Connecting National Security to Economic Security

Today on TAP: President Biden toughens America’s stance toward China’s designs on U.S. technologies.

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President Biden, in keeping with his administration’s moves toward a more proactive industrial policy and his resistance to China’s predatory trade moves, has issued an order dramatically expanding transactions that are to be blocked by the interagency Committee on Foreign Investment in the U.S. (CFIUS). Biden’s new order directs CFIUS to block proposed transactions that would give a foreign power access to critical cutting-edge technologies.

Biden’s order specifically flags as criteria for CFIUS action transactions that could affect the resilience of critical supply chains; ones that affect national security or technology; and cybersecurity or personal privacy risks.

The order explicitly mentions “microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, and climate adaptation technologies,” according to a summary released by the White House. Though the order discreetly does not mention China by name, these just happen to be priority areas under the Made in China 2025 initiative launched in 2015 by President Xi Jinping.

More from Robert Kuttner

In unveiling the order, a White House briefer took pains to point out that the U.S. generally welcomes foreign investment, but not from countries that take advantage of America’s open investment system for their own national-security priorities in ways that are harmful to our national interest and values. This also means … guess who.

Biden’s order is the first major toughening of CFIUS by presidential directive since the committee was created in 1975 during the Ford administration. In the past, CFIUS has blocked mainly foreign purchases of entire corporations, usually when they involved technologies with explicit military or intelligence uses.

This order defines strategic technologies much more broadly in terms of America’s economic well-being. And it covers partial foreign investments in American companies as well as controlling interest, aimed at Chinese venture capital investments in the tech sector.

As a shift away from the long-standing premise that market forces should determine trade and capital flows, the Biden order is a breathtaking reversal. Then again, Chinese trade and investments are anything but a reflection of market forces. It took the Biden administration to acknowledge that reality (which was hidden in plain view) and act accordingly.

Economic nationalism is one of those phrases that gets tossed around by the usual suspects, as an epithet. It’s clear that there is indeed such a thing as the national economic interest—and if we don’t define it, our adversaries will.

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