Skip to Content

CFIUS weekly news roundup: May 25

May 25, 2018 by in News

CFIUS reform moves ever closer, shelving the trade war for now, and Happy GDPR Day! As always, you can sign up for the mailing list here.

Onward:

CFIUS reform: glide path? As we discussed last week, the House and Senate reached an agreement in principle on the last major issue in CFIUS reform (whether CFIUS would have jurisdiction over exports of U.S. technologies). Late Thursday, the Senate added agreed-upon CFIUS reform language (the Foreign Investment Risk Review Modernization Act, or FIRRMA) to its version of the must-pass National Defense Authorization Act, one of the few bills both houses pass every year. The addition of the CFIUS amendment to the NDAA is a sign that CFIUS reform will very likely pass this year.

And not without good reason. This piece in Politico provides a very interesting deep analysis into how holes in current CFIUS policy have allowed critical technologies to flow out of the United States without proper review by CFIUS.

Emphasis on GD: Happy GDPR Day, said the thousands (and rapidly increasing) of data protection attorneys and consultants. Europe’s General Data Protection Regulation (GDPR) goes into effect today after seven years of work. GDPR (full text) is a sweeping regulation that fundamentally changes how companies can collect and store information regarding European persons, and the rights of Europeans to access and control that data. It’s also the cause of the seven hundred “we’ve updated our terms of service” emails you’ve gotten in the past two weeks. The full effects of GDPR will not be completely understood for years. As with any huge new regulatory system, the unintended effects of GDPR will only start to materialize over the coming months. For instance, some gaming companies and media companies have simply blocked European access to their platforms to avoid having to comply with the regulation. And in the case of one solo practitioner, his listserv provider was “experiencing a high volume of issues” today. One very early question U.S. courts may face is whether there are instances where, because many U.S. companies such as Facebook and Google now have the capability to comply with GDPR’s requirements in Europe, they can be held liable for not offering that same level of protection to U.S. users.

China agreed to stop winning: Treasury Secretary Steve Mnuchin announced that the U.S. was putting “on hold” its trade war with China. This announcement was made after China agreed to “significantly increase” its purchases of U.S. goods to cut its trade surplus with the U.S.. China declined to agree to $200 billion specifically, as the administration had requested, and there was no agreement to the process that would be undertaken to ensure that any reduction occurs. Effectively, China got itself off the hook by making a vague commitment.

So is this a good thing? Some free trade advocates “applauded.” Other analysts were less optimistic. As we’ve discussed before, most economists think trade deficits are a terrible metric to measure the economic relationship between two countries, and most were concerned that President Trump believes that China is “winning” just because America buys more Chinese goods than China does U.S. goods. So by delaying tariffs because of a vague commitment on the deficit, the administration has wasted its leverage on other, arguably more important issues (e.g., ZTE, intellectual property and technology issues, China’s military buildup in the South China Sea, etc.). This isn’t just coming from the mainstream media—it’s coming from Republicans. It’s also coming from the media. And the media. And the media. Their point is, if you’re going to start a trade war, you should end it for the right reasons.

In fairness, these criticisms fail to take into account just how damaging a trade war would likely be to the global economic system. The threat of a trade war was awfully cavalier, but edging away from one—on almost any pretense—may be better than following through. Separately, the administration knows that it has other tools at its disposal to address at least some of these issues, such as CFIUS reform to address IP and technology transfer issues, other tariffs and other sanctions. Also, given that President Trump just cancelled his summit with North Korean dictator Kim Jong-Un, he may resume a more aggressive posture towards China, whom he had wanted to avoid upsetting prior to meeting with Kim.

In any event, trade war averted for now.

Except: We haven’t solved our trade war with the rest of the world, and now the rest of the world is preparing to fight back. India and EU submitted to the WTO a list of goods that they will seek to impose retaliatory tariffs on if the U.S. follows through with its tariffs on steel and aluminum. The EU listed rice, cranberries, bourbon, corn, peanut butter and steel products as targets for retaliation, while India listed U.S. soya oil, palm olein and cashew nuts among its targets.

Similarly, Russia, Turkey and Japan have appealed to the WTO for relief. Russia and Japan declined to specify goods they intend to target for retaliation, while Turkey listed 22 U.S. goods that it was planning to target, ranging from nuts, rice and tobacco to cars and steel products.

The devil you know  and severely mistrust, but that lives in your backyard and has nukes: As we have discussed before, a consequence of Trump’s aggressive trade posture is that formerly allied nations are reevaluating their geopolitical strategies. At least some in Europe now believe they can no longer count on the United States as an ally. Without the U.S. playing its historically dependable deterrent role against Russia, several nations, from France to Japan and others, are reevaluating their relationship with Russia, and German officials have publicly acknowledged that improved relations with Russia are central to Germany’s foreign policy.

Quick hits:

A basic, nontechnical primer on cyberwar: https://www.bloomberg.com/news/articles/2018-05-11/cyberwar-how-nations-attack-without-bullets-or-bombs-quicktake

The U.S. has no apparent policy regarding the most fundamentally important developing technology: https://www.wired.com/story/the-us-needs-an-ai-strategy/

Preaching to the converted: Bloomberg reminds Wal-Mart and SoftBank that cross-border deals are increasingly complicated: https://www.bna.com/fair-play-watch-b57982092711

Free Consultation

This slideout can include a call-to-action or a quick scroll back to the top.

Scroll to Top