    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                       U.S. POLICY ON INVESTMENT SECURITY

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

                                    HEARING

                                   before the

              SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE,
                    AND INTERNATIONAL FINANCIAL INSTITUTIONS

                                     of the

                        COMMITTEE ON FINANCIAL SERVICES
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION
                                   __________

                                 JULY 16, 2025
                                   __________

                               Serial No. 119-34

           Printed for the use of the Committee on Financial Services

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                    ------

                       U.S. GOVERNMENT PUBLISHING OFFICE

    61-135 PDF                 WASHINGTON : 2025

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        FRENCH HILL, Arkansas, Chairman

    BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking
      Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                   Ranking Member
    ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York
    ANDY BARR, Kentucky                  BRAD SHERMAN, California
    ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York
    TOM EMMER, Minnesota                 DAVID SCOTT, Georgia
    BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts
    WARREN DAVIDSON, Ohio                AL GREEN, Texas
    JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri
    BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut
    WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois
      Carolina                           JOYCE BEATTY, Ohio
    MARLIN STUTZMAN, Indiana             JUAN VARGAS, California
    RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey
    DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas
    YOUNG KIM, California                SEAN CASTEN, Illinois
    BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts
    ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan
    SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
    MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia
    MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado
    MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana
    ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon
    ZACHARY NUNN, Iowa                   SAM LICCARDO, California
    LISA McCLAIN, Michigan
    MARIA SALAZAR, Florida
    TROY DOWNING, Montana
    MIKE HARIDOPOLOS, Florida
    TIM MOORE, North Carolina

                          Ben Johnson, Staff Director

                                     ------

            SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND

                      INTERNATIONAL FINANCIAL INSTITUTIONS

                        WARREN DAVIDSON, Ohio, Chairman

    ZACHARY NUNN, Iowa, Vice Chairman    JOYCE BEATTY, Ohio, Ranking Member
    FRANK D. LUCAS, Oklahoma             JOSH GOTTHEIMER, New Jersey
    PETE SESSIONS, Texas                 JUAN VARGAS, California
    ANDY BARR, Kentucky                  BILL FOSTER, Illinois
    ROGER WILLIAMS, Texas                VICENTE GONZALEZ, Texas
    YOUNG KIM, California                RITCHIE TORRES, New York
    ANDREW OGLES, Tennessee              SEAN CASTEN, Illinois
    LISA MCCLAIN, Michigan               SAM LICCARDO, California
    MARIA SALAZAR, Florida

                             C  O  N  T  E  N  T  S

                                   ----------

                            Wednesday, July 16, 2025
                               OPENING STATEMENTS

                                                                       Page
    Hon. Warren Davidson, Chairman of the Subcommittee on National
      Security, Illicit Finance and International Financial
      Institutions, a U.S. Representative from Ohio..................     1
    Hon. Joyce Beatty, Ranking Member of the Subcommittee on National
      Security, Illicit Finance and International Financial
      Institutions, a U.S. Representative from Ohio..................     2

                                   WITNESSES

    Mr. Jonathan Samford, President and Chief Executive Officer,
      Global Business Alliance.......................................     3
        Prepared statement...........................................     5
    Mr. Brian Reissaus, Senior Advisor for National Security,
      Freshfields US LLP.............................................     9
        Prepared statement...........................................    11
    Mr. Benjamin Joseloff, Partner, Cravath, Swaine & Moore LLP......    16
        Prepared statement...........................................    18
    Dr. Sarah Bauerle Danzman, Associate Professor of International
      Studies, Indiana University Bloomington........................    26
        Prepared statement...........................................    28

                                    APPENDIX

                       MATERIALS SUBMITTED FOR THE RECORD

    Hon. Warren Davidson:
        Investment Company Institute (ICI) Statement.................    46
    Hon. French Hill:
        Sidley, U.S. Outbound Investment Regulations: Lessons and
          Takeaways Six Months In....................................    52

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to questions for the record from Representative
      Joyce Beatty
        Dr. Sarah Bauerle Danzman....................................    57
    Written responses to questions for the record from Representative
      Maxine Waters
        Mr. Jonathan Samford.........................................    58
        Mr. Brian Reissaus...........................................    60
        Mr. Benjamin Joseloff........................................    62
        Dr. Sarah Bauerle Danzman....................................    65
    Written responses to questions for the record from Representative
      French Hill
        Mr. Brian Reissaus...........................................    69
        Mr. Benjamin Joseloff........................................    71

                       U.S. POLICY ON INVESTMENT SECURITY

                                  ----------

                            Wednesday, July 16, 2025

                 U.S. House of Representatives,
                     Subcommittee on National Security,
                     Illicit Finance, and International
                                Financial Institutions,
                               Committee on Financial Services,
                                                       Washington, D.C.

        The subcommittee met, pursuant to notice, at 10:04 a.m., in
    room 2128, Rayburn House Office Building, Hon. Warren Davidson
    [chairman of the subcommittee] presiding.
        Present: Representatives Davidson, Lucas, Barr, Williams of
    Texas, Kim, Beatty, Foster, and Liccardo.
        Chairman Davidson. The Subcommittee on National Security,
    Illicit Finance, and International Institutions will come to
    order.
        Without objection, the chairman is authorized to declare a
    recess of the committee at any time.
        This hearing is titled, ``U.S. Policy on Investment
    Security.''
        Without objection, all members will have 5 legislative days
    within which to submit extraneous materials to the chairman for
    inclusion in the record.
        I now recognize myself for an opening statement.

      OPENING STATEMENT OF HON. WARREN DAVIDSON, CHAIRMAN OF THE
        SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
      INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
                               FROM OHIO

        I welcome our distinguished witnesses to today's hearing on
    U.S. policy on investment security where we examine the
    Committee on Foreign Investment in the United States (CFIUS)and
    its critical role in safeguarding our national security.
    Today's testimony will provide a comprehensive overview of
    CFIUS' authorities and operations to protect American interests
    from foreign investment risks. Established in 1975 under the
    Department of Treasury, CFIUS evaluates foreign investments
    posing a national security threat. The 2018 Foreign Investment
    Risk Review Modernization Act, otherwise known as FIRRMA,
    expanded its jurisdiction to include non-controlling
    investments in critical technologies, infrastructure, and
    sensitive personal data. CFIUS must rigorously scrutinize
    foreign investments from any source that could undermine our
    technology, agriculture, energy sectors, and more, while
    enabling beneficial investment inflows that actually strengthen
    our economy.
        I commend President Trump's February National Security
    Presidential Memorandum--NSPM--directing CFIUS to intensify
    oversight of adversarial investments while streamlining reviews
    for trusted allies. CFIUS must operate efficiently to
    neutralize threats without burdening American business.
    However, reviewing inbound investments alone cannot fully
    protect our national security. Congress needs to enact a robust
    outbound investment bill with severe sanctions to prevent U.S.
    capital from supporting industries and adversarial nations that
    threaten our sovereignty. This legislation needs to provide a
    clear, streamlined framework ensuring American companies can
    comply without overly burdensome bureaucratic obstacles. Such a
    bill will safeguard our innovation, farmland, infrastructure,
    and critical technologies while fostering domestic investments.
        This hearing will hopefully help illuminate how CFIUS and
    an outbound investment regime could secure our Nation's vital
    national interests. I urge my colleagues to support an outbound
    investment bill and provide their input so that we can have
    stringent sanctions and transparent framework to protect our
    economic insecurity interests from all foreign threats. I yield
    back, and I now recognize the ranking member for her remarks.

     OPENING STATEMENT OF HON. JOYCE BEATTY, RANKING MEMBER OF THE
        SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
      INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
                               FROM OHIO

        Mrs. Beatty. Good morning, and thank you, Mr. Chairman, for
    holding this hearing, and thank you to our witnesses for
    appearing here today to discuss investment security.
        The Committee on Foreign Investment in the United States,
    or CFIUS, plays a critical role in our national security
    framework, conducting reviews of direct investment transaction
    by foreign investors originating from both adversary and allied
    nations to identify potential national security risks. Although
    it is incredibly rare for CFIUS to recommend that the President
    block a transaction, only occurring 10 times to date, the
    committee's thorough vetting process is essential to ensure
    that foreign investment of all kinds in the United States do
    not endanger national security.
        Another critical area of focus is outbound investment,
    which I am sure we will talk about, flowing from the United
    States to foreign countries and companies of concern. The Biden
    Administration took a significant first step 2 years ago by
    establishing the Outbound Investment Security Program at
    Treasury, which screened certain U.S. investments in China
    involving sensitive technologies and products that pose an
    acute national security risk. While we are waiting to see what
    changes the current administration plans to make to the
    program, several actions taken by President Trump has raised
    serious concern.
        A recent high-profile case including TikTok and U.S. Steel
    have demonstrated that the President is willing to disregard
    CFIUS recommendations and, instead, leverage foreign investment
    transactions in unrelated trade negotiations, creating
    uncertainty for the private sector and a dangerous potential
    for abuse. Further, President Trump seems to be engaging in his
    own corrupt business deals with foreign investors. For example,
    Trump's stablecoin is being used by an Abu Dhabi investment
    firm to invest $2 billion into Binance, a crypto exchange that
    has pleaded guilty to money laundering and sanctions
    violations. Look, this type of transaction is exactly why CFIUS
    exists, and it is why we cannot afford to gut the very laws and
    resources that allows it to do its job. If my colleagues across
    the aisle are truly concerned about national security risk,
    they should be similarly outraged by the President's
    activities. Instead, they are trying to eliminate critical
    national security tools like the bipartisan--let me say that
    again--the bipartisan Corporate Transparency Act, which
    President Trump signed into law during his first term.
        Gutting the Corporate Transparency Act (CTA) will hinder
    CFIUS' ability to identify foreign threats by making it harder
    for the committee, the Outbound Security Program, financial
    institutions, and national security agencies to properly assess
    who truly owns or controls a corporate entity. We simply cannot
    play politics with our national security, and I think we will
    all agree on that. Democrats are committed to resisting efforts
    that would either undercut CFIUS or distort its purpose. I look
    forward to learning more about how our investment security
    framework is operating and exploring ways that we can
    strengthen and not weaken it, and thank you again to our
    witnesses. I look forward to our dialog and our questions with
    you, and, Mr. Chairman, I yield back.
        Chairman Davidson. Thank you. Today we welcome the
    testimony of Mr. Jonathan Samford, President and CEO of Global
    Business Alliance; Mr. Brian Reissaus, Senior Advisor for
    National Security at Freshfields; Mr. Benjamin Joseloff,
    Partner at Cravath, Swaine, & Moore; and Dr. Sarah Bauerle
    Danzman, Associate Professor of International Studies at
    Indiana University. We thank each of you for taking your time
    to be here. Each of you will be recognized for 5 minutes to
    give an oral presentation of your testimony. Without objection,
    your written statements will be made part of the record.
        I also ask unanimous consent to enter the ICI statement
    into the record.
        Without objection.

        [The information referred to can be found in the appendix.]

        Chairman Davidson. Mr. Samford, you are now recognized for
    5 minutes for your oral statement.

     STATEMENT OF JONATHAN SAMFORD, PRESIDENT AND CHIEF EXECUTIVE
                   OFFICER, GLOBAL BUSINESS ALLIANCE

        Mr. Samford. Chairman Davidson, Ranking Member Beatty,
    members of the committee, thank you very much for the
    opportunity to be here with you today. I am Jonathan Samford,
    President and CEO of the Global Business Alliance (GBA). GBA is
    the premier advocacy voice of international companies in
    America. Our members represent about 200 of the most well-known
    international brands in the world that are globally
    headquartered overseas but are major U.S. employers in their
    own right. On average, these companies employ about 12,000 U.S.
    workers, and, importantly, all of them are headquartered in
    countries that are longtime friends and allies of the United
    States.
        Across America, more than 8 million workers earn a paycheck
    from a company that made a deliberate decision to invest and
    create jobs in the United States. Global investment is a key
    pillar of America's economic strength. International companies
    have invested over $5 trillion into the U.S. economy. They pay
    workers 7 percent more than the private sector average, drive
    12 percent of all private sector R&D, and produce nearly a
    quarter of all U.S. exports. Manufacturing is the largest
    sector for investment, growing 29 percent over the past 5
    years. In Ohio alone, given the representation of the Buckeye
    State, more than 320,000 Ohioans are employed by a global
    company, and half of that is in the manufacturing sector.
        This is not just about economics, though. It is also a
    strategic advantage. Seventy-five percent of all investment in
    the United States flows from just eight nations. These
    investments build local supply chains, fuel innovation, develop
    stronger workforces, and tie our allies' interests to our own.
    Meanwhile, Chinese direct investment in the United States is
    less than 1 percent in total and has declined since Congress,
    on a bipartisan basis, passed FIRRMA by about 15 percent.
    Global investment has long been a bipartisan priority. Every
    President in the past 50 years has reaffirmed America's
    commitment to open investment. Congress did the same through
    FIRRMA in 2018, ensuring that CFIUS robustly protects national
    security while keeping the U.S. open to trusted capital. Just
    last month, the House passed the Global Investment and American
    Jobs Act by unanimous support.
        The inbound business community strongly supports a vigilant
    national security-focused CFIUS process. CFIUS must stay
    squarely focused on genuine national security threats and not
    drift into broader industrial trade policy. When reviews become
    unpredictable, it deters precisely the kinds of investments
    that grow American jobs and American manufacturing. Updated
    public guidance, improved interagency coordination, and a fast-
    track pathway, such as the known investor portal for trusted
    investors with proven compliance records, would streamline the
    low-risk reviews, reduce administrative burdens, and allow
    CFIUS to prioritize high-risk reviews, enhancing both
    efficiency and investor confidence. CFIUS protects both our
    national security and our economic competitiveness. These are
    complementary results that have been forged through decades of
    thoughtful bipartisan leadership.
        In that vein, I want to thank Chairman Hill,
    Representatives Barr, Auchincloss, and Strickland for leading
    the Global Investment and American Jobs Caucus here in the
    House, and for this committee for advancing policies that
    strengthen America's workers and communities. Thank you for
    this opportunity. I look forward to your questions.

        [The prepared statement of Mr. Samford follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Davidson. Thank you, Mr. Samford. Mr. Reissaus,
    you are now recognized for 5 minutes for your oral statement.

       STATEMENT OF BRIAN REISSAUS, SENIOR ADVISOR FOR NATIONAL
                      SECURITY, FRESHFIELDS US LLP

        Mr. Reissaus. Mr. Chairman, Ranking Member Beatty, members
    of the subcommittee, thank you for offering me the opportunity
    to appear before you today. My name is Brian Reissaus. I am a
    Senior Advisor at the law firm, Freshfields, in Washington, DC.
    My government experience, spanning roughly 15 years in three
    administrations, includes leading the executive branch's
    provision of technical assistance to Congress for the Foreign
    Investment Risk Review Modernization Act of 2018, serving as
    the senior career official for CFIUS from 2018 through 2023,
    and contributing to the development of the executive order that
    is the basis for the Outbound Investment Security Program.
        Before getting into the substance of my remarks, I want to
    say that the views I express here today are my own and not
    those of my employer or any clients of my employer, and I am
    not here representing the interests of any other party.
        I would like to offer some observations on U.S. investment
    security policy. It is important to note that foreign
    investment overwhelmingly benefits the United States through
    creating jobs, funding innovation, and fostering economic
    growth. It also bolsters our national security. I witnessed
    this firsthand throughout my government service. At the
    Department of Defense, I oversaw foreign-owned defense
    contractors that supply cutting-edge technologies to our war
    fighters, and at CFIUS, I reviewed transactions involving
    friendly foreign investors that provided capital that was
    essential to funding U.S. innovation and emerging technologies.
    This has all been possible because of the longstanding
    bipartisan U.S. open investment policy. However, Congress
    recognized that some foreign investment can pose national
    security risks to the United States. CFIUS serves as a critical
    safeguard against these risks. CFIUS does this through its
    singular focus on reviewing transactions for cognizable
    national security risks that could reasonably result from the
    transaction, which, under the law, requires CFIUS to identify
    credible evidence of a threat of vulnerability and the
    consequence. Certain principles of the CFIUS process are
    essential to maintaining an open investment environment while
    allowing CFIUS to fully resolve national security risks. These
    include statutory timelines that provide predictability to
    transaction parties, evidence-based decisions that require
    credible evidence that a transaction poses a national security
    risk.
        The tool of last resort, CFIUS only acts when there are no
    other adequate or appropriate authorities that can address the
    national security risk: proportionality, CFIUS' actions are
    tailored to the national security risk arising from the
    transaction, not issues unrelated to the proposed acquisition;
    confidentiality that encourages transparency from transaction
    parties and ensures CFIUS can conduct an apolitical national
    security analysis; and accountability, congressional oversight
    that ensures CFIUS operates consistent with its statute. This
    framework has allowed CFIUS to adapt to emerging national
    security risks while providing transaction parties confidence
    that their filings would be handled fairly and efficiently.
        The foreign investment landscape has shifted considerably
    since Congress passed FIRRMA in 2018. At the time, Chinese
    investment was at its peak, and CFIUS was grappling with an
    increasing number of transactions that raised national security
    risks, yet were outside of its jurisdiction. This is not the
    case today. According to the American Enterprise Institute, the
    People's Republic of China (PRC) spending here has been
    negligible since 2018. Chinese investment around the world was
    stable at a historically low level in 2024 and barely visible
    in the United States. Despite the drop in Chinese investment,
    the number of CFIUS filings withdrawn and refiled increased to
    historic heights from 2021 to 2023, exceeding the previous
    highs when Chinese investment was at its apex from 2016 to
    2018. One can infer from this data that our U.S. partners and
    allies have been increasingly impacted by delays in mitigation.
        As Congress did when it passed FIRRMA, changes to the U.S.
    investment security policy should go through a similarly
    rigorous process that is, one, based on evidence of a defined
    national security risk; two, assesses the impact that such
    changes will have on the investment that does not pose a risk
    to U.S. national security. The Outbound Investment Security
    Program could benefit from such a process. As currently
    structured, the regulations pose ambiguities that complicate
    compliance. Better alignment between the national security
    risks it is intended to solve and the definitions for covered
    transactions would provide much-needed clarity to the private
    sector. Given the negligible volume of Chinese investment into
    the United States today, any expansion of CFIUS' jurisdiction
    is more likely to disproportionately impact benign foreign
    investment. It could blunt CFIUS' effectiveness as a national
    security tool by reducing its ability to thoroughly review each
    transaction.
        Thank you for your interest in these issues, and I look
    forward to your questions.

        [The prepared statement of Mr. Reissaus follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Davidson. Thank you, Mr. Reissaus. Mr. Joseloff,
    you are now recognized for 5 minutes for your oral statement.

      STATEMENT OF BENJAMIN JOSELOFF, PARTNER, CRAVATH, SWAINE &
                               MOORE LLP

        Mr. Joseloff. Thank you. Chairman Davidson, Ranking Member
    Beatty, and distinguished members of the subcommittee, thank
    you for inviting me to testify today. It is an honor to join my
    fellow panel members in contributing to your work on U.S.
    investment security policy. My name is Ben Joseloff. I am a
    Partner at the law firm of Cravath, Swain & Moore. Today I am
    presenting my own views and not those of my firm or of any
    client of my firm. The perspectives I will offer today are
    informed by over 10 years of experience in both the public and
    private sectors working on matters relating to the Committee on
    Foreign investment in the United States, or CFIUS.
        The United States of America has long been known as one of
    the most welcoming economies for foreign direct investment.
    This is in large part because the U.S. Government, through
    administrations of both parties, has recognized the benefits
    that come with foreign capital, but not all foreign investment
    is benign. Malign actors can and do try to take advantage of
    our general openness by using foreign investment to harm U.S.
    national and economic security. Thus, the United States has had
    for 50 years a mechanism to address harmful foreign direct
    investment. That mechanism is CFIUS.
        CFIUS operates within and is a part of the U.S. open
    investment framework. This means that CFIUS should not be seen
    as an exception to U.S. open investment policy. Rather, in my
    view, CFIUS is best understood as a mechanism that enables and
    perpetuates our commitment to an open investment environment. I
    believe that support for a robust, well-resourced, and
    efficiently run CFIUS not only helps preserve U.S. national and
    economic security, but also enables the continuation of our
    Nation's longstanding bipartisan open investment policy.
        This is the theoretical underpinning of CFIUS, but how does
    CFIUS operate in practice? In my written testimony, I provide
    details regarding how the CFIUS process affects U.S. businesses
    and their foreign investors. The key takeaway is that the CFIUS
    process can result in noteworthy timing and economic friction
    in cross-border transactions, and this friction has real costs
    and consequences. Of course this is not necessarily
    inappropriate. As I noted earlier, CFIUS plays a critical role
    within the broader U.S. open investment framework, and some
    transaction costs are unavoidable in a system that relies on
    thorough, case-by-case assessments carried out by subject
    matter experts across the U.S. Government.
        To me, the real question then is the following: can we be
    confident that we have reduced the transaction costs imposed by
    the CFIUS process to those that are necessary and appropriate
    to protect U.S. national security? In my view, the short answer
    is not yet, but CFIUS is trying, and they are making good
    progress. The longer answer is that in my 10 years of CFIUS-
    related experience, both in government and in private practice,
    my observation is that the individuals who administer the
    process are doing their best to accomplish their critical
    national security mission as efficiently as possible. This is
    true both for the dedicated career civil servants who undertake
    the day-to-day work of CFIUS as well as the political
    appointees who ultimately make the difficult decisions.
        To conclude, I know there are various legislative proposals
    relating to CFIUS the members of the subcommittee may be asked
    to consider. Rather than opining on any specific legislation, I
    would encourage members to ask two questions with respect to
    any CFIUS-related bill that crosses your desk. First, will the
    legislation help the individuals who administer the CFIUS
    process increase efficiency without harming U.S. national
    security? Second, if the legislation will create new economic
    friction, is that friction truly necessary in order for CFIUS
    to achieve its mission? With these questions as a guide, I
    believe that the members of the subcommittee will be to be well
    placed to ensure that we continue to have an inbound investment
    security regime that supports both American security and
    American prosperity, and that CFIUS will continue to be
    regarded as the global gold standard for the national security
    regulation of foreign direct investment.
        Thank you again for the opportunity to participate today. I
    look forward to your questions.

        [The prepared statement of Mr. Joseloff follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Davidson. Thank you, Mr. Joseloff. Dr. Bauerle
    Danzman, you are now recognized for 5 minutes for your oral
    statement.

    STATEMENT OF DR. SARAH BAUERLE DANZMAN, ASSOCIATE PROFESSOR OF
         INTERNATIONAL STUDIES, INDIANA UNIVERSITY BLOOMINGTON

        Dr. Bauerle Danzman. Thank you, Chairman Davidson and
    Ranking Member Beatty, for inviting me to testify on evolving
    investment security issues of concern to the American people.
    It is an honor to speak with the subcommittee today. The views
    I express in my testimony are my own and do not necessarily
    reflect the views of Indiana University or of the Atlantic
    Council where I am a fellow.
        As Congress evaluates current national security regulation
    for inward and outbound investment, I encourage representatives
    to ensure that any additional congressional action aligns with
    the following five principles. First, investment security
    policy should be clear to U.S. companies and foreign investors.
    The compliance burden of investment regulation has increased
    tremendously in recent years. Investors need to understand what
    their obligations are and believe these restrictions serve a
    legitimate public good. Frequent updates to investment rules
    make the policy environment unstable and expectations for the
    future regulatory landscape uncertain. Retroactive application
    of law generates concern over future respect for property
    rights and should be avoided.
        Second, investment security should be consistently applied.
    Investors and companies should not be differentially treated
    based on personal relationships with or connections to
    administration officials. For CFIUS, this means parties before
    the committee should not receive favorable treatment if they
    are well connected to the administration or to a Member of
    Congress. For the Outbound Investment Security Program, this
    means that the process for receiving an exception to
    prohibition should be clearly publicized, subject to a rigorous
    regularized review process, and the outcome of such
    determination should be quickly notified to the public. In the
    absence of oversight, CFIUS and the Outbound Program could
    become the site of special dealing that is inconsistent with
    the rule of law or the foundations of a dynamic market-based
    economy.
        Third, investment security tools should be contained to a
    narrow set of clear national security concerns. Overregulation
    would reduce investment in the United States, negatively
    affecting jobs and innovation capacity. Congress should resist
    the urge to further expand CFIUS' authorities to address broad
    national interest concerns. It should also reaffirm that
    mitigation agreements should be proportional to identified
    risks and should only be used to address national security
    concerns rather than expansive economic competitiveness issues.
    Any outbound legislation should focus on national security
    risks associated with a narrow set of technologies for which
    the U.S. holds an innovation lead. The likely innovation costs
    of restricting outbound investment in other technologies is too
    high to entertain.
        Fourth, investment security policies should be
    collaborative. U.S. power benefits from centrality in global
    innovation, finance, trade, and diplomatic networks, and our
    strategies should function to further embed us in those
    networks rather than insulate us from them. Building
    multilateral support and coordination is necessary for
    effectively countering PRC efforts to gain access to Western-
    developed dual-use technologies to modernize their military
    capabilities. Technology investment and know-how are very hard
    to control unilaterally. Acting multilaterally also reduces the
    cost of monitoring and enforcement, which saves U.S. taxpayer
    money and frees additional resources for investments in
    American families, workers, and communities.
        Finally, investment security policies should be curious.
    Many of the investment security policies that the United States
    has implemented in recent years are addressing problems for
    which there remains a great deal of uncertainty about the size
    of the concern and the cost of potential solutions.
    Consequently, policies in this area are risky. We have less
    certainty over their effect and their unintended consequences.
    Therefore, ongoing assessment of policy effectiveness is vital.
    Investment security policies should be subjected to cost-
    benefit analysis at regular intervals to better understand the
    tradeoffs to economic dynamism and technological innovation
    that investment restrictions induce. If measures of innovation
    drop, Congress should be prepared to work with industry to
    better understand why and should be willing to reverse course
    if it becomes clear that a policy has failed or has
    unacceptable unintended consequences.
        Thank you, Mr. Chairman. I look forward to answering your
    questions.

        [The prepared statement of Dr. Bauerle Danzman follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Davidson. Thank you very much. We will now turn to
    member questions. I now recognize myself for 5 minutes of
    questions.
        I support President Trump's February National Security
    Presidential Memorandum, which encourages foreign investment
    while protecting national security. Specifically, it states
    that ``CFIUS will be used to restrict Chinese investments in
    strategic U.S. sectors, like technology, critical
    infrastructure, healthcare, agriculture, energy and raw
    materials,'' and that ``The United States will protect our
    farmland and real estate near sensitive facilities, strengthen
    CFIUS' authority over greenfield investments, and restrict
    foreign adversary access to U.S. talent and operations in
    sensitive technologies.'' Mr. Reissaus, in your testimony, your
    opening statement, you said CFIUS only acts when other tools
    are not available. Would you concede that tariffs can be used
    for national security interests?
        Mr. Reissaus. Thank you, Mr. Chairman, for the question.
    When CFIUS looks at a transaction and identifies a risk, its
    first step is, ultimately, to look at those other authorities
    that are available and then determine whether they can actually
    address that concern. That could be something as simple as
    looking at export controls to determine whether that is
    sufficient to address the transfer of a particular piece of
    technology, but it could also be to look at other economic
    tools that may relate to the national security risk.
        Chairman Davidson. One of those tools would be tariffs,
    right?
        Mr. Reissaus. During my time, I had not seen tariffs used
    as a potential consideration. However, I think tools that
    address broader strategic issues can be an effective measure to
    avoid transactions that do present concerns.
        Chairman Davidson. Clearly, President Trump views it as a
    national security thing, and when we design the tariffs, you
    have 232 and 302 and other provisions in tariffs because
    sometimes it is a very efficient tool. People could debate
    whether it should be used the way that it is being used, but
    clearly, it is a tool that is available, and I just think as we
    are looking at CFIUS reviews, it is worth considering. It may
    be a fast thing to do is get into a negotiation, use tariffs to
    get the attention, and get the underlying issue addressed. As
    we are looking at CFIUS, Mr. Samford, when your organization
    emphasizes the importance of foreign investments into our
    economy how have CFIUS' expanded reviews under FIRRMA impacted
    multinational companies' investment decisions in the United
    States?
        Mr. Samford. Thank you for the question, Mr. Chairman. As
    you are well aware, since 2018, international investment has
    actually increased precipitously from friends and allies in the
    United States. As I mentioned in my opening, eight countries
    constitute 75 percent of all investment in the United States;
    that is Japan, Canada, and European countries, all of them
    longtime friends and allies of the United States. The top
    investors in Ohio, for instance, reside from those countries as
    well. What we have seen through FIRRMA is that Chinese
    investment in the United States has dropped about 15 percent
    since then. The reviews are less through the CFIUS process
    around Chinese investment, as was mentioned earlier, but I
    think that companies continue to value the United States
    economy, America's workforce, and the opportunities to build
    and create things here in the United States.
        Chairman Davidson. Yes. We have certainly seen a brisk pace
    this year. Hopefully, we keep building on it and we do it
    efficiently so that we can get it done, and I think the
    tailoring that you have all referenced has got the attention, I
    think, in a bipartisan way. Mr. Reissaus, on the Outbound
    Investment Security Program, I strongly agree with you on how
    important clear definitions of covered transactions are in
    order to implement the program. Could you elaborate on how
    specific or narrow these definitions need to be for proper
    enforcement? For instance, what if a large corporation has some
    business that falls undercover transaction and some that does
    not? I mean, you can think about Amazon in the United States as
    Amazon Web Services (AWS). That might be considered sensitive
    if it was a Chinese investment, but you might do their air
    cargo business, and you are doing business with Amazon either
    way, so how do you parse that?
        Mr. Reissaus. Mr. Chairman, that is an excellent question,
    and I think that is the exact challenge that many private
    sector parties are dealing with right now under the Outbound
    Investment Security Program, which is trying to understand what
    activities may be captured, which ones are clearly the ones
    that the government is concerned about and needs to be
    addressed. I think the key thing that does need to happen with
    the Outbound Investment Security Program is for it to go
    through a process that Congress put FIRRMA through, and the key
    elements of that which allow FIRRMA to be successful in
    targeting the core national security issues is, first, defining
    what that is that needs to be solved. I think there is a lack
    of clarity in the private sector and amongst many to understand
    what exactly the problem is that is trying to be solved.
        Chairman Davidson. Yes, thank you, and I would submit that
    the Office of Foreign Assets Control (OFAC) does get pretty
    precise, so we will look at how we can do that. My time has
    expired, and I now recognize the ranking member for her
    questions.
        Mrs. Beatty. Thank you, Mr. Chairman. Thank you to the
    witnesses, and thank you, Mr. Samford, for acknowledging Ohio
    and the 300,000-some employees. I hope I get to talk to every
    one of them. We like numbers like that and people being
    employed.
        Let me go to my first question for you, Dr. Bauerle
    Danzman, and I am probably going to, if I have time, ask
    everybody else if they have an opinion on this. In your
    testimony, you address the need for consistency in the CFIUS
    review process. Can you address some of the concerns associated
    with President Trump's response to certain high-profile CFIUS
    cases, and what are the broader national security risk, which I
    will ask everybody else, of this kind of approach to investment
    security?
        Dr. Bauerle Danzman. Thank you, Ranking Member Beatty, for
    your question. I would start by saying that national security
    is not a bargaining chip in any trade negotiation. If there is
    a national security problem, you need to address the national
    security problem, and it should not be traded away for other
    unrelated issues. The second thing I will say without getting
    into specifics of any deal is that, in general, and I did work
    on the committee in 2019 and 2020, that in CFIUS world, any day
    in which a CFIUS transaction is in the news is a bad day for
    CFIUS. We want the committee to be able to employ a rigorous,
    fact-based assessment of every single transaction, and the
    point of the CFIUS process is to do that rather than employ a
    politicized review of the transaction. We should try as much as
    possible to keep the committee's work at the working level
    until it rises up to a Presidential decision, and we should
    refrain from situations in which elected officials are opining
    on deals before the committee before they are determined.
        Mrs. Beatty. Thank you. Anybody else have a comment that
    they want to add on the broader national security risk of this
    kind of approach to investment security?
        [No response.]
        Mrs. Beatty. Interesting. Experts in it, you have no
    comment either way?
        [No response.]
        Mrs. Beatty. Let me go to my next question. I will come
    back to you, Dr. Bauerle Danzman. As you know, the Outbound
    Investment Security Program, which has been active for 6
    months, we do not have any reporting from Treasury on that
    process yet. What factors or data would you expect to see
    demonstrate that the program has been successful, or what
    questions should this committee ask of Treasury regarding the
    activities?
        Dr. Bauerle Danzman. Of course, we are in very early days
    of the Outbound Program. I think when you think about the sorts
    of information that you would like to have Treasury provide,
    that would be information on what types of transactions are
    going before the committee. Actually--excuse me--for Outbound,
    that is a notification and a prohibition, so understanding how
    many transactions are being notified, what is the process of
    looking for non-notified transactions that should have been
    prohibitive, have any been found. As the program matures,
    understanding how this is affecting things like innovation
    capacity is really important, so doing reviews over time about
    what is happening to the innovation ecosystem around these
    technologies that are scoped into review is an important thing
    that the committee should be assessing.
        Mrs. Beatty. Thank you. Let us try this again with the
    other members. Is there anything that this committee should be
    asking of Treasury regarding activities?
        Mr. Reissaus. One recommendation I would have is trying to
    understand the number of transactions that Treasury is looking
    into from an enforcement matter, and the percentage of those
    that end up being either failure to notifies or were violations
    of the prohibition. I think that would provide a clear
    indication of what is actually occurring, or is this creating a
    significant burden on parties on the enforcement side, despite
    the lack of evidence of noncompliance.
        Mrs. Beatty. Thank you. I yield back, Mr. Chairman.
        Chairman Davidson. Thank you Mrs. Beatty. I now recognize
    the gentleman from Oklahoma, Mr. Lucas, who is also the
    Chairman of the Monetary Policy Task Force.
        Mr. Lucas. Thank you, Mr. Chairman, and I would like to
    start with Mr. Joseloff and Mr. Reissaus. In your experience,
    would it be helpful to finally place the Secretary of
    Agriculture as a permanent member on CFIUS for ag-related
    transactions, like my bill, the Agricultural Risk Review Act
    would? How does having subject matter expertise in specific
    industries help inform the CFIUS review process?
        Mr. Joseloff. I am happy to start. Thank you for the
    question. I think it is absolutely critical that the Department
    of Agriculture be involved in CFIUS reviews of transactions
    that involve agriculture or food security issues. In my
    experience, when I was serving in government, the Department of
    Agriculture was involved in transactions that raised those
    issues. I think the committee does a good job of recognizing
    the different subject matter expertise around the U.S.
    Government and calling in that expertise, as appropriate, in
    reviewing transactions.
        Mr. Reissaus. I would agree with Mr. Joseloff. In my
    experience, the Department of Agriculture not only was
    consulted on those transactions, but often served as a co-lead,
    so certified to Congress at conclusion of those deals. So, it
    is very important that the United States Department of
    Agriculture (USDA) is included in those matters, and I think I
    understand there was a memorandum of understanding (MOU) signed
    between the Department of Treasury and the Department of
    Agriculture that memorializes the process to ensure that
    continues.
        Mr. Lucas. Absolutely, and I thank you both for those
    comments, and my bill passed the House this month, and based on
    your testimony, our friends of U.S. Senate will actually take
    it up. Mr. Reissaus, Mr. Samford has recommended a fast-track
    pathway for trusted investors to go through the CFIUS review
    process. What guardrails would be appropriate for a program
    like that so that we are re-incentivizing the right type of
    investment?
        Mr. Reissaus. Thank you, sir, for your question. I think
    the first one is the committee needs the ability to still
    assess both the threat, so receiving the intelligence
    community's assessment of the particular investor, and they
    still need to be able to look at the context of the deal
    itself. What is the U.S. business, and what does it do that is
    important for national security so that it can act if it needs
    to? I think what needs to be focused on, though, is how do you
    streamline the process so that the committee is focused on
    those narrow issues and is not looking into unrelated matters;
    so, how can it be more targeted in the questions that it poses
    to parties? How can it streamline the submissions of
    information so that can happen more quickly, and how can it
    improve its decision making so that those timelines are much
    shorter to then facilitate that benign investment?
        Mr. Lucas. Absolutely. Mr. Samford, in your view, are
    national security and an open investment climate inherently at
    odds, or can we encourage foreign direct investment without
    compromising our security interest and why is it important that
    we have policies that support both of those values?
        Mr. Samford. Absolutely, Congressman. Thank you for your
    leadership in this space. I think they are complementary
    objectives, and I think CFIUS is a good example. Over its
    transformation since its inception in the 1970s to today,
    Congress has met the challenge through the framework of CFIUS
    as threats have emerged and changed, and I think your
    leadership in this space is reflective of that with your
    legislation. I think that it is important to remember that the
    vast majority of investment into the United States comes from
    longtime friends and allies, and it is into sectors and
    businesses that are wholly unrelated to national security.
    These are great-paying jobs, many of them in the manufacturing
    sector. About 40 percent of all foreign direct investment (FDI)
    jobs are in U.S. manufacturing, and so having the ability to
    provide good-quality jobs, high-paying jobs that do not require
    mountain of debt and college debt is a benefit. One of the
    things that international companies bring to the U.S. is not
    just the capital they need to operate here, but they also bring
    world-class know-how; importing that best practice is not only
    beneficial to the companies, but also the communities where
    they operate.
        Mr. Lucas. Thank you, and thank you to the panel, and I
    yield back, Mr. Chairman.
        Chairman Davidson. Thank you, Mr. Lucas. The gentleman from
    California, Mr. Liccardo, is now recognized for 5 minutes.
        Mr. Liccardo. Thank you, Mr. Chair. I represent a
    significant portion of Silicon Valley, and we have gotten an
    awful lot of folks who are very frustrated the CFIUS process
    and would like to see many reforms aligned with what has been
    discussed here, so I appreciate the testimony of everyone here.
    Particularly, as we think about consistency and some of the
    challenges Mr. Joseloff referred to with regard to defining
    jurisdiction, I understand it is something that consumes an
    awful lot of time and legal analysis, and that creates a lot of
    sand in gears. I guess the question I have is, really, are
    there specific proposals out there, either that have already
    been introduced or language that you see organizations working
    on, like the Land Council or others, that could help us better
    define jurisdiction so at least parties can get to the question
    more quickly of whether this is governed by CFIUS or not?
        Mr. Joseloff. Thank you very much for the question. As I
    said in the written testimony that I submitted, I think one of
    the key improvements that could be made to the kind of
    jurisdictional process would be a review of the definition of
    ``critical technology,'' specifically as it applies in kind of
    mandatory filings, to see if there is a way to reduce the
    burden on companies of having to perform export control
    analysis, which can be timely and costly on things that they do
    not actually export. So, that is one concrete idea.
        Mr. Liccardo. Thank you, and do any of the other witnesses
    have any specific suggestions?
        Mr. Reissaus. Not necessarily from a legislative
    standpoint, but I think, from my experience, especially in the
    government, I did recognize that there were challenges in the
    venture capital (VC) space because of the need for companies to
    receive capital quickly. I think focusing on, whether it is
    even from congressional oversight, to ensure that the committee
    is processing transactions quickly so that, essentially, benign
    capital through VC investment can occur within the timelines
    that are often very short for those types of transactions, is a
    way to kind of help ensure that the committee is not
    unnecessarily impeding. I think that important investment.
        Mr. Liccardo. Thank you. I am sorry. Doctor?
        Dr. Bauerle Danzman. I will just add as well----
        Mr. Liccardo. Yes.
        Dr. Bauerle Danzman [continuing]. that outreach is very
    important here. Treasury already does outreach to the venture
    community, but I think continued outreach and really
    emphasizing educating venture on their obligations is an
    important part of the puzzle here.
        Mr. Liccardo. Thank you. Dr. Bauerle Danzman, since you
    just spoke, I am curious to follow up on the concerns about
    consistency. Are there specific examples under this
    administration where you are seeing considerations outside of
    national security playing into a negotiation?
        Dr. Bauerle Danzman. I am not privy to the inside
    negotiations on CFIUS, and I hesitate to opine too directly on
    specific transactions, but I do think that there is a sense
    that, in some transactions, there has been a desire to also put
    in place obligations that have more to do with economic
    competitiveness as opposed to national security specifically,
    and the use of mitigation agreements that have a lot of various
    components to it that seem quite far away from national
    security, especially if a transaction is not related to an
    entity that is directly integrated into the defense industrial
    supply chain. I would be worried and cautious about those kinds
    of mitigation terms.
        Mr. Liccardo. Doctor, I know a colleague of yours at the
    Atlantic Council wrote a piece back in February specifically
    expressing concern about limitations in cross-border
    investments imposed by the NSPM in this administration. Are
    there other elements that you would point to, other concerns in
    addition to the ones you just raised?
        Dr. Bauerle Danzman. With respect to inbound or outbound? I
    am sorry.
        Mr. Liccardo. In this case, well, I guess it was cross-
    border, so that would be either.
        Dr. Bauerle Danzman. Yes. I think that there are two
    things. First is that we should be really cautious about
    putting too many restrictions on outbound investment in
    technologies for which the U.S. is not at the cutting edge
    because by investing abroad, that is a way for us to bring back
    technology to the United States that is important and that we
    could use.
        Mr. Liccardo. Thank you, Doctor.
        Chairman Davidson. Thank you, Mr. Liccardo. The gentleman
    from Kentucky, the Chairman of the Subcommittee on Financial
    Institutions, Mr. Barr, is now recognized for 5 minutes.
        Mr. Barr. I want to start by picking up right where Mr.
    Liccardo left off and where Ranking Member Beatty, where she
    was in her line of questioning about the importance of keeping
    the CFIUS process and a prospective outbound regime
    depoliticized, and that is precisely why I was so concerned
    about the prior administration's politicization of the Nippon
    Steel deal. I am respectful of the fact that the ranking member
    represents Ohio where Cleveland-Cliffs is, but this was a deal
    that was highly politicized right before a national election
    where the United Steelworkers came into the Oval Office and
    helped the prior President kill a very beneficial investment
    that advanced American national security.
        Remember, Nippon Steel is a very technologically advanced
    steel company domiciled in an ally nation: Japan. This was an
    investment that was providing competition and preventing a
    monopoly in the United States on steelmaking. It strengthened
    U.S. Steel and enhanced U.S. national security. The fact that
    CFIUS did a rigorous re-review away from politics, made the
    correct recommendation, and then the President followed the
    career advice of CFIUS was a rectification of a politicization
    in the previous administration. I think the points made by my
    friends on the other side of the aisle of keeping politics out
    is very, very important, and I think we should take a lesson
    from the politicization of CFIUS from the prior administration
    here. I appreciate the current administration fixing that.
        Let me ask a question about outbound because we should
    learn from the virtues of CFIUS and also maybe some of the
    shortcomings of CFIUS as we work on an outbound regime. Mr.
    Reissaus, let me ask you, last year, the Select Committee on
    the Strategic Competition with China found that five venture
    capital firms funneled more than $1.9 billion to AI companies
    supporting China's human rights abuses and military
    modernization. At least $1.2 billion went into the PRC
    semiconductor industry. Clear controls are needed in respect to
    outbound investments into Chinese entities, and that is why I
    appreciate President Trump's National Security Memorandum,
    America First Investment Policy, and it is why I introduced the
    Fight China Act, which takes both an entity-and sensitive-
    technologies-based approach. Do you agree that using all of the
    tools in the toolbox--time-tested sanctions and forward-looking
    prohibitions on sensitive technologies--is the best way to
    ensure we are spreading the net wide enough to prohibit
    investments that progress Chinese military and surveillance
    ambitions, but not too much to impede benign and beneficial
    outbound investment?
        Mr. Reissaus. Thank you, Congressman, and appreciate the
    question. It is an important one, and I think the answer to
    understand whether or not you are using all of the tools
    necessary is first understanding what is the problem that needs
    to be solved. Is it the fact of an investment, or is it, I
    think, what President Biden's order was attempting to address,
    which was smart money? I think once we can understand what that
    is, the appropriate tool or tools will then I think flow from
    that, which is, is it a sanctions-based approach, an entities-
    based approach, or is it a transactional approach as was taken
    by the Biden Administration.
        Mr. Barr. Mr. Samford, as a fellow Kentuckian, it is no
    surprise that a Centre College graduate has risen to such
    influence as you, so congratulations on your new position. You
    are going to do a great job there advocating for beneficial
    foreign investment in the United States that makes the United
    States competitive. As we think about the outbound investment
    regime, how can we make it easier for U.S. investors in terms
    of making these decisions through a red light/green light
    system easier than maybe even CFIUS is for companies to
    navigate the CFIs process? How important is it to have a red
    light/green light clarity as opposed to uncertainty that
    sometimes comes with CFIUS?
        Mr. Samford. Thank you for that question. To be succinct, I
    think CFIUS provides a nice framework. CFIUS is designed to
    look at specific threats and specific circumstances. I think
    those same principles could be applied to the outbound.
    Obviously, the Global Business Alliance, we represent U.S.
    subsidiaries. Most of our focus is on the inbound business, the
    insourcing of jobs to the United States. Very few of our
    companies outsource or are investing abroad from the subsidiary
    here in the United States, but I think for those that are U.S.
    companies investing abroad, CFIUS provides a framework in that
    it looks at deals on a case-by-case basis, looking for specific
    threats and working to mitigate those specific concerns.
        Mr. Barr. Thank you. I yield.
        Chairman Davidson. Thank you, Mr. Barr. The gentleman from
    Illinois, who is the Ranking Member of the Financial
    Institutions Subcommittee, Mr. Foster is now recognized for 5
    minutes.
        Mr. Foster. Thank you, Mr. Chair, and I appreciate the
    bipartisan concern over trying to depoliticize the things that
    ought to be purely national security concerns. I think it is a
    very useful principle, and I look forward to my colleagues'
    public comments on, say, the tariff thing of Canadian steel and
    aluminum, which was done on allegedly national security
    grounds. It is something that we will have to continue talking
    about, and I think, in the end, Congress is going to have to be
    more explicit, given the behavior of the current
    administration.
        Let us see. One specific thing that came up, are China's
    capabilities in, say, integrated circuit manufacture, limited
    in any way by the amount of capital, or is it simply technology
    that limits them right now, because my feeling, it is just
    technology. They are putting in so much capital that they do
    not know how to spend it sensibly. Does anyone agree or
    disagree with that?
        Ms. Bauerle Danzman. I would say that China is very good at
    the extensive margin and less good at the intensive margin, and
    so, yes, they can throw a lot of capital at a problem. One of
    the points of the Outbound Program was that, along with
    capital, at least outbound foreign direct investment and
    venture capital comes with know-how and technology alongside
    that capital. That is really what China wants from U.S. capital
    markets and U.S. companies, and that is the reason why outbound
    was focused----
        Mr. Foster. Sure.
        Dr. Bauerle Danzman [continuing]. not on portfolio flows.
        Mr. Foster. Yes. No, I understand. We should keep our eyes
    on the technology. It is not money that limits Chinese progress
    in many things. Let us see. Several members have emphasized the
    need for technical expertise both inside CFIUS and in the
    agencies it partners with. Now, do you believe that the recent
    attacks on civil servants, generally, and the steep budget cuts
    and staff of CFIUS member agencies are going to support the
    efforts of this, or is it going to be a negative in recruiting
    people going forward? Comments from anyone? Dr. Bauerle
    Danzman, I guess.
        Dr. Bauerle Danzman. I will start by saying that it is
    always hard to attract subject matter experts in emerging
    technologies to work in the U.S. Government, and during my time
    on the committee, that was a concern that came up often. We
    need to do more to attract those subject matter experts to be
    willing to bring their gifts, bring their talents and their
    expertise to the U.S. Government.
        Mr. Foster. Any other comments?
        Mr. Reissaus. I would like to point back to FIRRMA, and I
    think Congress did two really important things in 2018 that
    greatly expanded the committee's ability to address this issue.
    One is it provided direct hire authority so the committee and
    members could directly recruit these types of people, and two,
    it provided significant resources to do that. Over the years,
    what I saw was, one, the committee could leverage expertise
    from individuals within the Department of Defense that are very
    familiar with sensitive technologies, experts and Ph.D.s at
    National Labs but what you were seeing and I think you continue
    to see is, there are more technical experts, Ph.D.s that work
    in, for example, the department of Treasury because of these
    resources that Congress provided.
        Mr. Foster. Yes. I am very familiar with National Labs,
    having worked there for 25 years, and I can tell you they are
    hemorrhaging talent because of the actions of this
    administration. It is really bad, and when you reach out to
    partner organizations, you will find in many instances that the
    experts you used to deal with there have quit in disgust. It is
    really bad out there, and at least, for sure, in the Department
    of Energy that I am very familiar with.
        Now, Dr. Bauerle Danzman, the U.S. has long been an
    attractive location for foreign investment. I believe this is,
    in large part, due to our stable economy and financial markets,
    talented workforce, and commitment to promoting fair and
    orderly business dealing. The U.S. has been also historically a
    leader in anticorruption efforts. The Corporate Transparency
    Act and the Foreign Corrupt Practices Act are two pieces of
    legislation that really aim to crack down on corruption and
    illicit finance but since taking office, President Trump has
    demonstrated his willingness to backtrack on anticorruption
    efforts and rolling back on enforcement of both the CTA and the
    Foreign Corrupt Practices Act (FCPA). Is this going to cause
    long-term problems for the enthusiasm for just investment in
    the United States?
        Dr. Bauerle Danzman. If we are talking specifically about
    the CTA, I think that the CTA would provide really important
    information to investment screening professionals so that we
    could actually move forward with review, including by
    increasing the pace of an ultimate beneficial owner (UBO)
    discovery and so forth.
        Chairman Davidson. The gentleman's time has expired. I
    would ask for further comments to be submitted for the record.
        Chairman Davidson. The gentlewoman from California, Mrs.
    Kim, is now recognized for 5 minutes.
        Mrs. Kim. Thank you, Chairman Davidson and Ranking Member
    Beatty, for holding today's hearing. Thank you, witnesses, for
    joining us.
        Foreign direct investment has been a key part of making
    America one of the greatest countries in the world, and it has
    ensured the Americans remain employed, and FDI-related
    employments in the United States is really highest in the State
    of California with 15 percent related to that. I just
    appreciate the FDIs coming into our country, but we also want
    to also ensure that our American direct investments going
    abroad is also protected. None of that could occur without the
    balanced role that the Committee on Foreign Investment in the
    United States plays in shielding national security while still
    facilitating our foreign investment.
        First question to you, Mr. Joseloff. For those who have not
    gone through that CFIUS process, could you detail how that
    process works and what kind of information companies are
    expected to provide?
        Mr. Joseloff. Thank you, yes. The process usually starts at
    the very earliest stages of a cross-border transaction with the
    parties thinking about whether their transaction would be
    within the jurisdiction of CFIUS. If so, whether it would
    trigger a mandatory filing requirement, or if the parties are
    at liberty to choose whether to file voluntarily, and then,
    ultimately, they have to think about will their transaction
    likely raise national security concerns. If they do file with
    CFIUS, either because they have to or because they have chosen
    to do so voluntarily, the committee requires a wide range of
    information from both the foreign investor and the U.S.
    business. That information on the foreign investor side touches
    on who are the ultimate owners of the company, what is their
    business, where are they located, what connections do they have
    to other countries. On the U.S. business side, it looks at what
    type of technology do they have--do they have government
    contracts, where are their facilities located--a whole range of
    information on both sides trying to get at this question of
    does a national security concern arise from the transaction.
        Mrs. Kim. Thank you. I want to do a follow up question to
    you, Mr. Samford, and ask, what do you see the Known Investor
    Pilot Program fitting into the CFIUS mandate of balancing
    national security while securing the greater investments from
    our allies and partners?
        Mr. Samford. Thank you for that question, Congresswoman. I
    think that this has tremendous potential. That was one of the
    facets of FIRRMA, when it was passed in 2018, was to create a
    mechanism for those that are frequent filers of CFIUS to be
    able to expedite the process. There have been a couple of
    iterations on that. This proposal, I think, is still being
    worked through in terms of what it will look like, but I think
    anything we can do to ensure that resources are used
    efficiently, that is to say that CFIUS is focused on the
    highest-risk transactions, and where you have well-established,
    well-known investors, frequent investors, that those can be
    handled efficiently.
        Mrs. Kim. Improvements like that Known Investment Program
    are what we need to continue to see CFIUS to ensure there is
    strong foreign investments in national security. I fear that
    under the previous administration, we saw the mission of CFIUS
    thrown to the side, and, instead, the committee was close to
    becoming a political tool. How does U.S. become less
    competitive for foreign investments since CFIUS become a
    political tool?
        Mr. Samford. There is no doubt that the world watches what
    happens with CFIUS reviews, and I think you are referencing the
    Nippon Steel-U.S. Steel acquisition. That was a situation where
    you had a well-known investor company that is operating in the
    United States, from our largest country, investing in Japan, a
    country with whom we have a mutual defense treaty. I think that
    deal was largely handled outside of the CFIUS process where you
    had the previous administration weighing in prior to a formal
    review taking place.
        Mrs. Kim. Thank you. I do want to make a last comment and
    highlight the Outbound Investment Security Program. When
    President Xi Jinping first rose to power in China, he stated
    that the Chinese Communist Party's (CCP's) foundation within
    the private sector was weak, and he outlined an economic
    philosophy where private sector existed to carry out the
    party's work and enhance the party's philosophy. I just wanted
    to point that out because in 2017, nearly three-quarters of
    private enterprises had an established CCP cell, and by 2021,
    the CCP took complete coverage of all 500 of the Nation's
    largest firms. As we consider investment security, it is
    important that we not just look at the investment dollars that
    are coming into America, but also the dollars going out to
    China, so----
        Chairman Davidson. The gentlelady's time has expired.
        Mrs. Kim [continuing]. I just wanted to make that point,
    and thank you so much for allowing me to go over time, and I
    yield back.
        Chairman Davidson. The gentleman from Texas and also the
    Chairman of the Small Business Committee, Mr. Williams is now
    recognized for 5 minutes.
        Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
    all of you for being here today. As the global economy becomes
    more competitive, especially in advanced technologies like AI
    and semiconductors, American investors are trying to position
    the capital where it matters most. Under the Biden
    Administration's Outbound Investment Rule, U.S. firms are now
    required to self-determine if a transaction might raise
    national security concerns without a clear guidance or a
    published list of restricted entities. This creates legal
    uncertainty, compliance risk, and could drive up the cost of
    doing business abroad. Meanwhile, state-backed competitors from
    China and the Middle East faced none of those constraints and
    are aggressively expanding. Mr. Reissaus, if a Texas-based
    investor wants to put capital into a tech firm overseas to stay
    globally competitive, how do these new outbound rules impact
    that decision, and are we at risk of forcing American investors
    to sit on the sidelines where others move in?
        Mr. Reissaus. Congressman, thank you for your question, and
    I think the challenge with the Outbound Investment Security
    Program, as it has currently been constructed, is it did not
    fully account for those types of cost considerations when the
    rules went into place. So, I think it is really important that
    a policy process, and one that Congress could lead, could
    consider these types of issues to ensure that the cost of
    implementing this type of regime does not make our businesses
    or U.S. investors less competitive in the long run.
        Mr. Williams of Texas. Thank you. When U.S. investors
    participate in overseas ventures, such as emerging
    technologies, they often bring more than capital. They bring
    standards, accountability, and transparency to markets that
    would otherwise fall under the influence of authoritarian
    regimes. Again, we see that under the Biden Administration's
    outbound investment framework, we may unintentionally undermine
    this leverage. We have already seen U.S. firms spin off or walk
    away from foreign investments that once helped shape tech
    ecosystems, and in that vacuum, others, like Saudi Arabia and
    China, are stepping in and aligning themselves in markets with
    their own values and strategic objectives. Again, Mr. Reissaus,
    with the outbound rules tightening, are we giving up our
    ability to influence the standards, culture, and direction of
    foreign tech firms, and letting regimes like China and Saudi
    Arabia take that seat at the table?
        Mr. Reissaus. I think that is another key cost, which is
    the ability for the U.S. to project its values into businesses
    when that is restricted. I think another piece of that is also
    our ability to learn things from those investments. I think a
    lot of investors are able to bring expertise back or get access
    to technology, and that is equally potentially lost depending
    on how proud the regime is.
        Mr. Williams of Texas. One more question. Texas plays a
    massive role in U.S. energy security, as we know, from refining
    capacity and export terminals to pipeline systems and electric
    grid infrastructure. Those sites are critical not just for the
    State, but for the entire country's energy independence. With
    foreign-backed firms seeking to acquire assets or real estate
    near these facilities, the threat is real. I have it in my
    district. I see it. As our adversaries become more
    sophisticated in exploiting economic access points, we need to
    ensure our investment screening tools are capable of
    identifying and acting on those risks early, largely when the
    infrastructure in question supports the national defense and
    economic resilience. Mr. Reissaus again, how has CFIUS adapted
    to the growing risk of foreign actors seeking strategic
    footholds in our energy sector?
        Mr. Reissaus. Thank you, Congressman, for your question. I
    think, first, in my experience, energy security has been a
    critical area of concern that the committee has focused on,
    and, in fact, the Department of Energy wields a significant
    number of transactions to look at that specific issue. So,
    trying to assess whether in any particular deal the transaction
    may pose a risk, whether to energy production, resource
    extraction, or even present vulnerabilities to critical energy
    infrastructure, whether it is supply of power or distribution
    of power. So, the Department of Energy (DOE), when it looks at
    this, it is obviously looking for problematic investors, but
    are trying to assess whether the transaction could result in
    vulnerabilities being inserted into those types of assets and
    protecting against that. The Department of Defense also will
    look at those deals closely to assess whether or not proximity
    to defense facilities or test ranges is also factored in when a
    foreign investor acquires, say, an oil field and is looking to
    do resource extraction.
        Mr. Williams of Texas. Thank you for that, and with that, I
    yield my remaining time back.
        Chairman Davidson. Thank you, Mr. Williams. I would like to
    thank all our witnesses for your testimony today.
        Without objection, all members will have 5 legislative days
    to submit additional written questions to the chairman for the
    record. The questions will be forwarded to the witnesses for
    response. The witnesses, if you get them, please respond no
    later than August 21.

        [The information referred to can be found in the appendix.]

        Chairman Davidson. This hearing stands adjourned.

        [Whereupon, at 1:07 p.m., the subcommittee was adjourned.]

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