Top Senate Republican Cornyn Slams Tech Lobby's CFIUS Bill Push

(Bloomberg) -- The Senate’s No. 2 Republican on Thursday used a floor speech to try to beat back efforts by IBM and a tech trade group to gut a bill that would expand the powers of a secretive national security panel.

The section of the bipartisan legislation that Senator John Cornyn of Texas is trying to preserve would strengthen the Committee on Foreign Investment in the U.S., known as CFIUS, and grant it the authority to review joint ventures with foreign firms.

The measure aims to prevent the Chinese from obtaining sensitive American technologies through tie-ups with U.S. companies that fall short of CFIUS’s purview because they aren’t full acquisitions. The bill is being debated as President Donald Trump has sought to limit China’s ambitions in the tech sector by denying it access to American markets and acquisition of U.S. intellectual property.

International Business Machines Corp., the Information Technology Industry Council trade group and others want to remove the bill’s emphasis on joint ventures and instead counter transfers of U.S. intellectual property to China that are deemed harmful by using export controls.

An IBM policy executive, Christopher Padilla, said in congressional testimony in January that the Cornyn bill “could constitute the most economically harmful imposition of unilateral trade restrictions by the United States in many decades.”

Cornyn, in his floor speech, said that "export controls are not an adequate solution to the situation we’re now dealing with because of their inherent limitations."

"These joint ventures are essentially acquisitions by another name, which is why CFIUS should be able to review them for national security risks," he added.

The legislation is co-sponsored by Cornyn and Representative Robert Pittenger, a North Carolina Republican. The provision on joint ventures is a key component of the bill and marks the most significant change to the current CFIUS framework.

IBM spent more than $5.3 million lobbying the U.S. government last year, including on CFIUS issues, according to disclosures the company filed.

House Financial Services Chairman Jeb Hensarling and Foreign Affairs Chairman Ed Royce are among lawmakers who have expressed skepticism with the joint venture provision. However, Hensarling’s office said that he wants to “ensure that technology transfers are appropriately reviewed without duplicating or undermining U.S. export controls.”

While the provision had been under threat of being stripped from the House bill entirely, an amendment may instead allow the Commerce Department, with input from the State Department and Defense Department, to review overseas joint ventures, instead of the Treasury Department, according to one person familiar with the discussions in Congress.

Heath Tarbert, the assistant Treasury secretary for international markets and investment policy, indicated on Thursday that a compromise was possible.

If CFIUS doesn’t review joint ventures, another process that has input from the intelligence community could be put into place to protect the transfer of sensitive technology, Tarbert said at an event in Washington on Thursday.

To contact the reporters on this story: Saleha Mohsin in Washington at smohsin2@bloomberg.net, Ben Brody in Washington at btenerellabr@bloomberg.net.

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Alex Wayne at awayne3@bloomberg.net, John Harney

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