WITA Panelists Analyze Select Committee Talk of Investment Controls
Members of Congress need to be mindful of what their proposals to regulate outbound investment might mean for U.S. businesses, one of the experts on a Washington International Trade Association webinar cautioned.
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The panel, held May 19 in response to the House Select Committee on the Chinese Communist Party's hearing earlier in the week (see 2305180060), addressed a proposal by Rep. Andy Barr, R-Ky., to harmonize various U.S. sanctions lists and forbid investment in those companies.
Clete Willems, a partner at Akin Gump and former Trump administration White House official working on trade with China, said that as Barr's proposal was discussed, something was overlooked. "I think the debate on Wednesday night didn’t really highlight enough just how dramatic the impact of those impacts would be," he said.
He noted that if the Treasury Department were to harmonize its military companies list -- known as the Non-Specially Designated Nationals Chinese Military-Industrial Complex Companies List (NS-CMIC List) -- with its SDN List, that wouldn't just restrict investment, that would prohibit all business with those companies. It would cover major energy companies and telecoms, and as a result, Willems said, "I think you’d actually find it very hard for American companies to operate in China."
Willems said there's a need to upgrade Treasury's NS-CMIC List because it only applies to publicly traded securities, and he said U.S. investors should not be able to provide them debt, or engage as private equity investors. Technology security experts have made similar recommendations (see 2302030023).
Although expanding that list to private equity is a good step, he said expanding it further to also include sanctioned parties on Treasury's SDN List would "totally disrupt supply chains."
Willems said that while the select committee is having substantive discussions on how to manage the U.S.-China economic relationship, he wonders "are those legislative recommendations going to be balanced? Are they going to represent a comprehensive approach to China, or are they going to be one-sided?"
Peter Harrell, a former Biden administration official, said Europe and other allies are converging with the U.S. on the kind of economic risks we're facing from China, as can be seen in its new anti-subsidy instrument. Still, he said, "other countries remain much more wary of tariffs." He said there's more convergence on investment restrictions and export controls.