Donald Trump’s first foreign direct investment (FDI) policy since returning to office promises to ease investment hurdles for companies from allied nations, while further tightening the screws on Chinese investment and seeking to expand national security screening to cover greenfield projects: “economic security is national security”, the document reads, with specific reference to China.
The America First Investment Policy, which the White House issued on February 21 and confirms the country’s open investment policy first formalised by President Reagan in 1983, creates a strict dichotomy between the tough treatment of China and other foreign adversaries that engage in “predatory investment” practices, and friendly nations which will benefit from a more open, streamlined approach to FDI into the US.
“Our nation is committed to maintaining the strong, open investment environment that benefits our economy and our people, while enhancing our ability to protect the US from new and evolving threats that can accompany foreign investment,” states Mr Trump in the document.
One big change floated by the White House’s new policy is extending the Committee on Foreign Investment in the United States’ (Cfius) remit to include greenfield investments. With the exception of real-estate acquisitions, which were added to the watchdog’s jurisdiction in 2018, greenfield FDI has largely escaped national security review.
That could now change with the Trump administration seeking a consultation with Congress to strengthen Cfius’s authority over these investment projects.
Friendly treatment for friendly countries
The policy also promises to cut FDI hurdles regarding critical assets and technologies for investors from friendly and allied countries. Specifically, the policy states that investment restrictions will ease in proportion with the company’s distance from China and other foreign adversaries, making clear that Chinese-backed investors from other countries will not be able to benefit.
This easing of restrictions includes a new “fast-track process” for allies and other countries partnering with the US on advanced technologies and “other important areas”, and expedited environmental reviews for $1bn-plus investments. The policy also promises greater administrative resources to facilitate “investments from key partner countries”, which will become available thanks to less time and effort being spent on so-called “mitigation agreements” which aim to derisk investment from adversary countries.
The explicit support for allied countries comes as Mr Trump seeks to salvage a minority investment by Nippon Steel — from long-term ally Japan — into US Steel, after Joe Biden vetoed an outright acquisition on national security grounds.
Hardline stance on China
By contrast, investors from China and other foreign adversaries — defined to include Cuba, Iran, North Korea, Venezuela and Russia — have been put on notice for four years of tough FDI treatment.
The policy accuses some in this group of “systematically” investing in the US to obtain “cutting-edge technologies, intellectual property, and leverage in strategic industries”. It singles China out for “targeting the crown jewels” of US assets and pledges to prevent Beijing from taking over the country’s critical infrastructure.
Without providing details, the policy makes explicit that Cfius’s longstanding scrutiny of Chinese investment on national security grounds will step up a notch.
The government also promises to tighten the government’s new grip on US investments that boost dual-use Chinese technologies. Just weeks after the Outbound Investment Security Programme took effect on January 2, Mr Trump is reviewing whether the first-of-its-kind screening regime is sufficient to address national security threats and if the current sector coverage — artificial intelligence, semiconductors and quantum computing — should be extended to also include biotechnology, hypersonics, aerospace and advanced manufacturing.
“The US will … use all necessary legal instruments to further deter US persons from investing in the PRC’s military-industrial sector,” it states.
The policy has resonated with China hawks both within and outside the government, while the policy’s distinction between friendly and adversary countries is drawing early praise from the country’s FDI and national security community. The president’s action “is a decisive step toward protecting US interests and fostering a collaborative environment where the US and its allies can thrive”, wrote Global Business Alliance president and CEO Jonathan Samford on LinkedIn.
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