ECONOMIC STATECRAFT INITIATIVE
ISSUE BRIEF
Launched in 2020, the Atlantic Council’s GeoEconomics Center has become the go-to place at the intersection of economics, finance, and foreign policy. The Center bridges the divide between these oft-siloed sectors and helps shape a better global economic future for the US and its allies. The Center is organized around three pillars: 1) The Future of Capitalism; 2) The Future of Money; and 3) The Economic Statecraft Initiative. Housed within the GeoEconomics Center, the Economic Statecraft Initiative (ESI) sheds light on what are becoming first-line tools of American power—sanctions, export controls, investment screening, and trade. We leverage deep government experience, regulatory expertise, and proprietary data to produce widely-read analysis and expert briefings. Our team liaises closely with the US administration and foreign counterparts. The Energy, Economics, and Security Program at the Center for a New American Security explores the changing global marketplace and implications for U.S. national security and foreign policy. The program develops innovative, pragmatic, and bipartisan recommendations for economic security policy.
Sand in the Silicon:
Designing an Outbound Investment Controls Mechanism SEPTEMBER 2022
SARAH BAUERLE DANZMAN and EMILY KILCREASE
I. Introduction Recent congressional efforts to establish new authorities to regulate outbound investment have revived a long-simmering debate in Washington about the economic and security risks associated with US investment in China.1 While the major proposals for regulating outbound investments were ultimately dropped from the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, the conversation in Washington is far from over.2 The stakes for rethinking the investment relationship between the United States and China are high.3 China is the world’s second-largest economy and
1
“Casey, Cornyn, DeLauro, Pascrell, McCaul, Fitzpatrick, Spartz Statement on National Critical Capabilities Committee Proposal,” Office of US Senator Bob Casey, press release, June 13, 2022, https://www.casey.senate.gov/news/releases/casey-cornyn-delauro-pascrell-mccaulfitzpatrick-spartz-statement-on-national-critical-capabilities-committee-proposal; “Chair DeLauro Applauds Trade Provisions in the America COMPETES Act of 2022,” Office of US Representative Rosa DeLauro, press release, January 27, 2022, https://delauro.house.gov/media-center/pressreleases/chair-delauro-applauds-trade-provisions-america-competes-act-2022; “Section 4: U.S.-China Financial Connectivity and Risks to U.S. National Security,” US-China Economic and Security Review Commission, November 2021, https://www.uscc.gov/sites/default/files/2021-11/ Chapter_2_Section_4--U.S-China_Financial_Connectivity_and_Risks_to_U.S._National_Security. pdf; Inu Manak, “Outbound Investment Screening Would Be a Mistake,” Council on Foreign Relations, June 30, 2022, https://www.cfr.org/article/outbound-investment-screening-would-bemistake; CFIUS Reform: Examining The Essential Elements: Hearing Before The Committee on Banking, Housing, and Urban Affairs United States Senate, One Hundred Fifteenth Congress (2018); Ellen Nakashima, “White House Wants Transparency on American Investment in China,” Washington Post, July 13, 2022, https://www.washingtonpost.com/national-security/2022/07/13/ china-investment-transparency; “U.S. Investment in China’s Capital Markets and Military-Industrial Complex,” US-China Economic and Security Review Commission, March 19, 2021.
2
H.R. 4346 – 117th Congress (2021–2022): “An Act Making Appropriations for Legislative Branch for the Fiscal Year Ending September 30, 2022, and for Other Purposes,” Senate Amendment to House Amendment to Senate Amendment. (July 27, 2022), https://science.house.gov/imo/media/ doc/the_chips_and_science_act.pdf.
3
Thilo Hanemann, et al., An Outbound Investment Screening Regime for the United States? Rhodium Group, January 2022, https://rhg.com/wp-content/uploads/2022/01/RHG_TWS_2022_ US-Outbound-Investment.pdf.