[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]








                           EVALUATING CFIUS:
                      ADMINISTRATION PERSPECTIVES

=======================================================================

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON MONETARY

                            POLICY AND TRADE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 15, 2018
                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-80




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]








                                   ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
31-385 PDF                WASHINGTON : 2018                 













                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
STEVE STIVERS, Ohio                  AL GREEN, Texas
RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
MIA LOVE, Utah                       DENNY HECK, Washington
FRENCH HILL, Arkansas                JUAN VARGAS, California
TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                     Shannon McGahn, Staff Director
               Subcommittee on Monetary Policy and Trade

                     ANDY BARR, Kentucky, Chairman

ROGER WILLIAMS, Texas, Vice          GWEN MOORE, Wisconsin, Ranking 
    Chairman                             Member
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan              BILL FOSTER, Illinois
ROBERT PITTENGER, North Carolina     BRAD SHERMAN, California
MIA LOVE, Utah                       AL GREEN, Texas
FRENCH HILL, Arkansas                DENNY HECK, Washington
TOM EMMER, Minnesota                 DANIEL T. KILDEE, Michigan
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                CHARLIE CRIST, Florida
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana






































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 15, 2018...............................................     1
Appendix:
    March 15, 2018...............................................    39

                               WITNESSES
                        Thursday, March 15, 2018

Ashooh, Hon. Richard E., Assistant Secretary for Export 
  Administration, U.S. Department of Commerce....................     7
Chewning, Eric D., Deputy Assistant Secretary for Manufacturing 
  and Industrial Base Policy, U.S. Department of Defense.........     9
Tarbert, Hon. Heath P., Assistant Secretary for International 
  Markets and Investment Policy, U.S. Department of the Treasury.     5

                                APPENDIX

Prepared statements:
    Ashooh, Hon. Richard E.......................................    40
    Chewning, Eric D.............................................    44
    Tarbert, Hon. Heath P........................................    49

              Additional Material Submitted for the Record

Pittenger, Hon. Robert:
    Written statement of the Department of Justice (DOJ).........    55
Ashooh, Hon. Richard E.:
    Responses to questions for the record from Representative 
      Emmer......................................................    58
Chewning, Eric D.:
    Responses to questions for the record from Representatives 
      Emmer and Pittenger........................................    59
Tarbert, Hon. Heath P.:
    Responses to questions for the record from Representatives 
      Barr, Emmer, Pittenger, and Waters.........................    63

 
                           EVALUATING CFIUS:
                      ADMINISTRATION PERSPECTIVES

                        Thursday, March 15, 2018

                     U.S. House of Representatives,
                 Subcommittee on Monetary Policy and Trade,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2128 Rayburn House Office Building, Hon. Andy Barr 
[chairman of the subcommittee] presiding.
    Members present: Representatives Barr, Williams, Lucas, 
Huizenga, Pittenger, Hill, Emmer, Mooney, Davidson, Tenney, 
Hollingsworth, Hensarling (ex officio), Moore, Meeks, Foster, 
Sherman, Green, Heck, Vargas, and Crist.
    Also present: Representative Royce.
    Chairman Barr. The committee will come to order. Without 
objection, the Chair is authorized to declare a recess of the 
committee at any time and all members will have five 
legislative days within which to submit extraneous materials to 
the Chair for inclusion in the record.
    This hearing is entitled, ``Evaluating CFIUS: 
Administration Perspectives.'' I now recognize myself for 4 
minutes to give an opening statement.
    Today's hearing is the third time in this Congress that the 
subcommittee has publicly examined the Committee on Foreign 
Investment in the United States, or CFIUS. While our first two 
hearings brought together former CFIUS practitioners, industry 
representatives, and think tank experts, this morning we will 
be hearing from Trump Administration officials at three of 
CFIUS's key member agencies. These witnesses will discuss the 
current state of CFIUS, its challenges, and those it is likely 
to face in the future.
    Our colleague, Representative Pittenger from North 
Carolina, along with the gentleman from Washington, Mr. Heck, 
have introduced legislation that seeks to update the CFIUS 
process. Everyone I have met with agrees with the goals of 
CFIUS reform. First, we must improve our security review 
process to ensure that bad actors do not get American 
technology or information that can be used against us; and 
second, make certain that the CFIUS process does not create 
disincentives for benign foreign direct investment (FDI) in the 
United States, killing jobs and much needed capital sources for 
national security advancements.
    There are different views on how to achieve these goals and 
our hearings are intended to show a path forward that will have 
broad bipartisan support in the same way this issue has always 
had in this committee. As we move forward in the legislative 
process, I want to make it clear that we need to be precise 
about what national security is and what the real threats or 
vulnerabilities are and are not.
    The security of this country rests on a strong defense and 
an equally strong and vibrant economy, but our economy will not 
remain strong or innovative if we unnecessarily block access to 
it or try to shield it from a free and fair competition. Down 
that road eventually lies weakness. American workers and 
American businesses are the best in the world and can compete 
with anyone, anywhere, anytime if we remove both barriers to 
their creativity and regulations that stand in the way of 
progress.
    We are very well aware of the threat that the Chinese pose 
to the American people. In no way do we want important 
technologies or know-how, that could be used for military 
purposes, traded to foes under the justification that it is 
good for business. At the same time, we must also be keenly 
aware of the benefits that foreign direct investment can 
provide to the American people. For example, Toyota, a Japanese 
company, has its largest automotive manufacturing plant in the 
world located in my district in Georgetown, Kentucky. Thousands 
of direct and indirect jobs have been created by this 
investment.
    Our default position should always be that foreign direct 
investment is good for both our economy, our competitiveness, 
and our security as it contributes nearly $900 billion in value 
to our annual GDP and is responsible for 6.8 million high-
paying American jobs.
    Overshadowing today's debate is the recent use of Section 
232 authorities to invoke national security as a justification 
to impose steel and aluminum tariffs. As the response to these 
tariffs on Capitol Hill has made clear, there is significant 
disagreement over their wisdom and their connection to keeping 
America safe. The tariffs have reminded members that once 
authorities are delegated by Congress they are no longer under 
our control and may be used in unforeseen ways and with 
unintended consequences.
    I have personally heard from constituents who fear that 
closing ourselves to trade will invite retaliation from abroad, 
even from our allies, which can undermine rather than 
strengthen our security. We must keep this in mind as our 
discussion of CFIUS proceeds. Again I want to thank our 
witnesses in advance for their contributions to this important 
discussion on how we can properly balance the needs of our 
economy and our competitiveness with the imperatives of 
national security.
    With that, the Chair now recognizes the Ranking Member of 
the subcommittee, the gentlelady from Wisconsin, Gwen Moore, 
for 5 minutes for an opening statement.
    Ms. Moore. Thank you so much, Mr. Chairman, and as always I 
really look forward to benefiting from the wisdom of our expert 
witnesses here today.
    I really do want to start out by acknowledging the 
tremendous work effort that you, Mr. Chairman, have put into 
this, and others on this committee like Mr. Pittenger and Mr. 
Heck put into this legislation. We live in a world that is 
increasingly changing and requires us to continue to refine and 
enhance our regulations, especially this regulatory tool that 
has national security implications. I might add, Mr. Chairman, 
I am relieved to know that the majority does see someplace for 
regulation and restraint in this ever-changing environment.
    Situations have been presented where the current CFIUS 
regime seems deficient and I think we can easily reach a 
bipartisan consensus on many of these circumstances and expand 
CFIUS in ways that address holes while continuing to encourage 
foreign direct investment in the United States. I think where I 
may have some pause with some proposals, I think they have 
moved beyond the intent of CFIUS and require a larger 
conversation which will include a review of our export regimes 
and of course it will require a lot more staffing resources.
    Now all this can happen, but I don't want to overlay 
competing regulatory regimes that are not rational and 
harmonious. I understand that the majority plans to hold a few 
more hearings on this important issue, so I think we have time 
to continue this discussion and drum out a product that we can 
all agree upon and address the concerns of members and 
stakeholders. I want to thank you again, our witnesses, and I 
want to yield the last 2 minutes to Mr. Heck.
    Mr. Heck. Ranking Member Moore, thank you very much. 
Chairman Barr, I appreciate your convening this hearing. I want 
to begin by thanking our witnesses. I appreciate not only your 
appearance today, but the important work you do in keeping us 
safe.
    I am proud to represent Joint Base Lewis-McChord which is 
the U.S. military's premier West Coast power projection 
platform. For me and the community I represent national 
security is personal. If my friends, family, and neighbors must 
head into battle I want them to have every advantage possible. 
I want our capabilities to be strong enough, unique enough to 
be a deterrent to potential adversaries picking a fight in the 
first place. CFIUS is how we protect that technological edge. 
It is obscure but incredibly important. Let's be clear, there 
are strategic competitors who want what we know. We have seen 
the DIUx report on Chinese technology transfer strategy and 
this committee unanimously recognized aggressive Chinese 
industrial policy as a significant challenge facing CFIUS 
during our budget view markups last week.
    I ask unanimous consent, Mr. Chair, to enter into the 
record two letters from CFIUS about the recently blocked 
Broadcom bid to buy Qualcomm which have already been released 
into the public domain. Our witnesses today are barred by law 
from discussing specific transactions in an unclassified 
setting, so I encourage my colleagues to read them. In my view, 
the letters make clear that Broadcom had taken repeated action 
in defiance of CFIUS interim orders to preserve the status quo 
while they reviewed the transaction including initiating steps 
to redomicile to the United States potentially causing CFIUS to 
lose jurisdiction.
    There are companies who are seeking to do an end run around 
the rules set in place to ensure foreign investment does not 
harm our national security. Now if we are in a race for the 
latest technology, I will be the first to say we are not going 
to win unless we run faster by investing in our knowledge and 
our infrastructure and do more to make sure that nobody in this 
country is left behind. I want the U.S. to remain a great place 
for foreign investment because we can't accomplish those goals 
without it.
    But I think it is also important to keep the other guys 
from cheating, and protecting ourselves against underhanded 
tricks. That is why we need a modernized, well-resourced CFIUS 
process. Congressman Pittenger, Senator Feinstein, Senator 
Cornyn, and I worked together on the bill to accomplish that--
FIRRMA. Since we introduced that bill in November, we have been 
working closely with CFIUS to incorporate feedback into the 
bill to make it stronger and even more tightly focused on the 
national security gaps we need to address.
    The progress we have made is in large part thanks to the 
critical and constructive engagement of our witnesses today. 
While we are still working through some issues, principally 
resources, I look forward to addressing those and to your 
testimony today. Nobody knows CFIUS like you do and your 
knowledge will be invaluable as our committee moves forward on 
this issue. Thank you very much, Mr. Chairman.
    Chairman Barr. The gentleman's time has expired and the 
Chair now recognizes the Vice Chair of the Subcommittee on 
Terrorism and Illicit Finance, the author of the legislation in 
question, the gentleman from North Carolina, Robert Pittenger, 
for 1 minute for an opening statement.
    Mr. Pittenger. Thank you, Chairman Barr, for your 
leadership and calling this hearing. Thank you to the witnesses 
for being with us today. There are significant gaps in CFIUS' 
ability to fulfill its responsibility to protect the U.S. from 
foreign investments that threaten our national security. Our 
adversaries, the Chinese Government in particular, are aware of 
CFIUS deficiencies and are actively exploiting them.
    Specifically, the Chinese Government has used weaponized 
foreign direct investment to evade our safeguards and review 
processes in order to acquire state-of-the-art, military-
applicable technologies from U.S. firms. In recent years, we 
have seen a massive transfer of dual use technology from U.S. 
firms to Chinese entities with close ties to the Chinese 
Government. This technology and know-how has been instrumental 
in China's military buildup and modernization efforts and has 
denigrated America's military industrial base and alarmingly 
depleted our technological superiority.
    Mr. Chairman, this is a very serious problem that needs to 
be addressed with diligent haste. As I detailed in my op-ed for 
the Washington Journal published this morning, export controls 
alone are not capable of protecting the U.S. from harmful 
foreign investment. Last fall, I introduced bipartisan 
legislation called the Foreign Investment Risk Review and 
Modernization Act, which modernizes CFIUS' process by 
addressing national security deficiencies in a measured and 
highly targeted manner. FIRRMA has been endorsed by the White 
House and is the product of nearly a year of outreach with 
close collaboration with Treasury, DOD, DOJ, ODNI, and DHS.
    Years of Chinese exploitation of CFIUS and outdated 
processes has been detrimental to U.S. national security. This 
is a serious problem that we must address now and my bill does 
that in a diligent and laser-focused manner.
    Thank you, Mr. Chairman. I yield back.
    Chairman Barr. Thank you and the gentleman's time is 
expired. Today we welcome the testimony of the Honorable Heath 
Tarbert, Assistant Secretary for International Markets and 
Investment Policy at the U.S. Department of Treasury. Dr. 
Tarbert oversees a diverse portfolio of issues in Treasury's 
Office of International Affairs. He focuses on investment 
security, supporting the work of the Committee on Foreign 
Investment in the United States to promote U.S. investments 
while protecting national security. The Assistant Secretary 
earned his JD and SJD from the University of Pennsylvania and 
his Ph.D. in Philosophy from Oxford University.
    The Honorable Richard Ashooh, Assistant Secretary for 
Export Administration, U.S. Department of Commerce, in this 
role he is responsible for the U.S. dual use export control 
policy and also participates on the Committee on Foreign 
Investment in the United States. Prior to assuming his current 
role, he served as the Director of Economic Partnerships at the 
University System of New Hampshire, the Executive Director of 
the Warren Rudman Center at the University of New Hampshire 
School of Law, and was a Senior Executive in the aerospace 
industry working for both Lockheed Martin and BAE Systems.
    Mr. Eric Chewning, Deputy Assistant Secretary for 
Manufacturing and Industrial Base Policy (MIBP) U.S. Department 
of Defense, in this capacity he is the Principal Advisor to the 
Undersecretary of Defense for Acquisition and Sustainment for 
analyzing the capabilities, overall health, and policies 
concerning the industrial base on which the Department relies 
for current and future warfighting capabilities and 
requirements. MIBP is also responsible for developing the 
Department's position on the business combinations and 
transactions, both foreign and domestic, that shape and affect 
national security. The Deputy Assistant Secretary is a U.S. 
Army veteran that served in Operation Iraqi Freedom and he has 
earned his MBA from the University of Virginia.
    Each of you will be recognized for 5 minutes to give an 
oral presentation of your testimony. Without objection, each of 
your written statements will be made part of the record.
    Assistant Secretary Heath Tarbert, you are now recognized 
for 5 minutes.

                STATEMENT OF HON. HEATH TARBERT

    Mr. Tarbert. Chairman Barr, Vice Chairman Williams, Ranking 
Member Moore, and distinguished members of the subcommittee, 
thank you for the opportunity to testify in support of FIRRMA 
and about CFIUS more generally. I would also like to thank 
Representatives Pittenger and Heck for their bipartisan 
leadership on the bill.
    My top priority as Assistant Secretary is ensuring that 
CFIUS has the tools and resources it needs to perform its 
critical national security function. I believe FIRRMA, a bill 
introduced with broad bipartisan support, is designed to 
provide those tools and resources. FIRRMA will protect our 
national security and strengthen America's longstanding open 
investment policy.
    The United States has always been a leading destination for 
investors. Alexander Hamilton argued foreign capital is 
precious to economic growth. Foreign investment provides 
immense benefits to American workers and families such as job 
creation, innovation, and higher median incomes. At the same 
time, we know that foreign investment isn't always benign. On 
the eve of America's entry into World War I, concerned by 
German acquisitions in our chemical sector, Congress passed 
legislation empowering the President to block investments 
during national emergencies.
    During the Depression and World War II, cross-border 
capital flows fell dramatically. In the boom years of the 
1950's and 1960's, investment in the U.S. was modest compared 
to outflows. During that time, foreign investment also posed 
little risk. Our main adversaries, the Soviet Union and its 
satellites, were communist countries economically isolated from 
us.
    But when the post-war trend changed in the 1970's, CFIUS 
was born. The oil shock that made OPEC countries wealthy led to 
fears that petro dollars might be used to buy strategic U.S. 
assets. In 1975, President Ford issued an Executive Order 
creating CFIUS to monitor foreign investments. Then, in 1988, a 
growing number of Japanese deals motivated Congress to pass the 
Exon-Florio Amendment. For the first time, the President could 
block a foreign acquisition without declaring a national 
emergency. For the next 20 years, CFIUS pursued its mission 
without fanfare.
    But in the wake of the Dubai Ports controversy it became 
clear that CFIUS needed greater procedural rigor and 
accountability. In 2007, some of you helped enact FINSA which 
formally established CFIUS and codified our current committee 
structure and process. Now we find ourselves at another 
historic inflection point. The foreign investment landscape has 
shifted more than at any point in CFIUS' 40-year history. 
Nowhere is that shift more evident than in the caseload CFIUS 
now faces. The number of annual filings has grown within the 
last decade from an average of 95 or so, to nearly 240 last 
year.
    But it is the complexity and not simply the volume that has 
placed the greatest demand on our resources. In 2007, about 4 
percent of the cases went to the more resource-intensive 
investigation stage. In 2017, nearly 70 percent did. This added 
complexity arises from a number of factors--strategic 
investments by foreign governments, complex transaction 
structures, and globalized supply chains. Complexity also 
results from the evolving relationship between national 
security and commercial activity. Military capabilities are 
rapidly building on top of commercial innovations. What is 
more, the data-driven economy has created vulnerabilities never 
before seen.
    New risk require new tools. The Administration has endorsed 
FIRRMA because it embraces four pillars critical for CFIUS 
modernization. First, FIRRMA expands the scope of transactions 
potentially reviewable by CFIUS to include certain nonpassive 
investments, joint ventures, and real estate purchases. These 
changes lie at the very heart of CFIUS modernization. Right now 
we can't review a host of transactions that present identical 
national security concerns to those we can examine.
    Second, FIRRMA allows CFIUS to refine its procedures to 
ensure the process is tailored, efficient, and effective. Only 
where existing authorities like export controls can't resolve 
the risk will CFIUS step in. Third, FIRRMA recognizes that our 
closest allies face similar threats and incentivizes our allies 
to work with us to address those threats.
    Finally, FIRRMA acknowledges that CFIUS must be 
appropriately resourced. Since testifying in the Senate in 
January, I have been meeting regularly with the Members of 
Congress, the business community and other stakeholders to hear 
their views on the bill. While some have proposed changes, all 
agree on an essential point, Congress needs to pass CFIUS in 
one form or another. As a result of these meetings, we have 
been working on proposed technical amendments to address 
jurisdictional gaps while encouraging investment in our 
country.
    There is only one conclusion, CFIUS must be modernized. In 
doing so, we must preserve our longstanding open investment 
policy, we must also protect national security. These twin aims 
transcend party lines and they demand urgent action. I look 
forward to working with the subcommittee to improving and 
advancing FIRRMA. Thank you.
    [The prepared statement of Mr. Tarbert can be found on page 
49 of the appendix.]
    Chairman Barr. Thank you, Secretary Tarbert.
    Now Assistant Secretary Richard Ashooh, you are now 
recognized for 5 minutes.

                STATEMENT OF HON. RICHARD ASHOOH

    Mr. Ashooh. Thank you, Mr. Chairman, and thanks to you and 
Ranking Member Moore and the members of the committee and also 
in particular to the sponsors of FIRRMA for your important 
leadership on this issue. I appreciate the opportunity to 
testify before the subcommittee today on CFIUS and to share the 
perspective of the Department of Commerce in this area both as 
a member of CFIUS and also as an export control agency.
    Within Commerce, the International Trade Administration and 
the Bureau of Industry and Security, or BIS, play important 
roles in the Department's review of CFIUS matters. BIS is the 
administrator of the Export Administration Regulations, or EAR, 
as the regulatory authority for the licensing and enforcement 
of controls on dual use items, which are items that have 
civilian end use but could also be used for a military or 
proliferation related purpose and that also includes less 
sensitive military items.
    The export control system is a process that like CFIUS 
involves multiple agencies, primarily the Departments of 
Defense, Energy, and State. We work closely with these agencies 
to review not only license applications submitted to BIS, but 
also to review and clear any changes to the EAR itself, 
ensuring that the export control system is robust. Further, the 
export control system benefits from close cooperation with our 
international partners through four major, multilateral export 
control regimes focused on national security as well as missile 
technology, nuclear, and chemical weapons' nonproliferation. 
Through these regimes, the United States and our partners 
coordinate on which items and technologies merit control and 
how those controls should be applied.
    The EAR's authority covers an array of in-country transfers 
of technology as well as exports of goods, software, or 
technology to foreign countries. For example, the EAR regulates 
the transfer of controlled technology within the United States 
to foreign nationals under what we call deemed exports. It 
differentiates between countries that range from our closest 
allies to embargoed nations thus allowing the export control 
system to handle technology transfers under different licensing 
review policies depending on the level of concern over the 
recipient country.
    The EAR also includes lists of end users of concern that 
trigger extraordinary licensing requirements as well as 
prohibitions on certain end uses. The export control system is 
also highly adaptable to evolving threats and challenges. BIS 
is currently reviewing control levels and procedures to 
specifically address such threats from adversary nations as 
well as their interest in emerging critical technologies.
    Our export control system includes aggressive enforcement 
capabilities. BIS's special agents are located across the 
United States and overseas with a primary focus on identifying 
violations of the EAR and bringing to justice domestic and 
foreign violators. In fact, just recently BIS, in conjunction 
with other Federal law enforcement agencies, announced 
prosecution against two individuals conspiring to violate 
export control laws by shipping controlled semiconductor 
components to a Chinese company that was under a commerce 
license restriction known as the Entity List.
    The export control system and CFIUS are complementary tools 
that we utilize to protect U.S. national security, with CFIUS 
addressing risks stemming from foreign ownership of companies 
important to national security and export controls dealing with 
the transfer of U.S. goods, software, and technologies to 
foreign nationals regardless of the mode of transfer.
    As with the export control system, it is also crucial that 
CFIUS remain adaptive to current and evolving security 
challenges. The FIRRMA legislation introduced in the House and 
the Senate, if enacted, would take several important steps in 
this direction, especially the provision requiring mandatory 
filings for certain transactions involving foreign government 
controlled entities as well as the provision which would 
facilitate greater cooperation and information sharing with our 
allies and partners. Such international cooperation is an 
essential part of our export control system and would benefit 
CFIUS as well.
    In sum, the export control system and CFIUS are both vital 
authorities and complementary tools that the United States 
relies upon to protect our national security. Strengthening 
CFIUS through FIRRMA, while ensuring that CFIUS and export 
control authorities remain distinct, will enable stronger 
protections of U.S. technology. The Department of Commerce 
looks forward to working with the committee and bill cosponsors 
on this important effort. Thank you and I would be pleased to 
take your questions.
    [The prepared statement of Mr. Ashooh can be found on page 
40 of the appendix.]
    Chairman Barr. Thank you.
    Now Deputy Assistant Secretary Chewning, you are now 
recognized for 5 minutes.

                   STATEMENT OF ERIC CHEWNING

    Mr. Chewning. Thank you. Mr. Chairman, Ranking Member 
Moore, and members of the subcommittee, thank you for the 
invitation to share the Department of Defense's role in CFIUS. 
Protection of our national security innovation base from 
strategic competitors like China and Russia is an increasingly 
important priority of the Department and I appreciate the 
opportunity to speak with you this morning.
    The Defense Department strongly supports modernization of 
the CFIUS process to ensure the interagency committee has the 
authorities required to address the evolving risks to our 
national security. We are thankful for the broad bipartisan 
support for the FIRRMA legislation. To quote Secretary of 
Defense Mattis who stated this Department's position in his 
letter of support, the DOD depends on critical, foundational, 
and emerging technologies to maintain military readiness; 
preserve our technological advantage over potential 
adversaries, FIRRMA would help close related gaps.
    I have spent the last 17 years working at the intersection 
of national security, industry, and finance in both the private 
and public sectors. It is important that this bill not be 
considered an additional regulation on business. Under this 
bill, the United States should and will likely continue to 
welcome the vast majority of foreign investment that does not 
present any threat to our national security. Rather, this bill 
should be considered a whole of Government response to our 
critical national security challenge, an insurance policy on 
the hundreds of billions of dollars per year we invest in our 
own defense industrial base.
    But most importantly, this bill will help safeguard our 
sons and daughters who volunteer to step into harm's way armed 
with the weapons that that industrial base produces. Simply 
put, United States military fights and wins wars through the 
unmatched performance of our men and women in uniform and our 
superior military technology. Knowing this, our competitors are 
aggressively attempting to diminish our technological advantage 
through a multifaceted strategy by targeting and acquiring the 
very technologies that are critical to our military success now 
and in the future.
    China in particular publicly articulates its policy of 
civil-military integration which ties into the intentions for 
it to become the world leader in science and technology and to 
modernize its military in part by strengthening its own defense 
industrial base. While methods like industrial espionage and 
cybertheft are clearly illegal, other approaches including 
technology and business know-how transferred through 
acquisitions of U.S. companies may not be. Acquiring or 
investing in U.S. companies offers an opportunity for our 
competitors to gain access and control over technologies with 
potential military applications, enabling them to create their 
own indigenous capabilities ultimately eroding our 
technological edge and military advantage.
    The current CFIUS authorities are limited to investments 
that would result in a foreign controlling interest. There are 
other transaction types such as certain joint ventures and 
nonpassive, noncontrolling investments that pose national 
security concerns such as technology transfer of critical 
capabilities. Additionally, the purchase of real estate by 
foreign persons provides opportunities to potentially establish 
persistent surveillance near sensitive military sites and this 
would currently fall outside CFIUS' scope to review.
    The Department of Defense does not view CFIUS as a panacea. 
Instead, it is part of a layered defense that can along with 
export controls and other regulatory mechanisms stem the flow 
of critical technologies to our potential adversaries. In order 
to do that, however, CFIUS authorities need to adjust to keep 
pace with the rapid change of technology. Let me add one more 
important point as I conclude my remarks.
    While the Department of Defense believes defensive measures 
like CFIUS modernization are necessary, they alone are not 
sufficient for winning a technology race. We must be proactive 
to ensure we improve our technology and innovation base because 
our future economic security will be a key determinant of our 
national security.
    I would like to close with another statement from Secretary 
Mattis. I strongly support the Foreign Investment Risk Review 
Modernization Act of 2017. The Defense Department continues to 
support foreign investment consistent with protection of 
national security. However, as the national security landscape 
changes, the existing processes and authorities must be 
updated.
    Thank you very much for the opportunity to testify on this 
important topic, and I look forward to working with the 
subcommittee to improve and advance FIRRMA.
    [The prepared statement of Mr. Chewning can be found on 
page 44 of the appendix.]
    Chairman Barr. Thank you all for your testimony, and the 
Chair now recognizes himself for 5 minutes for questioning. I 
will start with you Secretary Tarbert. Thank you again for your 
testimony.
    I recognize that you cannot talk about some of the specific 
circumstances related to the Broadcom Qualcomm decision but, 
generally speaking, does CFIUS currently have and should it 
have the authority to block deals that may not in themselves 
compromise national security but could give an adversary that 
is unrelated to the specific transaction a competitive edge?
    Mr. Tarbert. I think that CFIUS currently is focused solely 
on national security and our view is that it should continue to 
be focused solely on national security. It would depend on the 
various facts and circumstances of the transaction, but if that 
competitive edge had no major national security implications 
then I would say no. CFIUS is focused solely on national 
security.
    Chairman Barr. Obviously the definition of national 
security is really critical in establishing those boundaries 
and those limits. In the case of 5G wireless technology, can 
you just discuss how that does implicate national security 
potentially?
    Mr. Tarbert. I am not sure if I can. I think to be most 
helpful to you, I would recommend a classified briefing on the 
transaction as well the specific national security rationale 
for the transaction.
    Chairman Barr. OK, thank you for that.
    Let me go to Secretary Ashooh. As you discussed in your 
testimony, both CFIUS and the export control systems are vital 
in terms of advancing our national security interests and you 
testified that it is important that remain complementary and 
not overlap unnecessarily as that has the potential to 
overburden the CFIUS process and potentially duplicate the more 
comprehensive coverage of technology transfer under the export 
control system.
    Could you give us your thoughts in terms of the FIRRMA 
legislation, how we can structure reform and make the necessary 
modernization of CFIUS without duplicating your jurisdiction if 
Commerce already has experienced doing this and doing it 
quickly and tailoring controls beyond a single transaction?
    Mr. Ashooh. Thank you, Mr. Chairman. In any situation where 
you are expanding authorities, and by the way I am aware that 
there is an effort underway in the House Foreign Affairs 
Committee to expand and modernize the Export Administration 
Act, so we have a lot of legislating that is necessary. Any 
time you expand in that way you need to make sure that you are 
going to continue the good relationships between authorities 
that have worked so effectively as CFIUS and export controls 
have.
    In this particular case, CFIUS and the export control 
system are both well designed to do different things. CFIUS is 
very well designed to be a transactional review which 
oftentimes is necessary whether or not there is a technology 
transfer issue, whereas the export control system really is not 
focused on particular transactions and in fact is agnostic to 
them. What it does do well is focus on the very specific nature 
of the national security threat from a technology transfer.
    As a participant in both processes, I have the unique 
experience of seeing how they not only work together but 
support each other. As we grow authorities that is where we 
need to make sure that they work as designed.
    Chairman Barr. Assistant Secretary Tarbert, could you also 
offer your views about how we can update CFIUS without 
duplicating the efforts of the export control system?
    Mr. Tarbert. Absolutely, and my colleague is exactly right. 
We view it, we view the regimes as mutually reinforcing. I 
think the JV provision which you may be talking about or 
referring to implicitly, that is meant not to simply be a 
technology transfer provision but it is very specifically meant 
to be a situation where you have what is, in effect, an 
acquisition by another name where someone, a foreign actor, is 
getting the capability of a U.S. business and replicating it 
overseas when they could only get that capability if they had 
otherwise bought the business here in the United States.
    We want to make that distinction clear and I think we have 
some technical amendments that can help clarify that even 
further to ensure there is no unnecessary duplication.
    Chairman Barr. You would contemplate that those technical 
amendments would clarify which joint venture arrangements look 
more like a transaction or a concealed, disguised transaction 
versus those joint ventures that would not be implicated in 
CFIUS jurisdiction.
    Mr. Tarbert. As well as those joint ventures that are 
already subject to specific licensing under other regimes where 
there is adequate and independent authority that is addressing 
them.
    Chairman Barr. Thanks for your assistance on that. My time 
is expired and the Chair now recognizes the Ranking Member, Ms. 
Moore, for 5 minutes.
    Ms. Moore. Thank you so much, Mr. Chairman. Let me thank 
the witnesses once again, and welcome to the committee. I have 
a couple of questions. I would like to, and I indicated this in 
my opening comments that I was concerned about the expanded 
jurisdiction that FIRRMA, that this legislation would require. 
I was wondering if there was any notion about the numbers of 
full-time employees or budgetary authority that you would need 
in order to do an adequate job of the expanded responsibilities 
that are being proposed.
    Mr. Tarbert. I will go first, if I may.
    Ms. Moore. Right.
    Mr. Tarbert. FIRRMA does very specifically address the 
resource issue or acknowledge that there needs to be resources. 
But the other thing before we even get to the resources that 
FIRRMA does is it allows, as I mentioned in my testimony, the 
tailoring to make sure that really what FIRRMA does is it 
acknowledges that CFIUS doesn't need to look at every 
transaction, but we really only want to be focused on those 
transactions that are most likely to raise national security 
concerns.
    Before we can even gauge the amount of resources, I think 
we want to focus on tailoring the bill both on the text itself 
as well in the regulations so the actual transaction--
    Ms. Moore. OK, I get that. But you would have to look at in 
order to tailor it or narrow it, you would still have a much 
broader range of things you were looking at so it would require 
resources.
    Mr. Tarbert. It would, absolutely.
    Ms. Moore. You don't have a number or anything?
    Mr. Tarbert. We are working on that now, but I think we--
    Ms. Moore. Anybody else have any notion of some concrete 
number of employees or departments or offices that would have 
to be created?
    Mr. Ashooh. We are certainly trying to do some thoughtful 
planning. But it is important to reiterate that CFIUS, right 
now the caseload is at a historic high and so we are actively 
seeking resources to meet the current challenges that we are 
facing.
    Ms. Moore. Exactly, because sometimes you have to ask 
people to restart the application process, redo it in order to 
give yourselves more than that 30-day time. My time is waning, 
so let me move on.
    You say, I think it was Mr. Ashooh, you talked about real 
estate transactions, something other than intellectual property 
and sensitive technology, you brought in real estate 
transactions. I am concerned about real estate and the 
transactions that are done anonymously through shell 
corporations and I am thinking now of course of Trump Tower 
where we have numbers of Russians and Chinese that are buying 
real estate and I am wondering if these are the kinds of 
transactions that would trigger a review.
    Mr. Ashooh. It was not I that mentioned the real estate 
provision so I may defer to my colleague from Defense, but I do 
believe that is an important provision. There has certainly 
been in my experience a gap in CFIUS's authorities to be able 
to address real estate transactions that could pose an 
opportunity for nations who would appropriate our technology to 
perform intel activities. But I will ask DOD to reinforce.
    Mr. Chewning. Yes. No, and I think just to use a 
hypothetical situation, if there was a piece of real estate 
outside of Joint Base McChord and it didn't have a business on 
it, right now somebody could go ahead and buy that if it was 
just real estate and potentially set up a surveillance 
operation to surveil what is going on on the post. If it had a 
lemonade stand on it, it would constitute a business so it 
would potentially come under current CFIUS jurisdiction.
    I think as we are thinking about the need for modernizing 
CFIUS it is just like let's look at raw real estate purchases 
next to military installations.
    Ms. Moore. We have seen, for example, just reported in the 
news recently President Abe in Japan, bought real estate that 
belonged to the Kushners and it is just sitting there doing 
nothing. Would that generate some review where there is no 
activity in an investment?
    Mr. Chewning. The way we approach CFIUS cases now centered 
around what we call risk-based analysis has three parts--
threat, vulnerability, and consequence--so transactions are 
viewed along that lens.
    Ms. Moore. OK. All right, well, thank you very much and I 
yield back.
    Chairman Barr. The gentlelady yields back.
    The Chair recognizes the Vice Chairman of the subcommittee, 
Mr. Williams from Texas.
    Mr. Williams. Mr. Chairman, thank you for your leadership 
on this important issue and to all the witnesses thank you for 
your testimony this morning and for your committed service to 
the American people.
    Foreign investment in the United States touched each and 
every American in one way or another and I represent an 
extremely diverse district with one of the Nation's premier 
military installations, Fort Hood. I represent a booming 
technology and a welcoming business environment. These factors 
are all reasons why it pays to do business in Texas, as I like 
to tell people, and certainly in our District 25.
    The pervasiveness of Chinese influence is growing. As we 
continue to discuss CFIUS reform we must be committed to 
finding the right solutions, so such an important tool cannot 
be left to chance and we must ensure that we do our due 
diligence. I look forward to your responses this morning; 
appreciate the ones you have given us in the past.
    Secretary Chewning, I just want to continue to talk a 
little bit about, as I said, I represent Fort Hood, one of the 
largest military installations in the world. As you are aware, 
wind energy and foreign energy investment around our Texas 
bases has been an ongoing point of discussion for several years 
and it is my hope that any policy change is in the best 
interest of soldiers and their families in my district.
    Some CFIUS observers believe that purchase of real estate 
which we have been talking about near military bases or other 
sensitive locations is not a transaction CFIUS can review. My 
question would be, according to a 2016 GAO (Government 
Accountability Office) report DOD has made limited progress in 
conducting risk assessments on foreign encroachment on military 
bases so how can CFIUS effectively review real estate 
transactions near such sites if you have not implemented GAO's 
accounting recommendations?
    Mr. Chewning. Thank you for the question, Congressman. I 
spent time at Fort Hood, in my time in the Army, so I 
appreciate the beautiful hill country there and the concerns 
you have outlined. We are working on looking at that issue here 
specifically. It hearkens back to a couple of other questions 
around resources, hypothetically around how we can improve what 
we are doing isn't just additional resources but it is process 
improvements.
    For example, if there were a transaction that would involve 
a change of control that has, let's say, 1,400 different 
subsidiaries in the United States, right now we have to go 
request the information for all those different locations, 
physically have an analyst go input those addresses, identify 
the locations, and then cross-queue them against military 
installations. As you might imagine that is a very time-
intensive effort.
    What we would like to do is move to a model where that can 
be automated where we would require geolocation information to 
be provided that then we could very quickly do that through a 
larger technology solution set. Ideas like that in addition to 
the ability to cover a broader set of transactions are how we 
plan on balancing.
    Mr. Williams. OK, thank you.
    Secretary Tarbert, good to see you. In the subcommittee's 
oversight hearings we have consistently heard that the CFIUS 
resources are stretched thin. Again we have talked a little bit 
about that. The caseload has reached record highs due to 
enhanced scrutiny and the increased complexity of deals. Do you 
believe that CFIUS is sufficiently resourced to each of its 
member agencies and, if not, how does the present Fiscal Year 
2019 budget allow CFIUS needs to be fully funded?
    Mr. Tarbert. I can't speak for the other agencies in the 
committee but I can speak for Treasury. Right now we have 
resources available to meet the statutory obligations and we 
are meeting the statutory obligations. That said, our people 
who are absolutely top-notch are working long, hard hours and 
so we are committed to making sure that there is adequate 
resources there.
    CFIUS at Treasury does not have a specific line item, but 
we are part of the departmental offices and so one of the 
things we are looking at is ensuring that all departmental 
offices meet their obligations and that could mean shifting 
resources inside of Treasury to ensure that CFIUS has what it 
needs. It is a big priority to the secretary.
    Mr. Williams. Thank you. Another question for you, Mr. 
Secretary, is some proposals to modernize CFIUS could increase 
the time a case could be examined by the committee by nearly 
half at a time when companies are grumbling the committee 
already takes far longer to complete its work than the 
statutory 75 days.
    Could you please advise us on the balance between the 
necessary time for adequate review and the point of which a 
review just takes too long, recognizing that the review has to 
have adequate time to be done correctly? Is there a danger that 
at some point investors just throw up their hands and invest 
elsewhere?
    Mr. Tarbert. Thanks for that question. The number one thing 
as you said is making sure we actually have adequate time to do 
the national security review. I actually think with the changes 
that FIRRMA is bringing the average case time, particularly for 
those cases that can be cleared more easily, will be shortened. 
Two reasons for that, one is the review period will be 
lengthened by 15 days. But, paradoxically, I think it will 
actually shorten the period because right now we have a lot of 
cases that normally would be cleared in 30 days that are 
getting kicked to the 75 days. By making it 45 days I think we 
will be able to clear a lot more, quicker.
    Also there is the declarations provision in there which 
allows short form filings for those cases that can more easily 
be put through and again I think that will also shorten the 
time. Finally, I would mention that many of our other countries 
that have similar security screening programs are much longer 
than ours than even now and even what they potentially could be 
at the longest under FIRRMA.
    Mr. Williams. Thank you for your testimony. I yield back.
    Chairman Barr. The gentleman yields back.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks.
    Mr. Meeks. Thank you, Mr. Chairman. Thank you for your 
testimony. Thank you for being here today. Let me ask a 
question. Historically, the CFIUS analysis always focused 
primarily on, and I guess what you are talking about when you 
said, national security and now I think what you are also 
saying that we need to expand the concern, expand CFIUS, its 
role. I think the Chairman asked a question and where I am 
getting confused, if we are going to expand CFIUS' role 
shouldn't we have a clear definition of what is national 
security or its national security mandate, because otherwise we 
create uncertainty for companies, for both U.S. companies and 
foreign companies, and that could have a negative economic 
impact here in the United States when it comes to foreign 
direct investments of trade and outbound transactions? My 
question is can you clarify then what is national security 
because it seems like we are just broadening what CFIUS is.
    Mr. Tarbert. Thank you. Just to be clear, I think for the 
most part FIRRMA is not trying to broaden the definition of 
national security but simply broaden the types of transactions 
that are potentially reviewable. The statute lists a number of 
factors that constitute national security and we want to make 
sure they are clear. At the same time, I guess national 
security concerns are changing over time so we would want some 
flexibility to keep up with new national security threats.
    That said, our concept of national security is based 
ultimately on a national security threat assessment by the 
intelligence community which also feeds into the Defense 
Department's input. It is certainly not any economic benefits 
test or anything of that nature. I yield to my colleague at the 
Defense Department to maybe offer some more points on that.
    Mr. Chewning. If I might, I think that is right. At the 
heart of CFIUS is the RBA, the risk-based assessment. We think 
about it in terms of the threat, vulnerability, and 
consequences, that the threat piece is informed by a national 
intelligence estimate from the intelligence community, and then 
there is dialog on the committee about how to think about what 
that means, what the potential implications are based on our 
various stakeholders.
    Within the Department of Defense I represent 33 different 
equity holders who may have a concern with a particular 
transaction and what I personally appreciate about the process 
is there is a discussion around those three elements. For a 
case to go to the President there has, thus far, always been 
consensus around that.
    Mr. Meeks. All right. My concern just is that I was 
thinking if there are enough controls currently to prevent 
CFIUS from misusing its authority to thwart transactions for 
reasons that may be loosely associated with national security 
so for other reasons, and it should be tight.
    But I am running out of time. I have another question I 
just want to ask Mr. Tarbert. For decades, the United States 
has issued a formal open investment policy statement clearly 
articulating that it is open for foreign direct investment and 
recognizes the contributions that these investments bring. 
However, the Administration, the current Administration, has 
yet to do so.
    With 232 tariffs and recent CFIUS action it is time that I 
think we should reassure the world that we are indeed open for 
business and want global companies to locate here. As you 
mentioned, the Administration's commitment to an open 
investment policy, is the Administration going to formally 
issue a statement as has been done for decades?
    Mr. Tarbert. That is obviously a question for the White 
House and the President, but we do support an open investment 
policy. In the endorsement of FIRRMA that came out from the 
White House there was a specific statement about it, open 
investment policy.
    Mr. Meeks. I just asked because you said, and I haven't 
heard it, haven't happened yet, and I know in talking to some 
of our companies both ways they are waiting for the statement 
from this Administration. They are concerned when we hear the 
way the Administration is moving with regards to the tariff 
issue.
    The other concern that I have, because whether we like it 
or not our economy is global and there is no way of putting 
that genie back in the box as the way many folks would like to, 
it is a global economy. Countries can put forth policies to 
protect their companies from globalization but those countries, 
I believe, will do so at their own peril.
    Considering that many U.S. companies are in fact 
international in scope, do you have any concerns that CFIUS', 
or if CFIUS' overreach can disadvantage U.S. companies by 
limiting their access to non-U.S. technologies and could this 
encourage the offshoring of research and development?
    Mr. Ashooh?
    Mr. Ashooh. I am happy to respond. Thank you for the 
question. Certainly from an export control perspective, and 
again this is why export controls and CFIUS need to work well 
together, we want to be as narrowly focused on what we control 
so that the things we don't control can be free to be traded 
and commercialized. That is the primary precept of what informs 
us as we go forward not only in reviewing how we need to 
address emerging threats, but also expanding FIRRMA.
    There is no question that there are advantages to having a 
system, and by that I mean advantages to companies and 
innovators to do that work here under a system, that does 
protect technology that is developed here. We believe it is a 
reassuring state of affairs when we are prepared to protect 
that technology.
    Chairman Barr. The gentleman's time has expired.
    The Chair would now recognize the gentleman from Oklahoma, 
Mr. Lucas.
    Mr. Lucas. Thank you, Mr. Chairman, and I appreciate you 
holding this hearing as we continue to look at the CFIUS reform 
process. Just so the panel is aware, I represent a region that 
is heavy in the oil and gas industry and thus would like to 
discuss with the panel how CFIUS deals with the purchase of 
energy assets.
    First off, I will note for our witnesses the currently, 
nearly 30 percent of the U.S. refining capacity is foreign 
owned and I don't just mean the owners are foreign, but in this 
situation, in this instance, most such owners are state-owned 
or state-sponsored enterprises. My concern about this should be 
obvious. These are primary assets that have a large effect on 
the American economy and yet they are in the hands of foreign 
state-owned enterprises. In addition, often foreign owners 
refit their refineries to match their own product making it 
harder to refine oil and gas extracted in the United States.
    I want to make sure these transactions are accounted for as 
a part of the CFIUS reform act. One complication, however, is 
that such transactions are increasingly complicated which makes 
CFIUS review harder. For example, in order to get a loan from 
Russia it appears that Venezuela put up energy infrastructure 
in the United States as collateral. Imagine the consequences of 
that, the Russians being able to expand their ownership of 
critical energy infrastructure in the event of a default 
without a public transaction. I would note also that Saudi 
Aramco not only attempted to purchase a major facility in Port 
Arthur, Texas in recent memory, but is currently the owner of 
one of the largest refining facilities in the country after 
dividing up a joint venture.
    Number one, Mr. Chewning, as an initial matter, do you 
think it would be fair to characterize refineries and pipelines 
as critical assets?
    Mr. Chewning. Thank you, Congressman, and we agree with 
you. It is complicated, which is why the need for both CFIUS 
and export controls is necessary as an interlocking defensive 
system. To your question specifically, we would evaluate that 
transaction through the same lens of what is the threat, the 
vulnerability, and the consequence. If the critical 
infrastructure at the time, given who the potential buyer would 
be, was evaluated as a potential threat to national security 
then we would, and then we would want to look at it and have a 
conversation on the committee.
    Mr. Lucas. In particular, if the enterprise, the 
transaction involved a state-owned entity it most assuredly 
would get that review, I would hope.
    Mr. Chewning. I think that the view on what that threat and 
the potential vulnerability would probably determine the nature 
of who the state owner was.
    Mr. Lucas. Mr. Chairman, I also want to point out for 
everyone here that this is a real concern for the booming and 
very successful energy industry in the United States. We are on 
a path to being a net energy exporter in only a couple years. 
We were net energy exporters until, I believe, 1958 in 
particular in crude oil. Energy independence depends on being 
able to maintain our assets and our place.
    One other question while I am on the topic, and I would 
turn to Mr. Ashooh for this, explain to us in general terms, 
and anyone on the panel who would care to follow up I would 
appreciate that, how do you make the distinction under present 
law or the proposed law about how we deal with technology when, 
say, on one hand it might involve older, more widely available 
technology; on the other hand cutting-edge technology, things--
we don't care about who can make a vacuum tube anymore, but 
once upon a time it mattered. How do you sort out the 
difference between new and old, what is relevant and what is 
not relevant? Thumbnail sketch, if you would.
    Mr. Ashooh. Well, thank you. That is core to what we do at 
the Bureau of Industry and Security. We are constantly 
reviewing the commerce control list which is where the things 
we are concerned about go and the things that we are not 
concerned about, the vacuum tubes, are removed from. To my 
earlier point so that we are not over controlling and focus 
instead on the things that are a threat, we do that through 
several ways. One important way is certainly the BIS staff, 
which includes scientists and engineers and subject matter 
experts, which again also provide their expertise in the CFIUS 
process.
    But then, second, we deeply rely on technical advisory 
committees which draw from private sector subject matter 
experts because that is where the new technology is coming from 
and we actively engage them through these technical advisory 
committees to help us sort out that very question.
    The final point, I would say, is those technical advisory 
committees also have robust interagency participation so we 
routinely have Department of Defense, Department of Energy, and 
other representatives there so that they are also able to 
understand from that subject matter expert domain what matters 
and what doesn't.
    Mr. Lucas. Because, after all, we only want to protect the 
things that must be protected. We don't want to broad brush 
resources, assets, technology that really doesn't make a 
difference in our day-to-day existence.
    Mr. Ashooh. Exactly, sir. Exactly.
    Mr. Lucas. Thank you. I yield back, Mr. Chairman.
    Chairman Barr. Thank you. The gentleman yields back.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green.
    Mr. Green. Thank you, Mr. Chairman. I thank the witnesses 
for appearing, I thank the Ranking Member as well, and of 
course I thank the members who have been working on the 
legislation.
    Let's take a hypothetical situation. Let's assume that we 
have as President a billionaire who has worldwide investments, 
any resemblance is just coincidental, and let's assume that his 
worldwide investments are huge. With this as a possible 
possibility, can you give me an example of when these worldwide 
investments might become of concern to CFIUS?
    Yes, sir?
    Mr. Tarbert. Thank you. I am not sure if we can provide a 
specific example, but--
    Mr. Green. No, no. Not a specific example that relates to 
anything that is in fact in existence, just give me an example 
of when a worldwide investment would become of concern.
    Mr. Tarbert. It might be helpful to give you the analysis 
that we would go through.
    Mr. Green. I would really prefer an example. Just give me 
an example of when a worldwide investment, one of them, a 
billionaire president, there has to be a circumstance when one 
of those investments could become of concern. Just give me an 
example. It doesn't have to relate to anyone. This is a 
hypothetical.
    Mr. Tarbert. I am not sure. Every--
    Mr. Green. You can think of no example of when that would 
become of concern to CFIUS?
    Mr. Tarbert. I am sure there are instances when potentially 
some type of transaction--
    Mr. Green. Give me an example.
    Mr. Tarbert. --depending on the specific--
    Mr. Green. Well, just give me an example.
    Mr. Chewning. A billionaire, multinational person, Bruce 
Wayne as an example--
    Mr. Green. OK. I am good with that.
    Mr. Chewning. If Bruce Wayne owned a defense company, if 
that defense company--
    Mr. Green. He is president, go ahead.
    Mr. Chewning. No. If that defense company--
    Mr. Green. In my example he is.
    Mr. Chewning. If that defense company was acquired by a 
non, if a non-U.S. entity wanted to make a controlling interest 
in that defense company that would fall under CFIUS review.
    Mr. Green. Well, let's take another possible example. Let's 
assume that this billionaire's son-in-law met with some foreign 
investors at the White House. Let's assume that after that 
there was an offer to finance a piece of property that this 
son-in-law who is an investor had. By the way this is a 
hypothetical. If we took a real case someone might say well, 
that never happened so it didn't happen, but would CFIUS be 
concerned?
    Mr. Tarbert. If the case was filed before CFIUS?
    Mr. Green. Yes.
    Mr. Tarbert. National--yes.
    Mr. Green. Would you be concerned?
    Mr. Tarbert. The intelligence community would perform a 
national security threat analysis that would involve looking at 
the individuals who purchased the property, their potential 
intentions and capabilities as well as the vulnerabilities in 
the property itself and that would yield the committee's 
analysis.
    Mr. Green. Given that there are circumstances where you 
would be concerned, would it be a benefit to know what this 
hypothetical billionaire investment actually has invested in on 
a worldwide scope?
    Mr. Ashooh. Sir, I might jump in to say this is, you are 
making actually an argument of why FIRRMA is important because 
right now the way CFIUS works is it is a voluntary filing 
system. Under certain conditions under FIRRMA there would be 
more mandatory filings and that would certainly allow CFIUS to 
increase its scope into transactions, in particular complicated 
ones. There are a number of ways that CFIUS is not able to 
review transactions because of the complicated nature of the 
investments and FIRRMA would approve our ability to do that.
    Mr. Green. I thank you for that indication because I am 
concerned about investments that are worldwide that we may not 
have knowledge of because this billionaire who happens to be 
President doesn't share a lot of intelligence with us and 
ultimately makes a lot of decisions about investments that may 
conflict with what he is doing. I think Mr. Trump ought to be 
scrutinized a bit closer and I hope that this legislation will 
help us do that. I yield back.
    Chairman Barr. The gentleman yields back. The Chair 
recognizes an author of FIRRMA, the gentleman from North 
Carolina, Mr. Pittenger.
    Mr. Pittenger. Thank you, Mr. Chairman, and again thanks to 
the panelists. Considering the public statements of our 
adversaries, competitive adversaries, particularly President 
Xi, can we afford to delay CFIUS any longer even 6 months? What 
is the impact of their aggressive interest to acquire our 
intelligence and our technology?
    Mr. Chewning. Congressman, I don't believe we can delay 6 
months. We are very concerned about erosion of our 
technological advantage.
    Mr. Ashooh. Sir, and I would add, and I assume you mean 
FIRRMA, a delay in--
    Mr. Pittenger. Yes.
    Mr. Ashooh. I would quote the Secretary of Commerce who 
essentially said, ``a delay, any day that we delay is an 
additional day of risk.''
    Mr. Tarbert. As I said in my testimony I believe it demands 
urgent action.
    Mr. Pittenger. Thank you. For clarification, would you 
kindly tell us the distinctions between CFIUS and export 
control? I want to be real clear if updating export control 
alone would that solve the gaps that we have identified? Dispel 
the rumor, if you would, please, that CFIUS and export controls 
are competing functions.
    Mr. Ashooh. Sir, I would be happy to and I thank you for 
the question because it is an important one. CFIUS is a tool 
many people understand. Foreign transaction, it is relatively 
easy to understand, export control system is not. As one who 
again participates in both processes and in my private life was 
part of a company that was, if you will, CFIUS, I have a 
perspective from several angles and I can tell you that both 
systems are essential. Both systems not only should, but must 
support each other because they bring different strengths to 
the table.
    As far as one against the other, the threats that we are 
dealing with--and I took on this role approximately 6 months 
ago and since that day I have been dealing day in and day out 
with the threats you mention--we cannot do it with one 
authority alone. We need several. Both the export control 
system and CFIUS need to be adaptable to this wave of threats 
that we are experiencing. I have said it before, but I am 
grateful for your leadership on this issue because it is 
needed.
    Mr. Pittenger. Thank you.
    Secretary Talbert, the current CFIUS process, do you 
believe it is an overwhelming burden to foreign direct 
investment and will the FIRRMA bill make it an overwhelming 
burden, overall, do you believe, to FDI?
    Mr. Tarbert. Not at all. There is no evidence to suggest 
that America is anything other than a preeminent destination 
for investors and I believe the FIRRMA bill will not change 
that if not enhance that. Having represented foreign investors 
over the last decade in private practice, one of the things 
that investors look for is a country that protects its national 
security. I think that stronger protections on our own national 
security make America an even better investment environment.
    Also some of the specific things that you have in the 
FIRRMA bill to help speed up that process, to have declarations 
for those repeat players and things that don't necessarily need 
to go through the full notice, will only make investment 
easier.
    Mr. Pittenger. Yes. In this bill which is not included in 
the current FIRRMA we have a process for a good guys list for 
our countries who adapt the same type of oversight. Would you 
clarify how that is really going to open up greater foreign 
direct investment and make it even more accessible?
    Mr. Tarbert. Yes. I think it is absolutely critical because 
many of our allies--there was just a newspaper, I think, in the 
Financial Times this morning about how Germany is facing 
similar risks that we are.
    To really be effective CFIUS has to be investment screening 
the same as our allies. The thought is that if our allies are 
protecting their investments, we are protecting our 
investments, and they meet specific criteria that is in our 
national security, we could potentially exempt some of those 
investments as well to help facilitate greater investment.
    Mr. Pittenger. Secretary Chewning, just to close out, 
clarify for us the national security risk that we will face if 
we do not update CFIUS.
    Mr. Chewning. Thank you, Congressman. We face the loss of 
our technological edge. Just to underline how important this 
is, the last time we lost a U.S. soldier or marine on the 
ground to enemy air fire was 1953. For the last 60 years, the 
United States has enjoyed complete air dominance because we 
have great people flying that aircraft and we have great 
aircraft and CFIUS is an important part of maintaining that 
technological advantage that enables our defense industrial 
base to produce that type of decisive lead.
    Mr. Pittenger. Thank you, sir. I yield back.
    Chairman Barr. The gentleman yields back. The Chair now 
recognizes the gentleman from Washington, another valuable 
contributor to the reform effort, Mr. Heck.
    Mr. Heck. Thank you, Mr. Chairman. Indeed I want to 
reiterate my expression of gratitude to you for the manner in 
which you have undertaken this subject in the subcommittee. I 
am very appreciative. I was sorely tempted to initially begin 
my questioning with asking you all to reiterate the urgency 
surrounding the need to modernize CFIUS, but you guys have 
really done a good job and I thank you for that. I am just not 
sure that it can be stated too often that there is an urgent 
need here and the threats we are talking about aren't 
hypothetical in any way, shape, or form. Thank you for your 
testimony today.
    Instead, I think I want to get back to this issue of the 
relationship between export control system and the need for a 
modernized CFIUS regime. Some have suggested that if we update 
or modernize the export control system that that would abrogate 
or mitigate the need to update CFIUS. You all have talked about 
how these things really need to work together. Let's be clear 
on this point. Assume we update export control system, what is 
the gap if we don't also modernize CFIUS? Be as specific as 
possible. Why is it important that we do both, and if we don't, 
what have we exposed ourselves to? Secretary Tarbert, why don't 
we start with you, sir.
    Mr. Tarbert. Sure. Well, first of all, our jurisdiction 
hasn't been revisited in 30 years and so we have pointed out 
the jurisdictional gaps. Several of those jurisdictional gaps 
have nothing to do with export controls, the real estate 
provision, for example, next to U.S. military installations, 
the nonpassive, noncontrol investments.
    The only provision that I think gets to the export controls 
issue is the so-called joint venture where you are depositing 
intellectual property with associated support. As I mentioned 
before that is something that is very distinct from export 
controls. I think strengthening export controls in our view is 
very important. It helps CFIUS. But not addressing CFIUS and 
modernizing it not only, in my view, will not help CFIUS but it 
could also undermine export controls.
    Mr. Ashooh. Sir, thank you again for the important 
question. One additional gap that would be represented, it 
exists right now, as I stated earlier the export control 
system, one of its strengths is our ability to work with 
partner nations. When we agree over a certain technology that 
we are going to deny to what we consider to be a common 
adversary, that is far more potent a solution than just a 
unilateral control on something we are concerned about.
    Well, the same dynamic could apply on CFIUS and it does not 
now. We are limited to working with partner nations, many of 
whom if they don't already are coming up with a CFIUS-like 
process. That is an area that I believe would certainly enhance 
our CFIUS process in the way that the export control systems 
work well.
    Mr. Chewning. Congressman, I tend to think of them as a 
first line and second line of defense. Export controls, both 
ITAR and EAR, are the first line of defense. We have a list of 
technologies, we control the list of the technologies about who 
can access that. CFIUS is our backstop. If something gets 
through whether it is a real estate transaction, whether it is 
actual transition of capability for the replication of an 
industrial capability in a competitor state as opposed to just 
the technology, whether it is our ability to identify something 
that should have been on the list but wasn't, CFIUS helps us 
inform what that could look like. There is interaction there.
    You have to think about CFIUS as our backstop. I think the 
other point I would make is a keen difference between CFIUS and 
export controls is you can mitigate transactions through CFIUS. 
You can't necessarily do that with export controls. I think our 
ability to mitigate transactions is also something that is a 
very powerful tool.
    Mr. Heck. Thank you. In my time remaining, Secretary 
Tarbert, I want to deal with this elephant in the room, get 
back to something that Congressman Meeks talked about which is 
the concern some have expressed to be blunt that someone might 
block a transaction for either political reasons or for 
protectionist reasons as opposed to the national security 
reasons. Can you briefly summarize why it is you do not think 
that concern is valid?
    Mr. Tarbert. Yes. There is a statutory and a regulatory 
process that is focused on national security and there are a 
number of steps that are taken every single transaction that 
CFIUS reviews. There is a national security threat assessment 
made by the intelligence community that is then supplemented by 
a risk-based analysis which involves all the CFIUS agencies 
again focused on the specific national security factors laid 
out in the statute. Only then is a recommendation made to clear 
or potentially present it to the President.
    There is a documented process that focuses on national 
security and, moreover, under FIRRMA Congress has the ability 
to request a classified briefing. If there is a transaction 
where Congress is not sure, well, what was the actual 
rationale, obviously we can't talk publicly about the rationale 
in pretty much all cases because of classification, but then 
Congress has the ability to look at it and to provide that 
extra check on the process.
    Mr. Heck. Thank you, sir.
    Chairman Barr. The gentleman's time is expired. The Chair 
now recognizes the gentleman from Arkansas, Mr. Hill.
    Mr. Hill. I thank the Chairman. I thank the Ranking Member. 
I appreciate the opportunity to follow up on Mr. Pittenger's 
good work here in the House and Mr. Cornyn's good work in the 
Senate. There is no doubt that with the changing strategies by 
our adversaries in finance and economics that CFIUS has to 
catch up with that and be very clear and intentional in how our 
review process is done and also not burden the committee's 
efforts to the point of too much congestion, because you are 
asking for a very broad increase in the types of transactions 
that you will review. I hope that Congress is well aware of the 
staffing that you need in order to adequately do that work 
should this proposal become law.
    I also have said before on this topic, no doubt America for 
60 years has led the world in market development, transparency, 
global trade, and at the same time carefully protected things 
that we consider integral to our intelligence and security 
requirements. With that said, I want to bring up this recent 
transaction on Broadcom Qualcomm because I think this is an 
issue where we have to be very clear. You have said Congress 
can request a classified brief and all this, we have to be very 
clear about why something is in the national security interest 
as we look at each of these transactions. Since that one is in 
the news now, it gives me a chance to talk about something that 
was in the letter regarding it.
    In the Department's concern list it said that Broadcom 
could take a, quote, ``private equity style direction if it 
acquired Qualcomm, which means reducing long-term investment 
such as R&D and focusing only on short-term profitability,'' 
close quote. That sounds more like an opinion to me and 
indicting a business strategy or a business model rather than 
the national security concerns.
    Should Congress be suspect of private equity investors from 
a national security point of view? Who wants to tackle that? 
Sir?
    Mr. Tarbert. I will tackle it. The answer is not at all. 
Every transaction goes through the specific analysis. I would 
encourage everyone not to read anything other than the 
particulars of the transaction as to the specific and I would 
also encourage you to undertake the classified briefing, 
because then it will put everything into much greater context. 
But what I will say is that we regularly clear private equity 
transactions and I don't suspect that would change.
    Mr. Hill. Right. Well, I think that is important because 
business people, you are right. This right now is a voluntary 
submission to the committee for review and we want that as 
clear and transparent and easy for those companies and their 
lawyers to anticipate this so that we do maintain that 
international flow of goods and services where America is a 
leader and not bog down transactions that don't deserve it.
    When people see a business model question, you can imagine 
the lawyers at your former employer's asking, oh my gosh, we 
have to do a CFIUS review, or are we micromanaging the private 
sector by this, because you are going to broaden your reach. I 
think those are things that as we talk about the exact language 
in the bill we need to be sensitive to that and certainly the 
report language and the direction to the Executive Branch what 
we mean in Congress, let's be clear and intentional about what 
we mean in Congress.
    I love the joint venture addition. I think that has been a 
loophole for a long time. I like the intellectual property 
licensing piece. I like the careful scrutiny of subsidiaries 
that are in other countries that have a different ownership. I 
think those are all improvements. But when you think about 
joint ventures like a code sharing arrangement in airlines and 
things like that clearly with national carriers out there they 
are in countries that are not necessarily always in favor with 
the U.S. Government.
    Can you reflect on that subject when it is, I guess that is 
a joint venture. It is certainly a memorandum of understanding 
to share revenue on passengers. But talk about a little bit 
like that where it is very open. These are for the most part 
public companies in the United States who are entering into 
those. What is your--
    Mr. Tarbert. Sure. I will be happy to address it.
    First of all, I think that the joint venture provision 
right now in FIRRMA is pretty clear. It requires the depositing 
of intellectual property along with associated support. In many 
joint ventures that don't have anything to do with intellectual 
property they wouldn't be brought into this. Second, we have 
been meeting with industry groups as I mentioned, other 
stakeholders, Members of Congress, to make sure that this 
provision is narrowed through technical amendments to get at 
those transactions that are really most likely to raise 
national security issues.
    Mr. Hill. Well, we appreciate your service to the country 
in protecting the national security and intelligence assets of 
our private sector and public sector, and thanks for the 
opportunity, Mr. Chairman.
    Chairman Barr. Thank you. The gentleman's time is expired. 
The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. I have so many questions that a lot of them 
will have to be questions for the record. The first is if you 
could tell us what is the cost of the CFIUS process both in 
terms of the direct cost, the budget of the agencies you 
represent, and then some estimate of the indirect costs. The 
intel community of course does an awful lot of work to support 
what you do. Then this Congress would have to evaluate whether 
it is appropriate that the taxpayer pay for the costs caused by 
businesses that choose to merge or engage in other acquisition 
transactions or whether those costs should instead be borne by 
the businesses whose actions are under review.
    The second question for review is we already have a 
requirement that we look in cases involving government 
controlled entities whether the foreign country's record on 
cooperating in counterterrorism efforts is what we would like 
to see. The problem with that is for most of those with bad 
participation with us in counterterrorism, they don't have our 
model of separation between business on the one hand and the 
government on the other. To say that a business in Iran or 
China is independent to the government is to cast upon their 
society our legal system. I hope I will convince my colleagues 
that we should look at these factors based on where the company 
is based whether or not it claims to be independent of the 
government.
    I want to focus on the media. The question is whether 
national security should include control of the most important 
element of soft power, what people hear and see. We already 
have China exercising control over our studios by their system, 
and this is outside the scope of this hearing, of only allowing 
35 or so movies into China. Every studio has to figure out how 
they can kiss something in Beijing so that maybe they get five 
or eight of their movies into the Chinese market.
    No one is going to make a movie about Tibet. Not only will 
that movie not be shown in China, but none of your other movies 
are going to be shown in China. But it goes worse. CFIUS 
allowed, and I guess that is because of the statute as much as 
anything else, AMC Theaters to be controlled by a Chinese 
enterprise. Even if you could make a movie about Tibet and not 
worry about your Chinese revenue, who is going to show it, how 
is that going to pencil out if one-third or one-quarter or one-
eighth of the movie screens in the country are not allowed?
    Let me ask, do we have a statute adequate to prevent 
foreign entities from controlling our media either by being in 
physical control like owning the studio or being in a position 
where they can turn on or off the studio's profits so as to 
thereby exercise soft power over our soft power?
    I don't know who it is--Mr. Tarbert?
    Mr. Tarbert. I don't believe we have a specific statute 
that would forbid that. As far as CFIUS goes, so we review 
foreign acquisitions of U.S. companies where there is control. 
In the national security threat assessment, the intelligence 
community would do an analysis of what are the intentions of 
the foreign acquirer and capabilities and conceivably, if there 
was a specific intention to utilize media for propaganda 
purposes or other things to undermine our national security 
that would be something that would no doubt be analyzed.
    Mr. Sherman. Let me move on to one more question and then I 
will have even more questions for the record that will just be 
for the record.
    Keeping jobs in the United States is not explicitly part of 
CFIUS' mandate, but our industrial base is critical as one of 
our witnesses pointed out. We haven't been hit on the ground 
from the air since 1953 for a reason and that is our industrial 
base. If we lose the factories we lose the know-how, we lose 
the industrial base. I will ask all three panelists, does 
anyone here disagree that we should take into account how a 
foreign investment can result in the loss of American jobs 
especially when outsourcing means our industrial base and our 
knowledge goes overseas?
    Mr. Chewning. I am happy to take a first cut at it. Under 
FISMA, or the statute in 2007, loss of critical production 
capability with an adverse impact on national security is one 
of the factors we are to look at and so access to critical 
capability within our own domestic industrial base typically 
would warrant concern.
    Mr. Sherman. But jobs are not--
    Mr. Chewning. It would depend on the context of the jobs. 
Just any job not necessarily, a job that would create a 
national security concern, would.
    Mr. Sherman. Let's hear from the other witnesses.
    Mr. Ashooh. Yes, sir, if I might chime in. This is where 
the value of the interagency nature of CFIUS really, really 
comes home. Because in addition to as you have heard me go on 
about the export controls system, one of the other authorities 
that Commerce holds is management of the Defense Priorities & 
Allocation System, which is essentially a review of our 
industrial, defense industrial base to make sure that it is not 
only adequate but ready. That is a sensibility that we bring 
into CFIUS transactions.
    Chairman Barr. The gentleman's time is expired.
    Without objection, the gentleman from California, Mr. 
Royce, is permitted to participate in today's subcommittee 
hearing. Mr. Royce is a member of the Financial Services 
Committee and chairman of the House Foreign Affairs Committee 
with jurisdiction over the export controls system and we 
appreciate his interest in this important topic also as the 
author of the Export Control Reform Act of 2018.
    Mr. Royce. Thank you very much, Mr. Chairman. I thank the 
panel for being here. As we have heard today, export controls 
and CFIUS have different, independently important, and 
complementary responsibilities. I think U.S. technological 
leadership is going to be essential. Personally, I am a little 
chagrined that we didn't have higher standards a long time ago 
with respect to chip manufacturers in terms of the security 
aspect of that and the reliability of that and I think that our 
leadership with respect to emerging and foundational 
technologies are absolutely essential to our long-term view as 
national security concerns here.
    My view is that the U.S. should pursue a whole of 
Government strategy that does not rely exclusively on CFIUS or 
exclusively on export controls, but builds strength by 
countering illicit technology transfer and enhancing the U.S. 
economic competitiveness and enhancing our technological 
superiority. I think we have to keep an eye on that in its 
totality. Does anyone disagree with that proposition or want to 
make a caveat to that?
    Mr. Ashooh. No, sir, heartily endorse what you are saying.
    Mr. Chewning. Yes, 100 percent.
    Mr. Royce. I thank the panel.
    Secretary Ashooh, then I will ask you. The Export 
Administration Act was designed to impose trade controls on the 
Soviet bloc and it was never comprehensively updated. It has 
been in lapse most of the last quarter century. I have 
introduced the Export Control Reform Act of 2018, as the 
Chairman mentioned, which would repeal the expired authorities 
and replace it with a modern structure, a structure to regulate 
the export of dual use items and emerging critical 
technologies.
    Do you agree with the proposition that it is time to enact 
a modern statute that lays out clear policies and procedures 
for the Administration of our dual use export controls 
including requirements that such controls are adapted and 
regularly updated to respond to the evolving demands of the 
21st century?
    Mr. Ashooh. Sir, it is not just time, it is overdue. I will 
reiterate my gratitude for your thoughtful leadership on this 
issue. The statute that is in lapse refers to cold war 
anachronistic not only terminology but authorities and so this 
is a very, very important initiative you have begun. Dual use 
technology at one time was a fairly slim slice of American 
technology leadership. It used to be, quite frankly, driven out 
of the national security establishment. That has changed as we 
all know and we need to update our authorities to reflect that.
    Currently, we are operating under an Executive Order called 
IEEPA, the International Emergency Economic Powers Act, and 
that allows us to operate but is not reflective of the 
challenges we are trying to meet. Your efforts on this are 
really quite important and we appreciate it.
    Mr. Royce. Well, thank you. My own view on this and that is 
reflected in the hearing that we had before the Foreign Affairs 
Committee yesterday is that it is actually the export control 
system, in my view, that is best place to lead a whole of 
Government solution to this, especially when we consider what 
is necessary to counter Chinese and other adversarial efforts 
to acquire sensitive U.S. technology, to do this in tandem with 
CFIUS. Our export in controls and CFIUS both require this 
attention.
    But in terms of how we are going to lead to this to achieve 
this result, I think it is an important point and I raise it 
here at the committee today and I again thank the Chairman for 
giving me some time to make that point. Thank you very much, 
panel.
    Chairman Barr. Thank you and the gentleman yields back. The 
Chair now recognizes the gentleman from Ohio, Mr. Davidson.
    Mr. Davidson. Thank you, Chairman, and I thank our 
witnesses. I really appreciate the attention that this topic 
has received by our whole committee, by the subcommittee, by 
Mr. Pittenger, and by Mr. Heck as well. I really appreciated 
Mr. Heck's opening remarks in particular about the sense of 
urgency that this topic needs.
    I was a cadet at West Point when similar topics came to 
mind to me because that was when release authority for 
sensitive technology migrated from Defense to Commerce. One of 
the first actions was for Hughes to transfer the technology to 
launch multiple vehicles off of one launch platform. One rocket 
goes up, multiple little satellites go out into precise orbit, 
obvious applications for warheads and other things. I felt like 
we started down a bad path with that very decision, I don't 
know that we have entirely recovered.
    But in that same timeframe we have seen that China has 
figured out a grand strategy in a way that the rest of the 
world really hasn't. We have been playing in a very different 
dynamic. In a lot of ways, in my opinion, we haven't figured 
out a course of action. We have vacillated from the, say, John 
Bolton school of thought to the John Kerry school of thought 
and there is a wide gulf in between. But we don't have a 
unified way to deal with much of our national security. That 
has implications from everything like we are still on the same 
authorization for military force that happened days after 9/11 
despite missions that we know can't be jammed down it, but we 
lack the sense of cohesion. Until we really get that top level 
grand strategy I don't think we will get a lot of things right.
    In the meantime, we can't afford to get this wrong or 
continue to get this wrong because underlying it technology is 
being used by those people that do employ grand strategy and 
all the resources of their country, not just militarily but 
their economy, their academia, to accomplish their stated 
national objectives. China's One Belt One Road is probably the 
best example of that though not the only one.
    With that a lot has already been said by the time you come 
to someone in the rank order that I get to question, but Mr. 
Pittenger and Mr. Royce had good dialog about the concern and 
the differentiation between export control. Mr. Ashooh, you had 
a good answer to that but I guess, if you could, just boil it 
down into the why should CFIUS control intellectual property if 
that intellectual property is already controlled by Commerce?
    Mr. Ashooh. Well, intellectual property is actually a 
broader term than just the technology transfers that export 
control worries about so it is a much larger category. But 
again I go back and it is less about the subject matter of the 
technology and more about the method that we are talking about. 
CFIUS is designed to get at transactions and quite frankly 
there are a lot of innovative transactions out there that CFIUS 
has trouble getting at. Again this is why we are here today.
    But by the same token, export control system is trying to 
aim at those technologies that are a problem. In the current 
state where China is in particular, although let's not forget 
there are other adversary nations that are also quite 
aggressive, but China in particular has a strategy to accost 
our system to appropriate technology. Again that is why they 
are both necessary, but they are designed to do different 
things.
    Mr. Davidson. Thanks for that.
    Mr. Tarbert, some of the country's largest tech firms have 
been concerned that if CFIUS reform is done incorrectly it 
could create a parallel export control system so that balance 
that is there, differentiation, the group believes that the 
impact of a dual system could greatly hinder the speed of which 
business transactions are done. Frankly, sometimes because of 
the structure it has been a little bit ambiguous as to whether 
the transaction desired would fall under what type of oversight 
or regulation. Is there a risk that technology companies' fears 
are justified?
    Mr. Tarbert. No. I think every intention was made for the 
regulations to make sure there is unnecessary duplication. We 
have been meeting with the technology companies and firms and 
all sorts of other stakeholders. I think now we are working 
with a set of technical amendments to make sure that 
clarification is in the text of the bill itself so we won't 
create a dual two-tiered system.
    Mr. Davidson. Thanks. I think there has been a lot of 
attention given to that and as my time wraps up I do want to 
echo Mr. Hill's concerns about the designation of private 
equity as a suspect way to transfer technology. I hope we can 
keep the vibrant economy we have and protect the vital 
technology that we need to. With that, Chairman, I yield.
    Chairman Barr. Thank you. The gentleman yields. Now the 
Chair recognizes the gentleman from Indiana, Mr. Hollingsworth.
    Mr. Hollingsworth. Well, happy Thursday. I appreciate the 
opportunity to frankly listen to a lot of the testimony and 
hear some of the remarks and frankly wanted to add that I 
really appreciate Mr. Pittenger's effort here and the 
legislation before us to talk about how we might reform some of 
these programs that, as you well said, haven't been reformed in 
a long period of time. I am no advocate for the status quo. I 
think with the emergence of new threats, the emergence of new 
opportunities, we need to make sure that we are keeping up with 
the times. But I admittedly do have a lot of concern about the 
potential unintended effects of creating a larger and larger 
structure here.
    I think one thing that this town does very poorly is we see 
a problem and there may be an existing solution to that problem 
that we could revise and fix but instead we layer a whole new 
superstructure on top of it to layer over the problem and then 
we get into more and more duplicative work, more and more 
duplicative regulations that end up having a chilling effect on 
American competitiveness around the world. I certainly don't 
believe that we need to put American national security in the 
backseat but I don't believe that we should put American firms 
at a competitive disadvantage around the world.
    There are so many great things about this legislation and 
the concern that I continue to have and wanted to really talk 
through today with you guys was really about this outbound 
portion making sure that U.S. firms are still able to work 
abroad. What I want to be careful of is the insinuation that 
certain companies or certain firms are engaged in inherently 
un-American activities, inherently handing away their prized 
possession, the intellectual property that they have spent 
decades and billions of dollars developing in some willy nilly 
approach instead of a thoughtful, dutiful approach.
    Taking it as a given that we want to reform the status quo, 
I guess I want to better understand what the unintended 
consequences could be to American firms and the American 
economic competitiveness around the world and their ability to 
engage with other firms and in other markets around the world. 
What might be the unintended consequences of taking an expanded 
CFIUS to outbound transactions as well? Let's just think about 
the negative, and I will start with Mr. Tarbert.
    Mr. Tarbert. Sure. Actually CFIUS now can cover outbound 
transactions. Our regulation now allows us anytime there is a 
U.S. business that is being taken outside of the United States 
and put in a JV we have--
    Mr. Hollingsworth. This is certainly an expansion of the 
outbound. Yes.
    Mr. Tarbert. Yes. I would say what this does is it looks at 
a business capability, something that falls a little below what 
we can actually, technically, view as a business. I think we 
are very mindful of ensuring that our American businesses can 
compete abroad. Obviously national security is our first 
priority, but I don't think it is an and/or. I think we can get 
this right through technical amendments, through rolling up our 
sleeves working with you and your staff to ensure we do both.
    Mr. Hollingsworth. Yes. Additionally, so we have talked a 
lot about this legislation and I am a big fan of legislative 
process. I am a big fan of Article 1 certainly, but legislation 
takes time. Writing the rules, putting forth the procedures 
from this legislation isn't something that we are going to pass 
on day one, day two we are going to get this thing up and 
running. I continue to come back to some of the existing 
structures that we have in place, really updating those, really 
making sure that we can enforce something very quickly. It is 
two to 3 years that it might take to pull this together from a 
legislative aspect. That is forever in technology today.
    I wondered if Mr. Ashooh might talk a little bit about what 
we might do in the interim that could be a better, more 
appointed solution at controlling some of this work that might 
need to be done on those emerging technologies we don't want to 
be transferred to other countries.
    Mr. Ashooh. Thank you, sir. Yes, to your point, we can't 
afford to wait if there are things we can do now, we need to do 
them now. The Department of Commerce is doing that. We have 
talked a little bit about emerging technologies. That is 
clearly an area where we need to up our game. We are not 
waiting for legislation.
    Mr. Hollingsworth. How do we up our game? Is it going back 
to export control? Is it making sure that we update these and 
have new technologies placed on the list instead of a building 
an expanded CFIUS? How do we do that in the interim? What does 
up our game mean?
    Mr. Ashooh. Well, we do that now and gratefully we do it 
with the help of the interagency where we are constantly 
reviewing our controls. That has always occurred. It is more in 
terms of what are the challenges we have been facing recently. 
In one area commonly referred to as emerging technologies, that 
is this class of technology that really is coming at us at a 
rapid pace, very broad, very deep, but it is also coming from 
nontraditional areas, the classic two people in a garage come 
up with some idea. They know nothing about CFIUS. They know 
nothing about export controls.
    What Department of Commerce does have is an outreach 
capability to encourage knowledge, so that they comply with the 
system that we have, that we need to do better at and are.
    Mr. Tarbert. May I just chime in? I just want to say, we 
are modernizing CFIUS so we are not creating a new process, but 
rather we are taking something that has worked for 30 to 40 
years.
    Mr. Hollingsworth. Yes, but it is certainly an expansion of 
the existing process and it is certainly an expansion of the 
resources.
    Mr. Tarbert. It is.
    Mr. Hollingsworth. What I am really worried about is that 
in order to continue to build and maintain this competitive 
advantage companies have to have the ability to work around the 
world to be able to garner the type of revenues needed to 
continue the huge amount of R&D that they have to do to compete 
around the world and to continue this advantage. The more speed 
bumps we put in their place, the more opportunity we give other 
countries' firms the opportunity to be able to develop R&D 
faster than us. To me it is accelerating our own R&D, not just 
putting speed bumps in place around the world.
    Mr. Tarbert. We fully agree and we don't view it as a speed 
bump.
    Mr. Hollingsworth. All right. With that I will yield back.
    Chairman Barr. The gentleman yields back. With the 
indulgence of the witnesses, and I see Mr. Chewning may have an 
interest in chiming in on that point as well, just a few more 
brief questions if we could on related topics.
    Let me start again with the Secretary Tarbert. I think you 
have made a compelling case for the need for modernization of 
CFIUS. Certainly I applaud the gentleman from North Carolina 
and his work and Senator Cornyn and Mr. Heck, here, for their 
work. The case I think has been made that we do need to 
modernize CFIUS.
    But what the committee continues to hear and it dovetails 
with what Mr. Hollingsworth was saying that is a concern is 
that if FIRRMA were enacted as it is presently proposed CFIUS 
cases could rise to an estimated 10,000 cases in short order. 
Even if that expansion is only a couple thousand additional 
cases that is still a massive increase and every business that 
we talk to says that CFIUS resources are already constrained.
    The question is both one of caseload, the agency's 
capabilities to handle increased caseload that very well may be 
justified by national security developments, but answer that 
question for us, all of you, the capabilities of handling an 
increase in caseload and, second, what that means in terms of 
your resource needs. The current legislation has a mechanism 
for a fee. There are some concerns that fees associated with 
additional costs for benign transactions would create those 
speed bumps that Mr. Hollingsworth was talking about.
    Could you just respond to those concerns and how you would 
propose this legislation address those concerns?
    Mr. Tarbert. Sure, so I will go first. I think again as I 
have said before, we want to narrow the scope of transactions 
to those that are most likely to raise national security 
concerns and not look at other transactions that are not likely 
to raise national security concerns. The more we can put that 
tightening in the text of the bill itself the easier that will 
be for us. It will provide added clarity for the business 
community. That is number one.
    Number two, I would say, is that the fees are an important 
factor here. I think we want to make sure that the level of the 
fees, if we decide to charge them, don't impact the economics 
of the transaction, but at the same time shift some of that 
burden to the people in the business that are actually doing 
the transaction instead of the American taxpayer. Those would 
be my points.
    One final point to Mr. Hollingsworth's good question about, 
look, what are we going to do now. Section 26 of the bill says 
that this doesn't go into effect until the secretary signs, 
certifies that we have the resources, the regs in place, but 
the other thing it does in subsection C is it allows us to 
conduct pilot programs. If there is a very specific national 
security risk that we need to focus on, a subset of 
transactions, we could do that on day one, conceivably the day 
that a legislation is passed.
    Chairman Barr. OK, thank you for your answer there.
    Mr. Chewning, I wanted to follow up with you and if you 
wanted to react to Mr. Hollingsworth's questions, please feel 
free, but it was very helpful your testimony about thinking of 
CFIUS as a backstop and I wanted to follow up on that. How does 
the FIRRMA legislation update CFIUS in a way to capture 
technology transfers that the export control system might miss 
and could you maybe give us a scenario of how that would work?
    Mr. Chewning. Yes. No, I think happy to and I think I can 
probably respond to both. I think it is important just to 
reframe the context for why we think this is important from a 
national security dimension. The National Defense Strategy 
which recently came out from the Department of Defense said, 
inter-state rivalry is now the primary national security 
concern for the Department of Defense.
    One of the competitors we are facing is the second largest 
economy in the world and spends about 2 percent of their GDP on 
military equipment. They have an industrial policy that is 
designed to extract technology from Western companies, put up 
walls to defend their own industry so they can get global 
scale, and then eventually outcompete our domestic industry. I 
think it is important to, as we think about this measure, also 
make the point that ultimately it is about protecting U.S. 
industry and putting appropriate value on intellectual property 
so it can't be stolen through technology transfers. That is in 
the long run good for American business.
    Chairman Barr. Thank you.
    Secretary Ashooh, did you want to chime in on that?
    Mr. Ashooh. Well, I would certainly go back to the resource 
question because that is an important one. As has been said, we 
are already at an all-time high. From a Commerce perspective, 
one of the ways that I think is an effective way that we 
approach CFIUS is that we actually have very few, hundred 
percent dedicated to CFIUS, employees. We leverage the bureaus, 
science, and technology and business transaction personnel that 
we have now.
    Having said that, in the case of a large scope increase 
that might occur that means is, it is going to put pressure on 
the whole organization which does all the other things that we 
talked about. We do need to be thoughtful about how we go 
forward. Having said that, we also think it is a really good 
approach to leverage the organization as a whole rather than 
have as many dedicated.
    Chairman Barr. Thank you. My time is expired and the Chair 
will now recognize for a second line of questioning, Mr. 
Pittenger.
    Mr. Pittenger. Thank you, Mr. Chairman. I do appreciate it. 
To the point of my friend Mr. Hollingsworth's inquiry, I would 
say that what we have done in this bill, in creating a good 
guys list, is going to create even greater access to foreign 
investment, capital investment in this country, to those who 
subscribe to the same standards that is not correct today.
    In consideration of the resources that are needed, I think 
we should keep in mind the Chinese, particularly, investment, 
and there are other concerned parties, in 2010 was about $4 
billion, 2016 is $46 billion. Let's assess the scope of the 
problem that we are addressing now. Since 2015, they have 
acquired 43 semiconductor companies, 20 of which have been in 
the United States. This is a very significant concern. These 
are supply chains to our DOD very often.
    The crisis is there, the concern is there. I would welcome 
the comments from those on our panel to again show the 
distinction between export control and CFIUS. CFIUS is 
prospective. CFIUS looks--this is export control. Apple is 
CFIUS. It is the company that owns this. I think what gets lost 
in the maze here is the distinction of what CFIUS is capable of 
doing that is not consistent with export control, if you would 
comment on any of those issues.
    Mr. Ashooh. Sure. Sir, sometimes there are just 
transactions that cause concerns. By that I mean a marriage of 
two entities may just not be what you want to see done and it 
could have reasons that go beyond technology transfer and I 
won't go into specific cases. Having said that and why you need 
them to work together is if CFIUS denies a transaction that 
doesn't necessarily stop the technology transfer if there is 
technology transfer at concern. But most importantly is there 
are transactions that could be a concern to the United States 
national security establishment even though there is no 
technology transfer issue there, so we need both.
    Mr. Pittenger. Are you concerned historically that we have 
an issue with the transfer of intellectual property in the past 
and that is why we need to address this today?
    Mr. Ashooh. Oh yes, absolutely. I think it is important to 
note America is the technology world leader, no question, has 
been for awhile. That is the result of authorities we have been 
using to this point. The authorities that we have had, export 
controls, CFIUS, those authorities have worked but they have 
also been adapted along the way and it is time to continue 
that.
    Mr. Pittenger. Is this a particular concern in China in 
terms of their enhancing their avionics or their--
    Mr. Ashooh. Yes, in particular in two ways and I think it 
is important to be specific. Eric has already mentioned the 
volume of dollars that China is willing to spend. That is 
clear. But even trickier is they are becoming quite adept at 
using their massive market as almost a bludgeon to U.S. 
industries that need access to large markets in order to keep 
our industrial base secure. That is the path that we need to 
find a way to--
    Mr. Pittenger. They have accessed that through American 
markets and through the ability to obtain intellectual property 
through our own companies.
    Mr. Tarbert. Representative Pittenger, I think I am not the 
best person to speak to your point about the costs because I am 
from the Treasury Department and we generally don't like to 
spend money. But I think it would be helpful if maybe the 
Pentagon could weigh in on the proposition, the value 
proposition here.
    Mr. Pittenger. Yes, sir.
    Mr. Chewning. Yes. I think you can look at the costs or the 
incremental costs, but you also have to look at what it is 
protecting. If you think about it is an insurance policy on the 
hundreds of billions of dollars a year we spend on our own 
defense industrial base, it is a really small investment to 
make sure that what we are investing for our own military 
advantage and we are investing in our companies to be able to 
continue to replicate that still can and that investment 
doesn't get eroded because of theft.
    Mr. Pittenger. Thank you. I would like to ask if I can 
quickly, regarding technologies in the avionics industry would 
you all consider that a critical industry that must be 
protected and addressed by both our export controls and CFIUS 
processes?
    Mr. Tarbert. Yes, sir.
    Mr. Chewning. Yes.
    Mr. Pittenger. Well, there are specific firms in China that 
have been very engaged in this concerns of national security 
way. Do you think there are scenarios where private sector 
engagement with Chinese firms could create national security 
vulnerabilities?
    Mr. Chewning. Yes.
    Mr. Pittenger. Can you speak to the industries and 
capabilities in China that have benefited from the gaps 
identified in our export controls and CFIUS process and which 
industries in particular have benefited most from the gaps 
identified in our CFIUS laws?
    Mr. Chewning. I think to provide a complete context for 
that we probably need to have a closed door session. I think 
just in general the way we would view that is, think of the 
emerging technologies that we all would imagine that would have 
military application but that may not be on specific military 
programs right now.
    Chairman Barr. The gentleman's time is expired.
    Just for the record we are going to clear two, possibly 
three more members for questions and then we will conclude the 
hearing. With that we recognize the gentleman from West 
Virginia, Mr. Mooney.
    Mr. Mooney. Thank you, Mr. Chairman, for hosting this 
hearing and Congressman Pittenger for putting the bill in. I am 
already a cosponsor. Thank you for coming to testify on this 
important issue with these cyberthreats and advanced 
technology, this is just a critical, critical issue.
    I guess my first question is to Mr. Chewning. In a 2006 
report, the Government Accountability Office noted that the 
Militarily Critical Technologies List, MCTL, and the Developing 
Science & Technologies List, which your Department manages, 
have produced critical technology lists of questionable value. 
In a 2003 report, GAO further found that the MCTL, quote, 
``remains outdated and updates have ceased. The MCTL is not 
used to inform export decisions, its original purpose. Export 
control officials from DOD and the Department of Commerce and 
State reiterated their longstanding concern that the MCTL is 
outdated and too broad to meet export control needs,'' close 
quotes.
    Mr. Chewning, can CFIUS agencies rely on you to promptly 
and effectively identify emerging technologies given the 
Pentagon's own lack of confidence in the MCTL?
    Mr. Chewning. Yes. Just to be clear, the MCTL updates to 
that we have carried through, through on the USML and the CCL. 
While the MCTL itself we may have stopped updating, by statute 
we considered updates to USML and CCL as official updates.
    But your point, I think, is very accurate when, 
Congressman, in terms of how to think about the need for 
updating lists and obviously the role that that has in terms of 
export control versus the more holistic evaluation that a 
transaction would go through under FIRRMA and CFIUS. I think 
attention between knowing that technology has military 
application ahead of time versus realizing a specific 
transaction is worrisome based on the threat, the 
vulnerability, and the consequence evaluation that is done to 
complete it.
    Mr. Mooney. OK, thank you. This is a separate question for 
whoever wants to answer, do you believe it would benefit or 
harm our national security if we included some NATO allies on a 
CFIUS white list but not other NATO allies on that white list?
    Mr. Chewning. What we are currently doing with our allies 
because they recognize a similar set of concerns, the 2017 
National Defense Authorization Act asked the Department to 
establish the NTIB or the National Technology Industrial Base 
which is a partnership between ourselves, Canada, Australia, 
and the United Kingdom. That program is beginning to get 
underway now. One of the pilot programs that we are doing as 
part of that is a collective FDI protection regime so that we 
can create a common standard for foreign direct investment 
protection within that global set of industrial based 
activities.
    Mr. Mooney. On a follow up to that also, I saw Australia 
and New Zealand are not part of NATO but they are members of 
the Five Eyes intelligence alliance, so intelligence and 
academic reports have noted that China has sought influence in 
these countries' political systems through the use of campaign 
donations. Do you believe Australia and New Zealand should be 
on a CFIUS white list in light of China's actions?
    Mr. Chewning. I think we need to make sure our allies are 
aligned with us and we have a collective set of protection 
regimes for our friends who are also under threat from the same 
set of concerns that we have here.
    Mr. Tarbert. Congressman Mooney, first of all, thank you 
for your cosponsorship of FIRRMA and, second, the criteria for 
that list hasn't been established yet. It will be established 
hopefully in FIRRMA and then also further by regulation. But I 
can tell you that we are working closely with all of our allies 
now because they are facing similar threats to us and they are 
starting to do similar processes in their legislatures and 
their regulatory to beef up their investment security as well. 
We are having an active dialog.
    Mr. Mooney. OK. Thank you, Mr. Chair. I will yield my time 
back to the Chair.
    Chairman Barr. The gentleman yields back. The Chair now 
recognizes for a second round, the gentleman from Indiana, Mr. 
Hollingsworth.
    Mr. Hollingsworth. Back again. I probably won't take the 
full 5 minutes but I did want to address a few things that were 
said over the last little bit. The reality is America's 
technological advantage wasn't created or wasn't enduring 
because of CFIUS, because of Export Control Act, it was created 
and enduring because of the R&D of thousands of firms across 
this country because of the great academic institutions we 
have, because of the ingenuity of Americans overall.
    That is what I am concerned about. What I am concerned 
about, as the gentleman Mr. Chewning said, was their Chinese 
goal of reaching global capacity and then competing with us. 
Well, if we did deny our firms the same capability and say now 
you can't do business over there, you can't do business over 
here, you can't do business over there, then we deny them the 
ability to gain more and more resources to do more and more R&D 
so that we compete with this advantage.
    I think the history of moats has been very poor over time, 
but the history of doubling down on your advantage, continue in 
your work, and using older technology, these companies spent 
billions of dollars investing in and now they can use that as a 
cash cow so they can pour more money into R&D to develop new 
technology. I want that to happen in the United States. I want 
that to happen and be led by U.S. firms. What I am worried 
about is we are denying them the ability to do that and that 
things through the regulatory or bureaucratic process will 
begin to get mired up such that they can't leverage those 
capabilities that they spent decades and billions of dollars 
building these platforms for.
    I think there have been instances and continue to be 
instances where we use decades-old technology, go to emerging 
world countries, go to other countries and begin to sell that 
relatively low cost, high margin businesses that they can use 
those dollars to reinvest back here so that we have those 
advantages in the future. I think that history has shown time 
and time again that that is what creates enduring competitive 
advantages and gaps between us and the other world.
    I am not in any way saying CFIUS needs to remain unchanged. 
I am not in any way saying that China doesn't have a 
comprehensive, thoughtful, and tactful strategy for how they 
might get at these technologies. What I am simply saying is 
they will find some way to get in the door. I have seen them 
hack OPM down the street. We need to make sure that we have the 
advantage because our companies are leading the world in the 
work that they do in their fields and their industries and I am 
worried we are putting them at a disadvantage in doing this.
    With that I will yield back, Mr. Chair.
    Chairman Barr. The gentleman yields back.
    Does anybody seek--the gentleman from Washington seeks--OK. 
The gentleman from Washington is recognized.
    Mr. Heck. Thank you, Mr. Chairman. I appreciate the 
comments from my friend from Indiana very much and would like 
to, however, at least put it within a different context. 
Namely, our technological advantage was developed over a long 
period of time which was not within a global economy. We exist 
today under a much different world than we did at the time in 
which our technological advantage accelerated. In fact, I think 
I read recently that global trade has increased fivefold just 
since 1980. It is a stunning increase in the interweaving of 
the economies of the nations of the earth in the relatively 
recent past. We have a different context.
    I think it is also important to note that our technological 
advantage has been brought about in no small part because of 
public investment in research and development and that is an 
investment that we need to continue to make. Indeed, I have 
also read recently that the public investment in basic science 
research and development as a percentage of GDP is the lowest 
level that it has been since the early 1950's. There are a lot 
of dimensions to this in order for us to keep our technological 
advantage.
    Again, those of us who are cosponsors and supportive of 
FIRRMA also believe very much that foreign investment in the 
United States is an important part of our Nation's future and 
that this bill in fact will enable that by virtue of providing 
them with the certainty and us with the security that we need 
in order to do that.
    But the essential point remains and it should not be 
forgotten that what we are talking about here is an existential 
threat to the national security of our country. For those of 
you who aren't yet behind that, I strongly encourage you to go 
back and, for example, be the beneficiary of the classified 
briefing that could be available to you and to look at as an 
example the Broadcom effort to acquire Qualcomm. I understand 
the concerns. That is a part of this process and I am glad they 
have been brought forward. I think, however, that the 
theoretical concerns, the hypothetical concerns are materially 
outweighed by what has clearly been demonstrated to be, as I 
indicated, an existential threat.
    What we should leave here with is consensus on a 
conclusion. CFIUS needs to be modernized. CFIUS needs to be 
updated. Let's engage in the give and take about what the 
specifics of that may look like, but nobody should doubt that 
in the best national security interest of this country this is 
something that this Congress should do and should do 
immediately.
    With that I would be glad to yield my time to my friend 
from North Carolina.
    Mr. Pittenger. Thank you, Mr. Heck, and thank you for your 
leadership with this important legislation. You have been a 
real thoughtful individual to work with. I would like, Mr. 
Chairman, to submit for the record a Department of Justice 
statement regarding the FIRRMA bill--
    Chairman Barr. Without objection.
    Mr. Pittenger. --Unanimous consent for that. One more 
question if I could ask the panel, if that is OK.
    We just would like for you all to just comment on the 
importance of the inclusion of joint ventures within the 
jurisdiction of CFIUS.
    Mr. Tarbert. I think it is incredibly important. We have 
seen a number of cases where people have had an M&A transaction 
that is under CFIUS jurisdiction and they have simply 
restructured it as a joint venture to evade our jurisdiction.
    Mr. Pittenger. Thank you. I yield back, Mr. Chairman.
    Thank you very much to each of you.
    Chairman Barr. Thanks to all of our witnesses for their 
testimony today. It has been a very helpful hearing for all 
members and we appreciate your contributions to this important 
work.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record. I would ask our witnesses to please respond as 
promptly as you are able. This hearing is now adjourned.
    [Whereupon, at 12:04 p.m., the subcommittee was adjourned.]

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                             March 15, 2018

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