Fri, Jul 13, 2018 - Page 8 News List

Taiwan’s investment wake-up call

By Eric Chiou 邱奕宏

Last month, the US House of Representatives passed the Foreign Investment Risk Review Modernization Act with an overwhelming 400-2 majority, revealing strong bipartisan support among lawmakers determined to take concrete actions to defend against creeping encroachment of foreign capital on US democracy.

With strong support from the administration of US President Donald Trump, the act is expected to be reconciled with the US Senate version and passed by the US Congress next month.

The act not only symbolizes a critical milestone in US foreign-investment policy, but also implies Washington’s determination to substantially update and improve its defense mechanism to firmly protect its national security from the silent aggression of foreign governments under the guise of foreign investment.

Essentially, the significance of the act lies in its vigorous commitment to expand the authority bestowed on the Committee on Foreign Investment in the US — a Cabinet-level interagency entity responsible for reviewing foreign investments in the US in terms of national security — and to substantially reinforce the nation’s ability to safeguard its security from potential hazards caused by sophisticated and clandestine operations of malignant foreign investments.

From the perspective of US foreign-investment policy, it is not difficult to comprehend the rationale behind this new legislative initiative. Historically, significant refinements or reform of US foreign-investment policy have been largely driven by two elements: a massive shift in the US strategic-security environment and high-profile foreign-investment controversies.

This time is not an exception. The political momentum to improve the US’ ability to supervise merger and acquisitions of US companies by foreign entities (company or state) has been gradually accumulated for years, mostly due to the rapid surge of Chinese investment over the past decade.

In particular, Chinese outward investments with primary interest in purchasing high-tech US firms, as well as their enigmatic relationships with the Chinese Communist Party, have prompted US security concerns and drawn enormous political attention.

Moreover, intensified strategic tensions between the US and China in the South China Sea, as well as deteriorating trade negotiations between Washington and Beijing, have further aggravated the bilateral relationship, which has led to foreign investment becoming another arena of strategic confrontation between the two nations.

Last year, Trump blocked a Chinese company’s attempt to purchase an Oregon-based semiconductor company, Lattice Semiconductor. In May, he obstructed a Singaporean company, Broadcom, from acquiring a California-based telecommunications equipment company, Qualcomm.

The decisions were recommended by the foreign investment committee on grounds that they might impair national security, which showed that Washington has become more wary of foreign purchases of sensitive technologies.

Among all political factors triggering national security concerns, primary risks of foreign investment are mainly derived from two sources. The first is political relations between nations looking to make foreign direct investments and the host state. The second is whether the targets of foreign investment trigger any security concerns, such as in the case of defense-related industries, high-tech firms, critical infrastructure or national assets.

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