U.S. Department of Treasury aiming to plug and strengthen CFIUS law

The strategic move by the Trump Administration is aimed at rationalizing the treatment of business investment in the United States.

As per a senior Treasury official, the U.S. Department of the Treasury is weighing options to restrict investments by Chinese companies in the U.S. by invoking an emergency law and bring forward more security reviews during corporate acquisitions.

Heath Tarbert, the Assistant Secretary for International Markets and Investment told the Institute of International Finance Forum, as part of a series of remedies for “Section 301” related to intellectual property rights, the Trump administration is looking to include China-specific restrictions on investments.

This is part of a broader efforts to modernize security reviews by the Committee on Foreign Investment in the United States and use the International Emergency Economic Powers Act, said Tarbert.

“We have separate offices in Treasury which are considering those two issues distinctly,” said Tarbert.

He went on to add, the Treasury office that manages CFIUS is separate from the office working on China investment restrictions.

These restrictions are part of an effort to push China to lift its coercive restrictions on foreign companies which operate on its soild either directly or through joint ventures which are forced to transfer their proprietary technology to Chinese firms, a policy the U.S. administration deems unfair especially since the United States has no such restrictions on Chinese firms.

In what is likely to be a reaction to these steps, on Tuesday, China said it would end the 50% limit on foreign ownership on the automobile sector by 2022.

Tarbert also mentioned that the Treasury was committed to working with the U.S. Congress to pass the CFIUS legislation, known as the Foreign Investment Risk Review Modernization Act (FIRRMA).

“We think CFIUS modernization is something that needs to be done via statute and should be done in a thoughtful way,” said Tarbert.

As per a congressional aide, it may be possible to accelerate parts of the CFIUS reform bill through an executive order which fills the gap until the legislation is passed by Congress later this year.

As per White House trade adviser Clete Willems, the legislation aims to achieve a “balanced approach” that would plug the existing loopholes in the current CFIUS law while maintaining an “open investment climate” in the United States.

Further, the upcoming legislation will also have to ensure that it does not overlap with U.S. export controls aimed at prohibiting the export of restricted technologies,

“We also view export controls as the right measure to deal with tech transfer,” said Tarbert.

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Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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