U.S. President Donald Trump arrives prior to signing the "Right to Try Act," which gives terminally ill patients the right to use experimental medications not yet been approved by the Food and Drug Administration (FDA), at the White House in Washington, U.S., May 30, 2018 - Reuters
WASHINGTON: President Donald Trump, already embroiled in a trade battle with China, plans to ratchet commercial tensions higher by barring many Chinese companies from investing in U.S. technology firms, and by blocking additional technology exports to Beijing, said people familiar with administration plans.
The twin initiatives, set to be announced by the end of the week, are designed to prevent Beijing from moving ahead with plans outlined in its “Made in China 2025” report to become a global leader in 10 broad areas of technology, including information technology, aerospace, electric vehicles and biotechnology.
The Treasury Department is crafting rules that would block firms with at least 25% Chinese ownership from buying companies involved in what the White House calls “industrially significant technology.” The ceiling may end up lower than that, according to people familiar with discussions finalizing the plans.
In addition, the National Security Council and the Commerce Department are putting together plans for “enhanced” export controls, designed to keep such technologies from being shipped to China, said the people familiar with the proposals.
“We’ve got trillions of dollars seeking our crown jewels of technology,” said White House trade adviser Peter Navarro last week. “There has to be a defense against that.”
Before the rules go into effect, the individuals said, U.S. industry would have a chance to comment.
Industry groups, especially in the finance and technology industries, have been trying to track the progress of the proposal as it goes through various iterations in the administration.
They are mainly concerned that the export controls could negatively affect their businesses by preventing them from using their technological edge. While many object to the investment restrictions, they are seen as having less practical impact because Chinese investment has fallen off so drastically. Most of the industry lobbying has been focused on Congress, which is debating how to strengthen national-security reviews of foreign investment.
The twin measures would continue the administration’s use of a national-security rationale to justify economic actions. Steel and aluminum tariffs on Canada, Mexico, the European Union and other allies were put into effect earlier this year under a national-security provision of the Trade Expansion Act of 1962. For investment restrictions, the administration is planning to use the International Emergency Economic Powers Act of 1977, or IEEPA, which gives the president broad authority in the case of an “unusual and extraordinary threat,” said the people familiar with the internal debate.
IEEPA was widely employed after the Sept. 11, 2001 terrorist attacks to impose sanctions on other countries. Some trade associations are looking at whether they can challenge the use of the law in a continuing trade fight. “The administration is saying, ‘if we declare everything a national security issue we can do whatever we want,’” said Derek Scissors, a China expert at the American Enterprise Institute. “It’s a misuse of executive power.”
“The President has made clear his desire to protect American technology,” said Commerce Secretary Wilbur Ross, in a statement to The Wall Street Journal on Sunday. “All possibilities that would better protect American technology, including potential changes to export controls, are under review.”
The plan hasn’t been finalized and some details may change. Under plans being considered by the administration, the U.S. would bar purchases of U.S. technology companies from entities where Chinese investors own at least 25%—the exact cutoff is still being discussed. Investments below that mark could still be blocked if the administration determines that Chinese investors could obtain the technology through board seats, licensing agreements or other measures.
By Bob Davis
June 24, 2018 7:46 p.m. ET
7 COMMENTS
WASHINGTON—President Donald Trump, already embroiled in a trade battle with China, plans to ratchet commercial tensions higher by barring many Chinese companies from investing in U.S. technology firms, and by blocking additional technology exports to Beijing, said people familiar with administration plans.
The twin initiatives, set to be announced by the end of the week, are designed to prevent Beijing from moving ahead with plans outlined in its “Made in China 2025” report to become a global leader in 10 broad areas of technology, including information technology, aerospace, electric vehicles and biotechnology.
The Treasury Department is crafting rules that would block firms with at least 25% Chinese ownership from buying companies involved in what the White House calls “industrially significant technology.” The ceiling may end up lower than that, according to people familiar with discussions finalizing the plans.
In addition, the National Security Council and the Commerce Department are putting together plans for “enhanced” export controls, designed to keep such technologies from being shipped to China, said the people familiar with the proposals.
“We’ve got trillions of dollars seeking our crown jewels of technology,” said White House trade adviser Peter Navarro last week. “There has to be a defense against that.”
Before the rules go into effect, the individuals said, U.S. industry would have a chance to comment.
Industry groups, especially in the finance and technology industries, have been trying to track the progress of the proposal as it goes through various iterations in the administration.
They are mainly concerned that the export controls could negatively affect their businesses by preventing them from using their technological edge. While many object to the investment restrictions, they are seen as having less practical impact because Chinese investment has fallen off so drastically. Most of the industry lobbying has been focused on Congress, which is debating how to strengthen national-security reviews of foreign investment.
The twin measures would continue the administration’s use of a national-security rationale to justify economic actions. Steel and aluminum tariffs on Canada, Mexico, the European Union and other allies were put into effect earlier this year under a national-security provision of the Trade Expansion Act of 1962. For investment restrictions, the administration is planning to use the International Emergency Economic Powers Act of 1977, or IEEPA, which gives the president broad authority in the case of an “unusual and extraordinary threat,” said the people familiar with the internal debate.
IEEPA was widely employed after the Sept. 11, 2001 terrorist attacks to impose sanctions on other countries. Some trade associations are looking at whether they can challenge the use of the law in a continuing trade fight. “The administration is saying, ‘if we declare everything a national security issue we can do whatever we want,’” said Derek Scissors, a China expert at the American Enterprise Institute. “It’s a misuse of executive power.”
“The President has made clear his desire to protect American technology,” said Commerce Secretary Wilbur Ross, in a statement to The Wall Street Journal on Sunday. “All possibilities that would better protect American technology, including potential changes to export controls, are under review.”
The plan hasn’t been finalized and some details may change. Under plans being considered by the administration, the U.S. would bar purchases of U.S. technology companies from entities where Chinese investors own at least 25%—the exact cutoff is still being discussed. Investments below that mark could still be blocked if the administration determines that Chinese investors could obtain the technology through board seats, licensing agreements or other measures. - WSJ
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