US May Struggle to Coordinate Outbound Investment Screening With Partners, Experts Say
If the U.S. establishes an outbound investment screening mechanism, it could struggle to coordinate the measure with the EU and possibly other partners, experts said. Nargiza Salidjanova, director of the Rhodium Group’s China practice, said the proposal being considered by Congress may be too broad for the EU.
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“The U.S. regulatory impulse will continue to test the appetite of our allies and partners,” Salidjanova said during a June 28 event hosted by the American Institute for Contemporary German Studies at Johns Hopkins University. She said the recently revised version of the outbound screening bill, proposed by a bipartisan group of lawmakers this month (see 2206140048), is “very ambitious in scale, which is going to make any sort of coordination difficult.”
Although industry has pushed back against the notion of an outbound investment screening regime (see 2206270013), some U.S. lawmakers believe the tool is necessary to better protect U.S. export-controlled technologies and stop American companies from sending manufacturing power abroad (see 2206140048 and 2206240040).
The U.S. and the EU have worked through the Trade and Technology Council to better share information on foreign direct investment screening efforts, but those same efforts may be more difficult with an outbound regime, said François Chimits, an analyst at the Mercator Institute for China Studies.
“This is hardly possible for the European Union,” Chimits said. “National security is still a national responsibility within the EU. So anything that touches on national security, actually, the U.S. needs to cooperate with EU member states.”
Although the two sides have used the TTC to better cooperate on a range of trade issues, some issues may remain unilateral. “Nobody can agree on everything,” Salidjanova said. She said there will continue to be “small groupings” of like-minded countries to work on trade coordination, specifically pointing to the Indo-Pacific Economic Framework (see 2205230003), but she expects the U.S. to continue acting unilaterally. “At the end of the day, the U.S. government and Congress” are “going to pursue protection of national interest, regardless of whether allies and partners are” on board, Salidjanova said.
The U.S., however, has expressed interest in creating a new multilateral export control regime (see 2206170072). Matt Turpin, a former National Security Council official, said he expects the U.S. and allies to create the regime partly because Russia is a member of the Wassenaar Arrangement and can’t be voted out.
“I suspect we will build a new one,” said Turpin, a visiting fellow at the Hoover Institution. “And that is where we will likely coordinate all the nascent activities that are going on around dual-use export controls that are happening at member-state levels.”