U.S. Senators Push Investment Scrutiny of Allies Using Huawei

(Bloomberg) -- A group of U.S. senators wants to remove a preferred investment status for countries such as the U.K. that allow for the installation of Huawei Technologies Co. equipment in their 5G networks.

Senator Tom Cotton, a Republican from Arkansas, is set to introduce legislation as soon as Wednesday that would amend provisions of the Foreign Investment Risk Review Modernization Act, which scrutinizes direct investments such as real estate and venture capital deals by foreign countries in the U.S.

Certain allies -- the U.K., Australia and Canada -- are exempted from the investment screenings, but the proposed bill would end that exclusion for countries that install Chinese information and communications technology including for 5G and future networks. In January U.K. Prime Minister Boris Johnson decided that Huawei could have a partial role in its next-generation broadband networks.

“The United States values its special relationship with the U.K., but allowing Huawei into Britain’s 5G infrastructure will have consequences across several sectors,” Cotton, one of the leading China hawks in Congress, said in a statement Tuesday. “Ultimately, protecting U.S. trade secrets from the Chinese Communist Party is our top priority.”

The U.K. was the biggest source of foreign direct investment in the U.S. in 2018, according to the Commerce Department.

Texas Senator Ted Cruz and Missouri Senator Josh Hawley, both Republicans, are co-sponsors of the legislation and its scheduled introduction Wednesday coincides with a debate in the U.K. House of Commons on the security implications of Johnson’s Huawei decision.

National Security

There’s broad and longstanding concern among lawmakers in Washington that Huawei, China’s largest telecommunications equipment maker, is an arm of the Chinese Communist Party and that Beijing has the ability to use it to spy on Americans. Huawei has denied those allegations.

Cotton’s bill states that while the U.S. should remain committed to an open investment environment, “the national security landscape has shifted in recent years, and so has the nature of the investments that pose the greatest potential risk to national security.”

Trump administration officials said after Johnson’s announcement in January that they were disappointed by the decision and have urged London to reverse it. The topic is likely to come up in bilateral trade talks that are set to begin in the coming weeks.

“Boris Johnson seems to have misjudged how key members of Congress would react to his decision,” said David Hanke, a partner at Arent Fox. “This bill may have legs and will certainly get the attention of London’s financial district.”

The bill, titled the “Protecting America From Foreign Investors Compromised by the Chinese Communist Party Act of 2020,” would also require the administration to produce a report on whether and how the U.S. government is coordinating with close trade and investment partners to develop alternatives to Chinese 5G vendors.

To contact the reporter on this story: Jenny Leonard in Washington at jleonard67@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Margaret Collins

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