One of the government’s most important obligations is to protect our national security. Getting the details right for how to do so often leads to debate and disagreement, as it should. Unfortunately, such discussions can devolve into partisan acrimony.
This week, however, legislation that enhances U.S. government authorities to address emerging national security issues associated with foreign investment in the U.S. and the export of critical technologies will become law with overwhelming bipartisan majorities.
The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and the Export Control Reform Act of 2018 (ECRA) will combine to modernize the interagency committee assigned to review foreign direct investments to ensure that they don’t create unresolved national security risks – known as the Committee on Foreign Investment in the United States (CFIUS), and the export control system administered by the Commerce Department and supported by multiple other parts of the government.
While the legislation is not perfect, it is remarkable on both substantive and process grounds because it:
- Addresses vulnerabilities in our existing investment screening processes related to critical technology while remaining focused on national security and asserting that the U.S. not only welcomes foreign investment but actively promotes it;
- Provides robust support and a mandate for the export control agencies to think creatively about how to address future threats involving emerging technologies but without harming domestic research;
- Recognizes that the United States is not alone in the world and that if we want to prevent our adversaries from gaining military or technological advantages over us, we need to work with our allies on both investment reviews and export controls; and
- Improved over time—perhaps as important a point as any.
Earlier versions would have placed substantial unnecessary burdens on U.S. companies, created extraterritorial restrictions that would have made little sense and most likely have harmed U.S. competitiveness, and overwhelmed the U.S. government to the point that it might have actually harmed our national security. However, because Congress used a regular order, nonpartisan, bicameral, (mostly) civil, principled process that included robust hearings, thoughtful debate, and engagement with industry representatives, former officials from Democratic and Republican administrations, other subject matter experts, and administration officials – the more unworkable and anti-competitive parts of the bill were eliminated.
We are, respectively, a Republican and a Democrat who were responsible during our government service as assistant secretaries for the administration and significant overhaul of the regulations affected by this new legislation. We thus know first-hand how hard it is to get consensus on how to identify in a clear way the foreign investments and technology transfers of national security concern that warrant control in the least burdensome way possible so as not to do more harm than good. The members of Congress, staff, and administration officials and staff who worked so hard over the past year to get to this point should be applauded. And now the real hard work begins.
There is bound to be genuine concern that the new CFIUS and export control authorities could be implemented poorly, abused, or not adequately supported with sufficient staff. But such concerns should not lead to unfounded fears that it will be harder to invest in the United States or engage in domestic research involving emerging and foundational technologies. The legislation addresses such fears with considerable procedural protections, transparency, and by creating as little uncertainty as possible. However, it is not enough to state that the legislation avoided many of the pitfalls that could have discouraged benign investment, research, and development in the United States or unnecessary regulatory burdens.
Instead, businesses need to remain vigilant and ready to hold the executive branch accountable for following a sound, sober, and professional regulatory process that doesn’t re-litigate old battles that Congress debated and dispensed with – but instead lands on an investment and emerging technology review control regime that provides certainty to industry, adheres to the standards in the legislation, and protects U.S. national security. And, only then, with its national security assured, will the U.S. remain the most competitive economy in the world.
Clay Lowery was the Assistant Secretary for International Affairs at the Treasury Department from 2005-2009. He is a managing director at Rock Creek Global Advisors. Kevin Wolf was the Assistant Secretary of Commerce for Export Administration from 2010-2017. He is a partner in Akin Gump Strauss Hauer & Feld's international trade practice.