As the nation waits for the Biden administration to articulate its strategy for meeting the extraordinary challenges posed by Communist China, it calls to mind Andrew Carnegie’s remark that he paid “less attention to what men say. I just watch what they do” — and, to suggest a corollary, what they neglect to do.
While the world in 2021 continued battling the pandemic, China announced a nearly 7% increase in military spending and a five-year plan to focus on cutting-edge technologies, such as artificial intelligence, semiconductors, and biotechnology. It began to assemble its own space station and became the third nation to execute a soft landing on Mars.
It made noteworthy achievements in areas ranging from hypersonic missile capabilities to its quantum computing advantage. Private-sector advancements in such technologies support the Chinese communists’ philosophy of “civil-military fusion” and their desire to leapfrog U.S. military preeminence.
In 2018, Congress recognized the “national security landscape [had] shifted” and identified “the nature of [foreign] investments that pose the greatest potential risk to national security” — necessitating comprehensive statutory changes to the Committee on Foreign Investment in the United States, or CFIUS. In a nearly extinct level of bipartisanship that demonstrated the imperative of the problem, approaching unanimity in the House of Representatives, Congress and the Trump administration overhauled CFIUS to better protect U.S. innovation and cutting-edge technology while encouraging vital foreign capital flows.
Congress determined these objectives so critical that the Treasury Department (the “chair” of CFIUS) established a Senate-confirmed assistant secretary for investment security to lead and oversee the committee’s activities.
Now, more than a year since the position was vacated, a nominee has inexplicably not been named. President Joe Biden has only just now gotten around to selecting a nominee for the vital position to whom it reports, the Under Secretary for International Affairs, a leader responsible for international finance and global economic development policies, the alumni of which include two former Treasury Secretaries and a current World Bank President. The two most recent undersecretaries were key in orchestrating CFIUS’s improvements.
Today, this important national security remit at the Treasury Department lacks the accountable senior political leadership required to advise the secretary and engage Congress.
Intended to protect U.S. innovation and know-how, critical infrastructure, and increasingly valuable data, the law conferred longer reach and stronger authorities, directed more robust post-clearance oversight of certain investments, and charged the committee to find risky cross-border deals evading attention. Though CFIUS’s work is highly confidential, public reporting provided a glimpse of the deals considered in 2021 for their national security risk, including businesses involving semiconductors, space infrastructure and launch vehicles, autonomous trucking, and video gaming, to name a few.
The committee’s work has continued with committed career professionals, but the lack of a dedicated assistant secretary and the undersecretary is a leadership void. Absent are key voices for Treasury Secretary Janet Yellen, the NSC, and Congress regarding time-sensitive policy debates — among them, whether to impose monitoring of capital from U.S. investors into adversarial nations, further expansions of CFIUS jurisdiction, and ways to expedite the government’s identification of critical “emerging technologies” that warrant protection.
These leaders could also be reinforcing the significant gains in efficiency and resourcing made between 2018 and 2021; encouraging U.S. allies to develop similar tailored mechanisms to augment CFIUS’s impact; providing external stakeholders and investors an opportunity to be heard; and, critically, leading the challenging interagency process to achieve consensus about transaction priorities, risk, and response.
Not every transaction reviewed is easy, and the secretary needs these leaders to help reach appropriate and timely results — case in point, the still unresolved August 2020 presidential order that ByteDance divest any assets, property, and U.S. data used by the Chinese company to operate TikTok — a deal that “threatened to impair the national security of the United States.”
The role of the assistant secretary is apolitical, focused on eliminating national security risk while maintaining the country’s open door for foreign investment. Naming a nominee soon is crucial, and he or she should have demonstrated experience both in the private sector and the national security arena.
Although this position lacks a high profile in the bigger scheme of government, its vacancy is no doubt increasingly noticed by institutional investors, America’s international partners, and Congress, all of whom rely on the Treasury to lead this mission. The Chinese communists are certainly paying attention to what the administration does — or fails to do — in this regard.
Thomas Feddo served as assistant secretary of the Treasury for Investment Security from 2019-21. He is the founder of the Rubicon Advisors, LLC.
