Junior Policy Task Force Presents Research in Washington, D.C.
Dec 17, 2013
William Beacom '15, Ethan Jamnik '15 and Carolyn Yang '15
Woodrow Wilson School
“Owned By China? Dealing with Chinese Foreign Investment,” a Junior Policy Task Force at Princeton University’s Woodrow Wilson School, presented its research and policy findings in Washington, D.C. on Dec. 6.
The trip was the culmination of many Thursday evenings spent discussing the costs, benefits and particularities of Chinese inbound foreign direct investment (FDI) into the United States with the aim of forging an appropriate policy response.
Sophie Meunier, WWS research scholar and lecturer in public and international affairs and co-director of the European Union Program at the University, led the Policy Task Force (PTF) with the assistance of graduate consultant Thomas Tasche ’13, MPA I and senior commissioner Mianna Chen ’14. Nine WWS juniors – William Beacom, Tobias Citron, Alvaro Cuba, Ethan Jamnik, Elle Liu, Jessica Ma, Alex Scheetz and Carolyn Yang – undertook extensive research on various components of Chinese inbound FDI in the U.S, including: 1.) reverse technology flows; 2.) comparisons between Greenfield and Mergers and Acquisitions (M&A) investments; 3.) the Japanese antecedent; 4.) a cross-country regulatory comparison; and 5.) bilateral investment treaties.
Against the backdrop of considerable politicization of Chinese FDI, striking a balance between investment promotion and national security screening became the top priority of the Task Force. Under the assumption that FDI mostly confers benefits to the American economy, the students’ policy recommendations aimed to maximize inbound capital while minimizing national security risks.
The students presented their findings to the Committee on Foreign Investment in the United States (CFIUS), the Treasury-based interdepartmental regulatory body tasked with screening foreign investment for national security risks; SelectUSA, the investment promotion branch of the Department of Commerce; and the U.S.-China Economic and Security Review Commission, a congressional committee responsible for monitoring and investigating national security and trade issues between the United States and China.
The Task Force recommended that the expectations of foreign investors and the opportunities for investment in the U.S. could be better publicized and clarified. To this end, the students recommended fostering coordination between state and federal investment promotion agencies, founding public-private partnerships between investors and politicians and improving website accessibility. The students also recommended legislation that adds Greenfield investments in China to the purview of national security reviews and calls upon CFIUS to further clarify the definition of “national security.”
In addition, the Task Force suggested that the conclusion of a Bilateral Investment Treaty with China would not only secure American interests abroad but also act as a signal to Chinese investors that the United States is open for business. There was also substantial discussion focused on Chinese state-owned enterprises (SOEs) investing in the United States, using preferential access to capital obtained from nationalized banks – what some believe amounts to a subsidy. The Task Force suggested evaluating SOEs for market-compliant behaviour, at least in the event that antitrust concerns over Chinese investment become particularly acute.
Carolyn Yang ’15, who examined investment promotion in California, noted, “I couldn’t imagine having the opportunity to interact so meaningfully with policymakers if not for this Task Force.”
Following their presentation, the students received feedback on their recommendations.
Government officials at all departments - including several WWS alums - praised the work of the students and provided insightful feedback. Department of Defense officials voiced concern about restricting its working definition of national security and Department of Justice officials cautioned that the complexity of Greenfield reviews would create a new burden for CFIUS. As for investment promotion, the Department of Commerce clarified the unique restrictions on national investment promotion in the United States.
Tobias Citron ’15, whose work included researching federal level investment promotion efforts, said, “Studying in the Task Force gave us a great academic perspective of some of the issues at hand.
“Coming to D.C., though, helped us fully understand how these policy recommendations may be implemented because we discussed them with the people who work with these issues every day.”
The Task Force gathered precious feedback from experts who specialize in Chinese investment. The debate from the discussions that followed their presentations provided context, understanding and justification for their recommendations. Moving forward, the insights gained from this trip will be incorporated into their Junior Papers and may, in some cases, significantly alter how they ground their main arguments for their recommendations.
All photos courtesy of Sophie Meunier.