The Feds’ Chinese Investment Ban Will Harm America, Not China
The Treasury’s Office of Investment Security (OIS) is set to publish its final rule restricting U.S. investments in certain technologies in China and other covered countries this week, reports Reuters. OIS’s proposed rule is overly inclusive in its covered transactions and would threaten American competitiveness and national security.
OIS’s advance notice of proposed rulemaking cites President Biden’s August 2023 Executive Order and the International Emergency Economic Powers Act to justify its authority to curtail the investments of all citizens, permanent residents, and entities organized under U.S. jurisdiction. The Legal Information Institute explains that the act does grant the executive branch the power to “investigate, regulate, or prohibit any transactions in foreign exchange” after declaring a national emergency. But just because the government can do something doesn’t mean it should.
Perpetually declaring a national emergency to use expanded executive authority to enact substantive policy is an ironic, ineffective way of responding to an authoritarian regime. If Congress believes the U.S. is imperiled by certain American investments, then legislators should pass a law prohibiting them and be evaluated by their constituents at the ballot box.
Back to reality. The purpose of the rule is two-fold: first, to identify categories of prohibited transactions, which are those that pose “a particularly acute national security threat because of [their] potential to significantly advance the military, intelligence, surveillance, or cyber-enabled capabilities of a country of concern”; second, to identify categories of notifiable transactions, which are those that “may contribute to the threat to the national security of the United States identified in the Order.”
The rule identifies three categories of transactions that are notifiable or prohibited: semiconductors and microelectronics, quantum information technologies, and AI systems. Each of these categories comprises dual-use technology: the same product can be used for commercial and military purposes. Just as fission can power a town or level it with a thermonuclear explosion, a semi
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