National Security Adviser Explains Delay on Outbound Investment Rules
National Security Adviser Jake Sullivan said the length of time the White House has been considering a set of outbound investment regulations without releasing a plan isn't "because we're lazy, or we're not doing the work," but because it's difficult to find a solution "that is sustainable and effective."
"We’re trying to draw the line in a place that really does address national security," he said, "but also addresses the fact that there is massive bleeding of core [Chinese] commercial activity into the national security realm."
Sullivan, who was speaking at the Brookings Institution in Washington on April 27, was asked by the moderator whether the U.S. wants to avoid Chinese foreign direct investment, given the strong ties between Chinese companies and the country's government.
"You put your finger on what is a difficult conundrum," Sullivan replied. "We do have an issue, which is that the [People's Republic of China] has a series of policies that link its major industrial champions to its national security enterprise in ways that harm America’s national security."
He said the administration is grappling with the same question as they consider limits on outbound investments. When asked when the restrictions might be made public, he said: "We'll see."
Sullivan argued that the export controls that the Biden administration has issued so far have been "carefully tailored restrictions," hewing to the philosophy of "a small yard and a high fence" being the right approach to national security interventions into the market.
He said these moves have been "premised on straightforward national security concerns," and allies have followed suit. "Our export controls will remain focused on technologies that could tilt the military balance," he added. "We are not cutting off trade."
Sullivan was asked by an audience member how the U.S. convinces other countries to cut off sales of technology goods to China, when those countries' firms may have a larger portion of their sales in China than do U.S. competitors.
Sullivan said the U.S. talks with European, Korean and Japanese partners about these issues and frames it as burden sharing, in the same way that NATO asks its participating countries to dedicate a certain percentage of GDP to defense.
"Taking some economic hit to protect your national security is harder to quantify," he said, but said there's enough trust between President Joe Biden and the leaders of these allied countries that makes them "able to have that conversation in a way that produces good outcomes. We have proven this in semiconductors."
Sullivan added that this work to coordinate with allies tends to reinforce the administration's desire to draw the line on export controls with specificity and rigor so that only what is truly a national security threat is restricted. "That conversation has its own kind of way of placing some brakes on rushing forward on expanding the yard so broadly so it swallows the entire field," he said.