WASHINGTON — A bipartisan measure that would require screening of U.S. private investments in high-tech enterprises in China, Iran, North Korea and Russia may not be included in Congress’ annual defense policy legislation.
The Senate approved the so-called “outbound investment” amendment, 91-6, in its version of the National Defense Authorization Act in July, with proponents arguing it was needed to keep adversaries around the globe from gaining access to sensitive technologies funded by U.S. dollars.
But Pennsylvania Sen. Bob Casey, one of its original sponsors, is concerned House GOP members are blocking the measure from reaching the final text of the defense legislation, known as NDAA.
Lawmakers from both chambers have been working to reconcile the House and Senate defense bills. A final compromise legislation is expected to be unveiled as early as this week.
“House Republicans have talked a big game on China, but House leadership — Speaker (Mike) Johnson and Financial Services Chairman (Patrick) McHenry — are stopping our bill from being passed at the eleventh hour,” Casey, a Democrat, said in a statement Friday to States Newsroom.
“Instead of holding the Chinese government accountable, they’ve chosen to help President Xi Jinping against the interests of the American people.”
Republican Sen. John Cornyn of Texas sponsored the legislation alongside Casey.
Upon passage of the bill, Cornyn warned that “(w)hen American companies invest in technology like semiconductors or AI in countries like China and Russia, their capital, intellectual property, and innovation can fall into the wrong hands and be weaponized against us.”
“This bill would increase the visibility of these investments, which will help the U.S. gather the information needed to better evaluate our national security vulnerabilities, confront threats from our adversaries, and remain competitive on the global stage,” he said in July.
Johnson and McHenry’s offices did not respond to requests for comment.
Notification required
The Casey-Cornyn amendment would require U.S. corporations and other entities to notify the secretary of the Treasury prior to deals involving artificial intelligence, advanced semiconductors, satellite communications and quantum computing.
However, McHenry, chair of the House Committee on Financial Services, warned in a late November letter to negotiators that the measure, Section 1085 of the Senate-passed NDAA version, “would create a new bureaucracy to regulate Americans’ investments abroad, including in China.”
“While we appreciate the intentions and objectives of Section 1085, the result of this provision would be to strengthen rather than weaken the objectives of Xi Jinping and the Chinese Communist Party,” wrote McHenry, a North Carolina Republican.
McHenry argued that the advantage of outbound investment is having Americans at the table in the “world’s most opaque major economy.”
The letter was co-signed by Republicans Andy Barr of Kentucky and Warren Davidson of Ohio, Ann Wagner and Blaine Luetkemeyer of Missouri, French Hill of Arkansas, and Bill Huizenga of Michigan, all chairs of House Financial Services subcommittees.
McHenry and co-signers maintain that there’s “a misconception that U.S. investors are fueling China’s economic growth,” citing a 10-year low of U.S. venture capital investment in China concluded in an August analysis from the economic research firm Rhodium Group.
No reviews of investments overseas
Unlike the monitoring of some foreign investment that comes into the United States, no federal law exists to screen the dollars American companies are investing outside the nation.
The Biden administration in August issued an executive order to require U.S. investors to notify the government about deals in China, Hong Kong and Macao in advanced technologies, including semiconductors, quantum computing and artificial intelligence. The order also prohibits some transactions involving sensitive technologies.
The executive order, which is not law, establishes a narrower geographic area than the Casey-Cornyn amendment, but it does include certain prohibitions.
U.S. outbound investment totaled $6.58 trillion at the end of 2022, according to the U.S. Bureau of Economic Analysis.
Most was concentrated in the United Kingdom, the Netherlands, Luxembourg, Ireland and Canada. Just over $1 trillion landed in Latin America and the Western Hemisphere, while roughly $951 million went to Asia and the Pacific. The Middle East and Africa were near the bottom of the list with just over $80 million and $46 million respectively.
Another legislative option?
The House Committee on Foreign Affairs marked up a similar bill in November that would require U.S. investors to notify U.S. officials of advanced tech deals, adding hypersonics to the list of covered sectors.
Like the White House executive order, the bill would also prohibit certain transactions, going further than the Casey-Cornyn amendment.
Countries of concern listed in the legislation include China, Iran, North Korea and Russia.
“Building upon efforts of Senators Cornyn and Casey added to the FY 24 National Defense Authorization Act, this bill will help ensure there are vital restrictions and enhanced transparency on outbound investment to safeguard America. The U.S. investment of today should not fund the Chinese Communist Party hypersonic program of today or tomorrow,” House Foreign Affairs Committee Chair Michael McCaul, a Texas Republican, and ranking member Gregory Meeks of New York said in a joint statement Nov. 13.
Committee members hope that the bill will be considered by House GOP leadership during the first quarter of 2024, according to a majority staffer for the House Foreign Affairs Committee.
Defense policy bill
The NDAA is the annual defense policy bill that continues defense policies, nuclear weapons programs and authorizes defense-related spending.
Lawmakers often use the massive bill as a vehicle for various policy matters because Congress consistently enacts the legislation each year.
The House version, which would authorize $874.2 billion and contains language targeting abortion access, transgender health and racial equity, passed the lower chamber in July in a 219-210 vote.
The upper chamber approved its version, which would authorize $876.8 billion, in August in a 86-11 vote.
The legislation does not appropriate, or give, money for the Department of Defense and other relevant federal agencies. Rather, the bill authorizes how the funds should be spent.
The 2023 NDAA authorized $847.3 billion.
