Alarmed by foreign deals, lawmakers eye new review powers

Lawmakers are pushing to bolster the power of a secretive federal panel that monitors foreign investments for national security risks.

The House and Senate are close to acting on a bipartisan proposal that would expand the kinds of business deals that can be blocked or impeded by the Committee on Foreign Investment in the United States (CFIUS), an interagency committee led by the Treasury secretary. 

The Trump administration has endorsed the bill, which would expand the jurisdiction of CFIUS and add layers of national security analysis to the panel’s reviews.

White House press secretary Sarah Huckabee Sanders said in January that the legislation “would strengthen our ability to protect national security and enhance confidence in our long-standing open investment policy.”

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CFIUS was established in 1975 to stop acquisitions that could put the country at a competitive disadvantage to rivals or sacrifice critical intellectual property. The panel includes the heads of several Cabinet departments, along with leaders of intelligence agencies.

The panel has been unusually active during the Trump administration. The White House has followed the panel’s recommendations to block several deals, citing concerns about China gaining an edge on critical technology.

The president in September blocked the pending sale of Lattice, an Oregon-based semiconductor and chip manufacturer, to a group of investors including Chinese state-owned entities. Trump in January also blocked the sale of MoneyGram, a money transfer firm, to a subsidiary of the Chinese company Alibaba. Then, in March, Trump froze Singapore-based Broadcom’s attempt at a hostile takeover of Qualcomm.

Republicans and Democrats wary of China’s economic ambitions and trade practices have cheered those moves.

But some lawmakers and businesses are fretting about an expansion of CFIUS’s power and influence. They fear the bill being considered in Congress could put unnecessary restraints on foreign investment and allow CFIUS to stray from its mandate.

“All of these additional roadblocks just make it harder. The bar is being set higher and higher and eventually will be set too high,” said one advocate working on CFIUS issues. “The deals will continue, but these deal won’t continue among U.S. companies.”

The proposal from Sens. John Cornyn (R-Texas) and Dianne Feinstein (D-Calif.) and Rep. Robert Pittenger (R-N.C.) is expected to be taken up within weeks by committees in both chambers. 

The bill would expand CFIUS’s oversight to include investments where a foreign company would not necessarily gain control of a U.S. firm. These include certain joint ventures between U.S. and foreign companies, minority stake investments and transactions near military bases or U.S. government facilities.

“China too often requires technology transfer as a quid pro quo for U.S. companies to access its own markets,” Cornyn said in a speech promoting the bill. “It’s time to wake up to the mounting risks and to counter China’s aggressive effort to push the U.S. out of East Asia.” 

The Senate bill is co-sponsored by six Republicans and five Democrats, including Sens. Joe Manchin (D-W.Va.) and Tammy Baldwin (D-Wis.), who are up for reelection this year. The companion bill in the House is backed by 39 Republicans and six Democrats. 

Given the bipartisan support, it’s possible the measure could be attached to a massive defense spending bill that lawmakers are working to pass before the summer recess. 

But action on the CFIUS bill is far from certain. Business advocates are warning lawmakers that the legislation gives CFIUS far too much leeway to decide what transactions can be reviewed. 

“There’s a tremendous amount of uncertainty, and that’s one of the issues that the investment community and various sectors, such as the technology industry, are trying to address,” said Barbara Linney, a lawyer at Miller & Chevalier that covers issues before CFIUS.

The bill would give CFIUS, not Congress, broad authority to dictate by regulation what types of deals would be subject to review. The Information Technology Industry Council, a trade group representing dozens of major U.S. companies, has pushed for Congress to clarify which deals could be subject CFIUS approval. 

“We believe Congress should define these fundamental concepts rather than defer to the executive branch,” said Josh Kallmer, the trade group’s senior vice president for global policy, at a House hearing in April. “They should not be a vehicle for the agencies to make policy judgments best reserved to Congress.” 

Investors and businesses say the lack of clarity could cause a chilling effect in global markets, spurring firms to either abandon planned mergers or overload the CFIUS filing system out of caution. They’ve also insisted that current U.S. export controls are sufficient to protect American intellectual property and trade secrets. 

Others have raised concerns that bolstering CFIUS could give Trump more power to dictate U.S. trade policy. Trump and administration officials have said that new tariffs on aluminum, steel and Chinese imports are justified to defend national security and curb China’s historic theft of intellectual property.

Critics of boosting CFIUS powers say doing so would let Trump trample deals that are not a threat to national security as a way to penalize China for unrelated actions.

“This new administration has been using CFIUS in a much more aggressive and wide ranging manner,” said the K Street source. “The president is opening a Pandora’s box of tools that he could use to drive economic policy globally.”