US weighs countering China and ‘malign actors’ with outbound investment review board
South China Morning Post
28/03/2023
- Option considered as authoritarian regimes accelerate 'their efforts to appropriate critical technologies', says deputy commerce secretary
- Comments delivered ahead of second Washington-led Summit for Democracy gathering some 120 world leaders
US President Joe Biden's administration confirmed on Tuesday that it was considering the establishment of an outbound investment review board to counter "malign actors" including China, disclosing its possible next step in the American leader's strategy to blunt Beijing.
Deputy Commerce Secretary Don Graves made his comments in an address tied to the second Washington-led Summit for Democracy, where some 120 world leaders will gather virtually to advance strategies aimed at pushing back on the influence of authoritarian governments.
"Authoritarian regimes are accelerating their efforts to appropriate critical technologies," Graves said.
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"We've seen this around the world including for military modernisation, for mass surveillance, and other human rights abuses ... Look no further than China, which, for example, is using supercomputing capabilities and AI models to monitor track and surveil their own citizens.
"We're working closely with the private sector to alert companies to the potential risks of transactions with malign actors, and we're considering outbound investment screening in areas where we may inadvertently further adversaries' efforts to undermine our economic and national security interests."
An outbound investment review board - a reverse version of the Committee on Foreign Investment in the United States, which examines purchases of US assets by overseas entities - has been pushed by some US lawmakers. The board was part of an earlier version of the Chips and Science Act, which passed last year without its inclusion.
The announcement by Graves follows a string of moves made to restrict the provision of advanced US technology to China over concern that such flows support repression of dissent and measures to control ethnic minorities in the country.
Officials are grappling with the scope of a potential outbound investment regime that would could carry significant risk for many companies operating in China, according to an analysis published by WilmerHale, a law firm with offices in Washington and Beijing.
If it aligns with some of the more stringent legislative proposals, a review process could apply not only to investments and mergers, "but also technology licensing or even exports of US-origin goods", the firm said in the analysis published last month.
"How the new outbound review regime will define covered sectors or subsectors will be critical and may create unique compliance challenges," it said.
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Graves' remarks, delivered in the lead-up to the two-day summit beginning on Wednesday, marked the start of a day of "thematic" events covering issues ranging from transnational repression to Russia's aggression in Ukraine.
Lisa Monaco, US Deputy Attorney General, highlighted China's attempts at transnational repression in her opening address on threats to rule of law from "hostile nation states".
To address transnational repression, the US government would issue new rules to clarify the range of activities requiring registration under the Foreign Agents Registration Act, Monaco said, as well as examine potential gaps in the law and further rein in technologies used for repression.
"We will be relentless in addressing [foreign malign] efforts at repression here in the United States," she added.
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US Deputy Attorney General Lisa Monaco says the America government will be relentless in addressing transnational repression that takes place in the US. Photo: AFP
As a "cornerstone initiative" of the summit, Biden signed an executive order on Monday prohibiting federal government use of commercial spyware that poses risks to national security. It marked the first time the administration has identified factors that agencies must weigh before using cyber surveillance tools.
The executive order also prohibits commercial spyware that poses "significant risks of improper use" by a foreign government or person, noting that a product may pose such risks if a foreign government has used it to target dissidents.
Director of National Intelligence Avril Haines last week issued binding guidance to implement new statutory restrictions on former intelligence community officials seeking employment with foreign entities.
Beijing has accused Washington of sowing division with the hybrid global summit, which will feature some regional in-person events.
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It hosted its own international forum on democracy last week, inviting over 300 guests from more than 100 countries and regions and criticising Washington's "monistic and hegemonic narratives", according to state media.
Earlier on Tuesday, the State Council Information Office released its annual assessment of US human rights, which followed a foreign ministry report last week about the decline of American democracy.
Some observers have highlighted how the event's effectiveness could be undermined by the participation of countries now experiencing signs of democratic backsliding at home.
Rob Berschinski, senior director for Democracy and Human Rights at the National Security Council, said last week the administration included governments on the basis of demonstrated political will and that an invitation to the summit did not indicate that "all aspects of any country's democracy are perfect".
Berschinski said the government re-invited all 111 governments from the inaugural summit in 2021 and added eight more.
About 10 countries, including Pakistan, Malaysia and South Africa, reportedly declined the invitation in 2021. Pakistan again declined to attend this year's summit.
While China, Russia, and Nato countries Hungary and Turkey have again been excluded, self-ruled Taiwan - which Beijing sees as a breakaway province - is set to take part.
The summit will overlap with Taiwanese leader Tsai Ing-wen's stopover visit to New York this week, where she is expected to receive a "global leadership award" from Washington-based think tank Hudson Institute.
In a nod to concerns that the previous summit was too driven by the US, Biden this time tapped four co-hosts hailing from different continents: South Korea, Zambia, Costa Rica and the Netherlands.
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But as countries contend with post-Covid-19 financial crises and demands for debt relief, even co-hosts were warning that democracy holds little appeal unless it means strong governance in difficult economic times.
Zambian President Hakainde Hichilema said in an op-ed for Bloomberg on Tuesday that "you can't eat democracy".
"Human rights may sustain the spirit, but not the body," he wrote.
Accusations that American companies were enabling repression of ethnic minorities in China surfaced throughout a separate event convened by the Congressional-Executive Commission on China (CECC) in Washington on Tuesday.
In a hearing titled "Preserving Tibet: Combating cultural erasure, forced assimilation and transnational repression", the CECC's chair, Republican congressman Chris Smith of New Jersey, called out Thermo Fisher Scientific, an American supplier of scientific instruments, and its CEO Marc Casper for allegedly selling DNA kits to police in Tibet.
Smith said the data was being used for "ongoing human rights abuses".
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US President Joe Biden speaks during the inaugural Summit for Democracy in the Eisenhower Executive Office Building in Washington in 2021. In all, 111 governments were invited to the virtual event. Photo: Bloomberg
"Biometric data, DNA and scans of over a million Tibetans ... have been harvested and stored by [China's Communist Party], blood samples were drawn even from children in kindergarten," Smith said.
"What is even more shocking is the role of an American company, Thermo Fisher Scientific, [in China's] genetic data collection and genetic surveillance programmes."
The CECC is a bipartisan, bicameral body created by Congress in 2000, tasked with submitting annual reports to Congress and the US president.
Thermo Fisher Scientific did not immediately respond to a request for comment. China's embassy in Washington also did not immediately respond to a request for comment.
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