Achieving Economic Security Depends on Assuring National Security
By James Edwards, Executive Director of Conservatives for Property Rights
“Economic security is national security.”
Different officials have made this statement over the years. Only, now the news has begun to catch up and validate the truth it expresses.
Reports have proliferated, exposing various ways America’s competitors — particularly China and Russia — assault U.S. national security by economic means.
For instance, a U.S. civil jury found that China’s national champion in wireless communications, Huawei, stole intellectual property from T-Mobile. Huawei now faces criminal charges for this trade secrets theft.
In addition to current indictments, U.S. investigators have widened scrutiny of Huawei’s theft of other companies’ IP.
Aside from economic espionage, China has escalated its war for technological dominance — through state-owned and state-subsidized companies, venture capital firms with Chinese government financial backing investing in Silicon Valley startups, and Chinese “scholars” from the People’s Liberation Army working on advanced technology projects on American university campuses.
“The Chinese play very dirty,” says Asia Times columnist David Goldman. “I’m a free trader, but national security sometimes supersedes the free market.”
It’s increasingly clear that economic security and national security are uniquely entwined. And for the United States, private property rights are a key to our prevailing in both respects.
CFIUS sits at the nexus of U.S. economic and national security. The Committee on Foreign Investment in the United States, or CFIUS, has responsibility for reviewing proposed foreign investment, mergers and acquisitions, and other transactions involving foreign interests. CFIUS’s authority extends only to the national security considerations of such investments.
In 2017 when then-Singapore-based Broadcom pursued a hostile takeover of U.S.-based Qualcomm, the global leader in core 5G wireless technology, CFIUS reviewed the consequences of the merger for U.S. national security.
CFIUS concluded that “a reduction in Qualcomm’s long term competitiveness … would significantly impact U.S. national security.” Based on CFIUS’s findings, President Trump quashed the hostile takeover in March 2018.
CFIUS’s fact-based and rules-based process assesses foreign financial involvement in the U.S. economy for the national security implications alone. This is all the more important given the race for industrial leadership in next-generation technologies, including artificial intelligence, 5G, the Internet of Things, self-driving vehicles and robotics, as well as the potential military and intelligence uses of certain advanced technologies.
In 2018, Congress expanded CFIUS’s authority to scrutinize creative ways of getting access to U.S. business secrets or gaining influence on a company’s governance. American businesses in “critical technologies” or “critical infrastructure” or having American citizens’ personal information that could be exploited now stand subject to CFIUS review.
Private U.S. companies can be vulnerable to foreign interests calling the shots, to the detriment of U.S. national security. A foreign agent sitting on a board of directors, having access to sensitive business information, involved in technologies subject to export controls and the like now falls under CFIUS’s eyes. Companies in business lines such as airplanes, space vehicles, semiconductors, computers, telecommunications and the like must satisfy CFIUS’s clearance.
Foreign investors in it purely for the economic opportunity, in a line of business unrelated to U.S. national security, without control or authority over investment and governance decisions, not having access to proprietary technical information won’t confront CFIUS.
CFIUS, through its vigilant national security reviews of foreign economic transactions in the country, protects American firms’ property rights and, thus, market-based U.S. leadership in such cutting-edge technologies as 5G and AI.
It’s important to remember that American companies, whether startups or established firms, have their shot at economic success through private property rights. A company like Qualcomm, which devotes significant resources to research and development, succeeds in the marketplace because of its property rights. It can win when there’s a level playing field and economic freedom.
But not all countries respect private property rights and aren’t committed to fair competition, where quality and value prevail. Some foreign governments direct their nations’ propped-up, favored companies and agents to get their tentacles on free nations’ private companies in national security-related sectors.
China certainly disrespects American firms’ private property and the competitive marketplace. China’s aim is to bolster its own military and economic dominance and to cripple America’s economy and national security.
The U.S. Trade Representative reported in 2018, “[T]he Chinese government continues to direct and unfairly facilitate the systematic investment in, and acquisition of, U.S. companies and assets by Chinese entities, to obtain cutting-edge technologies and intellectual property and generate large-scale technology transfer in industries deemed important by state industrial plans.”
Such attacks on property rights and economic machinations cross the line. They illustrate how economic security is national security.
James Edwards, Ph.D., is executive director of Conservatives for Property Rights (@4PropertyRights) and patent policy advisor to Eagle Forum Education & Legal Defense Fund. The views expressed are his own.