US President Donald Trump on Aug. 13 signed the US National Defense Authorization Act for fiscal year 2019. The majority of Taiwanese media have focused on clauses within the act that provide for an increase in military cooperation and exchanges between Taiwan and the US.
However, an aspect that has been overlooked by many observers is the Foreign Investment Risk Review Modernization Act (FIRRMA), which introduces a major reform to the investment environment in the US.
FIRRMA won cross-party support in the US and was also signed into law by Trump on Aug. 13.
While the act seeks to uphold freedom of investment for foreign entities investing in the US, it recalibrates the regulations toward upholding national security. The impetus behind this significant change mainly derives from widening concerns in Washington over Chinese investment in the US.
The act ushers in a raft of changes to the way in which national security checks on foreign investments into the US economy are carried out and it offers several insights that could be applied to how Taiwan conducts its own reviews of foreign investments.
First, FIRRMA greatly increases the remit of the Committee on Foreign Investment in the US (CFIUS) to perform checks when national security concerns are triggered by suspect real-estate transactions, minority shareholdings or secretive investment funds.
Second, any foreign investment that relates to any use, development, merger and acquisition, maintenance, management or operation involving critical technology, critical infrastructure or sensitive personal data must now be subject to a foreign investment national security investigation.
Third, FIRRMA strengthens the role of US national intelligence agencies within CFIUS. In the past, CFIUS was guided by the US Department of the Treasury, whose main consideration was maintaining investment freedom. FIRRMA requires the directors of US intelligence agencies to submit an analysis report on any investment transactions with the potential to create a national security threat.
They must also present the view of the intelligence community on cases under review by the committee in order to facilitate more informed discussion by the committee. It is a measure explicitly designed to place national security considerations at the forefront of the decisionmaking process.
Additionally, during the act’s review by the US Congress, the stated sense of Congress was that “it is the policy of the United States to enthusiastically welcome and support foreign investment, consistent with national security considerations” and that investigations by CFIUS should look at the national security aspect of transactions that could allow “countries of special concern” to obtain key strategic US technology.
This is undoubtedly a veiled reference to Beijing’s “Made in China 2025” policy, which aims to use Chinese investment funds to acquire elements of the US’ high-tech industry.
The act requires CFIUS to issue a biannual Report on Chinese Investment to Congress from the time the act takes effect through 2026. The report is to include information on Chinese businesses investing in the US economy and US businesses investing in China, as well as an analysis of the methods used by Chinese businesses investing in the US.
This means that the US Congress is deliberately applying pressure on US government departments to toughen up their supervision of the activities of Chinese businesses and investors. It is a clear demonstration of the extent to which Congress is concerned about the security threat posed by such actors.
It is worthwhile contrasting the US’ rigorous and single-minded approach toward tackling the security threat from foreign investments with the situation in Taiwan.
The Ministry of Finance’s Investment Commission is actually an interdepartmental commission primarily geared toward dealing with investments by overseas Chinese, technological cooperation and Taiwanese outward investment.
The commission is not a single government department specifically responsible for assessing the national security threat of foreign investment into Taiwan.
Over the past few years, there has been an endless stream of Taiwanese technical personnel passing secrets to China, in addition to Chinese businesses employing covert and circuitous means to infiltrate Taiwanese industry.
The government should seek to emulate the US system for conducting national security checks on inward investment.
There needs to be a complete overhaul of the national security threat assessment model used by the government to evaluate foreign investments by Taiwanese businesses, as well as investment into Taiwan by foreign organizations. Taiwan must create a free, investment-friendly environment that is focused on upholding national security.
It is only when national security threats are taken care of within the wider structure of a free, investment-friendly environment that the US and the governments of other democratic nations will feel confident to invest in Taiwan, and use the nation as a primary location and trusted partner for advanced technology transfers, research and development, and manufacturing.
Eric Chiou is an associate professor of international political economy at National Chiao Tung University.
Translated by Edward Jones
What began on Feb. 28 as a military campaign against Iran quickly became the largest energy-supply disruption in modern times. Unlike the oil crises of the 1970s, which stemmed from producer-led embargoes, US President Donald Trump is the first leader in modern history to trigger a cascading global energy crisis through direct military action. In the process, Trump has also laid bare Taiwan’s strategic and economic fragilities, offering Beijing a real-time tutorial in how to exploit them. Repairing the damage to Persian Gulf oil and gas infrastructure could take years, suggesting that elevated energy prices are likely to persist. But the most
In late January, Taiwan’s first indigenous submarine, the Hai Kun (海鯤, or Narwhal), completed its first submerged dive, reaching a depth of roughly 50m during trials in the waters off Kaohsiung. By March, it had managed a fifth dive, still well short of the deep-water and endurance tests required before the navy could accept the vessel. The original delivery deadline of November last year passed months ago. CSBC Corp, Taiwan, the lead contractor, now targets June and the Ministry of National Defense is levying daily penalties for every day the submarine remains unfinished. The Hai Kun was supposed to be
Most schoolchildren learn that the circumference of the Earth is about 40,000km. They do not learn that the global economy depends on just 160 of those kilometers. Blocking two narrow waterways — the Strait of Hormuz and the Taiwan Strait — could send the economy back in time, if not to the Stone Age that US President Donald Trump has been threatening to bomb Iran back to, then at least to the mid-20th century, before the Rolling Stones first hit the airwaves. Over the past month and a half, Iran has turned the Strait of Hormuz, which is about 39km wide at
There is a peculiar kind of political theater unfolding in East Asia — one that would be laughable if its consequences were not so dangerous. Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) on April 12 returned from Beijing, where she met Chinese President Xi Jinping (習近平) and spoke earnestly about preserving “peace” and maintaining the “status quo.” It is a position that sounds responsible, even prudent. It is also a fiction. Taiwan is, by any honest definition, an independent country. It governs itself, defends itself, elects its leaders, and functions as a free and sovereign democracy. Independence is not a
RSS