March 11, 2025 • 36 mins
Among the dizzying number of executive orders, tariff negotiations, and Doge activity since the inauguration, the America First Investment Policy requires a specific focus to better understand the potential impact on foreign investment in the United States, from both allies and hostile nations.
Nova J. Daly is a Senior Public Policy Advisor at Wiley Rein, LLP. He formerly served in the Treasury Department as the Deputy Assistant Secretary for the Committee on Foreign Investment in the United States (CFIUS.) Coercive Capital host, Elaine Dezenski, recently spoke with Nova about America First, what it means for capital flows, U.S. companies, and the broader seismic shift in the global trade order.
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Episode Transcript
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Speaker 1 (00:03):
Today's program is supported by K two Integrity. K two
is the premier global risk advisory firm in an ever
changing world filled with uncertainties and risk. K two helps
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two integrity dot com. I'm Elaine Dezenski and this is
(00:35):
coercive capital on the illicit edge network. Among the dizzy
number of executive orders, tariff negotiations, and DOGE activity since
the inauguration, there is one very critical aspect of the
Trump administration's economic agenda that I believe requires further examination.
It's called the America First Investment policy. This policy stands
(00:57):
out as a clear articulation of the new new pathways
and barriers the revised rules for foreign investment in the US.
The goal, it's actually twofold, boost foreign investment from allies
while restrict capital inflow from hostile states. Joining me for
this conversation is Nova Daily. Nova has held senior leadership
(01:18):
physicians in the US Departments of Treasury and Commerce, the
White House, and the US Senate. While at Treasury, he
served as Deputy Assistant secretary overseeing investment, security, and policy.
He's now a senior public policy advisor at the law
firm Wiley Ryan and also works alongside me serving as
senior advisor at the Foundation for Defensive Democracy Center on
(01:38):
Economic and Financial Power. I'm also lucky enough to call
him a friend. Nova and I break down some of
the key elements of the America First investment policy and
what it means for capital flows US companies and the
broader seismic shift in the global trade order. There's so
much to talk about, and I think we've all been
feeling some sets of whiplash on what's happening in the
(02:01):
trade space, tariffs, and more broadly on how the economic
order is going through some pretty fundamental shifts, and a
lot of that focus has been on trade and tariffs.
But today I thought we could focus on what's happening
with respect to readying the investment landscape in the US
for what are anticipated to be a lot of new
(02:22):
foreign direct investment, and that really seems to be a
core part of what the Trump administration is trying to
drive towards to bring advanced manufacturing to the US to
reindustrialize across certain sectors. There have been a couple of
really big announcements. There was one in December with soft
(02:44):
Bank one hundred billion dollar investment in the US over
the next four years, focused on AI and related infrastructure.
And then just yesterday, TSMC, the world's leading chip manufacturer,
announced an additional one hundred billion in investment going into
its fabrication facilities in Arizona. So there's a lot of activity,
(03:05):
and a couple of weeks ago, the administration released a
new policy called the America First Investment Policy, and that's
where I thought we could focus our conversation today. This
document came out on a Friday afternoon without much fanfare,
but I think its implications are far reaching, and it's
(03:27):
somewhat notable in terms of the tone and the substance,
which feels like it's quite a departure from what we're
hearing on the tariff's side. And it starts with this
premise that economic security is national security. So I'm just
curious about what you think of this America First Investment Policy.
(03:47):
It seems to have two objectives, which is boost foreign
investment from allies while restricting capital inflo from hostile states.
But there are a lot of questions about exactly how
we're going to define ally in this context, and a
lot of interesting aspects related to pushing back against China.
Speaker 2 (04:08):
It's a great topic and it's extremely important, and I'm
glad we're talking about it.
Speaker 3 (04:12):
It's great to be talking about it with you.
Speaker 2 (04:15):
You are an expert yourself on these matters, and we've
had a good long history talking to a number of
folks on the Hill and Congress and policymakers about these issues.
But you know, having had the experience I had at
Treasury running the Committee on Foreign Investment in the United
States and also having a dual hat of being the
open investment person, I was supposed to promote investment while
(04:38):
being the one restricting it.
Speaker 3 (04:40):
It gave me a.
Speaker 2 (04:41):
Really good window in terms of the importance of investment,
but also trying to balance and straddle between bringing in
as much investment into the US economy as you can,
because that's a lifeblood. It's actually exponentially bigger than trade
in terms of its impact on the US economy and
(05:01):
the growth of the US economy, while addressing the national
security aspects because we do have companies that are forefront
of technology or ones that are providing invaluable resources to
the US military or other branches of the government that
are really critical to our security and national security. So
(05:22):
is that real balance that gets amazing and difficult to address.
So this issuance from the Trump administration is really kind
of remarkable in a lot of ways. We've been seeing
a lot about the tariffs and going out a number
of different existing US allies and others about the unfair
(05:44):
sort of trade relationships. But this document dealing with investments
really goes at the heart of something that's been a
longer trend, and that's knowing and seeing China's place in
the new World military, economically and otherwise, and where they've
gone in terms of their investment.
Speaker 3 (06:03):
They did a big.
Speaker 2 (06:04):
Going out policy framework for a while where they pushed
investment by their companies out to the forefronts of the
globe and in the United States, and there was a
lot of investment that happened in the United States, but
a lot of that happened in critical technology areas. And
so this document in a lot of ways is very
(06:25):
aligned with how the progression of the relationship and addressing
investment issues, especially with China.
Speaker 3 (06:32):
Has gone.
Speaker 2 (06:33):
But what's amazingly invaluable value about it is that it
also brings in and restores and continues the open investment
reiteration of the open.
Speaker 3 (06:44):
Investment policy of the United States.
Speaker 2 (06:46):
That America believes in the open investment policy and wants
to ensure to expedite and heighten it, and this document
seeks to do it. So I really find it.
Speaker 3 (06:57):
It's a really heartening document and in terms of its continuity,
So just two sentences more and then I'm happy to
talk about more questions. But so it really does.
Speaker 2 (07:09):
It balances inviting foreign investment from allies, especially you know,
in some of the promotional aspects that it is trying
to do expedantic fast track authority and seeking to sort
of address mitigation concerns and pulling that together and inviting
that for passive investment, while also addressing a key issue,
(07:33):
and that's the strategic investment that China's made by saying, look,
we'll open up the spigots of the US economy in
terms of investing here. But that also has to be
conditioned on your relationship with China. So it's telling China,
you're going to have a difficult time continuing the investments
you're having, and if you're partnering with third party entities
(07:55):
to invest in.
Speaker 3 (07:56):
The United States, that is going to continue to have
heightened securities. We can really get into the depths of it,
but it's my opening.
Speaker 2 (08:03):
Yeah.
Speaker 1 (08:03):
Thanks, thanks, It's a great starting point, and I agree
China's is the primary focus, and that reflects a lot
of concerns about their weaponization of Foreign Investment and Intellectual
Properties Act and surveillance and policies of civil military fusion.
(08:23):
The investment policy also targets other regimes. Iran has mentioned Russia,
as mentioned North Korea, Cuba, Venezuela. I actually found that
quite heartening that this document actually makes a distinction between
adversaries and others. And while it doesn't go as far
as identifying what an economic ally is, I think it
(08:47):
points the way towards how we need to be thinking
about that. So I was somewhat relieved to see this
come out because it also stands in contrast to the
you know, as you've alluded to, the more protectionist messaging
coming out on the tariff side, where we're not making
a distinction amongst allies and partners, we're kind of treating
(09:09):
everybody the same. So obviously that's not the case at
least as how this administration is thinking about it for
the domestic environment. Let me talk about one piece of
this that I think is interesting and where I know
you've had a lot of thought, leadership, and experience, and
(09:30):
that's on the SIFIAST process, America's Foreign Investment Review Committee
on Foreign Investment Review and how this document highlights the
risks of the risks to American capital and intellectual property,
and the emphasis on streamlining that process but also strengthening
(09:55):
that process to restrict certain kinds of investment in critical infrastructure, energy,
raw material, other strategic sectors, and strengthening authority over greenfield investments.
This is interesting and I think it does point the
way in terms of how we might be thinking about
(10:18):
SIPHIUS going forward. But what do you think and where
are the opportunities to put the syfious process in the
context of this, not only this document, but how we
need to be thinking about managing the risk across these
new investment flows.
Speaker 2 (10:35):
Yeah, it's going to be interesting because it lays out
some fundamental new horizons in terms of SYPHIUS that are
gonna be interesting to see how they really approach it.
I mean, one of the big items that this document
puts in there is that they want to cover what's
called green field investments. And green field investments are those
(10:55):
just for the audience sake for those who may not
know those where it's just a fresh investment. You're not
acquiring a company, you're actually making just an investment and
building a building in the United States, actually building something
that makes something or provides a service. For instance, a
lot of people don't recognize that while Huawei a company
that was under a lot of focus in terms of
(11:17):
their operations and their equipment here in the United States,
while a lot of efforts were made to sort of
push out that equipment because the dangers that presented to
the US.
Speaker 3 (11:25):
Telecommunication systems, they had two huge R and.
Speaker 2 (11:29):
D facilities inside the United States that were greenfield where
they just build the building and put their own people
there where they're doing research and development, one in Texas
and I think another Washington state. But so what this
seeks to go after and how they do it is
going to be interesting is those types of investments where
a company comes in and sets up a business here
(11:52):
in the United States that could have national security implications. Obviously,
if the focus sticks to sort of foreign adversarial nations
that'll keep it in a smaller range. But obviously, when
you're dealing with a situation where it's also companies that
could have in nexus to our foreign adversaries, that opens
up a broader aspect. So how they're going to be
(12:12):
able to address that issue and go after that kind
of investment legally? First of all, because right now Syphius
isn't authorized to do that, So it would either take
an Act to Congress or the President would have to
evoke as he has some other documents the International Economic
Emergency Powers Act to make that effectively a function of
(12:35):
what Syphius does and looks at. And then how would
you sort of force that notification make it a mandatory
process as Cypius now contains mandatory requirements for certain investments
to file with Syphius and what it would concern certain technologies,
So how do you really cabin it off and how
do you keep it from being this huge expansive program.
Speaker 3 (12:56):
So that's one very remarkable thing.
Speaker 2 (12:58):
Well, it'll be interesting to see how this administration decides
the implement that.
Speaker 3 (13:03):
Yeah.
Speaker 1 (13:03):
Absolutely, One of the questions that I've been thinking about
is whether there's an opportunity for expansion of Syphius in
terms of a unified policy that we uh, we talk
about and we align across our cour trading partners and
economic allaized. So this idea that we build Sophius into
(13:25):
the trade structure and the basic rules of global trade.
We're at this moment where that system is going through
some upheaval. Do you think it's an opportunity to extend
the use of these tools and through that have a
much more concerted effort to push back against uh uh,
(13:46):
you know, investment that is problematic for us and potentially
for our allies.
Speaker 2 (13:51):
Yeah, and and it's it's interesting that this document brings
it up, and I know it's something you've really looked
into and considered, and it's uh, it's frankly, you know,
really important, especially when you're dealing with the broader issues
of supply chain security, of technology security. How do we
build our systems to protect them and our technologies and
(14:11):
our innovations.
Speaker 3 (14:13):
So, after the latest sipious law was.
Speaker 2 (14:17):
Passed FIRMA in two thousand and seventy, part of the
aspects of FIRMA was that the US would engage as
foreign partners to have them build up SIPHIUS like mechanisms
so they could be exempted investors, which would exempt them
from mandatory filing on a non controlling, non passive investments.
So right now the list of exempted countries that don't
(14:40):
have that are effectively not covered if they make those
kind of investments include our five I partners, UK, Canada,
Australia and gosh, well I forget why am I forgetting
our front New Zealand. So but anyway, so just the
(15:01):
five eyes are really the ones that are exempted.
Speaker 3 (15:03):
So you know, so there's the consideration like do we
broaden that out?
Speaker 2 (15:07):
And so why it all matters is that when you
have those nations where you do have sort of an
ease of investment, that ease of investment also brings greater
trade in a lot of ways because you have companies
foreign foreign owners that come in and buy US companies
that start to build and usually for the most part,
you know, those those investments are in manufacturing enterprises, and
(15:31):
that creates a trade relationship, a stronger trade relationship, especially
when they're producing a good that's exupported between the two
countries or otherwise they're not making that investment if they
don't see a benefit to them either in their own
domestic market road somewhere. So so I think it's really interesting.
Speaker 3 (15:47):
And Ciphius.
Speaker 2 (15:48):
You know, when initially the law got passed, the gentleman
that headed CIFY at the time, you know, they went
out to sixty plus Tom Feedow, it went out to
sixty plus countries to say, hey, can you build up
systems Liscifius like regimes that will help us, you know,
build build relationships. Now, the broader auspices for that design
(16:12):
was that, you know, the Uscifius and I was seeing
when I was their treasure. But it definitely expanded over time.
China was going ahead and doing you know, China was
making its observation in terms of what it wanted to
do globally. You know, they were looking at a global aspect.
They saw supply chains and technologies, and they were in
different countries, in different and different regions. But you combine them,
(16:36):
you made a supply chain.
Speaker 3 (16:37):
They gave you a greater power. But the US was
seeing just its own regime.
Speaker 2 (16:41):
It's all China wants to acquire, you know, this this
one company here, but not in the broader aspect, not
not not only in terms of the entirety of what
the investments of China was making within the United States
and different technologies, but also globally.
Speaker 3 (16:56):
So this was a way to.
Speaker 2 (16:57):
Sort of get our partners and bring them into a
cone where we discuss investments that had global implications that
not only impacted them but also the United States. Cucko
was one was a robotic company in Germany that China
was acquiring a piece in Germany but also had implications
in the US, and then there was a number of
others and it.
Speaker 3 (17:18):
Happens all the time.
Speaker 2 (17:18):
So it's a way to unstove pipe how we look
at foreign investment globally with our partners and address it.
So that along with the trade relationships, I think is
definitely a horizon that needs to be continually explored.
Speaker 3 (17:32):
Yeah.
Speaker 1 (17:33):
Absolutely. One challenge I see is how ultimately we can
apply and enhance due diligence framework on this new deal flow.
You've been in the midst of Saphia's conversations and review processes.
Do we have the tools to conduct that enhanced due
diligence when it comes to source of funds, ownership structures,
(17:58):
What kind of reforms we need the you know, the
announcement on the Corporate Transparency Act, I think it was
earlier this week indicating that Treasure we would not be
enforcing that law anytime soon. Made me think about that
and what happens when anonymous shell companies start buying up farmland,
(18:19):
your military installations. Do we know if these are foreign buyers?
What do you think about that question of enhanced due
diligence in what form it could take?
Speaker 2 (18:29):
Yeah, I mean, I you know, the court I haven't
really dug into the non enforcement of Corporate Transparency Act,
and I think there was some caveat if it, you know,
if it included some foreign adversaries or included others or China,
that that it was not applicable, that they actually was
going to be applied. But I really have to look
into it. But you know, it's essential. I mean, you know,
(18:53):
if you just look in Civius in terms of exempted
investor or exempted country, I mean, an investment from an
exempted investor country still may not be an exempted investment
if their ties or ownership or other things that have
China investments or adversarial investments to a certain degree where
they have a controlling interest, and you just see it
(19:15):
all the time, especially in the world I'm in where
you're helping companies go through the cifious process and you're
asking about the general say a fund, you're asking about
the general partner, and then you ask about the limited partners,
and there's a whole host of limited partners their funds,
and then what powers.
Speaker 1 (19:30):
Do they have.
Speaker 2 (19:30):
So I think, like I think the US, if it
really wants to address because the China issue in terms
of nefarious investments, you really have to get into the
weeds of the corporate ownership. And it can't just be
one off on a sifious transaction. I mean, it's happening
all the time and there you know, there are many
transactions where companies look at them and it's not a
(19:52):
mandatory required filing that if they don't not force to
do it, if it's voluntary, even if they know their
national security issues, are going to say, well, it's easier
just to do the transaction and then get caught later.
And for the seller, you know, they have no liability,
they're out once the sale happens. It's the buyer that's
going to have to deal with any cipious liability in
(20:12):
the future. So without other mechanisms to sort of recognize
the corporate formation, who owns what, where the real decisions
are coming from. You know, Cyphia's is going to be
at you know it's going to be on its back
heels about a lot of things. And so the more
information I think we have, we don't want to be
an orwelly in state, but we need these observable points
(20:35):
of data to make informed decisions about our.
Speaker 3 (20:37):
Own national security.
Speaker 1 (20:40):
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I want to switch to the other side of the equation,
which is the language in the policy on outbound investment.
This has been discussed for a while now. We thought
(21:46):
that we were probably going to see new legislation at
the end of last year solidifying outbound investment requirements. Ultimately
we didn't get that it may come forward this year.
But this policy moves out on that concept, which is,
(22:07):
you know, the question about where US investment is going,
and that it really shouldn't be going to support military
civil fusion in China. It shouldn't be going to support
the Chinese army. So where do you see outbound investment
within the framework of this investment policy and is there
(22:29):
an operational pathway or an implementation strategy That seems clear
now because of how the policy references this.
Speaker 2 (22:39):
Yeah, yeah, no, it's great, and trust me that there
is an outbound investment regime that's actually now operating within
the United States.
Speaker 3 (22:50):
I think the beginning of this year is when it
took effect.
Speaker 2 (22:53):
Is it was just an unspeakable thought when I was
at Treasury many years ago, just that we would turn
and restrict US persons from deciding where they wanted to
put their money and how they wanted to do it.
But I mean you have to given the nature of
what's been going on between the US and China and
(23:13):
the relationships and the many things China has done that
have been detrimental.
Speaker 3 (23:18):
To the unience, it makes no sense.
Speaker 2 (23:20):
It makes some sense, so because I mean outbound restrictions,
although seemingly ridiculous, I mean they are perfectly logical. Why
would a company choose to pay another company, as we
have seen in history, to take their technology know how
and then use it against their country broadly economically and
(23:40):
technologically or military.
Speaker 3 (23:44):
I mean, you have to, you have to address this issue.
That's what's been happening.
Speaker 2 (23:47):
And you know, I just I think it's instructive to
just read on some of the findings of the US
China the Select Committee on US China Relationships.
Speaker 3 (23:56):
I mean they found that, you.
Speaker 2 (23:58):
Know, US Venture Capital Company, he's invested one hundred and
thirty eight million in Chinese AI companies blacklisted by the
US government for supporting CC ethnic cleansing and human rights abuses.
They found that twenty four million was getting paid to
companies blacklisted by the US government for supporting surveillance in
equipment for the Wigers Sequoias. Well, I think, god I
(24:22):
want to name actual companies by name, but you know
five US venture capital firms that were examined by the
committee where invested more than one hundred and forty million
in PRC artificial intelligence companies that supported PLA contractors and activities.
So it's just I mean, the list goes on and on.
There are major US financial institutions that have billions, if
(24:47):
not trillions invested in China. In places where China is
using that money, those funds to develop their civil military fusion,
there's being used against the United States to the detriment.
So it's the short term, you know, invest money and
get some back that is going to actually negatively impact
(25:09):
US for the long term. So as much as it
seemed odd, it would seem crazy to me way back
when to think about an outbound investment regime is being
necessary given where we've seen China go and use our
funds and decide to take the relationship.
Speaker 3 (25:24):
I think it's critically necessary.
Speaker 2 (25:26):
But we can talk about more in terms of what
to do with the program and how this piece things
of expanding it.
Speaker 1 (25:32):
As I was digging through this document, I was really
interested to see some references to other ways that we
may be looking to limit Chinese influence in the US.
So the policy talks about investment vehicles. For example, Chinese
(25:53):
companies use of offshore variable interest entities or vies, which
are used to bypower US ownership restrictions through offshore structures.
These are typically housed in places like the BVII, and
it's interesting they actually expose US and multinational investors to
a substantial amount of risk, and most Americans, I would imagine,
(26:15):
don't know how these structures work, but that they serve
as a way to funnel US capital into Chinese companies,
but ultimately insulate the Chinese from liability and potentially leaving
US investors without ownership rights, voting power, legal recourse, exposing
them to a pretty high degree of financial insecurity risk
(26:39):
because of the way these corporate structures operate. So I
thought that was interesting. And then also the reference to
protecting American retirement savings by quote restoring the highest fiduciary
standards quote end quote. So this includes ensuring foreign adversaries
are not eligible for pension pan plan contributions. Or shielding
(27:02):
American workers from funding entities that threaten US security. It
targets index fund providers which have faced some scrutiny for
including Chinese government linked companies and their offerings and preventing
passive investment vehicles from becoming a backdoor for American capital.
(27:22):
So I'm curious about what your thoughts are and some
of these types of provisions and whether we do have
an opportunity to tighten up some of these loopholes and
mechanisms that expose investors to certain types of hidden risks.
How can we shine a light on some of these
types of concealed strategies.
Speaker 2 (27:42):
Great question and complex, complex resolutions. So you know, two
aspects of what you've sort of raised is the vehicles
that China uses to gain access to US investment and
the US markets. And then and also what US entities
are doing, including retirement funds, to increase their portfolio's wealth
(28:06):
and subsequently sometimes that it also involves investments in Chinese
entities that should otherwise not be having US investments.
Speaker 3 (28:19):
So two sides to it.
Speaker 2 (28:20):
So on the one side, in terms of investment vehicles,
the Chinese are the are the are the experts on
hiding and shielding their investments through multiple layers, through multiple ownerships,
through informal arrangements. I saw that in Cepis, and it continues.
It gets more complex. There's the issue of flying money
as well. That's also its own complexity. However, the very
(28:43):
smart and intelligent folks and Treasury. There are very smart,
intelligent folks and Treasury who focus on this kind of
these kind of it matters and how money moves, what
the vehicles are. So I think the Secretary of Descent
needs to get those super technical people who know how
money flows in the different vehicles, send them together with
(29:05):
the Sifius folks that that hasn't happened already, and use
the two resources to come up with ways to address
that kind of investment flows and how it's happening, and
how Sipious can do a better job and the staff
and leadership.
Speaker 3 (29:20):
There to identify it, track it and address it.
Speaker 2 (29:24):
On the other hand, it's the retirement accounts in terms
of security of their investments.
Speaker 1 (29:30):
You know.
Speaker 2 (29:30):
The tricky part, and this has been going on for
quite a while, is that these big investment CalPERS and
other big investment entities all throughout the United States and otherwise,
and even in big financial institutions through four one case,
you know, those investments are done through bucket investment types
where it's emerging markets or blue chips or otherwise. And
(29:50):
in that bucket, sometimes designed by a computer system or
that identifies the best investments, will decide where the investments are.
But in the big buckets like merging markets will be
a big one for Asia, then another one that will
encompass you know, China and Chinese entities as well, and
then sometimes it's just investment indexes that.
Speaker 3 (30:12):
Have multiple investments in multiple layers.
Speaker 2 (30:14):
So it's complex, very complex in terms of the investment
vehicles that are out there and the ones that eventually
channel money and investment to entities for which the United
States would rather otherwise not have investments going, especially entities
that are supplying the PLA complex, complex issue that requires
a lot of work, and I think AI is becoming
(30:36):
really good maybe helping address some of these issues in
digging down the rabbit holes.
Speaker 1 (30:43):
Yeah, absolutely so. I love the forward leaning nature of
this policy. I want to circle back to the reference
to allies and partners, which comes up multiple times. We
talked about it at the outset and the fact that
this language which in this policy document feels incongruous with
(31:03):
the tariff rhetoric, where again we don't see that much
distinction in terms of how we treat allies and partners
versus countries that maybe don't fit into either of those categories.
It seems to me that we need a set of
ground rules around economic alliances and that defining those rules
(31:24):
will be important to avoid losing credibility. And we don't
want to undermine the stability, the transparency, the rules, the
predictability of the US market. That would be a recipe
for reduced foreign direct investment, and that's not where we
(31:45):
want to go, I don't think so. Do you have
a sense of what do you think the ground rules
should look like for allies and partners? Is there a
way that we can use this policy document as a
first step in making those definitions a bit clearer.
Speaker 2 (32:02):
Yeah, that's a good question, and it's a difficult one too.
I mean, having runs if it's you know, you're you know,
the five eyes are very close. The five eye countries UK, Canada, Australia,
New Zealand very close, share classified information, work together on.
Speaker 3 (32:22):
A lot of stuff. However, you know, allies and the peripheries.
Speaker 2 (32:26):
You know, there's there have been historic histories of you know,
industrial espionage or technology espionage where they are spying on
us technology and gaining and using and pulling it back
for their own uses. So as things have evolved, we
those things are happening less, but nonetheless they're out there.
And then the other tricky part of it is is
(32:46):
that you also have China who's gone out abroad with
so much investment in so many different companies all throughout
the globe that you know, nearly every country has a
sizeable Chinese investor there. That sort of creates creates a
difficult complexity to addressing the issue where this.
Speaker 3 (33:07):
Memorandum is trying to get, and that's to say we.
Speaker 2 (33:10):
Want our allies in with passive investments.
Speaker 3 (33:13):
It's easy. And they're saying passive investment pretty.
Speaker 2 (33:15):
Much all across the board, which is interesting, but they're
saying from our allies, you know, as long.
Speaker 3 (33:20):
As you have a less or less.
Speaker 2 (33:22):
Connection to China, we want to welcome an expedite the
way we review that investment. And that's just going to
require a lot of person work to really get through
the layers and details and it's going to require our allies,
which I like, to start pushing back on that Chinese investment,
utilizing the informal and formal mechanisms we have through other
(33:44):
investment regimes and sharing information to start pushing back on
that China investment so that we don't have as much
problems and delays in the investments that are happening bilaterally.
Speaker 3 (33:57):
Multi level.
Speaker 1 (34:00):
Final question, uh So, if you were to consult your
crystal ball, what do you think China's reaction to this
policy will be? Do you think that we'll be looking
at more foreign direct investment coming in from China? Do
you think that they'll be happy with the ground rules around,
(34:20):
you know, restrictions on certain kinds of investment ownership, focusing
on the passive side versus versus other ways that their
capital might enter into our market. Do you think that
there will be pushback around this or do you think
they'll say, okay, these are the rules.
Speaker 3 (34:39):
Yeah.
Speaker 2 (34:39):
I mean one of the one of the fun things
I got to see what I.
Speaker 3 (34:44):
Hard come back to, but it was the way Chain operated.
Speaker 2 (34:47):
I mean, they just they pushed the envelope even when
they were making investments they knew would.
Speaker 3 (34:51):
Be blocked that should obviously be blocked. They would do
it anyway because they knew two things.
Speaker 2 (34:55):
The catch twenty two for the United States, if we
said no to that investment, then we were all suddenly
as protectionists as they were in terms of allowing foreign investment.
And then if we allowed it, they got it. So
it was a no lose situation for them. So I
don't think China is going to be too apoplectic on
this reciprocal document in reciprocity to how they operate as
(35:17):
well as their regime that also controls out when they
want to and where they want to, So I don't
think they're going to have an issue with it anyway
they need to right now, They're very focused domestically in
terms of their own economic issues, and she is pushing
for more domestic consumption to strengthen their internal internal economic environment.
(35:38):
And they're begging for foreign investment from abroad because they
know where they are economically. So I think really they're
going to take this in a greater stride than they
would with trade matters.
Speaker 3 (35:50):
So that's my view.
Speaker 1 (35:53):
Thanks to the Fantastic Nova Daily for his key insights.
If operationalized and enforced effectively, the America First and Cosmen
policy could mark the start of a new age of
economic security, where American capital drives innovation and prosperity at
home while safeguarding US interests abroad. These are goals worth pursuing.
Thanks for joining me. I'm Elaine Dozinski and this is
(36:15):
coerceive capital on the Illicit Edge Network.
Today's program is supported by K two Integrity. K two
is the premier global risk advisory firm in an ever
changing world filled with uncertainties and risk. K two helps
its clients with better insights, better solutions, and better decisions.
K two Integrity believe in better for more. Visit K
two integrity dot com. I'm Elaine Dezenski and this is
(00:35):
coercive capital on the illicit edge network. Among the dizzy
number of executive orders, tariff negotiations, and DOGE activity since
the inauguration, there is one very critical aspect of the
Trump administration's economic agenda that I believe requires further examination.
It's called the America First Investment policy. This policy stands
(00:57):
out as a clear articulation of the new new pathways
and barriers the revised rules for foreign investment in the US.
The goal, it's actually twofold, boost foreign investment from allies
while restrict capital inflow from hostile states. Joining me for
this conversation is Nova Daily. Nova has held senior leadership
(01:18):
physicians in the US Departments of Treasury and Commerce, the
White House, and the US Senate. While at Treasury, he
served as Deputy Assistant secretary overseeing investment, security, and policy.
He's now a senior public policy advisor at the law
firm Wiley Ryan and also works alongside me serving as
senior advisor at the Foundation for Defensive Democracy Center on
(01:38):
Economic and Financial Power. I'm also lucky enough to call
him a friend. Nova and I break down some of
the key elements of the America First investment policy and
what it means for capital flows US companies and the
broader seismic shift in the global trade order. There's so
much to talk about, and I think we've all been
feeling some sets of whiplash on what's happening in the
(02:01):
trade space, tariffs, and more broadly on how the economic
order is going through some pretty fundamental shifts, and a
lot of that focus has been on trade and tariffs.
But today I thought we could focus on what's happening
with respect to readying the investment landscape in the US
for what are anticipated to be a lot of new
(02:22):
foreign direct investment, and that really seems to be a
core part of what the Trump administration is trying to
drive towards to bring advanced manufacturing to the US to
reindustrialize across certain sectors. There have been a couple of
really big announcements. There was one in December with soft
(02:44):
Bank one hundred billion dollar investment in the US over
the next four years, focused on AI and related infrastructure.
And then just yesterday, TSMC, the world's leading chip manufacturer,
announced an additional one hundred billion in investment going into
its fabrication facilities in Arizona. So there's a lot of activity,
(03:05):
and a couple of weeks ago, the administration released a
new policy called the America First Investment Policy, and that's
where I thought we could focus our conversation today. This
document came out on a Friday afternoon without much fanfare,
but I think its implications are far reaching, and it's
(03:27):
somewhat notable in terms of the tone and the substance,
which feels like it's quite a departure from what we're
hearing on the tariff's side. And it starts with this
premise that economic security is national security. So I'm just
curious about what you think of this America First Investment Policy.
(03:47):
It seems to have two objectives, which is boost foreign
investment from allies while restricting capital inflo from hostile states.
But there are a lot of questions about exactly how
we're going to define ally in this context, and a
lot of interesting aspects related to pushing back against China.
Speaker 2 (04:08):
It's a great topic and it's extremely important, and I'm
glad we're talking about it.
Speaker 3 (04:12):
It's great to be talking about it with you.
Speaker 2 (04:15):
You are an expert yourself on these matters, and we've
had a good long history talking to a number of
folks on the Hill and Congress and policymakers about these issues.
But you know, having had the experience I had at
Treasury running the Committee on Foreign Investment in the United
States and also having a dual hat of being the
open investment person, I was supposed to promote investment while
(04:38):
being the one restricting it.
Speaker 3 (04:40):
It gave me a.
Speaker 2 (04:41):
Really good window in terms of the importance of investment,
but also trying to balance and straddle between bringing in
as much investment into the US economy as you can,
because that's a lifeblood. It's actually exponentially bigger than trade
in terms of its impact on the US economy and
(05:01):
the growth of the US economy, while addressing the national
security aspects because we do have companies that are forefront
of technology or ones that are providing invaluable resources to
the US military or other branches of the government that
are really critical to our security and national security. So
(05:22):
is that real balance that gets amazing and difficult to address.
So this issuance from the Trump administration is really kind
of remarkable in a lot of ways. We've been seeing
a lot about the tariffs and going out a number
of different existing US allies and others about the unfair
(05:44):
sort of trade relationships. But this document dealing with investments
really goes at the heart of something that's been a
longer trend, and that's knowing and seeing China's place in
the new World military, economically and otherwise, and where they've
gone in terms of their investment.
Speaker 3 (06:03):
They did a big.
Speaker 2 (06:04):
Going out policy framework for a while where they pushed
investment by their companies out to the forefronts of the
globe and in the United States, and there was a
lot of investment that happened in the United States, but
a lot of that happened in critical technology areas. And
so this document in a lot of ways is very
(06:25):
aligned with how the progression of the relationship and addressing
investment issues, especially with China.
Speaker 3 (06:32):
Has gone.
Speaker 2 (06:33):
But what's amazingly invaluable value about it is that it
also brings in and restores and continues the open investment
reiteration of the open.
Speaker 3 (06:44):
Investment policy of the United States.
Speaker 2 (06:46):
That America believes in the open investment policy and wants
to ensure to expedite and heighten it, and this document
seeks to do it. So I really find it.
Speaker 3 (06:57):
It's a really heartening document and in terms of its continuity,
So just two sentences more and then I'm happy to
talk about more questions. But so it really does.
Speaker 2 (07:09):
It balances inviting foreign investment from allies, especially you know,
in some of the promotional aspects that it is trying
to do expedantic fast track authority and seeking to sort
of address mitigation concerns and pulling that together and inviting
that for passive investment, while also addressing a key issue,
(07:33):
and that's the strategic investment that China's made by saying, look,
we'll open up the spigots of the US economy in
terms of investing here. But that also has to be
conditioned on your relationship with China. So it's telling China,
you're going to have a difficult time continuing the investments
you're having, and if you're partnering with third party entities
(07:55):
to invest in.
Speaker 3 (07:56):
The United States, that is going to continue to have
heightened securities. We can really get into the depths of it,
but it's my opening.
Speaker 2 (08:03):
Yeah.
Speaker 1 (08:03):
Thanks, thanks, It's a great starting point, and I agree
China's is the primary focus, and that reflects a lot
of concerns about their weaponization of Foreign Investment and Intellectual
Properties Act and surveillance and policies of civil military fusion.
(08:23):
The investment policy also targets other regimes. Iran has mentioned Russia,
as mentioned North Korea, Cuba, Venezuela. I actually found that
quite heartening that this document actually makes a distinction between
adversaries and others. And while it doesn't go as far
as identifying what an economic ally is, I think it
(08:47):
points the way towards how we need to be thinking
about that. So I was somewhat relieved to see this
come out because it also stands in contrast to the
you know, as you've alluded to, the more protectionist messaging
coming out on the tariff side, where we're not making
a distinction amongst allies and partners, we're kind of treating
(09:09):
everybody the same. So obviously that's not the case at
least as how this administration is thinking about it for
the domestic environment. Let me talk about one piece of
this that I think is interesting and where I know
you've had a lot of thought, leadership, and experience, and
(09:30):
that's on the SIFIAST process, America's Foreign Investment Review Committee
on Foreign Investment Review and how this document highlights the
risks of the risks to American capital and intellectual property,
and the emphasis on streamlining that process but also strengthening
(09:55):
that process to restrict certain kinds of investment in critical infrastructure, energy,
raw material, other strategic sectors, and strengthening authority over greenfield investments.
This is interesting and I think it does point the
way in terms of how we might be thinking about
(10:18):
SIPHIUS going forward. But what do you think and where
are the opportunities to put the syfious process in the
context of this, not only this document, but how we
need to be thinking about managing the risk across these
new investment flows.
Speaker 2 (10:35):
Yeah, it's going to be interesting because it lays out
some fundamental new horizons in terms of SYPHIUS that are
gonna be interesting to see how they really approach it.
I mean, one of the big items that this document
puts in there is that they want to cover what's
called green field investments. And green field investments are those
(10:55):
just for the audience sake for those who may not
know those where it's just a fresh investment. You're not
acquiring a company, you're actually making just an investment and
building a building in the United States, actually building something
that makes something or provides a service. For instance, a
lot of people don't recognize that while Huawei a company
that was under a lot of focus in terms of
(11:17):
their operations and their equipment here in the United States,
while a lot of efforts were made to sort of
push out that equipment because the dangers that presented to
the US.
Speaker 3 (11:25):
Telecommunication systems, they had two huge R and.
Speaker 2 (11:29):
D facilities inside the United States that were greenfield where
they just build the building and put their own people
there where they're doing research and development, one in Texas
and I think another Washington state. But so what this
seeks to go after and how they do it is
going to be interesting is those types of investments where
a company comes in and sets up a business here
(11:52):
in the United States that could have national security implications. Obviously,
if the focus sticks to sort of foreign adversarial nations
that'll keep it in a smaller range. But obviously, when
you're dealing with a situation where it's also companies that
could have in nexus to our foreign adversaries, that opens
up a broader aspect. So how they're going to be
(12:12):
able to address that issue and go after that kind
of investment legally? First of all, because right now Syphius
isn't authorized to do that, So it would either take
an Act to Congress or the President would have to
evoke as he has some other documents the International Economic
Emergency Powers Act to make that effectively a function of
(12:35):
what Syphius does and looks at. And then how would
you sort of force that notification make it a mandatory
process as Cypius now contains mandatory requirements for certain investments
to file with Syphius and what it would concern certain technologies,
So how do you really cabin it off and how
do you keep it from being this huge expansive program.
Speaker 3 (12:56):
So that's one very remarkable thing.
Speaker 2 (12:58):
Well, it'll be interesting to see how this administration decides
the implement that.
Speaker 3 (13:03):
Yeah.
Speaker 1 (13:03):
Absolutely, One of the questions that I've been thinking about
is whether there's an opportunity for expansion of Syphius in
terms of a unified policy that we uh, we talk
about and we align across our cour trading partners and
economic allaized. So this idea that we build Sophius into
(13:25):
the trade structure and the basic rules of global trade.
We're at this moment where that system is going through
some upheaval. Do you think it's an opportunity to extend
the use of these tools and through that have a
much more concerted effort to push back against uh uh,
(13:46):
you know, investment that is problematic for us and potentially
for our allies.
Speaker 2 (13:51):
Yeah, and and it's it's interesting that this document brings
it up, and I know it's something you've really looked
into and considered, and it's uh, it's frankly, you know,
really important, especially when you're dealing with the broader issues
of supply chain security, of technology security. How do we
build our systems to protect them and our technologies and
(14:11):
our innovations.
Speaker 3 (14:13):
So, after the latest sipious law was.
Speaker 2 (14:17):
Passed FIRMA in two thousand and seventy, part of the
aspects of FIRMA was that the US would engage as
foreign partners to have them build up SIPHIUS like mechanisms
so they could be exempted investors, which would exempt them
from mandatory filing on a non controlling, non passive investments.
So right now the list of exempted countries that don't
(14:40):
have that are effectively not covered if they make those
kind of investments include our five I partners, UK, Canada,
Australia and gosh, well I forget why am I forgetting
our front New Zealand. So but anyway, so just the
(15:01):
five eyes are really the ones that are exempted.
Speaker 3 (15:03):
So you know, so there's the consideration like do we
broaden that out?
Speaker 2 (15:07):
And so why it all matters is that when you
have those nations where you do have sort of an
ease of investment, that ease of investment also brings greater
trade in a lot of ways because you have companies
foreign foreign owners that come in and buy US companies
that start to build and usually for the most part,
you know, those those investments are in manufacturing enterprises, and
(15:31):
that creates a trade relationship, a stronger trade relationship, especially
when they're producing a good that's exupported between the two
countries or otherwise they're not making that investment if they
don't see a benefit to them either in their own
domestic market road somewhere. So so I think it's really interesting.
Speaker 3 (15:47):
And Ciphius.
Speaker 2 (15:48):
You know, when initially the law got passed, the gentleman
that headed CIFY at the time, you know, they went
out to sixty plus Tom Feedow, it went out to
sixty plus countries to say, hey, can you build up
systems Liscifius like regimes that will help us, you know,
build build relationships. Now, the broader auspices for that design
(16:12):
was that, you know, the Uscifius and I was seeing
when I was their treasure. But it definitely expanded over time.
China was going ahead and doing you know, China was
making its observation in terms of what it wanted to
do globally. You know, they were looking at a global aspect.
They saw supply chains and technologies, and they were in
different countries, in different and different regions. But you combine them,
(16:36):
you made a supply chain.
Speaker 3 (16:37):
They gave you a greater power. But the US was
seeing just its own regime.
Speaker 2 (16:41):
It's all China wants to acquire, you know, this this
one company here, but not in the broader aspect, not
not not only in terms of the entirety of what
the investments of China was making within the United States
and different technologies, but also globally.
Speaker 3 (16:56):
So this was a way to.
Speaker 2 (16:57):
Sort of get our partners and bring them into a
cone where we discuss investments that had global implications that
not only impacted them but also the United States. Cucko
was one was a robotic company in Germany that China
was acquiring a piece in Germany but also had implications
in the US, and then there was a number of
others and it.
Speaker 3 (17:18):
Happens all the time.
Speaker 2 (17:18):
So it's a way to unstove pipe how we look
at foreign investment globally with our partners and address it.
So that along with the trade relationships, I think is
definitely a horizon that needs to be continually explored.
Speaker 3 (17:32):
Yeah.
Speaker 1 (17:33):
Absolutely. One challenge I see is how ultimately we can
apply and enhance due diligence framework on this new deal flow.
You've been in the midst of Saphia's conversations and review processes.
Do we have the tools to conduct that enhanced due
diligence when it comes to source of funds, ownership structures,
(17:58):
What kind of reforms we need the you know, the
announcement on the Corporate Transparency Act, I think it was
earlier this week indicating that Treasure we would not be
enforcing that law anytime soon. Made me think about that
and what happens when anonymous shell companies start buying up farmland,
(18:19):
your military installations. Do we know if these are foreign buyers?
What do you think about that question of enhanced due
diligence in what form it could take?
Speaker 2 (18:29):
Yeah, I mean, I you know, the court I haven't
really dug into the non enforcement of Corporate Transparency Act,
and I think there was some caveat if it, you know,
if it included some foreign adversaries or included others or China,
that that it was not applicable, that they actually was
going to be applied. But I really have to look
into it. But you know, it's essential. I mean, you know,
(18:53):
if you just look in Civius in terms of exempted
investor or exempted country, I mean, an investment from an
exempted investor country still may not be an exempted investment
if their ties or ownership or other things that have
China investments or adversarial investments to a certain degree where
they have a controlling interest, and you just see it
(19:15):
all the time, especially in the world I'm in where
you're helping companies go through the cifious process and you're
asking about the general say a fund, you're asking about
the general partner, and then you ask about the limited partners,
and there's a whole host of limited partners their funds,
and then what powers.
Speaker 1 (19:30):
Do they have.
Speaker 2 (19:30):
So I think, like I think the US, if it
really wants to address because the China issue in terms
of nefarious investments, you really have to get into the
weeds of the corporate ownership. And it can't just be
one off on a sifious transaction. I mean, it's happening
all the time and there you know, there are many
transactions where companies look at them and it's not a
(19:52):
mandatory required filing that if they don't not force to
do it, if it's voluntary, even if they know their
national security issues, are going to say, well, it's easier
just to do the transaction and then get caught later.
And for the seller, you know, they have no liability,
they're out once the sale happens. It's the buyer that's
going to have to deal with any cipious liability in
(20:12):
the future. So without other mechanisms to sort of recognize
the corporate formation, who owns what, where the real decisions
are coming from. You know, Cyphia's is going to be
at you know it's going to be on its back
heels about a lot of things. And so the more
information I think we have, we don't want to be
an orwelly in state, but we need these observable points
(20:35):
of data to make informed decisions about our.
Speaker 3 (20:37):
Own national security.
Speaker 1 (20:40):
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believe in better for more visit K two integrity dot com.
I want to switch to the other side of the equation,
which is the language in the policy on outbound investment.
This has been discussed for a while now. We thought
(21:46):
that we were probably going to see new legislation at
the end of last year solidifying outbound investment requirements. Ultimately
we didn't get that it may come forward this year.
But this policy moves out on that concept, which is,
(22:07):
you know, the question about where US investment is going,
and that it really shouldn't be going to support military
civil fusion in China. It shouldn't be going to support
the Chinese army. So where do you see outbound investment
within the framework of this investment policy and is there
(22:29):
an operational pathway or an implementation strategy That seems clear
now because of how the policy references this.
Speaker 2 (22:39):
Yeah, yeah, no, it's great, and trust me that there
is an outbound investment regime that's actually now operating within
the United States.
Speaker 3 (22:50):
I think the beginning of this year is when it
took effect.
Speaker 2 (22:53):
Is it was just an unspeakable thought when I was
at Treasury many years ago, just that we would turn
and restrict US persons from deciding where they wanted to
put their money and how they wanted to do it.
But I mean you have to given the nature of
what's been going on between the US and China and
(23:13):
the relationships and the many things China has done that
have been detrimental.
Speaker 3 (23:18):
To the unience, it makes no sense.
Speaker 2 (23:20):
It makes some sense, so because I mean outbound restrictions,
although seemingly ridiculous, I mean they are perfectly logical. Why
would a company choose to pay another company, as we
have seen in history, to take their technology know how
and then use it against their country broadly economically and
(23:40):
technologically or military.
Speaker 3 (23:44):
I mean, you have to, you have to address this issue.
That's what's been happening.
Speaker 2 (23:47):
And you know, I just I think it's instructive to
just read on some of the findings of the US
China the Select Committee on US China Relationships.
Speaker 3 (23:56):
I mean they found that, you.
Speaker 2 (23:58):
Know, US Venture Capital Company, he's invested one hundred and
thirty eight million in Chinese AI companies blacklisted by the
US government for supporting CC ethnic cleansing and human rights abuses.
They found that twenty four million was getting paid to
companies blacklisted by the US government for supporting surveillance in
equipment for the Wigers Sequoias. Well, I think, god I
(24:22):
want to name actual companies by name, but you know
five US venture capital firms that were examined by the
committee where invested more than one hundred and forty million
in PRC artificial intelligence companies that supported PLA contractors and activities.
So it's just I mean, the list goes on and on.
There are major US financial institutions that have billions, if
(24:47):
not trillions invested in China. In places where China is
using that money, those funds to develop their civil military fusion,
there's being used against the United States to the detriment.
So it's the short term, you know, invest money and
get some back that is going to actually negatively impact
(25:09):
US for the long term. So as much as it
seemed odd, it would seem crazy to me way back
when to think about an outbound investment regime is being
necessary given where we've seen China go and use our
funds and decide to take the relationship.
Speaker 3 (25:24):
I think it's critically necessary.
Speaker 2 (25:26):
But we can talk about more in terms of what
to do with the program and how this piece things
of expanding it.
Speaker 1 (25:32):
As I was digging through this document, I was really
interested to see some references to other ways that we
may be looking to limit Chinese influence in the US.
So the policy talks about investment vehicles. For example, Chinese
(25:53):
companies use of offshore variable interest entities or vies, which
are used to bypower US ownership restrictions through offshore structures.
These are typically housed in places like the BVII, and
it's interesting they actually expose US and multinational investors to
a substantial amount of risk, and most Americans, I would imagine,
(26:15):
don't know how these structures work, but that they serve
as a way to funnel US capital into Chinese companies,
but ultimately insulate the Chinese from liability and potentially leaving
US investors without ownership rights, voting power, legal recourse, exposing
them to a pretty high degree of financial insecurity risk
(26:39):
because of the way these corporate structures operate. So I
thought that was interesting. And then also the reference to
protecting American retirement savings by quote restoring the highest fiduciary
standards quote end quote. So this includes ensuring foreign adversaries
are not eligible for pension pan plan contributions. Or shielding
(27:02):
American workers from funding entities that threaten US security. It
targets index fund providers which have faced some scrutiny for
including Chinese government linked companies and their offerings and preventing
passive investment vehicles from becoming a backdoor for American capital.
(27:22):
So I'm curious about what your thoughts are and some
of these types of provisions and whether we do have
an opportunity to tighten up some of these loopholes and
mechanisms that expose investors to certain types of hidden risks.
How can we shine a light on some of these
types of concealed strategies.
Speaker 2 (27:42):
Great question and complex, complex resolutions. So you know, two
aspects of what you've sort of raised is the vehicles
that China uses to gain access to US investment and
the US markets. And then and also what US entities
are doing, including retirement funds, to increase their portfolio's wealth
(28:06):
and subsequently sometimes that it also involves investments in Chinese
entities that should otherwise not be having US investments.
Speaker 3 (28:19):
So two sides to it.
Speaker 2 (28:20):
So on the one side, in terms of investment vehicles,
the Chinese are the are the are the experts on
hiding and shielding their investments through multiple layers, through multiple ownerships,
through informal arrangements. I saw that in Cepis, and it continues.
It gets more complex. There's the issue of flying money
as well. That's also its own complexity. However, the very
(28:43):
smart and intelligent folks and Treasury. There are very smart,
intelligent folks and Treasury who focus on this kind of
these kind of it matters and how money moves, what
the vehicles are. So I think the Secretary of Descent
needs to get those super technical people who know how
money flows in the different vehicles, send them together with
(29:05):
the Sifius folks that that hasn't happened already, and use
the two resources to come up with ways to address
that kind of investment flows and how it's happening, and
how Sipious can do a better job and the staff
and leadership.
Speaker 3 (29:20):
There to identify it, track it and address it.
Speaker 2 (29:24):
On the other hand, it's the retirement accounts in terms
of security of their investments.
Speaker 1 (29:30):
You know.
Speaker 2 (29:30):
The tricky part, and this has been going on for
quite a while, is that these big investment CalPERS and
other big investment entities all throughout the United States and otherwise,
and even in big financial institutions through four one case,
you know, those investments are done through bucket investment types
where it's emerging markets or blue chips or otherwise. And
(29:50):
in that bucket, sometimes designed by a computer system or
that identifies the best investments, will decide where the investments are.
But in the big buckets like merging markets will be
a big one for Asia, then another one that will
encompass you know, China and Chinese entities as well, and
then sometimes it's just investment indexes that.
Speaker 3 (30:12):
Have multiple investments in multiple layers.
Speaker 2 (30:14):
So it's complex, very complex in terms of the investment
vehicles that are out there and the ones that eventually
channel money and investment to entities for which the United
States would rather otherwise not have investments going, especially entities
that are supplying the PLA complex, complex issue that requires
a lot of work, and I think AI is becoming
(30:36):
really good maybe helping address some of these issues in
digging down the rabbit holes.
Speaker 1 (30:43):
Yeah, absolutely so. I love the forward leaning nature of
this policy. I want to circle back to the reference
to allies and partners, which comes up multiple times. We
talked about it at the outset and the fact that
this language which in this policy document feels incongruous with
(31:03):
the tariff rhetoric, where again we don't see that much
distinction in terms of how we treat allies and partners
versus countries that maybe don't fit into either of those categories.
It seems to me that we need a set of
ground rules around economic alliances and that defining those rules
(31:24):
will be important to avoid losing credibility. And we don't
want to undermine the stability, the transparency, the rules, the
predictability of the US market. That would be a recipe
for reduced foreign direct investment, and that's not where we
(31:45):
want to go, I don't think so. Do you have
a sense of what do you think the ground rules
should look like for allies and partners? Is there a
way that we can use this policy document as a
first step in making those definitions a bit clearer.
Speaker 2 (32:02):
Yeah, that's a good question, and it's a difficult one too.
I mean, having runs if it's you know, you're you know,
the five eyes are very close. The five eye countries UK, Canada, Australia,
New Zealand very close, share classified information, work together on.
Speaker 3 (32:22):
A lot of stuff. However, you know, allies and the peripheries.
Speaker 2 (32:26):
You know, there's there have been historic histories of you know,
industrial espionage or technology espionage where they are spying on
us technology and gaining and using and pulling it back
for their own uses. So as things have evolved, we
those things are happening less, but nonetheless they're out there.
And then the other tricky part of it is is
(32:46):
that you also have China who's gone out abroad with
so much investment in so many different companies all throughout
the globe that you know, nearly every country has a
sizeable Chinese investor there. That sort of creates creates a
difficult complexity to addressing the issue where this.
Speaker 3 (33:07):
Memorandum is trying to get, and that's to say we.
Speaker 2 (33:10):
Want our allies in with passive investments.
Speaker 3 (33:13):
It's easy. And they're saying passive investment pretty.
Speaker 2 (33:15):
Much all across the board, which is interesting, but they're
saying from our allies, you know, as long.
Speaker 3 (33:20):
As you have a less or less.
Speaker 2 (33:22):
Connection to China, we want to welcome an expedite the
way we review that investment. And that's just going to
require a lot of person work to really get through
the layers and details and it's going to require our allies,
which I like, to start pushing back on that Chinese investment,
utilizing the informal and formal mechanisms we have through other
(33:44):
investment regimes and sharing information to start pushing back on
that China investment so that we don't have as much
problems and delays in the investments that are happening bilaterally.
Speaker 3 (33:57):
Multi level.
Speaker 1 (34:00):
Final question, uh So, if you were to consult your
crystal ball, what do you think China's reaction to this
policy will be? Do you think that we'll be looking
at more foreign direct investment coming in from China? Do
you think that they'll be happy with the ground rules around,
(34:20):
you know, restrictions on certain kinds of investment ownership, focusing
on the passive side versus versus other ways that their
capital might enter into our market. Do you think that
there will be pushback around this or do you think
they'll say, okay, these are the rules.
Speaker 3 (34:39):
Yeah.
Speaker 2 (34:39):
I mean one of the one of the fun things
I got to see what I.
Speaker 3 (34:44):
Hard come back to, but it was the way Chain operated.
Speaker 2 (34:47):
I mean, they just they pushed the envelope even when
they were making investments they knew would.
Speaker 3 (34:51):
Be blocked that should obviously be blocked. They would do
it anyway because they knew two things.
Speaker 2 (34:55):
The catch twenty two for the United States, if we
said no to that investment, then we were all suddenly
as protectionists as they were in terms of allowing foreign investment.
And then if we allowed it, they got it. So
it was a no lose situation for them. So I
don't think China is going to be too apoplectic on
this reciprocal document in reciprocity to how they operate as
(35:17):
well as their regime that also controls out when they
want to and where they want to, So I don't
think they're going to have an issue with it anyway
they need to right now, They're very focused domestically in
terms of their own economic issues, and she is pushing
for more domestic consumption to strengthen their internal internal economic environment.
(35:38):
And they're begging for foreign investment from abroad because they
know where they are economically. So I think really they're
going to take this in a greater stride than they
would with trade matters.
Speaker 3 (35:50):
So that's my view.
Speaker 1 (35:53):
Thanks to the Fantastic Nova Daily for his key insights.
If operationalized and enforced effectively, the America First and Cosmen
policy could mark the start of a new age of
economic security, where American capital drives innovation and prosperity at
home while safeguarding US interests abroad. These are goals worth pursuing.
Thanks for joining me. I'm Elaine Dozinski and this is
(36:15):
coerceive capital on the Illicit Edge Network.
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