In the history books it is likely that 2018 will be seen
as the year that US President Donald Trump put his quest to
prevent immigration between Mexico and the US into fifth gear.
His mission to build a wall stretching the entire southern land
border of the US sparked the longest government shutdown in US
history. Until he caved – temporarily – then
declared a national emergency.
Not content with one battle, late last year Trump was also
busy fighting another front with Chinese authorities in the
form of a bitter tariff war. The ongoing dispute has the
potential to send millions of hardworking Americans into
destitution if left to ferment much further. It is no
exaggeration to say that the US-China tariff war is costing the
US economy billions.
But it is not only tariffs stopping the US from doing
business with China. New regulations imposed by the section of
the Foreign Investment Risk Review Modernisation Act (Firrma),
which beef up how the Committee on Foreign Investment in the
United States (Cfius) looks at inbound acquisitions, have
greatly impacted the volume of Chinese investment in the US,
especially in the technology sector.
The statistics back up the theory. Chinese investment in the
US took a swan dive last year, and it isn't the case that
investors are no longer interested. They appear acutely aware
that these new provisions won't allow them to buy anything
Cfius considers even remotely sensitive, which under Firrma is
basically everything they could possibly want.
Meanwhile, Chinese investment into the EU tech sector grew
over the same period, ipso facto at the expense of the US.
It is fair to say the anxieties of the US government are
legitimate. In the age of modern warfare, the scope and
increasing sophistication of the Chinese economy –
particularly in the tech space – is genuinely
concerning for US policymakers, so taking measures to protect
national security by closing back doors is surely sensible. But
when parts of the country begin to suffer, and inward
investment decreases as a result, perhaps it is time to take a
step back and look at the bigger picture.
Rather than introduce policies that throttle Chinese
investment by putting out a closed-shop mentality, shouldn't
the new Cfius regulations be a little more constructive? It is
possible to take measures to protect technology, or data, or
whatever it is that the US is so terrified that the Chinese
will take, while also ensuring that national security remains
In early February, this conversation took another turn as
the US government outright banned all American firms from
selling pretty much anything to the Chinese telecoms technology
company ZTE for seven years. The impact that this may have on
ZTE itself is obvious – it's potentially ruinous
– but on the flip side, the volume of sales that will
now be lost from US firms unable to sell to the company are
also enormous. US semiconductor company Qualcomm, for example,
itself already directly impacted by Cfius in 2018, will take a
major hit as the main provider of chips to ZTE. It may be
forced to downsize to compensate.
Protecting national security is important, but so is the
domestic workforce, and one should not have to come at the
expense of the other. Future administrations, Democrat or
otherwise, should be open to re-examining recent changes to
Cfius and tariff wars to ensure that stifling Sino-US relations
isn't damaging the very thing it is meant to be protecting.