Transcripts For CSPAN3 Foreign Investment In The U.S. 20180112

Departments. The chair is authorized to have five days to submit materials for inclusion in the record. This hearing is entitled examining the operations of the committee on Foreign Investment in the United States. I now recognize myself for five minutes to give an opening statement. The free flow of capital is a bed rock tenant of a United States economy. Ensuring that free flow worldwide has always been a bipartisan goal and im proud to serve as cochair of the Global Investment in america caucus along with our colleagues mr. Holding, mr. Himes, and mr. Meeks. It promotes Global Investment in the United States economy and helps educate members about the importance of Foreign Direct Investment. Today, the United States is both the largest Foreign Investors and the recipient of the largest amount of capital investments. That capital has provided a good deal of the energy that kept our enemy vibrant. Compensating to some extent for our low National Savings rate to provides the fuel for growth of u. S. Businesses and jobs. Today almost 5 of u. S. Workers and jobs are related to Foreign Investment. Most of these jobs pay handsomely, far better on average than other u. S. Jobs. But if Foreign Investment is to be a force for good, it must not be welcomed unthinkingly any more than one might leave the front door of the house open around the clock. Investment that might weaken us is not good or welcome investment, and we must guard against it. That investment might come for purely economic reasons but especially in this era of international turmoil, conflict and economic uncertainty, it can come from individual or nation states who might wish to weaken our economy in comparison to theirs or try to spirit away technology or knowhow that could strengthen their military to gain an advantage over ours. To maintain a vigilant watch on investment, the committee on Foreign Investment in the United States or sifius reviews many investments to determine if they pose a threat to National Security. This involves rigorous scrutiny of proposals by all appropriate departments or agencies including a scrub by the Intelligence Community and the president has the power to Block Transactions or order divestment if such concerns cannot be mitigated by a change in the original proposal. Today we face new threats on a number of fronts, not just of a hollowed out industrial sector but also from terrorism and major nations that are economic competitors. Also potential military competitors. Im referring of course mainly to china. Concerns have risen about using that countrys vast reserves to acquire Key Technology with an eye towards taking the lead in the industrial markets of the future. The chinese government, for example, has set aside 250 billion to be used in dominating the vital semiconductor market. This is not a new phenomenon but a new challenger. President ford set up out of concern that the vast inflows coming from opec countries could weaken our economy. In 1988, among concerns japan was seeking to buy critical technology, Congress Gave president reagan the authority to actually block deals. That authority only has been used sparingly. Interestingly, the first use came when president george h. W. Bush blocked the sale of an airplane component maker and President Trump already has blocked a proposed of semiconductors by a Chinese Company. Sifius has also improved Foreign Investment conditionally, approving a deal only when divestment has occurred. The statute under which it operates has not been updated in a decade. We should think about modernizing it. Aside from chinas intentions, there are burdens on the process from the volume and complexity of proposed deals. About 40 more reviews in 2017 than 2016 and a more than fourfold expansion in chinesebacked deals since 2013. To that end, our colleague, representative pittenger and senator cornyn have spent more than a year studying the process and considering possible reforms. I commend their work. This hearing is the beginning of the committees study of sifius and will be followed by further hearings soon. In considering reforms, the committee will ensure that they have the tools and resources it needs to examine Foreign Investment. As members of congress, it is our duty to advance the National Security of the United States. At the same time, we must aspire to the greatest extent possible a welcoming Investment Climate so that u. S. Companies have the capital needed to grow. As well, we need to be mindful that the Investment Climate for u. S. Companies overseas is not unnecessarily compromised. To start that process, the subcommittee has a panel of witnesses with unique abilities to discuss the operations of and challenges that they face. This hearing and their testimony is intended to prepare members make wise and cautious decisions on this vital topic. This should provide the beginning of a strong and thoughtful review. With that, i would now recognize a member of the democratic side, the gentleman from washington, mr. Heck, for five minutes for an opening statement. Thank you very much, mr. Chairman. And mr. Chairman, to begin with, i would ask unanimous consent to enter into the record a letter i sent to you and the chairman of the full committee on december 8 requesting that a witness from the department of treasury be added to this hearing. Without objection. Thank you. While i look forward to hearing from todays witnesses, i believe theres no substitute for hearing from the people who actually are administering sifius. I have given treasury a very hard time in this committee, some of you may recall, it was a very hard time about this issue in past hearings. I want to make clear that they have begun to engage in what i would characterize as a constructive manner. I acknowledge that and express my hope that the committee could benefit from their expertise during a future hearing. I would be happy to yield to chairman barr if he would like to respond . I appreciate the gentleman yielding. Just to clarify, this is the first of a series of hearings. We most certainly will be extending an invitation to treasury officials who have a large role in the process to testify, and you will have that opportunity. Again, thank you very much, mr. Chairman. Im glad to hear that. I thank you again for convening this hearing. I believe the sifius process generally works well for private commercially motivated transactions but in the ten years since Congress Last passed legislation dealing with this issue, we have seen some countries gain the resources and sophistication needed to pursue a comprehensive strategy to acquire u. S. Technology or dominate strategically important industries. Existing authorities were not designed and are not sufficient to deal with that kind of challenge. And although many of our witnesses will note, this is a problem that every part of the u. S. Government will have to Work Together to address. I believe there are some aspects of this problem that can only be addressed through legislative action to close gaps in existing sifius authorities. When i asked secretary mnuchin about this in july, he agreed this was a pressing issue. And that we could not afford to do nothing. I hope we can all bring that sense of urgency to how this committee approaches its work on sifius reform. The kind of urgency and unity which i know this congress can still bring to bear on issues critical to our National Security. Because here we are dealing with just such an issue. And there are certainly things we need to keep in mind as we move forward. Im glad many of todays witnesses have raised issues, will raise issues like the need to improve information sharing and cooperation with our allies and partners, many of whom are also in the process of reevaluating their own sifius equivalent. Im glad many of todays witnesses will raise the need to provide more resources to sifius which i agree are urgently needed to keep pace with the times, the demand, and the need. And im proud the United States is in fact a place that welcomes Foreign Investment, but the broader legitimacy and acceptance of that principle of openness, which i believe in, and the ability of the United States to stand up for a free and open global economy, is in fact dependent on our National Security. As secretary mnuchin affirmed, doing nothing is not an option. But im confident that starting with this hearing, we can find a bipartisan path forward and strike that balance between continuing to allow robust Foreign Investment, which i think does serve our nations needs, our economic prospects, while at the same time balancing it against very legitimate security concerns which are growing in number velocity and in complexity. Sifius needs to be reformed. It starts here with this committee and starts here with this hearing today, mr. Chairman. Finally. Thank you again very much for convening it. Thank you, the gentleman yields back. And today, we welcome the testimony of the honorable mr. Kimmitt, from 2005 to 2009, he served as deputy secretary of the u. S. Treasury where he had significant responsibility for the Departments International agenda, which included a revamp of sifius. He also served in the Reagan White House as National Security Council Executive secretary from 1983 to 1985. In 1997 he was a member of the National Defense panel, and from 1998 to 2005, he was a member of the director of Central Intelligence National Security advisory panel. Mr. Kimmitt served in combat in vietnam with the 173rd airborne brigade, retired as a Major General in the army reserve, and also served as the u. S. Ambassador to germany. National Security Strategy and Logistics Executive at deloitte consulting. Served for 36 years at the department of defense. From 2013 to january 2017, mr. Estevez served as the secretary of defense acquisition and logistics. He represented the department of defense while Chinese Investment in the United States accelerated rapidly. Previously, he held several key positions including assistant secretary of defense, and assistant deputy under secretary of defense for supply chain integration. Mr. Wolf is a partner and from 2010 to january 2017, he was the assistant secretary of commerce for export administration. In this role, he was primarily responsible for the policy and administration of the u. S. Dual use export control system, and as a result of the effort, he helped lead part of the defense trade system. Also during this time, mr. Wolf was the primary Commerce Department representative to sifius. Mr. Segal is the ira a. Lipman chair and director of the Cyberspace Policy Program at the council on foreign relations. An expert on security issues, technology development, and chinese domestic and foreign policy, before coming to cfr, he was an arms control analyst for the China Project at the union of concerned scientists. Hes been a visiting scholar at the hoover institution, at stanford university, the Massachusetts University of technologys center for international studies, the Shanghai Academy of social sciences, and the university in beijing. Ms. Mclernon is president and ceo of the organization for international investment, representing the unique interests of u. S. Subsidiaries. With a strong background in economics, her efforts focus on the Important Role u. S. Subsidiaries play in the American Economy and policy issues that would make the u. S. A more competitive location for Foreign Direct Investment and job creation. Prior to be named president and ceo, ms. Mclernon was ops Senior Vice President where she focused on advocacy. Each of you will be recognized for five minutes to give an oral presentation of your testimony, and without objection, each of your written statements will be made part of the record. Mr. Kimmitt, youre recognized for five minutes. Thank you, mr. Chairman, members of the subcommittee. Thank you for your invitation to offer a perspective on the committee on Foreign Investment in the u. S. This is one of those rare instances where advancing age, including three decades of service on sifis has benefits. My experience with sifis started under general baker. It was then governed by an executive order signed in 1975 by president ford because of concern about saudi petro dollars being recycled to buy american assets. By 1988, concern shifted to japanese purchases which led to an amendment, and in 1992, concern about stateowned Companies Buying sensitive u. S. Technologies led to passage of the byrd amendment. In 2005, i returned to treasury as deputy secretary. After deals involving the Chinese National overseas oil company in dubai courts were blocked by congressional concerns, Congress Passed the Foreign Investment and National Security act of 2007. Today, growing concern about Chinese Investments, particularly by state owned enterprises and especially in the technology sector, has led to legislation proposed by congressman pittenger, senator cornyn, and bipartisan cosponsors. I would like to offer some observations that may assist in your deliberations. Earlier this year, this committee helped legislate the secretary of the treasury as a statutory member of the National Security council, demonstrating the u. S. Economic strength is tightly linked to our overall security. And Foreign Direct Investment as both you and mr. Heck have noted, mr. Chairman, makes an important contribution to the u. S. Economy. Almost 7 million americans will receive their paychecks this month from companies headquartered overseas. Close to 40 of those workers are in manufacturing jobs, and as you noted, fbi jobs pay about 25 more than the economy wide average. More open investment policy is integral to u. S. Economic success, and i urge President Trump to issue the traditional u. S. Open Investment Policy Statement at the earliest opportunity. But in issuing that statement it is important to make clear that the u. S. Government must insure Foreign Investment does not harm u. S. National security interests. Chinese investment has an appropriately high priority for close scrutiny because china seeks to compete strategically against the United States in multiple spheres. Military, diplomatic, and economic. Using all elements of the state, including Stateowned Enterprises in that competition. Current legislation provides significant authority to block troublesome chinese acquisitions. As you noted, mr. Chairman, the first acquisition unwound by a president was under george h. W. Bush in 1990. The acquisition of threecom did not proceed under george w. Bush, and President Trump block ed the semiconductor by a chinese group. As you consider new legislation, i would be sure to address actual gaps in the authority. There is particular concern that Chinese Companies may be using creative legal structures to conclude deals short of ownership and control that could nonetheless impair u. S. National security. I believe this is a very valid area for stricter scrutiny in the United States. I would be careful about extending the reach to transactions occurring outside the United States. Sifius is intended to give the president exceptional authority to protect the United States. Without, however, superseding important authorities in other statutes. For example, if a joint vincher abroad raises questions, the export Administration Regulations or International Traffic and arms regulations should be the first line of defense. Although additional legislative authority is warranted, the greatest problem facing sifius today is a lack of resources. As cases filed climbed to 250 this year, and with a prospect of agencies led by treasury could be involved next year in a major legislative and regulatory implementation exercise, the increase in workload may begin to delay jobs producing investments that do not raise National Security concerns. I urge that matching requirements to resources continue to be a Central Point in your further deliberations. Todays hearing and your future actions are also being watched closely overseas. Of particular concern, the European Commission in brussels is establishing an investment review mechanism. Even though under european law, the commission has no authority or jurisdiction on National Security matters. So the new ec review may become a political screening process that could create a new barrier to u. S. Investment into that important market of over 300 million consumers. In conclusion, im more concerned today about growing investment protectionism than trade protectionism. If we want to grow well paying jobs in the United States through Foreign Investment, we must send a clear message that the United States is open to investment, except in those instances where a cfius process focused squarely on National Security determines an investment must be blocked. I know you will strive to strike that important balance. Thank you. Thank you. The gentlemans time has expired. The honorable mr. Estevez, youre recognized for five minutes. Distinguished members of the committee, thank you for the opportunity to appear before you today to discuss the committee on Foreign Investment in the United States, or cfius. While im now at deloitte, i want to be clear my views today are my own views and not those of my firm. I believe its important to review why cfius is critical to the National Security from the dod perspective. There are many reasons that the United States has the finest military in the world, most importantly, the men and women who volunteer to join that force. However, another reason is that technological superiority of our military force that we have over our adversaries. Sifius is one of the tools that helps our military retain its technological advantage. Based on my experience, the cfius interagency process not only worked but worked well in protecting National Security of the United States for those cases that cfius had jurisdiction over. I never signed off nor did i ever ask the deputy secretary of defense to sign off on a cfius case resolution that in any way would imperil National Security. The dod always achieved the mitigation terms we asked for or received mitigation support in which it was too risky. When i assessed the National Security risk involved in each cfius transaction, i used the construct which i call the three cs plus one. The cs represented country, company, and commodity. Commodity including technology. The plus one was colocation. When a Foreign Company was buying your company that was located near a sensitive military installation. Framework worked like this. For the country, we assess the home country of the purchasing party or a potential adversary of the United States or a country that lacks personal technology or identifying information. In assessing companies, we would determine if the company was a stateowned enterprise or the company had been created for that specific deal, or if the company or its ownership was reliable and stable. Through assessed commodities we would review the criticality of the technologies to dod Weapons Systems both current and the future, how cuttingedge the technology was and whether the technology was already globally available. In colocation cases, we would assess what activities were taking place at a given location and whether the purchasing party would be able to observe or impact those activities. If we had concerns with two or more of those cs, my experience was such cases were heading to mitigation at a minimum or potentially a block. I would like to now turn to areas where i believe cfius needs expanded authorities. I recognize that there are proposals currently being reviewed by congress. My comments arent based on that specific piece of legislation. The first area is joint ventures. While the vast majority of joint ventures do not threaten National Security, some joint ventures may put National Security at risk through technology or intellectual property transfer. Bankruptcy is another area where i believe we need to expand cfius authorities. Bankruptcies of u. S. Companies, especially those involved in cuttingedge technologies, could end in the sale of technology or intellectual Property Assets companies or countries of concern. The final area i believe we need to assess with regard to the cfius authorities is what i call connecting the dots. During my time as the dods cfius representative, we noticed trends in which specific countries and companies were engaged in multiple transactions involving industry segments. Most times the companies and technologies being purchased were relatively small, they were not stateoftheart, and they were not critical to National Security. Nonetheless, i believe there comes a point where too much of a particular industry segment is under foreign control, and this may put National Security at risk. The last area i would like to address is resources. The reality is just to process, manage, and mitigate the cases in the current work load, cfius needs more resources. The cases coming before the committee are growing in their complexity. Resources are dated to perform due diligence, to assess onfile transactions and perform mitigation oversight. I thank the committee for holding this hearing. This is a critical topic for the continuing longterm viability of our technical superiority. I look forward to your questions. Thank you. The gentleman yields back. The honorable mr. Wolf, youre now recognized for five minutes. Thank you, chairman, other members for inviting me and for holding this hearing on the very important topic. Although im now a partner at aiken gump, my views are my own. Im not speaking for or against any legislation. Im here to answer your questions about how the cfius and the control system work. Im also not going to speak about any case that alan and i or others worked on or thats before cfius now. The other panelists have described well how it works, so i want to get straight to my main point, which is that cfius and the export control system complement one another. Cfius has the authority to control and regulate and block the transfer of technology of National Security concerns if there is a transaction however defined. The export control system, the very purpose of the control system is to regulate the transfer of technology regardless of whether there is an underlying transaction. This means that if specific concerns arise with respect to any particular type of technology, whether its part of a cfius review or any other activity of u. S. Government, that the export control system, the rules governing the flow of goods, technology, software and services out of the United States, should and could control that technology of concern to specific destinations, specific end users and specific end uses. I realize that identifying, describing that technology, particularly dual technology that has both benign commercial applications as well as military and other applications, is complex. I also realize that the export control system itself is very complex. However, the system is designed, it was created to constantly evolve to address new threats, new technologies, new issues, new end users of concern. In particular, the export Administration Regulations at the bureau of industry and security where i was for the previous eight years, have the authority to impose these controls and alter them in coordination with largely the department of defense, state, and commerce. The descriptions of technology can be as broad or narrow as the concern arises, the scope of the controls can apply to specific entities or entire countries or they can apply to particular end users and end uses. Most of the export Administration Regulations implement multilateral controls, that are controls that are agreed to by between 30 and 40 other allied countries with similar concerns. And this is a reflection of the fact that multilateral controls, controls that our allies all work on together, are the most effective because they achieve a common objective. Its also a reflect of the understanding that unilateral controls, controls that are imposed only by one country, generally tend to be counterproductive because they result only in harming the industry of the country imposing the controls and dont actually block in the end the technology to the country of concern. So recognizing these two competing structures and recognizing that the multilateral system can move very slowly because its a need for consensus with our allies to decide which technologies to impose, we created during my time a unilateral process to be able to tag and identify sensitive technologies of control unilaterally in order to be able to address the threat quickly and tailor it to whatever the concern is on the condition that eventually it gets presented to the multilateral regimes for controls there. There are many additional tools in the export Administration Regulations that can be tailored such as a process of informing particular companies about particular technologies and particular end users, again, regardless of whether there is an underlying transaction that there is technology of a particular concern. I focused in my comments here in the first four minutes on Just Technology transfer issues, but respect to cfius, you also need to keep in mind the National Security issues we looked at are colocation issues, transactions that involve espionage vulnerabilities, those that could reduce the benefits of investments, transactions that could reveal personally identifying information. Those that would create security of supply issues. Those that would implicate Law Enforcement issues and those that would create exposure for telecommunications. Each one of these individual topics has their own issues and warrants their own hearing. Im here because i have a threeminute and a 30minute, and a 3hour, and a 3day version. Ill stop here with the fiveminute version and be available for your questions. Thank you for inviting us. Thank you, mr. Wolf. Mr. Segal, youre recognized for five minutes. Chairman barr, Ranking Member, members of the committee, thank you for inviting me here today. My purpose pull your microphone to you. My purpose is to provide a context for chinese activities and what the motivations and challenges might be. Im going to make three points. The first is that china has a comprehensive strategy to move up the value chain and develop high technologies for National Security and economic interests. That strategy involves many parts. It involves investment in r d, in technology. Industrial policy, policies focused on semiconductors, Artificial Intelligence and whats called made in china 200025, which is the use of the internet of things and automation on manufacturing. It has its own Forward Investment regime, which forces Foreign Companies to transfer technology and fails to protect ipr. And it is involved in cyber and industrial espionage and its involved in foreign acquisitions. Can it acquire those technologies in the United States, europe, india, israel, and other locations. So the policy that china has adopted is broad and comprehensive, and any u. S. Response will similarly have to be broad and comprehensive. Second, as a number of people have already noted, the Investment Decisions behind chinese firms is often opaque, who the actors are is opaque. They may say that theyre private. They may in fact be private, but still receive significant support from Stateowned Enterprises. They may have tight connections to local or provincial governments, and so the sources of their money and the motivations of that money are often unclear. They may be strategic, they may be economic. It may be hiding money from corruption scandals. The problem is compounded by the fact that president xi jinping has accelerated a process started under the president of Civil Military fusion. That goal is to tightly link the civilian and military economies so that any benefits that are brought to the civilian economy are eventually turned into military strength as well. And so that means that in this context, any advantage that is brought to the civilian economy could also be brought to the military economy. Third and final, while i support many of the specific reforms that have been mentioned about increased capacity, increased information sharing, and other points for sifius, it is extremely important to point out that the u. S. And Chinese Technology platforms and systems are increasingly integrated. We have seen that in Information Technology where it is very, very hard to draw a line between where china starts and where the United States starts. We see a master flow of people back and forth. We see investment. We see a huge amount of coresearch and cowriting of research papers. When chinese scientists look for coauthors, they look to the United States. Over 40 are u. S. Authors. And this pattern is going to be reproduced in these new areas of frontier technology. So we already see this in ai, in Artificial Intelligence, that the two systems although right now are often cast as competitors, as running a race against each other, they are going to be tightly integrated, and googles announcement yesterday that it was setting up an r d center inside china is just the most recent example of how tightly linked those systems are going to be. That means that for any type of either export control law or sifius reform, there is a high degree of chance that we could in fact hurt ourselves, that we would be affecting science and technology that feeds back into the u. S. System, that drives u. S. Systems and drives at u. S. Innovation. Thank you very much, and i look forward to your questions. Gentleman yields back. Ms. Mclernon youre recognized for five minutes. Chairman barr, Ranking Member moore and other members of the subcommittee, thank you for your invitation to testify today. I have the pleasure of being the president and ceo of the organization for international investment. The only Business Association exclusively comprised of u. S. Subsidies of International Companies. We represent a wide variety of industries from companies headquartered all over the world, including lego and nbae. I applaud the effort to take the time to examine the economic importance of Foreign Direct Investment to americas economy and the effectiveness of the forch investment sifius process. To americas economy. Our mission is to insure the United States remains the most attractive destination for Foreign Direct Investment due to the outsized impacts it has on the economy and workforce. 6. 8 million workers in the United States take home a paycheck from an international company, including 20 of the u. S. Manufacturing workforce, offering 24 higher compensation that the economy wide average. And somewhat counterintuitively, International Companies manufacture in the u. S. Not just for our consumption but also for worldwide consumption. In fact, u. S. Workers at International Companies produce about 25 of all u. S. Exports. International companies are also tied to their communities. They provide worldclass training and worldclass workforce training and help strengthen the communities in which they sustainably operate. For example, toyota, whose kentucky plant is the largest manufacturing facility in the world, is applying its manufacturing knowhow to help Childrens Hospital reduce infection rates with a neonatal intensive care unit. Decreasing infection rates by 80 . Think about it. A Japanese Company in kentucky, the largest manufacturing facility they have in the world. Historically, the vast majority of fdi flows into the United States through mergers and acquisitions in line with other advanced economies. And the vast majority of that cross Border Investment flows into industries totally unrelated to National Security. For example, lohr eals successes have been achieved by their Strategic Acquisitions here. They have expanded their footprint in the United States to include research, manufacturing, and distribution facilities across 13 states. In fact, i recently had the opportunity to go out to a facility in little rock, arkansas, that was the result of an acquisition of a maybelline facility. Now that facility is the largest cosmetic manufacturing facility in the world, in little rock, arkansas, a French Company manufacturing for consumers all around the world. Indeed, examples like loreal demonstrate when Global Companies acquire or merge with u. S. Companies, they often raise the industrys economic performance, become reliable commercial and industrial anchors, making Large Capital investments and reinvesting u. S. Earnings into their operations here. Without cross order mma, our economy would not receive the full benefits that International Companies provide. A critical factor in the attraction of the u. S. To Foreign Investors is our countrys commitment to the rule of law and the stability of the regulatory environment. As was mentioned earlier, the result of extensive deliberations in congress, laid the foundation for success. Importantly, during 2008, congress engaged in an equally thoughtful process to implement sinsa. They captured the balance that congress sought, providing helpful guidance on the kind of transactions that are within the purview of sifius. Based on publicly available information and anecdotal experience of members, it seems clear the process is under stress. There appears to be more investigations and mitigation agreements, withdrawals of cases, and lengthening period for resolution. Our members report although Staff Members continue to impress with their long hours and attention to unique circumstances, resource constraints are straining their ability to handle its current workload. Such delays increase the risk to foreign owned bidders in the auction process, potentially forcing them to pay a premium. But let me underscore that the International Business Community Supports the efforts of sifius to insure america remains safe, and were in full agreement National Security should be paramount, yet i caution it shouldnt be viewed as a panacea. The government has a wide variety of tools at its disposal, insuring fairness, predictability, and stability in National Security reviews must remain the tenants of the sifius process. Any changes must be done thoughtfully with the full awareness of the economic state. Once again, thank you, mr. Chairman. I look forward to answering your questions. Thank you. The chair now recognizes himself mr. Kimmitt, let me start with you because of your background in the development and evolution of sifius and your expertise. Obviously, as ms. Mclernon was pointing out, its critical to the u. S. Economy. She mentioned toyota in kentucky. But in my home state of kentucky, Foreign Direct Investment supports 117,000 jobs. A little more than 7 of the entire employment. At the same time as many of the witnesses pointed out here today, National Security of our country is of critical importance. And fdi, if not carefully watched, could enable our enemied to inflict hard harm, not just on our economy, but create a whole lot of National Security concerns, and ill just quote the u. S. China economic toyota and kentucky. In my home state of kentucky, Foreign Investment supports 117,000 jobs, a little more than 7 of the employment. At the same time, as many witnesses pointed out here today, National Security of our country is of critical importance. And fdi, if not careful re kw h enable those to reform and create National Security concerns. And ill quote the u. S. China Economic and security review commission. China appears to be conducting special espionage dwons goodness companies to presbyterian trait the Information Systems to steal their intellectual company, degree value them and acquire them at dramatically reduced prices. The central question of the hearing is how can we balance both the desire for strong Foreign Investment and strong National Security, and can you give us a little guidance on that . Precisely striking that balance that not only you as a subcommittee and committee seek to do, but really what the members of the administration do on a daily basis. I think it is important to reiterate that the u. S. Is open to investment for the reasons that you and others have mentioned. At the same time, no one serving in Public Office has a higher responsibility in protecting the National Security. I think we start out from the point of view that were looking for ways to attract good, highpaying fdi jobs to the United States. Appearing before this committee now almost 30 years ago my then boss jim baker said Foreign Direct Investment was our ace in the hole. As nancy said, our marketplace, our system and our workers are worth that investment. I think thats where we start but thats not where we end. We have to look at those security considerations you mentioned. And i think today, unlike past concerns the saudis, perhaps the japanese were talking about someone who not only wants to be a pure competitor but a pure winner against the United States, that is china, and we have to look at Chinese Investment particularly closely. That doesnt exclude that there could be Chinese Investment that does not raise National Security concerns. It doesnt exclude that there could be Chinese Investment that needs to be regulated or looked at by others. But i think again we start with a point of view that we want to attract that investment but not at the cost of harming u. S. National security. And ms. Mcclurnen, what interests me about this issue is why for are not robust sufficiently robust capitol markets in the United States to provide alternative sources of capital for startups or maybe Mature Companies in financial distress. Is there an alternative to Foreign Direct Investment, and why do we not have Strong Enough Capital Markets in the United States to provide that capital as an alternative to maybe a chinese entity . Yeah, well i would start with it fact that we dont want to close our borders to Foreign Direct Investment. So even if there was a way to try to figure out how to fund through our Capital Markets here, we dont have are the answers and Foreign Companies when they come, they dont just bring capital, they bring innovation, worldclass work force training, new ways to do things. Weve seen that in the auto sector. I dont think it would be a desire to wall us off and think we have all the smarts and have all the answers if we can just sort of contain it here. We have had many people on the panel and you yourself talked about the amazing benefits that direct Foreign Investment means to the u. S. Economy and the work force so i wouldnt even think that would be a goal. Observers have said the process offers the view that other Committee Members somehow roll the pentagon on a decision or that the brass at pentagon somehow caved to outside influences and ignored input from pentagon staff. Can you elaborate on that . I dont think thats true. Inside the pentagon, when i looked at case, we brought in all the pertinent parties from the breadth of the pentagon. Military surveillances, key agencies like National Security agency, who i have concerns on cyber cases for example. And i always got the sign off at the Senior Leadership level. Looking to say i believe in Foreign Direct Investment too. And we need have that flow of capital and we need the innovation that brings. But i want to make sure were protecting National Security in doing that. We brought the full gamut of the pentagon resources when we exam a case. My three cs construct, chooichb was always a place we looked at regardless of the next step. I was pretty firm in my discussions, as mr. Wolf would tell you. My time is well more than expired. I appreciate the members indulgence. And i would like to recognize the gentleman from North Carolina. Mr. Pit inger. Not only is he the author of the modernization act but the author of the legislation that made the treasury secretary a member of the National Security council. And with that i yield to my friend from North Carolina and applaud his leadership on this issue. Thank you, chairman barr, for your commitment and leadership. And thank you for being with us today and your expertise and background. Im from North Carolina. We had the largest hog Processing Plant in the world in my district. Owned by the chinese. Smithfield. 5,000 jobs. Right across the border from me is a big textile plant owned by the chinese. I have a real interest in Chinese Investments, Foreign Investments of all kind. I have a real appreciation for that. Having said that, i certainly read the statement by president xi regarding his clear vision for china, his fiveyear plan to aggressively acquire technology companies. Theyve been pretty focussed on that. Since 2014 i think theyve acquired 43 semiconductor companies, 20 of which have been in the United States. To that end it brings us enormous concern, and i think those concerns are shared by many leaders who support our interest in reform of sifius. I would read you a few of them. Attorney general Jeff Sessions says sifius is not able to be effective enough. Your legislation is first rate. We think it as Great Potential to push back against the abuses and dangers we face. Secretary mattis, it needs be to updated to deal with todays situation. Director coates, we should do a significant review of the Current Situation to bring it up to speed. Admiral rogers. We need to address the cfius process and make sure its optimized for the world of today and tomorrow. Does anyone disagree with those perspectives . Thank you for that. With that in mind i would just like the ask you, mr. Wolf and thank you for your service again. You served as assistant secretary of commerce for export administration. At that time you were involved in providing relief in the arms embargo that the u. S. And eu had had had impose said in 1989 following the tiananmen massacre. These efforts in export controls reduced enabled through president obamas export control reform that initially led to a massive Chinese Military modernization effort. Today, the u. S. Military faces a far more capable because, frankly, i believe of these efforts. Under the same tenure you had it took half a decade to publish the chinese for actions by zte and selling what we have in technology to north korea and iran. I worked on this. Ultimately, they were fined a billion dollars. It took a long time to get that done. I would like to know from you how credible you believe you can be as a witness on this cfius process, given the lapse and what has occurred through the time of your tenure. Thank you for the question. With respect to the zte case, that was two years of my life pursuing the matter, and i was the one that signed the denial order in pursuing it. So i think we were actually extraordinarily aggressive with respect to that matter and it speaks for itself. We did exactly the opposite with respect to china. The whole point to the reform effort was to make it easier with respect to trade with our close allies, nato in particular, to have more focus and to strengthen the embargo with respect to china. Net effect was it provided the chinese access in greater capability as a result of what occurred and did not occur. I would like to clarify for this committee what we intend not do in the bill. The bill does not impose a ban or automatically block all Chinese Investments or that being of any other country. It does not require cfius to consider investment reciprocity as part of this bill. It does not cover all joint ventures. Joint ventures are a concern but does not cover all of them. Does not require any list of countries or special concern. No country is named in this bill. It does not require a list of technologies or duplicate functions performed by the export control system, and it does not designate specific technologies that are to be safeguarded. So i think there has been prudent consideration for what needs to be done and what should not be done. I would convey to this committee and to each of you that without this type of clear focus and commitment, americas interests will be greatly threatened. I yield back my time. My time is gone. The gentlemans time is expired. The chair recognizes the distinguished gentleman from arkansas, mr. Hill. Thank you, mr. Chairman. Appreciate our witnesses being with us today. Thanks for the effort to start this process, mr. Barr, in evaluating how we adjust cifius resource needs on behalf of the administration as well as balance the new challenges to our country. I appreciate my friend from North Carolina taking a leadership role in the topic as well. Id like to explore the issue, maybe starting with you, ambassador, talking about the challenges of Licensing Technology opposed to outright acquisition of it. Could you reflect on that and how that gets reviewed in the process . I will defer to well let others, too. Two panelists to the left. What i would say is there is no definition of National Security either in existing law or the new bill. I think thats very wise because National Security is a dynamic concept, quite different today than it was during the cold war. To me, its the summation of foreign defense and International Economic policies all resting on a strong intelligence base. When those cfius Committee Members come together they have responsibility in their statutes and regulations to protect National Security at the foer and particularly for state and commerce and licensing issues on another track are brought into cfius on that particular case. Its really important to note that cfius shouldnt substitute for work done on licensing export controls in other areas, but certainly it needs to be part of that consideration. I just would make sure cfius isnt leading in an area more properly the domain of state and commerce. Somebody else want to comment . Thats exactly my main point. If there is technology of concern we should be controlled by the technology of return regardless whether theres a transaction or licensing arrangement. If we will spend the time and attention of Government Resources with dual use of commercial technology concern i grant everything said today except for note vating anxieties and concern we should do that and the control system is specifically created regardless of the nature of the transaction to control it and without the collateral consequences of spooking or otherwise having a broader impact on foreign in investment and can be tailored without affecting the entire ecosystem. Thats why im an advocate to the extent humanly possible, it cant solve all problems but if there is a Technology Issue spend the time on that to regulate it accordingly through the system. You think the statute gives you the ample authority to go through that process and identify it inside the executive branch . The legislation is already there. A matter of will and time, not a statutory issue. Whats a bigger challenge to this country, Foreign Direct Investment of sensitive assets or outright theft of American Intellectual property . In my view, its clearly the latter. Foreign direct investment at large is not the issue but transfer and ip theft can occur in many circumstances not necessarily something captured by Foreign Direct Investment. I would agree with that. Something like 510 of exports not exports, export value, sheer theft of intellectual property from europe and the United States, would you agree with that estimate . I dont know the percentages but that seems reasonable, yes. That was always a concern of mine, things that werent in our process, the cfius process. Cybertheft was a major concern. We put in rules through rules that required companies to have a minimum standard of protection doing business with the department of defense to protect their ip that we were using. Do you think inside the executive branch, in todays world, intellectual property, cyber risk, data security, true protection, im not talking about just the trademark on mickey mouse but talking about all of the above, is that really adequately coordinated in the executive branch process . Whats your view, having worked on it recently opposed to centuries ago when we worked on it we didnt even have email then. Are we adequately coordinated there . I agree with the essence of your question a lot more time and resources and commitment could and should be made to identify those technologies commercial that werent that warrant control, absolutely. Both i. P. Theft and thank you. My time has expired. Thank you. The time has expired, i recognize the gentleman from ohio, mr. Davison. Thank you. I appreciate the importance of Foreign Investment in the United States. We want to be clear were talking about things that would be counterto our National Security interests, not things that would be counter to our national interests. We want Foreign Investments. We dont want to give away our national secrets, even at a high price, if they would jeopardize the security of our country. I became concerned about this when i was a cadet at westpoint. In 1993, one of the first things the Clinton Administration did was transfer release authority for Sensitive Technology from department of defense to department of commerce, and we proceeded to sell, via hughes, the capability to china to launch multiple satellites, in this case, not warheads, off of one launch vehicle. It seemed tantamount to treason at the time but really a commercial decision. It seemed really a bad thing for u. S. National security. Im grateful to mr. Pittenger and folks on this committee that have tried to address a modernization post 1993 but really past due for some reforms. One of my big concerns are where are the gaps, even with this legislation . Whats left to be done . Mr. Hill talked about licensing, but also one of the big things you see are Startup Companies and capture and venture and not only about balance but we benefit from trade and concerns of trade policy. Here, were talking about National Security. Setting aside countries, the kinds of mechanisms transferring technology we may still need to address beyond this cfius, as it stands today. Ms. Mclernen. Would you care to start . I think that you raise a number of very important issues. There are a variety of different Security Experts on the panel, other than myself. I do think its important that we dont lull ourselves into false sense of security if we focus only on one country. We ring fence it and risk being vulnerable to other areas of threat and risk discouraging investment from that particular country that could actually benefit the u. S. Economy. Thank you for the clarification. Mr. Kimmitt . I would say your point about instances beyond normal mna activity is a really important one, congressman. The current law applies in the only in the cases of ownership, but also control. And cfius looks very closely at investments, including in startups, where a Foreign Company or investor would have enough Equity Ownership and enough governance rights, board seats, observer status, accumulation rights, special Voting Rights, that that could trigger the cfius covered transaction rule. I think, having spent two years myself running a Software Company in Silicon Valley, that isnt well understood there. We need to do a better job letting people in our hubs. Not just Silicon Valley but austin, they have to be careful when they take that Foreign Investment that it does not rise to the level of control, which would then trigger cfius, and if they set up an Investment Fund lets make sure any Foreign Limited Partners are truly limited, passive investors. I think thats an issue cfius looks at closely but i think on the company side, particularly in the startup community, there is not as clear understanding what Foreign Investors with malign purposes may be trying to do. Thank you. Mr. Estevez . I have to agree with the ambassador on that point. We also have to watch the negative implications. So if youre a start upin Silicon Valley with cool technologies. I want those companies to do business with the department of defense and dont want them to not want to do business with the department of defense because we will suddenly put a fence around them. Correct. And i think the big thing is it my time is expired a lot of folks dont realize the National Security implications. Its a Brilliant Technology for our economy but can be used for nefarious purposes. My time has expired. I yield. The chair recognizes mr. Sherman from california for five minutes. With dubai ports we had a company that happened to be own by the government that at that time was supporting national terrorism. Should we have in the cfius law a provision that says you explicitly must take into account whether the host government of whatever company is making the investment supports terrorism, whether or not it is a state support of terror. Anybody have a comment . Anybody think we shouldnt take into consideration whether the Company Making an investment in u. S. Assets is based in a country that supports terrorism . Mr. Sherman, i think the treasury i know a bit better, although the cfius process is run by the International Affairs division, as you know, the people in tfi, terrorist finance comment on every they comment but theres not an explicit provision that says it might be a wonderful Company Buying a wonderful asset, it just happens to be based in tehran. That wouldnt and theres nothing in the law i read that you can point to that says that would be one of the factor, correct . Theres nothing specifically, as you know in wake of c nook and dubai ports there was scrutiny put on acquisitions of state owned or controlled entities. Not just talking about state owned or controlled entities. I would say where you will find that language is legislation you passed and executive orders issued by the president on state sponsored terrorism on iranians and others. Government or private enterprises in tehran. I would say both. You say it would be rejected on that basis or what weight would it be given . Certainly, if it were a Company Based in tehran, it would be rejected outright. But i think the key point youre making maybe dubai we would look at more carefully. I would point out we may be looking too narrowly when we look at ownership or control of a company, as if you have to have seats on the board when you control them. I will give you one example. We allowed a terrible position in our weak position with common. Theyre able to turn to boeing and say, we wont buy your planes unless you make the fuselages here in china. So they dont have anybody on the board, they dont own any stock but they control corporate decisions. Now, i dont know whether it was the fuselage or Wing Assembly and i dont know whether that poses risk to our National Security or intellectual property but i do know once we consent to a situation where a country can have a huge trade surplus with us, over 300 billion, and then turn to our companies and say, and you cant even sell your products here unless you transfer this technology, unless you build this plant here, unless the patents are located here, unless the Computer System or cloud is located here. That we may be looking over at corporate ownership and not looking at corporate control. The fact is, if you can close your markets you can control corporate decisions. Another thing i will point out is that i think its important to note that if bad decisions are made by cfius, they can be reversed under the International Emergency economic powers act. That would be extraordinary, its never been done before. As we plan to revisit cfius, we should be aware of that act which could be used and i cite 50 us c1702, to reverse a bad decision. I yield back. The gentleman yields back. The chair recognizes the gentleman from minnesota, mr. Emmer. Thank you, mr. Chair and thanks to the witnesses for being here today. I want to go back to chairman barrs opening when you say how do you balance National Security versus direct Foreign Investment. I want to tie it to i think it was something ambassador kimmitt said, there is no definition of National Security in the law. What is the priority for cfius, when youre reviewing a transaction . Is it National Security or is it Foreign Direct Investment . Which one comes first and then has to be balanced against the other one. When youre talking National Security, ill just add, how do you define it and well start with the ambassador. My point was National Security is a dynamic, everchanging concept. It meant one thing in the cold war, post 9 11, post financial crisis. The important thing is cfius, which exists only to screen investments for National Security concerns, has at the table every department and agency that is responsible for safeguarding the National Security interests of the United States, so the Defense Department might bring their concerns about military technology. The state Department Might bring or treasury, some of the concerns mr. Sherman mentioned about terrorist activity, commerce will bring concerns about export controls. Dhs, doj bring a very different set of concerns. Basically, each of the agencies is looking at the investment, in an open investment policy environment, that the reason theyre there is to say even though we are open to investment, are there any elements of this transaction, if concluded, that would raise concerns from our department or agencys perspective. If so, they need to be identified, addressed, or mitigated. If they cant be mitigated the deal needs to be blocked. It doesnt look like, when i look at this summary, a total of 770 transactions over the last, what is it, six years, Something Like that, thats cited in this graph. There arent many. I go back, maybe mr. I shouldnt call you mr. The honorable mr. Estevez. You were talking about when you review something inside the pentagon. There was a case i tried to look up, because its back from 2011, 2012, involving cirrus airplanes in duluth, minnesota, and a Chinese Company came in and put a Purchase Agreement together, and all kinds of red flags went up, because the argument was they are going to buy this very interesting technology, theyre going to reverseengineer it in china. So we lose the jobs, we lose the its great to want this Foreign Direct Investment. Had a great point, you also have it going on with what mr. Hill is talking about, with outright theft. What happened . Do you remember the case im talking about. And is it one of the ones there were 20 back in 2012, the notices were withdrawn after commencement of the investigation. First, being a member of the committee, we dont really want to talk about specific cases, because of the confidentiality of that process helps us dig into those companies. The reality is i also dont recall that specific case. Thats great. I respect that. If i can just add before i forget about it and let you finish. It would be very helpful at some point down the road when you think its not hot anymore when policymakers can see some of the cases and deliberations you go through. Maybe it would help us understand how cfius is working. In any case we would have looked at the technology. There is Economic Security as part of National Security, absolutely. We would discuss that, too, when we were discussing cases. We would look at the technology and say, is this technology in the stateoftheart . Is it useful military, that it would advance their capability, whoever they are, in this case, china, over ours . If there was any doubt about that, i would be in there arguing we either have to put control around this, depending who the company was depending who the company was and discuss those controls or i would be arguing for a block. As the honorable mr. Wolf sitting next to me would say i was usually sitting there pounding the table you can get overruled. Never. Okay, good. I see my time has expired. Thank you. The gentleman yields back. The chair recognizes the gentleman from illinois, mr. Foster. Thank you, mr. Chairman and our witnesses. Mr. Segal, in your testimony, you mentioned things like source code as one of the things that are hard to keep under control when you get an investment. Are there investment models that allow us to accept money but keep the intellectual property here, or is that pretty much a lost cause once you have a significant investment . Happy to have anyone is there a workable model of that, or once you have somebody who a 20 stake they will want to see a review of the technology on regular intervals and have basically people injected into the company and see both the present and the future Technological Developments . Any way to keep that from happening . Thank you. I think that that specific case refers to investment inside of china. So when it was just an example of the sort of intellectual property thats hard to keep in one place. So i think it would go back to ambassador kimmitts point, when you are investing in a startup or other Technology Company what percentage control you get, what the terms are and what access to the information. I think those are often individually negotiated. It would have to be brought to the attention, depending upon what the source codes was or technology was to be transferred. Is there a retrospective look how successful those have been in keeping the technology from escaping or this is a one time decision and you dont look back five years later and see if the technology has actually not been we would we would always look at the technology and see again how cutting edge it was and how it would impact potential adversaries capability again from the department of defense perspective. Not only would we look at the technology itself, we would look at the industrial process. Some companies are better at doing things than other companies. We wouldnt want the secret sauce to migrate overseas if it was a very stateoftheart company. We would consider all those things. If we thought we would mitigate we would propose the mitigation on how to wall off the fact that there was foreign cash going into the company. If we didnt think we could do that we would propose a block. When you believe youve walled it off, do you have a process in place to review how successful that walling off has been . If we proposed mitigation we would enforce that mitigation agreement in perpetuity and assess how thats working. With that said, to my earlier testimony, theres not enough resources to continue doing that especially as cases get more complex. If you look farther into the future, its easier to catch up than develop new technology that doesnt previously exist. In the medium longterm, were going to be coequals with many countries in europe and asia. The question is, do we have a structural disadvantage . Or will it become as easy for us to invest and get their technologies moving back in areas where theyre ahead of us or is that something we should negotiate now . This in a world where we are coequal technologically . Particularly in the case of china, we do want to insist on greater reciprocity. There are a number of sectors in High Technology that are still offlimits for u. S. Investment. The amount of openness and access to u. S. R d does not exist in the chinese case. As china becomes a more capable player it we hooves us to insist on greater reciprocity and access to those resources. In addition to cutting edge technological spaces, a lot f technology are things like drone swarms and massive numbers of security cameras where its actually the price as important, mass production of very large numbers of relatively low tech includes cameras with facial id and things like that. I was wondering, is there a lot of concern, even though the technology might not be leading edge, manufacturing is another area we could fall behind and have to protect technology . Let me address that very briefly. We would look at the technology. If it wasnt cutting edge, we believe our innovation would pace that. More importantly, from a military perspective, our tactic, techniques and the men and women in our forces constituted an advantage how they used that technology that would pace whatever competitors there are. Thank you. The gentlemans time is expired. The chair recognizes the gentleman from indiana, mr. Hollingsworth. Good morning. I appreciate all the witnesses being here today. This is certainly an interesting topic and vital topic we discuss further. Mr. Foster, my colleague brought up ongoing monitoring and mr. Estevez answered some of his questions, i want to get back to these monitoring agreements and how vital it is what we set in place and the guardrails around that continually being updated. You mentioned resources are a problem. Can you talk about previous issues with resources, what resources might be required, what apparatus we have in place and need in place and fill in some of the color around the ongoing monitoring agreements. Others can certainly take the question as well. I would start at the general, let my colleagues go to the specifics. I spent a lot of time working in government. Most of the energy and resources are on the upside, the policy decisions reached, legislation enacted. We dont give the attention and resources to the implementing side of it, which is really important. You know that from your businesstime, you have to drive to results. What i would say is lets make sure we have resources on both sides of that equation. If in the middle of it is a mitigation agreement, lets make sure theres as much energy put into implementing overseeing that mitigation agreement there was negotiating it. Thats where i think we run into a real resource problem, both in treasury and the process more broadly we have barely enough people to address todays cases. If you then have an increase in cases or implementation responsibilities because you passed new legislation, i think the place thats going to lose is continuing to watch those mitigation agreements, make sure theyre faithfully executed. As mr. Estevez said very importantly we connect the dots across decisions made. Thats where the resource strength comes in. One other factor and i fully agree with ambassador kimmitt on that, as time elapses from the time the mitigation agreement is put in place. We did one for dod in 2013, i remember it, im gone, some of the staff is turned over, some of the outside directors we put on have turned over. Im real concerned about institutional memory that comes with resources to do that enforcement. I think both of your comments are really really thoughtful in insuring ultimately if were going to make a decision we have to have the resources and if its barely enough to face those cases if theres a probability above zero, resources need to be allocated to those long term as well. I wanted to specifically ask mr. Wolf, was there ever a time in your tenure you felt like you didnt have enough time to adequately review, thoroughly vet and arrive at the right decision in your mind, that the process was rushed . No. I agree with alan we never cleared off a transaction we believed there was an unresolved security threat. To the extent we needed more time, there was withdraws and refiling. And with massive ter relative support, im confident, with all the cases we reviewed we made it to the right outcome. They were never a balance. We were never balancing investment with National Security. If there was an unresolved National Security threat we blocked or mitigated it. The answer to your question is no. That answer will certainly help hoosiers back home sleep at night knowing were giving enough time to vet them. I really appreciate the comments. This is something more broadly a problem. Epidemic across all aspects of government. We spend too few of our resources on the enforcement of a decision incentive on the decision itself. I yield back, mr. Chairman. Mr. Chairman could i add picking on the point mr. Wolf just made, its important to understand the role the intelligence plays in the cfius process. When it is filed it is sent to the director of Central Intelligence for a communitywide look at the case. Going to mr. Fosters point some of the snt considerations need to be looked at closely and dni comes back with a low, medium or high assessment. It helps guide, doesnt make the decision but guides what the committee does but as mentioned most all cfius agencies have their own intelligence inside. Theres almost two bites at that apple. For looking ahead, that five years look ahead to make sure we implement correctly were really relying on the Intelligence Community to come with us, not just on the instant concerns on these transactions, what are the five ten year trends we need to be concerned about. Thank you. The time is expired and the chair recognizes the gentleman from texas, mr. Green. Thank you, mr. Chairman. I thank the witnesses for appearing today and i think this is an exceedingly important hearing. Im very much concerned about assuring ourselves that we are on the right course. Mr. Segal, you have indicated that unilateral action may not be sufficient, that there is something more we have to do do protect our u. S. And science originated technology. Would you give additional intelligence on this, please . The fundamental issue is there are very few technology the United States still monopolizes. For any technology the United States decided it represents a dual use threat it is very possible to find except for a very very range of technologies, similar producers. To give an example on issues on cybersecurity or ai or Computer Science or technology the chinese are sending delegations to israel every week. While the israelis are more aware of our concerns about dual use, theyre not going find in the same ways that we are in every instance. I think the issue is unless you have a fairly broad set of agreements among your partners, it will be very easy for chinese actors to find most technologies in other markets. With reference to partners, are there certain institutions that can validate a partners position, such that we can feel more comfortable with it as opposed to someone that night not be associated or affiliated with the institution . I may defer to mr. Wolf, but i suspect the intelligence agencies cooperate and share information. If you would, please . Sure. To the extent theres information about an entity that creates National Security or policy concern, my old bureau has the ability to identify it publicly to which exports are dropped or other transactions are red flags and within the cfius process the Intelligence Community will provide other information about entities that might not be known to the parties and we factor that into whether to block or mitigate. What about nato, a membership in nato, does that give you some degree of assurance . With respect to a company absolutely, it doesnt mean every Company Inside each nato country is per se not of concern. When we view not only the country of issue, the personnel, the personnel, the funders, so just because its from germany or france doesnt per se mean that theyre absolutely no concerns. How effective are we at spotting companies that have investors that may have ill intentions such that theyre in a position to take advantage of knowledge that they acquire, not withstanding the fact that they look legitimate . Real quick, thats one reason for my emphasis on the focus of the technology. If the technology is of concern it warrants review period, regardless of who the parties are, and the licensing process gives the u. S. Government the opportunity to do a deep dive into who the investors of the other parties are opposed to the other way around. And the Intelligence Community does a very good job digging out all the facets of the company, including who are the back investors that may not be good actors. We have some sensitive areas in the United States, where we have certain things being developed that are to be kept under wraps for want of better terminology. Do we have any concerns about persons locating businesses in and around these very sensitive areas . If it was a covered transaction we certainly would address that. Could you get closer to the mike . If it was a covered transaction we address that under the cfius regiment. My time is up. I yield back. The gentlemans time is expired. With the witnesses indulgence, were about ready to have a vote on the house floor but well take the liberty to ask one final five minute round of questioning with the members agreement here. We heard earlier that although the u. S. Capital markets are the deepest most liquid and competitive in the world, in and off themselves u. S. Domestic Capital Markets are not sufficient to provide the level of startups that other Companies Need and a very important part of financing of our companies in this country. They provide, in cases of Foreign Direct Investment, many times other assets other than just capital. We also heard today there are legitimate National Security threats and we need to strike the right balance. In the remaining time, could each of you briefly, if you could identify one policy recommendation to improve the current or modernized cfius review process, what would that be and well start with mr. Kimmel and work our way down. I would go back to what has been the common theme, make sure we have adequate resources both for the identification of potential issues, the review and adjudication of those and then implementation of any agreement that might be reached, mitigation agreement to bring us to a yes answer. I think it was very important going back to mr. Pittengers point of the number of senior officials in the administration that have talked about the need to reform cfius, i hope those senior officials will themselves get involved in the process, both to identify the resources they need in the departments and agencies and empower their people involved in the cfius process to deal with these cases expeditiously on behalf of the american people. Thank you. Mr. Estevez. I address many areas in the bill. Resources needs to be addressed. I would also say cfius is one tool in the toolbox. We need to look at the gamut of our legal capabilities and what industrial policy and reciprocity we might want to enforce across the board in our dealings with foreign nations and Foreign Companies. So while cfius is one way to get at that its not just cfius. You need carrots as well as sticks in this process. Mr. Wolf . A massive whole of government effort creative and deals with the emerging technologies and other technologies not on the control list in commercial applications sensitive or of concern discussed behind all the comments today. That requires a lot of agencies and a lot of creativity and a lot of attention and resources to do that. With everything were talking about today, all depends whether part of the legislation or export controls of ability of cfius or export control system to identify the areas of concern whether broadly or specifically, thats the work at the core of everything were talking about today and thats my policy recommendation. Mr. Segal. If the concern is primarily china i think we need address all the other forms of Technology Transfer occurring. Some of the issues of reciprocity i mentioned before as well as battling back on techonationalism and Chinese Industrial policy. On cfius process it calls for resources and perhaps new mechanisms tapping into the expertise, academic and business communities how the technologies are developing and which ones are the ones we will be worried about 25 years from now and what type of joint ventures and other types of agreements people are thinking about in the future. Let me also echo the important need for resources. Its very hard to determine how well cfius works now and what the gaps are if they dont have the resources to do the job thats in front of them now. If we expand the scope, we risk leaving ourselves vulnerable and they take their eye off the true defense related National Security concerns. I dont think it was mentioned earlier the number of deals blocked. I dont think that is an indicator if cfius is working. You have no idea how many dont start because cfius exists and i wouldnt look at those to say its not functioning properly. I cannot emphasize the need for resources not only for National Security but to be competitive. Foreignbased companies are concerned the length of time it happens to get a review. I cant emphasize that enough as well as looking at other tools cfius cannot be the one and only thing we focus on to protect our National Security in this space. Thank you. Id like to yield to the gentleman from North Carolina for a comment. Thank you, mr. Chairman. Thank each of you for being with us today. Its very very meaningful to all of us. I would like to enter into the record statements of support for cfius that includes former secretary of commerce, penny prisker and wilbur ross. Without objection. I would like to thank senator cornyn for his leadership. Its been remarkable. He and his team have worked hard on this. An honor to work with them. I would like to thank secretary mnuchin, they have played a significant role in writing this legislation along with chairman nunez who is a cosponsor of this bill and chairman burr. Everyone has participated in a very significant way to make sure that we have a good perspective on what needs to be done going forward. Thank you, chairman burr thank you. For a final comment ill yield to the gentleman from illinois. I want to thank you and apologize for the attention Deficit Disorder of congress on this issue and thank you, chairman, for trying to remedy that. This is something where i think our government and our nation suffers from the lack of the longterm vision that you actually, frankly, see in china, that a lot of our investment model where youre bonused on the quarterly profits as opposed to the ten year performance of a company causes us to not invest as strategically as we should and i hear you very clearly about the lack of resources. When we have some big mess like i dont know the ebola crisis or so on, theres a big temporary spike in funding and then it gets eaten away until the next time things become a crisis. This has been an ongoing crisis for more than a generation. One thing that occurred in some of your testimony was reference to intellectual property violations and one of the reasons we depend on foreign capital for Venture Capital when you have a really good invention like microsoft word and find it gets pirated in other companies you dont have the followon investment capital. I was just wondering, do you see that as an important area that we have to this would be much smaller problem if there was a huge increase in the amount of Venture Capital available simply because we didnt have our inventions ripped off offshore . There was a number of like 150 billion of Chinese Investment into startups. Was that a number that occurred in one of your testimony . That is probably small compared to the amount of software that gets stolen, for example, in china every few years. I think we have to keep our eyes on that one very strongly. Anyway, i just want to thank the chairman for having this hearing. Its a big deal. Thank you. Thank you. I appreciate the gentleman and he yields back and id like to thank all of our witnesses for their testimony today. It was very educational, illuminated a lot of issues for the members. As we indicated before, this subcommittee will continue to review the cfius process. We will have several more hearings the beginning of 2018 and we invite the continued engagement of these witnesses and others as we continue to review and update this process. I would echo the comments we do hear you loud and clear on the resources point a unanimous point made here today. Without objection all members will have five legislative days within which to submit additional written questions to the chair to be forwarded to the witnesses for response. I ask our witnesses to please respond as promptly as youre able. This hearing is now adjourned. [ indiscernible ]. Tonight on our companion network, cspan, former Texas Governor and Current Energy secretary rick perry sits down with cspan to talk about his childhood, his military service, his time in the Governors Mansion in austin and serving in the trump administration. Thats at 8 00 p. M. Eastern on cspan. And then at 9 00 eastern on cspan the Supreme Court oral argument. The case is husted versus randolph institute. The issue is Voting Rights in ohio and whether the state can purge voters from the rolls for failing to vote in