President Biden has a powerful weapon with which he can defend against Beijing’s attempts to overpower Washington: the Committee on Foreign Investment in the U.S., an interagency panel that reviews the national security implications of foreign investment in American companies. Though Cfius, as the body is known, has been mostly quiet since its creation in 1975, a Trump administration overhaul gave the committee the authority and resources it needs to protect from theft and compromise U.S. innovation and infrastructure. Foreign investment in American businesses can allow a backer access to or influence over highly valuable intellectual property, sensitive data or key infrastructure. But will the new administration use Cfius to its full potential?
In 2018 Congress passed and President Trump signed the Foreign Investment Risk Review Modernization Act, or Firrma, to modernize the committee and expand its jurisdiction. Perhaps the most bipartisan major legislation of the last decade, Firrma found overwhelming support because America’s technological and military advantages have been instrumental in protecting our interests. A threat to those advantages is a threat to the whole country.
The revamped Cfius did much to shield the U.S. from this risk even in the few years after Firrma was passed. Between the new law’s enactment and January 2021, the committee reviewed more than $400 billion in cross-border business deals. In 2020 alone Cfius reviewed more transactions than any year since 2005. Cfius considered five times as many transactions in 2019 as in 2009, and Mr. Trump prohibited more committee-reviewed transactions based on national security risks than all previous presidents combined. Under the law that created Cfius, the president alone has the authority to stop a cross-border deal.
as Cfius’s chairman, led the effective implementation of Firrma. As it wrote carefully tailored regulations to guide investors, Treasury engaged with nearly 60 foreign allies on the importance of screening investments for national-security risks and urged roughly four dozen nations to maintain security amid the pandemic. Through the implementation of the new legislation and the improvement of internal business processes, the committee cut clearance times dramatically despite the record case numbers. Treasury also established a dedicated enforcement team to look for investment deals that haven’t been reviewed, particularly venture-capital investments that could pose national-security risk.
While many critical questions remain, the Biden administration has taken some steps that signal a willingness to combat the Chinese government’s machinations. The White House is organizing allies in unified opposition to Beijing. The administration issued a joint statement with Japan highlighting the threat Beijing poses to the international order and convened a virtual summit with the Quad nations—Australia and India plus the U.S. and Japan—to promote stability in the Indo-Pacific region. Mr. Biden’s Commerce Department issued subpoenas to Chinese companies over national security concerns, and the State Department imposed sanctions on 24 Chinese officials for undermining Hong Kong’s autonomy in March. The U.S. Navy has sailed ships through the Taiwan Straits several times since Mr. Biden took office.
Still, without the effective use of Cfius, America and its allies opposing Beijing will remain vulnerable. Rapidly developing technologies in fields like machine learning, quantum computing, autonomous vehicles, robotics and biotech will dramatically affect our way of life. The U.S. must maintain leadership in innovation and infrastructure, while clearing foreign capital to fund the next generation of industry-leading companies. The Trump administration handed Mr. Biden a powerful tool to do so. The world is watching to see how he uses it.
Mr. Feddo served as assistant Treasury secretary for investment security, 2019-21. He is founder of Rubicon Advisors LLC.
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Appeared in the April 23, 2021, print edition as ‘Will Biden Use Every Tool Against Beijing?.’
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