This is from Jenny Leonard of Inside US Trade:
The White House is considering the creation of a reciprocal investment regime with China following a Section 301 investigation into Chinese technology and intellectual property policies, but some in the administration fear it would lead to stock market losses and negatively affect U.S. companies doing business in China, private-sector sources briefed by White House officials told Inside U.S. Trade.
The sources said the administration, if it went that route, would apply the 1977 International Emergency Economic Powers Act, which gives the president broad authority to regulate commerce “to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose.”
Trump, they said, would sign an executive order declaring a national emergency and, as required under the statute, “immediately” transmit a report to Congress specifying the rationale behind the emergency and actions, and naming “any foreign countries with respect to which such actions are to be taken and why such actions are to be taken with respect to those countries.”
Sources said the idea -- pushed for by U.S. Trade Representative Robert Lighthizer and USTR General Counsel Stephen Vaughn -- would be to restrict Chinese foreign investment in the U.S. to the extent that Beijing restricts U.S. foreign investment in its market, which could effectively lead to sectoral investment bans.
Chinese investors under the new regime would have to demonstrate that China allows U.S. investment in a specific sector. For example, one source said, if Chinese investors wanted to buy a U.S. bank, they would be able to acquire no more than a 49 percent stake -- in line with Chinese rules on foreign ownership of banks in China.
Several agencies, including the Treasury Department, have agreed to the investment reciprocity regime approach, some sources say. The administration is working on the architecture and enforcement mechanism for the regime as well as nailing down the statutory guidelines for how to proceed under the IEEPA statute, a source said.
Here are a few quick thoughts:
-- I like the idea of doing something different and innovative in international economic relations. There's too much copying and pasting of what we did last time.
-- Is it really credible to talk about restricting Chinese investment in the U.S. in this way? It would cause a lot of economic harm in the U.S., and unlike with trade restrictions, there are no beneficiaries to praise you for it (although some anti-China folks would support this, I suppose, even if everyone loses economically).
-- I think it would be great if China would relax its foreign investment restrictions, but I thought the Trump administration hated outsourcing, so why do they care about Chinese foreign investment restrictions?
-- Wouldn't this issue be better dealt with as part of a larger package?
-- I wonder how much China will care about restrictions on U.S. investments by its companies.
