Committee On Foreign Investment In The United States Research Articles

ISRAEL'S APPROACH TO LIMITATION OF FOREIGN INVESTMENTS ON THE EXAMPLE OF COOPERATION WITH CHINA, JAPAN AND INDIA

The article focuses on the specifics of the Israeli mechanism of foreign investments control that was created primarily under the influence of the political will of Israel's main global partner, the United States, but not on the basis of the country’s economic interests. The author considers the course of negotiations between the government of B. Netanyahu and the administration of D. Trump on the formation of an advisory committee for foreign investment approval, its goals, objectives and directions of work, as well as the differences from the Committee on Foreign Investment in the United States (CFIUS). The cases of China, Japan and India are consistently analyzed. The choice of these examples is motivated by both by the level of their business activity in Israel and the dynamics of contacts with the United States, which forces the White House to support or hinder their cooperation with its Middle Eastern partner. The author comes to conclusion that the Israeli government did not completely repeat the American experience of control over foreign investment, although it is moving towards tightening this practice. The study shows that that the main focus of the Israeli advisory committee since its creation in 2019 has been transactions with China, while relations with representatives of Japan and India have particularly no restrictions.

SHAPING APP DATA PUBLICS AS A NATIONAL SECURITY ISSUE: A COMPARATIVE ANALYSIS OF THE CFIUS-GRINDR AND CFIUS-TIKTOK RULINGS

In March 2019, the Committee on Foreign Investment in the United States (CFIUS) labelled Grindr as a risk for national security and forced the Chinese conglomerate Kunlun Tech to divest from the queer dating app by June 2020. Later that year, the Committee launched an investigation into the Chinese company ByteDance, owner of the popular app TikTok, after it acquired the app Musical.ly in 2017. The objective of this paper is to compare how the CFIUS-TikTok and CFIUS-Grindr rulings were shaped as national security controversies, as well as to highlight how app data publics are increasingly the subject of discursive struggles to determine whether or how they constitute risk, especially amid the ongoing US-China trade conflict. Drawing from a political economy approach to communication, we collected and analyzed newspaper articles pertaining to the CFIUS-TikTok (n=294) and the CFIUS-Grindr (n=107) rulings. Our analysis highlights how both rulings were framed by construing the Chinese ownership of popular social media apps as a potential threat to US national security by conjuring anti-Chinese sentiment. However, a closer examination revealed that TikTok’s and Grindr’s data publics were made to matter differently. If the CFIUS-TikTok ruling was predominantly framed as a human rights issue, the CFIUS-Grindr investigation was made to matter by depicting LGBTQ+ citizens as higher security risks for the US because of their sexual and gender identities. This paper concludes by raising the implications that datafication poses for the LGBTQ+ communities who have little control over the regulatory frames that oversee their activities online.

Regulatory Issues when Acquiring US Pump Companies

When a non-US company is buying a US pump company, the proposed acquisition may need to be reviewed by the US Committee on Foreign Investment in the United States (CFIUS). Eric McClafferty and Wyatt Mince walk us through the process.

Changing Mechanism of the National Security Review for Foreign Investment – A Perspective from the Foreign Investment Risk Review Modernization Act

As the host country with the largest capital inflow, the United States has always been highly concerned about its foreign investment access and review policy. Facing the uncertainty of Sino-US trade friction development, China must also pay close attention to the United States' foreign investment national security review policy. The Foreign Investment Risk Review Modernization Act (FIRRMA), signed into law in 2018, expanded the scope and revamped the process of CFIUS 'review of foreign investment and is bound to introduce even more changes to the national security review of foreign investment in the United States. Against the background of the rapid increase in the scale of Chinese outbound investment, the strict national security review by the Committee on Foreign Investment in the United States (CFIUS) conducted by Chinese-funded enterprises especially those based in the digital economy for their acquisitions of U.S. companies in recent years. The article discusses the new trends and new ideas in the national security review of foreign investment in the United States as well as the effective responses of Chinese-funded enterprises in light of the signing and implementation of FIRRMA.

Grindr? it’s a “Blackmailer’s goldmine”! The weaponization of queer data publics Amid the US–China trade conflict

In March 2019, the Committee on Foreign Investment in the United States (CFIUS) identified Grindr, a hookup app that predominantly caters to men who have sex with men, as a “national security threat” and compelled the Chinese conglomerate Kunlun Tech to divest from it entirely. The CFIUS-Grindr ruling is indicative of larger regulatory debates over increasing datafication trends in the dating app industry. Through a political economy approach to communication, this paper examines how this ruling was predominantly constructed by various stakeholders as a public controversy in light of the ongoing US–China trade conflict. This interpretation of the controversy relies on a prejudicial trope that construes queer dating app users as vulnerable targets of potential blackmail schemes operated by Chinese intelligence agencies. Through the Lavender Scare, a historical period referring to state-led investigations into the presence of LGBTQ+ employees in Western federal workforces, this paper historicizes this blackmail trope to highlight how the politicization of queer vulnerabilities amid global hegemonic conflicts is a tactic that predates the US-China trade conflict. It argues that the CFIUS-Grindr ruling weaponizes Grindr’s queer data publics as threats against which the US government should protect itself, while failing to fully recognize the urgency for the state to protect the data privacy rights of the LGBTQ+ communities in the digital economy. In light of the CFIUS-Grindr ruling, this paper examines the implications that datafication raises for the LGBTQ+ communities whose sexual lives and identities are increasingly being datafied and exploited by digital media platforms.

The Role of Committee on Foreign Investment in the United States in the Tech War with China

With the escalation of the science and technology war against China, the Committee on Foreign Investment in the United States (CFIUS) continues to expand its powers with the support of Congressional legislation, and plays an increasingly important role in the science and technology war against China. The committee strictly restricts Chinese technology companies’ investment in the United States by means of routine review, case tracing, whitelisting, and long-arm jurisdiction, preventing China from acquiring advanced American technology through investment channels in the United States, so as to curb China’s high-tech development and maintain American technological hegemony. The goal of CFIUS’s review of Chinese companies’ investment in the United States has shown trends such as generalization of security, joint action, focus on emerging fields, and strengthening of law enforcement capabilities China should pay attention to the scope of CFIUS expansion and behavioral trends, and take corresponding countermeasures to avoid and reduce investment risks in the United States.

Cross-Border M&A: A Checklist of US Issues for Non-US Acquirers

As much as cross-border M&A activity offers great transactional opportunity, it also entails an array of jurisdictionally, culturally, and commercially specific concerns and nuances that must be navigated. This article offers a practical guide to non-US acquirers seeking to conduct cross-border M&A in the US, covering topics ranging from acquisition structure to regulatory compliance to representations and warranty insurance. While each M&A transaction will present bespoke issues, some particularly foreign to non-US acquirers, a foundational familiarity with the most common issues that underlie and accompany US M&A deals will help secure a successful outcome for non-US acquirers. cross-border M&A in the US, non-US acquirers, acquisition structure, acquisition vehicle, Committee on Foreign Investment in the United States (CFIUS)

Китайский феномен экономического роста

Modern China should be considered as an unique experiment and great world project of human civilization, effectively a co-product of the Communist Party of China (CPC) and the West. The centuries-old concept of a free-market economy fell on fertile ground of the hardworking Chinese people and in a short historical period since the beginning of the reform has finally bore fruit. Globalization and digitalization have greatly helped the Chinese economy to expand around the world and have become powerful catalysts for Chinese economic development, providing it with new approaches to doing business. The article attempts to analyze this phenomenon and systematize the factors of China’s growth. Key aspects of the Chinese economy transformation are studied, such as GDP (in current and constant prices) and GNI per capita, manufacturing and trade, finance and capital. Special attention is paid to the global leadership role of China or/and the USA: Economy, Manufacturing, and International Trade. An in-depth comparative analysis of the economic growth indicators for China and the USA is based on extensive international statistical data. The author focuses on estimates of key indicators published by international bodies, such as the United Nations, UNCTAD, UNIDO, OECD, WTO and others. Various think tanks, independent agencies and other institutions such as McKinsey Global Institute, Primakov Institute of World Economy and International Relations RAS, Congressional Research Service (CRS), United States–China Economic and Security Review Commission, Committee on Foreign Investment in the United States (CFIUS) have been analyzing Chinese phenomenon of economic growth. Quantitative assessments of China’s economic growth are discussed. As shown, China plays a major role in the world economy and manufacturing. It is now the world’s first country by many economic indicators. In 2007, China became the world’s largest merchandise exporter. In 2009, it took the 1st place in manufacturing value-added output. Measured by purchasing power parity (PPP), in 2017 China stood as the world-largest economy in terms of GDP in current US dollars. Over the past decade, China has provided at least 30 percent of global GDP growth, while the United States was half as much. China is in the world’s top two for receiving and being the source of foreign direct investment (FDI). In 2020, China had 124 Global Fortune 500 companies compared to 121 American. At the same time, the US remains the world leader in many other quantitative indicators, for example in GDP at official exchange rates, innovation, research and development, finance, and services. It also ranks first in the world in terms of quality indicators of economic development. The author gives his vision of the China’s economic growth fundamental factors. Four of them are identified: a) low labor costs, b) well-designed legal environment for attracting foreign capital, c) massive FDI influx, d) imports of capital goods as well as modern Western technologies, including transfer of critical technologies, intellectual property and know-how (mainly through acquisition of Western firms). The general conclusion is that the reforms completely transformed the lives of Chinese people. China of the 1970s 80s and today’s China are two different economic, industrial, scientific, technical, socio-humanitarian entities.

The Center Cannot Hold: A Comparison of the FDI Screening Regimes of the United States and European Union in Addressing the West's China Problem

Whether or not current U.S.-China strategic competition may be properly named a new Cold War, it is useful to compare the regimes of the United States and the European Union to better understand how domestic FDI screening mechanisms are growing in importance as a foreign policy tool (e.g. national defense strategies). Section II provides a contextual background weighing China’s own restrictive FDI policies against its increased technology and market access acquisitions in the U.S. and Europe. Section III outlines the U.S. FDI screening review by the Committee on Foreign Investment in the United States (CFIUS) with particular focus the broadening of its review powers by the Foreign Investment Risk Review Modernization Act of 2019 (FIRRMA). Section IV outlines the European Union’s Regulation 2019/452 which provides both a framework for FDI screening by Member States on the grounds of “security or public order” and a cooperation mechanism between Member States, as well as Member States and the Commission. Section V considers whether the increased use of FDI screening as a foreign policy tool potentially (1) undermines other multilateral efforts, in areas such as international trade, to address concerns related to the influence of Chinese state-owned enterprises, and (2) is ineffective given the difficulties faced by national authorities to fully appreciate organizational structures related to foreign government-supported investment. Looking to the “geographical pivot of history,” this paper concludes that “multilateralism still matters” and calls for renewed efforts to realize an International Convention on Foreign Investment.

United States Pursues Regulatory Actions Against TikTok and WeChat Over Data Security Concerns

The Trump administration is engaged in an ongoing legal battle against the makers of two Chinese smartphone applications, TikTok and WeChat, over their data-collection and content moderation practices. The administration has used both the International Emergency Economic Powers Act (IEEPA) and the Committee on Foreign Investment in the United States (CFIUS) in an attempt to force the companies to cease U.S. operations and, in TikTok's case, to change ownership. The administration's actions have spurred multiple legal challenges, several of which are ongoing, and for now, both TikTok and WeChat remain in operation in the United States.

CFIUS issues final regulations on national security review of foreign investments in the United States under FIRRMA: broader reach, mandatory filings, and limited exceptions

Purpose The article examines the sweeping changes to the review process undertaken by Committee on Foreign Investment in the United States (CFIUS) as a result of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). The Article specifically reviews the long-awaited final sets of regulations, effective as of February 13, 2020, and analyzes their impact on the CFIUS process, as well as considers the implications of FIRRMA for parties to foreign acquisition, control, and investment transactions. Design/methodology/approach The Article begins with an overview of the CFIUS framework and a general explanation of FIRRMA. It then moves to an analysis of FIRRMA and the resulting changes to the prior CFIUS regime. The Article concludes with general considerations and provides recommendations for parties who may find themselves analyzing the potential applicability of CFIUS to foreign acquisition and investment transactions. Findings FIRRMA resulted in significant changes to the existing CFIUS regulatory framework. Practical implications Parties should learn the CFIUS changes as a result of FIRRMA, including the new mandatory filing requirements as well as implications for non-controlling investment transactions. Parties should include CFIUS analysis and planning in the earliest stages of deal planning and due diligence. Originality/value The article provides an in-depth review of the changes to CFIUS resulting from FIRRMA. The changes to the existing CFIUS landscape have resulted in new mandatory filing requirements and expanded jurisdiction over non-controlling investment and real estate transactions, which are discussed in the article.

Are Chinese Acquirers Discriminated against in Cross‐border Mergers and Acquisitions? An Analysis Based on Covered Transactions Filed with CFIUS

AbstractThis study employs a sample of covered transactions filed with the Committee on Foreign Investment in the United States (CFIUS) of cross‐border mergers and acquisitions targeting American companies based on publicly available news reports and announcements to examine the heterogeneity hypothesis in the CFIUS review process. A comparative analysis of case studies and an empirical analysis of logit regressions are performed. We also explore how CFIUS reviews may have an impact on corporations' future mergers and acquisitions decisions in a panel data model setting. The results show that both unfair treatment in CFIUS review and the deterrent effect of CFIUS interventions have contributed to the recent sharp decline in China's direct investment in the US.

CFIUS 2.0: An Instrument of American Economic Statecraft Targeting China

On 13 August 2018, the president of the United States signed a bill to strengthen the Committee on Foreign Investment in the United States (CFIUS), an interagency executive body responsible for screening foreign investments made in the United States for national security risks. The move is primarily aimed at preventing Chinese firms from exploiting the US open capital markets to acquire technology. While much commentary exists spelling out the changes made to CFIUS by way of the legislation, their focus is largely on the legal and business ramifications of the policy at the firm level. This analysis assesses what CFIUS strengthening portends for the tech ambitions, examines the Chinese state’s response to the move, and observes its relevance to US–China economic decoupling.

Governance implications of CFIUS reform for US investment funds with foreign investors

PurposeTo explain how corporate governance is likely to be affected by drastic changes to national security reviews by the Committee on Foreign Investment in the United States (CFIUS), especially for US funds with foreign investors.Design/methodology/approachThe article summarizes the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and then details the pilot program and how to qualify for exceptions.FindingsWhile many questions and considerations remain, including how FIRRMA will play out across various industries, we concluded that there will be an increase in CFIUS filings.Originality/valuePractical guidance from experienced national security and CFIUS lawyers.

Trade regimes as a tool for cyber policy

PurposeThis research develops a framework for assessing international trade regimes which could be used to address global cybersecurity challenges based on the corresponding costs of implementation and their distribution. Trade regimes, such as export controls, tariffs, investment restrictions and localization requirements, have disparate effects on foreign and domestic producers and consumers.Design/methodology/approachThese trade regimes and their effects are explored through a literature review and conceptual framework. A case study then assesses trends in the use of the Committee on Foreign Investment in the United States (CFIUS).FindingsCFIUS investment restrictions have justified blocking specific Chinese acquisitions of American companies, at least partially, on cybersecurity grounds using a targeted and evidence-based approach. Because of its targeted effect, CFIUS is the least likely of these trade regimes to block legitimate international trade. Restrictions on international trade, without sufficient cause, produce dead weight loss under the theory of comparative advantage.Originality/valueThese costs should be accounted for in any policy-based decision, particularly as policy entrepreneurs increasingly push for embedding cybersecurity reforms into these trade regimes. While the literature on trade regimes and cybersecurity is growing, this paper advances this research with its comparative framework.

A U.S. Perspective on China's External Economic Disputes in the Past 40 Years and in the Coming 40 Years

On the disputes over China’s trade imbalance, (1) they were marked by analytical confusion over the meaning of the term “equilibrium exchange rate”; (2) China’s trade imbalance reflects the economic conditions in both China and abroad, and that the efficient and fair solution of the problem requires policy changes not only by China but also by the US; (3) the dispute on exchange rate misalignment has been a diversion away from (a) addressing the underlying structural factors causing the trade imbalance, and (b) improving the inadequacy of US job transition programs that has exacerbated US unhappiness with trade imbalance. On the industrial policy dispute, (1) the issue of forced technology transfer is largely a dispute about a large economy using its market power to benefit itself at the expense of its trade partners; (2) this use of market power is normally temporary because of the almost inevitable retaliation by other large countries; (3) notion of national security that is commonly adopted in the US trade policy debate is overly broad and short-sighted, and, unless these two aspects are corrected, they will hurt the US economy and weaken US national security in the long-run; (4) the US must reform the CFIUS (Committee on Foreign Investment in the United States) process of reviewing foreign acquisition of US technology by (a) making the process more comprehensive (e.g. setting up foreign-owned R&D centers in US) and (b) making the process more operational by a defining a list of technologies for CFIUS to cover, a list that is constantly updated. On China’s Belt Road Initiative (BRI), (1) as the number of BRI project grows and as the number of partner countries increases, the number of economic disputes that China will be involved in will grow; (2) China should ensure that the BRI projects in a country are beneficial to the general population of that country and not just politically-biased toward the government in power at that time because, unlike in China, most governments in other countries come and go more frequently; and (3) economic disputes are a systemic feature of the present uncoordinated multi-polar world. Our principal policy suggestion to China is that, because China’s economy in 2018 is very different from that in 1978, there should be more reciprocity in China’s trade and investment relations with the advanced economies. China should not only give national treatment in the near future to foreign firms but should also set up a mechanism to start easing up on foreign acquisition of Chinese firms in a manner that is consistent with China’s national security concerns. Our principal policy suggestion to the US is to stop equating strategic competition with economic competition. Strategic competition is normally a zero-sum game while economic competition is usually a zero-sum game in the short-run, but generally creates a win-win outcome in the long-run. National economic dynamism and economic resilience emerge from international economic competition and not from sheltering domestic high-tech firms permanently.

Financial Protectionism, M&A Activity, and Shareholder Wealth

The Committee on Foreign Investment in the United States (CFIUS) added new frictions to the U.S. takeover market after the enactment of the Foreign Investment and National Security Act (FINSA). Foreign takeovers decline for U.S. firms more susceptible to these frictions after FINSA, including research intensive firms (by 56 percent) and those with greater ability to disrupt U.S. supply chains (by 36 percent). These firms lose 3.12 percent of their value over a three-day window surrounding nine events related to the passage of FINSA. Our findings suggest a tradeoff between national security and shareholder wealth.

Smart Machines and Smarter Policy: Foreign Investment Regulation, National Security, and Technology Transfer in the Age of Artificial Intelligence

The Foreign Risk Review Modernization Act, a bill introduced to Congress in 2017 that seeks to strengthen the Committee on Foreign Investment in the United States (CFIUS), has the potential to increase restrictions on Chinese companies investing in the U.S. artificial intelligence (AI) industry. Although the bill addresses legitimate national security concerns related to the military applications of AI, it also has the potential to negatively impact the U.S. AI industry and the U.S. economy as a whole. Currently, the combination of a Chinese government focused on strategic technology acquisitions, the open and diffuse nature of AI systems, the off-the-shelf nature of defense technology procurement, the integrated Chinese and U.S. AI industries, and the connection of Chinese tech companies to the Chinese Communist Party create a pipeline for technology transfer from U.S. companies to Chinese government entities. Given the vague nature of what constitutes a national security threat according to CFIUS, past high profile CFIUS action against Chinese companies investing in the U.S. technology sector and an emerging bipartisan consensus that CFIUS needs to be strengthened, there is a strong potential for new foreign investment restrictions. Restricting Chinese investment in the U.S. AI industry, however, may be counterproductive, because it may negatively impact U.S. economic competitiveness by reducing the venture capital pool for AI, potentially driving away top talent and causing AI research and development centers to relocate elsewhere. Instead of increasing restrictions, a smarter policy would be to continue utilizing CFIUS risk mitigation measures in a non-discriminatory manner, while increasing government funding for AI research and development and increasing visas for science and technology graduate students who are foreign nationals.

Investing near the National Security Black Hole

Multinational corporations dominate the global economy. Their aggressive business expansion has led to occasional conflicts with some sovereign governments’ core interests. The most irreconcilable one is probably between foreign direct investments by multinationals and the need of sovereign states to safeguard their national security. This article empirically explores the tension in its most manifested case, i.e. the reactions of China-based multinationals to the highly confidential national security review system of the United States, also known as the Committee on Foreign Investment in the United States (CFIUS) review. I find that, contrary to conventional wisdom, most Chinese investors know little about CFIUS and are content to remain ignorant. The majority of those who have some knowledge about it consider the process politicized and non-transparent. A minority reported to have abandoned contemplated investments in the United States due to concerns with CFIUS. Variations in the perception and the reactions of the China-based multinationals generally turn on their government ownership, sectoral sensitivity, and investment size. In addition, the recent landmark decision in Ralls v. CFIUS has a profound impact on the investors’ perception of the system, but has not altered their filing behavior. The findings make several important theoretical and policy contributions.

Institutionalizing neoliberalism: CFIUS and the governance of inward foreign direct investment in the United States since 1975

ABSTRACTThe United States has been one of the world's premier destinations for inward foreign direct investment (IFDI) since the 1970s, yet research remains limited on the origins of the domestic institutions that govern IFDI flows. This article focuses on the Committee on Foreign Investment in the United States (CFIUS), an executive body created in 1975 ostensibly to stand sentry on the US's ‘open’ investment door. Previous accounts have explained CFIUS's origins in terms of an inter-branch conflict between an ‘internationalist’ Executive and a ‘protectionist’ Congress, but these accounts are far from comprehensive. Based on new archival evidence as well as a broad review of congressional-hearing transcripts, government reports and trade publications, this article finds that existing analyses underestimate the influence of internationally oriented segments of capital, overlook the emergence of key conflicts within the Executive and disregard the specific economic ideas that motivated policy-makers to establish CFIUS and later reform it. These findings buttress the article's conclusion that CFIUS represents not merely a generic case of inter-branch conflict, but a concrete case of neoliberal state-building.