Chuck Grassley

United States Senator from Iowa

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Grassley, Brown Urge Mnuchin to Protect U.S. Jobs as Treasury Reviews Chinese Investments

Jun 22, 2018

WASHINGTON – U.S. Sens. Chuck Grassley (R-Iowa) and Sherrod Brown (D-Ohio) penned a bipartisan letter to Treasury Secretary Mnuchin urging the Administration to take action to review all Chinese investments in the U.S. for their long-term economic impact. Treasury is currently reviewing Chinese investment patterns and impact as part the Section 301 Investigation into China’s intellectual property abuses, and is expected to announce restrictions on Chinese investments by July.   

As part of that process, the senators are urging Treasury to consider not only intellectual property theft, but also economic security and U.S. jobs. 

“As part of your efforts, we urge you to take action to review all Chinese investment in the U.S. for its long-term economic impact,” the senators wrote. “The Chinese government has shown through its acquisitions of companies such as Smithfield Foods, Terex Corp, and General Electric Appliance Business that it is purchasing U.S. businesses with the intent of gaining U.S. market share and access to technology that they can replicate in their country. Due to the increase in Chinese investment in the U.S. and the growing potential threat these investments pose to our overall economy, we urge you to ensure any action taken to restrict Chinese investments is not limited to those that fall under the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS).” 

In August of 2017, the Administration initiated an investigation into China’s abuses of intellectual property under section 301 of the Trade Act of 1974. Treasury’s upcoming investment restrictions are one part of that investigation. 

Separately, Grassley and Brown have introduced a bill to authorize the Department of Commerce to begin screening all foreign investments to ensure they don’t harm American economic interests.

Under current law, the Committee on Foreign Investment in the United States, or CFIUS, screens foreign investments coming into the U.S. and blocks those that threaten national security. The Senate recently passed legislation to strengthen CFIUS’s tools to better prevent China from stealing critical technologies.

However, CFIUS only looks at foreign investment that impacts national security. Right now, the U.S. has no way to screen foreign investments for whether they are harmful to jobs and the economy.

Foreign direct investment in the U.S. totaled more than $373 billion in 2016, but none of this investment was reviewed to ensure it was in the long-term, strategic economic interests of the United States. Chinese companies specifically invested a record $45.6 billion in the U.S. economy in 2016. This is triple the amount the U.S. recorded for 2015 and a tenfold increase of annual investment just five years ago.  

A copy of their letter can be found below: 

 

Dear Secretary Mnuchin, 

We are writing with great interest in the Section 301 investigation for Intellectual Property abuses regarding China. According to reports, the U.S. government will enact restrictions on Chinese investments as a result of the Section 301 investigation. As part of your efforts, we urge you to take action to review all Chinese investment in the U.S. for its long-term economic impact. 

Foreign direct investment (FDI) has created many jobs in the United States during the last several decades; however, the rise of new investment from the governments of foreign countries through state-owned enterprises (SOEs) raises new questions about the role of FDI in the U.S. economy. The Chinese government has shown through its acquisitions of companies such as Smithfield Foods, Terex Corp, and General Electric Appliance Business that it is purchasing U.S. businesses with the intent of gaining U.S. market share and access to technology that they can replicate in their country. Publicly traded companies cannot compete on a level playing field with their government-sponsored counterparts because SOEs enjoy a lower cost of capital and the full financial backing of a government, which allows them to sometimes pursue political goals at the expense of market signals. 

Due to the increase in Chinese investment in the U.S. and the growing potential threat these investments pose to our overall economy, we urge you to ensure any action taken to restrict Chinese investments is not limited to those that fall under the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS). There is bipartisan support in Congress to review the strategic long-term investments China is making in the American economy. Specifically, our bill, the Foreign Investment Review Act, would give the Administration new powers to review foreign investments that may not be in the long-term interest of the United States. We urge you to make this legislation a priority of your Administration’s efforts and to pursue investment restrictions in line with its objectives.

We look forward to working with you on this critically important issue for the country.

Sincerely,

Senators Sherrod Brown and Chuck Grassley

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