1 raw text is: Congre &onaI les hnfarming Ih leg ilive deba 3rch Service since 1914 April 8, 2024 Proposals to Regulate U.S. Outbound Investment to China Introduction The U.S. government has generally supported an open investment environment at home and abroad to promote U.S. economic growth, sustain the U.S. position as a premier destination for foreign direct investment (FDI), and ensure the competitiveness of U.S. companies. The U.S. government's interagency Committee on Foreign Investment in the United States (CFIUS) reviews a small subset of foreign inbound investments, primarily mergers and acquisitions, that could result in foreign control of a U.S. business and raise potential national security concerns. Since 2016, some Members of Congress have focused on the potential U.S. economic and national security effects of certain U.S. outbound investments to the People's Republic of China (PRC or China), including the transfer of U.S. technology and know-how in sensitive or strategic areas. The 118th Congress is considering legislation to strengthen foreign investment review authorities and restrict some U.S. investment in the PRC and other countries of concern that involves dual-use and critical technology. In response to congressional activity, in August 2023, President Biden issued Executive Order (E.O.) 14105 to establish a targeted outbound investment program. Some countries (e.g., the PRC, South Korea, Taiwan) have regimes that govern some outbound investments. While the E.O.'s proposed scope of covered activity is limited, new U.S. outbound rules would depart from longstanding U.S. economic policy. Opponents argue that U.S. sanctions and export control tools are sufficient to address national security risks. Proponents argue that new measures are needed to preserve a market- based climate and counter PRC trade and investment rules that incentivize and require the transfer of U.S. technology and advanced capabilities to PRC competitors to the benefit of the PRC government. The 118th Congress is debating the scope of U.S. restrictions through hearings, oversight of the E.O. implementation, and proposed legislation. Background and Policy Debate Between 2016 and 2018, Congress led efforts to strengthen U.S. foreign investment review and considered regulating some outbound activities. Enactment of the Foreign Investment Risk Review Modernization Act (FIRRMA, Title XVII, Subtitle A, P.L. 115-232) in 2018 enhanced authorities for CFIUS to review, mitigate, or restrict inbound foreign investments in U.S. businesses involved in critical technologies, critical infrastructure, or sensitive personal data, and certain real estate transactions. Other proposed FIRRMA provisions-including on U.S. outbound investment in China-were diluted or eliminated during congressional and executive branch deliberations, following business pressures and other policy considerations. Members instead reformed U.S. export controls to regulate some critical and emerging dual-use technologies and technology transfer abroad. Since FIRRMA's enactment, Congress has returned to these issues, in part in response to high-profile PRC greenfield investments in the United States and U.S. investments in China, particularly in strategic sectors (e.g., semiconductors and biotechnology). U.S. investments include the creation of research and development centers, production facilities, and joint ventures with the PRC government and PRC firms. Some Members say U.S. portfolio investments support strategic PRC firms and also should be regulated. U.S. firms have benefitted from the ability to invest and sell in China as a top global market since the 1990s. Despite the commitments it made to join the World Trade Organization in 2001, the PRC maintains policies that require firms to localize production in China and transfer technology to PRC firms in order to sell or operate in the market. Since 2014, PRC practices have included the issuance of additional industrial policies and economic security measures. The U.S. Chamber of Commerce, among other business groups, has expressed support for the Biden Administration's efforts to develop a thoughtful regime that safeguards American national security and economic leadership without unnecessarily restricting beneficial U.S. business activity. At the same time, the Chamber has advocated for an approach that is narrowly tailored to target specific national security concerns in a transparent, efficient, and predictable manner, follows clear, workable rules, and avoids creating a chilling effect on business activity. Congressional Action Congress has sought to address what some Members characterize as statutory, regulatory, and implementation gaps with regard to CFIUS and export controls. Some proposed legislation broadly aims to sustain and rebuild U.S. production, technology, and innovation capabilities and counter PRC trade and investment policies of concern. Proposals have included notification requirements, prohibitions in certain sectors, and a case-by-case review process broadly similar to CFIUS that some call a reverse CFIUS (Text Box). Select Legislation on Outbound Investment Enacted legislation in the 1 1Th Congress includes Consolidated Appropriations Act, 2023 (P.L. 117-328), enacted in December 2022, directed Depts. of Commerce and the Treasury to report on an outbound investment initiative and the resources required to establish and implement it. The agencies released their status reports in March 2023. Proposed legislation in the I 18th Congress includes National Critical Capabilities Defense Act of 2023 (H.R. 3136) would create a new interagency committee to review and block or modify U.S. investments involving national critical capabilities in countries of concern. Outbound Investment Transparency Act of 2023 (S. 2678) proposed a notification scheme for certain sectors/ investments and was included in the Senate-version of the National Defense Authorization Act 0

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Already a HeinOnline Subscriber?

Log In

profiles profiles most