House Proposal on CFIUS Would ‘Crater’ Foreign Investment, Think Tank Says

A congressional proposal to allow the Committee on Foreign Investment in the U.S. to reopen or alter previously mitigated transactions when national security risks have increased would discourage foreign investment in the United States, an expert at the Center for a New American Security said in written comments posted Jan. 4.

“This would be a great way to crater the U.S. open investment environment,” said Emily Kilcrease, a CNAS senior fellow and director of the center's Energy, Economics, and Security Program. “CFIUS is based largely on a voluntary process, in which parties to a transaction have a strong incentive to file because they receive safe harbor from further regulatory review. Gutting the safe harbor, as this recommendation would do, throws the whole system out of balance and needlessly heightens regulatory risk for the investments that the United States wants to welcome.”

Kilcrease added that CFIUS already has the ability to address potential future risks in its mitigation agreements, and it uses that power “aggressively.”

Kilcrease also questioned a congressional proposal to make the secretary of agriculture a voting member of CFIUS, saying the committee already brings USDA into the process for agriculture-related transactions.

Kilcrease made her comments as part of CNAS' review of a 53-page bipartisan report that the House Select Committee on China released in December. The House report contains almost 150 policy recommendations for resetting U.S. economic and technological relations with China (see 2312120050). The Select Committee’s leaders said they plan to turn the recommendations into legislation.

Addressing a recommendation to give CFIUS jurisdiction over greenfield investments from foreign adversary entities involving critical technologies, critical infrastructure, or sensitive personal data, Kilcrease said that such introductory investments from China are at their lowest level in years.

Turning to a recommendation to review all commercial items to see if they should be subject to export controls, she considers that approach to be too broad. “This would require a review of things like pencils, toothbrushes, my daughter's Taylor Swift poster,” she said. “A more pragmatic approach could be to focus on technologies on the [White House Office of Science and Technology Policy] critical technologies list.”