U.S. President Donald Trump said on Wednesday he will use a strengthened national security review panel process to deal with potential threats from Chinese acquisition of American technologies, instead of imposing China-specific restrictions.
The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control transactions. The legislation expands the scope of deals reviewed by the interagency panel to address security concerns, Trump said.
The decision marks a somewhat softer approach to curbing Chinese investments pushed by Treasury Secretary Steven Mnuchin, while other senior Trump advisers had argued for harsher, China-specific curbs invoking an emergency economic powers.
The investment restrictions are part of the administration’s efforts to pressure Beijing into making major changes to its trade, technology transfer and industrial subsidy policies after U.S. complaints that China has unfairly acquired American intellectual property through joint venture requirements, unfair licensing and strategic acquisitions of U.S. tech firms.
“I have concluded that such (CFIUS) legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said in a statement that did not specifically name China.
U.S. stocks traded higher on Wednesday morning after Trump announced the new approach to U.S. investment restrictions.
Trump added that upon final passage of the legislation, the Foreign Investment Risk Review Modernization Act, he will direct his administration “to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies.”
If Congress fails to pass the legislation quickly, Trump said, he would direct the administration to implement new restrictions under executive authority that could be applied globally.
MNUCHIN WINS A ROUND
The decision marks a victory for Mnuchin in a fierce internal debate within the Trump administration over the scope of China investment restrictions, in which he had clashed earlier this week with White House trade and manufacturing adviser Peter Navarro.
Mnuchin had favored a more measured approach using authority approved by Congress, while Navarro, the administration’s harshest China critic, had said that investment restrictions would be China-specific.
“We are not, on a wholesale basis, discriminating against China as part of a negotiation,” Mnuchin said on CNBC on Wednesday.
U.S. tariffs on an initial $34 billion in Chinese goods are still scheduled to take effect on July 6.
Mnuchin said on CNBC that Trump wants to hear differing views on important issues, but the administration’s economic team typically comes together on major recommendations such as the investment restrictions.
Mnuchin said the new CFIUS legislation, passed 400-2 in the House of Representatives on Tuesday, would broaden the types of transactions that could be reviewed by the panel on national security grounds, including minority stakes, joint ventures and property purchases near U.S. military bases.
“This isn’t a question about being weak or strong, this is about protecting technology. We have the right tools under this legislation to protect technology,” Mnuchin said.
Trump also said that he has directed Commerce Secretary Wilbur Ross to examine U.S. export controls and recommend modifications that may be needed “to defend our national security and technological leadership.”