Leadership1 publisher3 min readPublished
A designer of Biden's industrial policy says US investment screening now undercuts the factory push
In Foreign Affairs, the former director of Biden's National Economic Council argues Washington has an elaborate apparatus for refusing inbound capital and almost no route to approving it. The two federal measures it names are still proposals.
The Board Room · Leadership desk
What happened
- A Foreign Affairs essay by the former director of Biden's National Economic Council, who says he helped design the US turn to industrial policy, argues Washington is now hostile to foreign investment in counterproductive ways.
- That hostility is sharpest toward China, according to the essay, but has also been trained on allies and partners rather than adversaries alone.
- It also cites bipartisan legislation from Senators Tammy Baldwin and Josh Hawley that would tax foreign capital inflows outright.
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Why it matters
- decision If the screen follows knowledge rather than equity, then choosing a licence or a minority joint venture over outright ownership stops being the route around the process and becomes a question to settle in deal design, before term sheets.
- exposure Allied co-investors are inside the perimeter of the proposals on the table, so an ally on the cap table is a variable in a project's cost rather than a safe harbour.
- precedent A critique of inbound screening coming from the office that built the CHIPS programme is harder to dismiss as a pro-China position, which makes loosening a debate inside the industrial-policy camp rather than between it and its opponents.
- constraint With no rejection counts or forgone-investment figures behind the argument, a board can read direction but cannot yet put a number on screening risk in a project model.
A screening system with a well-staffed refusal gate and no comparable route to approval does not leave a visible casualty list. That asymmetry is the load-bearing part of the Foreign Affairs argument that Washington has built an elaborate apparatus for saying no to inbound investment and few ways of getting to yes [10]. Deals that die in pre-filing conversations never enter anyone's statistics, which is why a regime can look calibrated from inside while foreclosing projects that were never formally proposed.
What moved at Fremont was method, not money. General Motors and Toyota reopened a shuttered GM plant in California in the early 1980s, brought in Japanese manufacturing systems, and within two years had the most productive auto assembly plant in the country while largely keeping the same American workforce [14]; those methods are now standard across US auto manufacturing [15]. The transferable asset was know-how, and know-how arrangements are exactly the category the essay says the current aversion has grown to cover: not only foreign ownership, but joint ventures, licensing of foreign intellectual property, and other arrangements in which a foreign firm shares knowledge or resources [5]. Restructuring a deal so that Americans hold control does not, on that reading, move it outside the screen.
The skeptic's answer is that the screen exists because leverage over US companies and critical infrastructure is a real risk, and the essay concedes the point rather than arguing past it: mitigation is proper, and the complaint is that the present regime is overzealous and denies the country the tools to compete in the sectors it is trying to rebuild [9]. The criteria offered in its place, transparency, protection of US data, and American control of companies when it matters [11], are principles. Who applies them, and at what stage of a transaction, is not settled in the argument.
The claim also arrives without a denominator. There are no rejection counts, no case tallies, and no dollar figure for forgone projects [18], so this is an argument about direction rather than a measured cost. The two federal measures named are still prospective: Council of Economic Advisers chair Stephen Miran has suggested fees on foreign holdings of US assets, including allied holdings [6], and Senators Tammy Baldwin and Josh Hawley have introduced legislation to tax foreign capital inflows outright [7]. Neither is described as enacted [17].
Here is the board-deck version: avoid foreign partners in anything touching chips, critical mineral processing, or data storage, and you avoid the process risk [8]. It is incomplete because it prices the capability gap at zero. The essay's assertion is that the frontier of knowledge for many industries now sits outside the United States [12], and its historical exhibits, French capital and French technique behind the company du Pont founded in 1802 [13], and Fremont, are cases where the borrowed method was the point.
This quarter the decision is narrow: whether to treat the approval question as deal design or as closing paperwork. The decade's question is whether any agency builds the yes pathway, because while the refusal gate is the only gate, the projects that go unproposed are the ones the CHIPS and Science Act was written to attract [16].
What to watch
- Whether the Baldwin-Hawley inflow tax advances out of committee or draws a stated administration position, which would move it from proposal to a number in a capital stack.
- Whether Miran's suggested fee on foreign holdings of US assets ever appears in a Treasury or CEA document with a rate and a scope attached.
- Whether any agency publishes an approval pathway with conditions, timelines and mitigation templates, rather than further tightening the refusal criteria.