New Treasury program limits foreign investment in U.S

Irving Hamilton
October 12, 2018

The new rules, which take effect November 10, updated 30-year-old statutes giving the president broad powers to block foreign investments in sensitive industries or those deemed harmful to U.S. national security.

Biotech is among 27 industries subject to Treasury Department rules, which mandate that foreign investments in "critical technologies" undergo review by the Committee on Foreign Investment in the U.S.

Treasury Secretary Steven Mnuchin said the new interim rules will "address specific risks to USA critical technology" while also giving officials critical information they can use in developing the final rules.

In announcing the reform in August, Trump made it clear the focus would be on Beijing and the threats to national security.

Democrats and Republicans in Congress, as well as Trump, have alleged the Chinese government uses Chinese entities to seek footholds in US technology through investments and other partnerships, and the pilot program could put stricter boundaries around future deals.

The administration has imposed penalty tariffs on about $250 billion of Chinese imports, triggering retaliation by China, as a trade war between the world's two biggest economies has widened.

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As part of the trade battle, President Donald Trump had initially ordered the Treasury Department to draft investment restrictions aimed specifically at China. According to the rules, foreign investments that result in a USA company sharing nonpublic information are subject to federal review, a provision that all but guarantees every overseas biotech deal will undergo scrutiny.

The new investment restrictions were seen as a compromise by some lawmakers, who believed Trump wanted to try to cut off all access to the United States from Chinese investors.

The restrictions, which go into effect on November 10, are part of a pilot program authorized by the Foreign Investment Risk Review Modernization Act, a law passed with bipartisan support earlier this year.

Congress approved the law known as FIRRMA with bipartisan support, and Treasury is implementing new rules under a pilot program until the final version takes effect in 15 months.

The legislation received strong bi-partisan support in Congress, with lawmakers from both parties expressing concerns about the need to prevent China from obtaining American technology by buying or investing in US companies.

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