Foreign Investment Reviews Expanded in Bill Passed by U.S. House
(Bloomberg) -- The House voted to expand U.S. reviews of foreign investment in sensitive U.S. industries and keep in place President Donald Trump’s controversial deal to revive Chinese telecommunications firm ZTE Corp.
The measures passed 359-54 Thursday as part of a $717 billion defense policy bill. Next week the Senate is likely to pass the legislation, whose details were negotiated among lawmakers in the two chambers.
Chinese investment in U.S. technology companies probably would become more difficult and time-consuming under the legislation, with an increased risk of being blocked by a U.S. government panel that examines national security risks.
The bill, H.R. 5515, would subject more joint ventures and minority stakes to reviews and empower the panel, the Committee on Foreign Investment in the United States, to reject more investments in companies that provide access to personal data.
The ZTE provision was included after Senate Republicans and Democrats sought to reimpose the prior ban on exports of U.S. equipment to the company.
Trump reached a deal to lift the export ban, imposed due to violations of Iran and North Korea sanctions, in exchange for the payment of a $1.4 billion fine, the installation of U.S. inspectors at ZTE facilities and the replacement of ZTE’s corporate board and management. ZTE had said it would shut down if the ban remained in place.
The foreign investment language was adopted after negotiations between House Republicans, who said the bill would stymie economic growth, and Treasury Secretary Steven Mnuchin. Mnuchin had raised the possibility that Trump would invoke sweeping emergency executive powers to block foreign investment if a deal wasn’t reached.
The final version of the measure would require broad reviews of investments unless they come from a list of pre-cleared countries.
"After meaningful discussions and negotiations with our Senate colleagues, we were able to reach agreement on a plan that will enhance the review process without massive government overreach," Financial Services Chairman Jeb Hensarling, a Texas Republican, said in a statement Wednesday.
The defense bill bars U.S. government purchases of ZTE products and maintains the revised fine imposed by Commerce Department. An earlier version of the Senate bill would have reimposed the ban on exporting U.S. materials to ZTE.
‘Muddy the Waters’
"Congress didn’t need to muddy the waters,” said Senator David Perdue, a Georgia Republican who authored the final language on ZTE.
Senator Marco Rubio, a Florida Republican, repeated his call for reimposing the ban. He cited China’s refusal to approve U.S. chipmaker Qualcomm Inc.’s $44 billion bid for Netherlands-based rival NXP Semiconductors NV. Qualcomm on Thursday scrapped the deal. China has a say on the deal because it is the biggest market for smartphones.
Rubio wrote on Twitter that after the U.S. reversed its ZTE ban, "how did China return the favor? By blocking Qualcomm deal with NXP despite the begging & pleading from @USTreasury & Commerce Dept."
Democrats also criticized the weakened ZTE provision.
“President Trump has once again broken his core promise to be tough on China simply to please the president of China -– and he got nothing in return," said Senate Minority Leader Chuck Schumer, a New York Democrat, in a statement.
The annual defense authorization bill sets funding levels and prescribes military policy for the fiscal year starting Oct.1. Congress is moving to enact the defense policy bill on a quicker schedule than usual in part because of the declining health of Senate Armed Services Chairman John McCain, an Arizona Republican, after whom the bill has been named. He is in his home state being treated for brain cancer.
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