In our latest “Foreign Correspondent” podcast, we detail the Trump administration’s America First Investment Policy. Host Jason Hewitt is joined by Michael Considine, former Deputy Assistant Secretary at the US Department of Energy and now senior advisor at FGS Global, and Skadden counsel Tatiana Sullivan, to discuss the policy’s implications for investors, the new outbound investment review, and the impact of the policy on the investment screening landscape globally.
Episode Summary
The Trump administration's America First Investment Policy “reinforces that concept of the US being a preeminent destination for foreign direct investment,” Michael Considine explains in this episode of “Foreign Correspondent,” dedicated to exploring the policy’s implications. A senior advisor at FGS Global and former deputy assistant secretary at the U.S. Department of Energy, Michael joins Skadden’s Tatiana Sullivan, a lead counsel on CFIUS matters, to unpack the policy with host Jason Hewitt. Tune in for their insights on how the policy may promote investment from allies while expanding restrictions on China, as well as the coordinated economic tools that create more predictable investment environments for cross-border transactions.
Voiceover (00:01):
From Skadden, you’re listening to Foreign Correspondent, an FDI podcast where we discuss foreign direct investment reviews and the foreign policy, national security and political issues that drive them. The cross-border investment screening insights you need start now.
Jason Hewitt (00:24):
Hi there, and welcome to Foreign Correspondent Skadden’s FDI podcast. We explore the complex world of foreign direct investment reviews [00:00:30] and the national security policy behind them through monthly conversations with leading national security policy experts and regulators. Today we’re joined by Michael Considine, who’s a senior advisor at FGS Global. FGS is a preeminent global communications and public affairs consultancy. And Mike joined earlier this year after 24 years in the US government. Mike spent almost 16 of those years investigating transactions before CFIUS, ultimately in his role as deputy assistant secretary at the US Department of Energy. He’s been a fixture here in Europe [00:01:00] as well, often representing the US government in ongoing work with European capitals developing their own FDI regimes. Welcome, Mike.
Michael Considine (01:07):
Thank you very much Jason, and glad to be here today and looking forward to our conversation.
Jason Hewitt (01:12):
Excellent. And we’re also joined by Tatiana Sullivan from our Washington, DC office here at Skadden. Tatiana is a lead counsel on CFIUS, DCSA and government contracting matters. She joined us after a career in government as well, including time at the US Department of Defense where she was staff lead for the FIRRMA reforms and [00:01:30] responsible for reviewing investment transactions before CFIUS. Hi, Tatiana.
Tatiana Sullivan (01:34):
Thank you, Jason. Happy to be here.
Jason Hewitt (01:36):
So I’m Jason Hewitt. I advise on global foreign investment screening and lead skadden’s non-US investment screening practice here in Europe. In today’s episode, we are exploring the America First investment policy announced by President Trump in February of this year. We’re going to unpack some of its implications for investors in the US and beyond, as well as explore some of its impacts on the foreign investment screening landscape [00:02:00] outside of the US. Perhaps Tatiana, you can start us off with an overview of the policy.
Tatiana Sullivan (02:04):
Sure, Jason. So the America First policy was issued in February of this year, and it’s a policy document outlining what we expect the administration will focus on with respect to US investment policy. I think it’s an important note that it was not an executive order. So it didn’t immediately change any existing laws or regulations or it didn’t necessarily call specifically for new regulations, but it does provide some insight [00:02:30] into what the administration is going to be focused on. And to some extent it’s the next tweak in the CFIUS policy rules and regulations, which over the course of CFIUS’s 50-year history divided into these policy concepts that we really first saw in the first Trump administration of promote and protect.
(02:49):
All FDI regimes grapple with this balance between an open investment policy to attract foreign investment and then from allies and partners and then protect weaponized investment [00:03:00] from foreign adversaries. In particular, there is a large focus on expanding restrictions with respect to China. So on the expansion with respect to China, the administration adopts the same policies that we’ve been seeing grow over the course of the last 10 years, particularly with respect to FIRRMA, with the new Biden administration executive order, expanding the risk factors that CFIUS was designed to consider and now culminating in this investment first policy that really just says the Chinese investment in the United States is [00:03:30] going to become harder and harder.
(03:31):
They’re expanding how they’re looking at greenfields, they’re expanding how they’re looking at real estate investment transactions while also expanding outbound investment restrictions from US investments into China. On the promote side though, the investment policy makes a couple of statements and outlines potential actions that they want to take to promote foreign investment. So on the one hand, they signal that all passive investment is welcome in the United States. They mentioned very specifically that foreign investment in [00:04:00] key sectors such as critical technology, critical infrastructure, and sensitive data are welcome based on their distance with respect to foreign adversaries. Which I think was a value signaling where I think before foreign investments, particularly from certain countries, it wasn’t quite clear how CFIUS was going to view whether those sectors were considered walled off from foreign investment from all but five eyes or very close US allies.
(04:25):
And then finally, they signal a concept that they call a fast-tracked investment policy. [00:04:30] So I think some of that was considered in FIRRMA when we were developing and implementing FIRRMA, this idea that if you’re a repeat investor, we already know who you are. Is there some way that we can get a fast track or jump to the front of the line or get an easier review with respect to CFIUS? Some of the things that we... Concepts that we had considered when we were trying to develop FIRRMA, particularly with respect to the declaration process, was this idea, can we do a waiver for certain investors into certain sectors?
(04:58):
Can we give a license to [00:05:00] investors into certain sectors? And ultimately the process itself, this case by case review, that CFIUS has as cornerstone to its review made it really hard to adopt some of these exemptions. The administration about last week signaled some process alleviation in this concept of a known investor portal. And we don’t know much about how it’s going to be implemented and how far it’s going to go, but the concept really is is that if you’re a repeat investor, you shouldn’t have to answer the same questions with respect to yourself [00:05:30] every time you file.
Jason Hewitt (05:31):
Great. I think that known investor portal is something that the market has been looking for for a long time and certainly has the opportunity to streamline filings for a lot of people. To turn to some of the harder topics around it, Mike China seems to be at the heart of the policy. What does this actually mean for Chinese investors in the US?
Michael Considine (05:51):
Yeah. No, no, absolutely. I mean, clearly China is a focus, and let’s be honest too, China has been a focus in the context [00:06:00] of CFIUS and CFIUS reviews for a couple of decades now. My entire time on the committee, it obviously was a major focus. A couple of things now, if you’re looking now where is that focus and what’s that nexus at? I mean, there has always been this issue in looking at transactions that involve China when you’re talking about technology and thinking about the nexus with China on the move of civil and military fusion in technology spaces. So [00:06:30] that’s one of the contexts that CFIUS is always approaching, the China question on.
(06:35):
And then I think a somewhat newer dynamic that has emerged over the last several years in the context of China and China investments, particularly in the US and those that would come before CFIUS, is understanding China’s position in various industry sectors and their push towards dominating certain industry sectors. So if you [00:07:00] do look at sectors like semiconductors and batteries and some of the other emerging tech areas, that’s also an area of focus that I think CFIUS has been very keen on and looking at in the China context.
Jason Hewitt (07:13):
Yes. Are there sectors, Mike, that you see as more green light sectors versus those more advanced technology, civil military fusion kind of sectors?
Michael Considine (07:24):
Well, I would say... I mean, I think Tatiana pointed out pretty clearly in her earlier [00:07:30] remarks that through a series of actions now over the years on CFIUS, whether it’s clarifications or executive orders that do clearly map out those areas where there is increased concern. So certainly in the emerging technology space, and that gets into a pretty broad range of technologies. Obviously the critical infrastructure and sensitive personal data and things like that. Sure, these are sectors that are going to [00:08:00] be scrutinized quite closely on CFIUS. I mean, that’s not to say that there cannot be an investment in those sectors and there cannot be a Chinese investment in those sectors. But again, it goes back to the merits of the transaction that’s sitting in front of CFIUS and looking at all the factors and considerations. The sectors themselves are very broad, so it isn’t a matter of, for instance, say in a biotechnology space, all biotechnology [00:08:30] investment is sensitive. It is going to be something that has to be looked at on a case-by-case basis based on where emerging trends and sensitivities in those sectors are in any given time.
Jason Hewitt (08:43):
And I suppose there continues to be a spectrum in terms of risk, right? There are passive minority roles where there’s no access to information versus controlling roles. And I suppose the policy is somewhat incremental in the sense that there will continue to be that [00:09:00] distinction. We’re not necessarily looking at this as saying there’s an easy veto on Chinese deals.
Michael Considine (09:06):
Right. No, no, no. I think it is something that’s still very much case-by-case. Look, the reality is that any given time, there are probably a number of Chinese cases that are probably on the CFIUS docket. It’s been that way through history my entire time-serving on CFIUS. So for over 16 years there were always Chinese cases that were on the docket and there were always Chinese cases that [00:09:30] were moving through with no issues or concerns. So again, it goes back to... It’s looking at the merits of the transaction and it’s looking at it in the context of where sensitivities in the various industry sectors are. And that is something that is constantly... I would say it’s fluid, it’s constantly moving.
(09:49):
I think the government is constantly calibrating where those sensitivities are in the sectors. I mean, you mentioned passive investment, so that’s an important feature as well because [00:10:00] true passive investment from that CFIUS context where somebody maybe only has a financial interest and there really is no access, no ability to influence within the context of a transaction, no access to either sensitive data information, intellectual property or sensitive technology that pushes somebody closer and closer to how CFIUS might identify something as being passive and is likely moving closer into that more [00:10:30] permissible range or comfort level for CFIUS. Of course, sectors aren’t stagnant, so the pace of technology development is constantly changing, and that’s especially true in some of the emerging sectors. So whether you’re talking something like maybe quantum computing or AI, I mean, these are very, very fast moving sectors. So where the bar is in terms of sensitivity is something that constantly changes. And as a regulator, CFIUS needs to recalibrate [00:11:00] for that.
Jason Hewitt (11:01):
So we know that the US has implemented its outbound investment restrictions. The policy certainly mentions consideration of new or expanded outbound investment restrictions. Tatiana, perhaps you can give us a state of play.
Tatiana Sullivan (11:15):
The outbound investment regime focused on quantum computing semiconductors and AI systems, and they were narrowly defined in the regulations. Again, there’s this... I think what you see in the history of national security law and policy in [00:11:30] the United States is this inching forward of ensuring that you’re trying to maintain the balance of not disrupting beneficial financial flows, not disrupting the benefits of potentially getting profits and investments in China, but focusing on the specific areas that are of national security concern. And I think you see that with respect to the outbound investment regime that was adopted by the Biden administration. The America First policy signals that they’re going to expand that. You see a lot of [00:12:00] those expanded sectors being included in the America First policy as potential targets for expanding the outbound investment regime. And those include biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and then other areas that they say are implicated by the military civil fusion policy.
Jason Hewitt (12:19):
Mike, the outbound investment rules are something that certainly faced a lot of different hurdles and different perspectives, and it’s been something that has been really slow to pick up traction [00:12:30] outside of the US. We’re just starting to see the outbound investment recommendations come out of the European Commission. I mean, do outbound investment restrictions from the US really achieve the US’ policy objectives if they’re standing alone?
Michael Considine (12:43):
Yeah. No, that’s a great question. So clearly there was, and when the Biden administration... As the administration was going through that process of thinking about what outbound would look like and how it would be structured in parallel to all of those internal discussions, I [00:13:00] was part of those on what would be the scope of the outbound investment regime. There was an effort also to socialize these ideas with partners and allies and obviously Europe probably being the biggest piece of that focus in making sure that Europe understood what the scope and parameters were going to be for the US outbound program. And part of that was in encouraging, I think to some extent Europe to [00:13:30] consider adopting some type of similar regime.
(13:33):
And part of that goes back to the same premise of why there has been for many, many years a significant outreach effort from the US to partners and allies and in particular on Europe on FDI screening. So for outbound, it’s a similar effort and it goes back to this premise that if the US is doing something, whether it’s to control inbound or outbound [00:14:00] investment because we believe that there are adversarial investments in a certain space, we’re trying to protect against this creep further into whether it’s civil-military fusion, technology issues in China, things like that.
(14:17):
If all we’re doing is trying to protect ourselves internal to what’s happening inbound and outbound in the US and we’re not sharing that information with partners and allies, the same types of [00:14:30] transactions are simply probably going to occur in another part in other jurisdictions. So I think in the outbound discussion it’s the same thing. And I think that in some respects was reflected when you see some of the areas that were highlighted in the European Commission’s white paper on outbound, the parameters that they want the member states to start thinking of in the context of outbound track pretty similarly to where we landed, at least in the current [00:15:00] formulation of an outbound regime for the United States.
Jason Hewitt (15:05):
It’s certainly been interesting to observe over the last few years that maturing process of European FDI regimes really being influenced by US policy and the work of CFIUS and the likes of yourself here in Europe are spreading the good word of foreign investment regulation outside of the outbound investment rules. Can you see some of the themes of the America First investment policy starting to influence European regimes, whether that’s [00:15:30] on fast tracking or expanded sectors?
Michael Considine (15:33):
A lot of the cooperation that exists between the US and European partners and allies on FDI screening. A lot of that conversation was sharing information about what is changing in the world of sensitivities in particular sectors. So sectors that needed to be added to people’s lists of sensitive sectors. What kinds of things are FDI regulators experiencing [00:16:00] in those sectors in terms of where newer risks may be emerging and importantly when new risks are emerging, how are regulators dealing with those risks? What are the types of either mitigation measures or conditions that can be put on transactions to try to buy down that risk? So I think that is a natural effort that will continue even under the America First investment policy in terms of that cooperation. It would be interesting to [00:16:30] see where we end up landing in the United States in terms of this fast track and the concept of a known investor portal and whether or not something like that might also be something that there is interest taken on Europe in looking at something very similar.
Jason Hewitt (16:49):
We’ve seen in the recent US-UK trade deal terms, although a lot’s still to be fleshed out. There’s certainly a reference to an enhanced investment screening cooperation. And maybe we’ll have some answers on these by the [00:17:00] time this episode goes live. So we’re recording this in the middle of May, but do you imagine that fast tracks might be part of those broader trade and diplomatic discussions that are going on at the moment, whether it’s countries seeking inclusion on US, on CFIUS fast tracks, or indeed the US looking to ensure it’s on any fast track regimes that might be implemented in Europe and beyond?
Michael Considine (17:25):
Yeah. I mean, I think everybody’s going to be watching as this concept of fast track [00:17:30] develops within CFIUS. I think for any trading partner with the US, there’s going to be a great amount of interest in understanding how that process could work and how to be involved in it. And then I think from other regulators looking at it, there probably will be a process of seeing how this fast track system may work in CFIUS and how a similar type system could potentially be adapted to work in other jurisdictions. And [00:18:00] I would suspect that there would potentially be some interest in Europe, and that’s just based on if you look at the volume of deal flow in the transatlantic space, whether it’s inbound to CFIUS or US investment going into Europe.
Tatiana Sullivan (18:13):
Yeah. And I’ll just add there’s two themes that you’ve seen out of this Trump second administration here. And that is the idea of trying to welcome foreign investment and speed up the process of people coming to the US and making their investments here and expanding the industrial base [00:18:30] here. And also this concept of reciprocity. So the existing rules have concepts of exempting accepted investors in accepted foreign states. Right now it only applies to certain in-tip countries and five-eyed countries, but whether or not we see greater cooperation turn into harder exemptions for those states, I think that’s something that we will keep an eye on. It’s something that a lot of countries and when FIRRMA was initially being implemented, lobbied [00:19:00] for, and so whether or not a cooperation or a fast track or an easing of process review is what’s put on the table or whether there’s more hard exemptions being applied to allies and partners to really give them, I think a faster track to investment in the US is something that I think we’ll see as people negotiate foreign investment screening regime, one to the other.
Michael Considine (19:27):
Jason, one thing I would point out that was interesting from the [00:19:30] UK perspective on the US-UK deal that was announced, the reference on investment screening, so foreign investment measures and cooperation, that was under the context of collaboration on economic security. What was interesting to me is that... And I think this is a theme that we will see continuing particularly in this administration, is that the reference on investment security measures collaboration [00:20:00] was made also with a reference in that same portion of the document to collaboration on export controls and ICT vendor security. And I think that’s important in that one particular thing I believe we’re seeing in this administration is bringing all of these different tools that the US has and the different tools that we would work with with partners and allies to make sure that governments are bringing [00:20:30] all of these tools together.
(20:32):
When we’re talking about trying to rebalance where things are in the world in terms of trade and investment. From the investor’s side of the equation, I think one of the benefits that can be derived out of this level of cooperation on these various fronts, whether it’s FDI screening, export controls, the ICT vendor security in having more of that outreach and in this effort [00:21:00] to align views with partners and allies on all of this. I think what that potentially does from the perspective of the investment community is create a more predictable investment environment so that how various issues are treated within these different regulatory regimes. If there’s this information sharing, if there’s this collaboration and cooperation amongst partners and allies, I think you have a better chance at having more predictable [00:21:30] outcomes in multiple different environments for investment. So it makes investment in the world a little bit more predictable that way.
Jason Hewitt (21:38):
Do you see the America First investment policy influencing or indeed the current state of perhaps more transactional diplomatic relationships between the US and other jurisdictions? Do you see that as potentially driving a different perception of US investors from, say European and other non-US FDI regulators?
Tatiana Sullivan (21:58):
I don’t think the America First [00:22:00] investment policy in isolation changes the dynamic for FDI regulators with respect to US investors. It’s really focused on trying to attract beneficial investment into the United States, not really punishing allies and partners, right? It’s a sign of welcome to allies and partners who are looking to invest in the United States that from countries we perceive as allies and partners. While really [00:22:30] focused in on expanding restrictions for adversarial nations. Whether or not the broader administration policies, for example, in the trade context will lead to this concept of economic security being national security, changing the way that they perceive US investment.
Michael Considine (22:51):
Yeah, I certainly would agree with that. And also point out, I mean, America First investment policy, if you sort of look at the language in the very front end of [00:23:00] that document, it speaks very, very much about the idea about attracting partner and ally investment into the United States. And that is a premise that is stated right up front. So the administration is clearly identifying the value that foreign direct investment plays into the United States and into the economic security, if you will, of the United States. So it is meant to be a policy [00:23:30] statement that reinforces that concept of the US being a preeminent destination for foreign direct investment and a policy that’s existed for decades now.
(23:42):
So I think it is reinforcing that measure and in the classic sense of how CFIUS approaches it, where you attract foreign investment, but you are looking at it through the lens of potential national security issues that may arise from time to time in those investments. [00:24:00] Tatiana, as you pointed out, there are other tools in the toolkit now that are enhanced export controls and some of the other things that you mentioned. And that is good in the sense that CFIUS often becomes probably the last regulatory hurdle that people have to go through in the context of something like an M&A transaction in the US and trying to solve all of the potential issues through CFIUS action is [00:24:30] usually not the best outcome. That if some of that can be handled by other enhanced existing authorities, it makes things less complicated to potentially have to be dealt with in the context of CFIUS through something like an extremely complex mitigation agreement.
Jason Hewitt (24:47):
And I think that point takes us, Mike, really, really neatly into sort of three observations I have thinking about this conversation we’ve had. Whilst I offer my observations, I’ll give you some thinking time. I’ll ask you both to give me your last word on [00:25:00] the conversation we’ve had. But three observations I have, I think from an investor perspective, the prospect of streamlining the regime fast tracking for allies is very attractive. A lot of the volume of cross-border deals is obviously with allies and partners. And the idea of a more efficient investment process is both attractive from a process perspective as well as offering more substantive benefits for volume of investment. It sounds like investors should continue to be very cautious around or very thoughtful, at least [00:25:30] around that topic of civilian-military fusion that you talked about.
(25:34):
There are necessarily a bunch of advanced technology sectors that have both civilian applications and military applications where parties need to be quite careful regardless of whether their country of origin is an ally or partner to the US or otherwise where it can be even more challenging. And finally, just rounding on the point that you both just made, that really we’re seeing a more [00:26:00] cohesive, sophisticated use of a toolkit of statecraft tools that is just relevant for investors to understand in going about seeking approvals and in understanding that those are part of a broader reciprocal trade relationship between their countries of origin. So with those three observations, perhaps I’ll ask you Tatiana first for your last word, and then Mike, you can round us off.
Tatiana Sullivan (26:26):
Yeah. So I think overall, from an investment policy perspective, [00:26:30] you’re going to continue to see a focus on this protect, promote idea of we’re trying to promote, we’re trying to get money into the United States from beneficial investment to expand the US and defense industrial base. I think that theme is something you’re going to see throughout the administration. They champion new projects and manufacturing plants and other types of expansionary practices that we’ve been seeing from foreign investment with a clear [00:27:00] focus on restricting access to foreign adversaries with a focus on China. I think from a process standpoint, it’s clear that they’re looking for ways to streamline the process to make it even faster, but I think what’s going to be a challenging task for CFIUS to find new ways of streamlining the process without moving away from this, again, this case by case review.
Michael Considine (27:23):
Yeah, so I think from that top line US investment policy, I think we’re going to see this administration [00:27:30] very much focus on this idea about making the United States a premier destination for foreign investment from partners and allies. I think in terms of the process... So the concept of this fast track and a known investor portal, it’s an interesting concept that is, I think really worth watching and seeing how that develops. Because I think it does have a potential to create efficiencies within the [00:28:00] CFIUS process, which I think are very desperately needed right now. The process is pretty set in terms of statutory deadlines, and I don’t necessarily see that changing anywhere. But within the process, you do not have to run a transaction a full 90 days through a review and an investigation to get an outcome. But I think there has been a tendency to use all the time on the clock, if you will, within the CFIUS process.
(28:28):
And part of that is driven [00:28:30] by this idea that even with investors that come back often, I think there tends to be this tendency sometimes to start from square one, ask a lot of the same questions over and over again in the context of that one transaction that they’re trying to review in front of them. So this idea that we might be able to gain efficiencies in the US system by having a set of information that already resides in a portal to eliminate [00:29:00] all of that rehashing and going back to square one on a transaction, it is a possibility. I think the thing to remember in all of that is understand that from that national security perspective, the nexus on everything is how this relates to an investor’s association or distancing, if you will, those relationships that would trace back to China. So regardless of where the investment is coming [00:29:30] from, from a US perspective, CFIUS is always going to be looking at associations, dependencies, and how distant relationships may or may not be with China.
Jason Hewitt (29:43):
Well, that’s really helpful and thank you so much, Mike, Tatiana, for the insight. It’s been a pleasure having you on.
Tatiana Sullivan (29:49):
It’s been a pleasure to be here.
Michael Considine (29:51):
Yeah.Thank you very much. Great opportunity.
Jason Hewitt (29:53):
Thanks very much both.
Voiceover (29:56):
Thank you for joining us for today’s episode of Foreign Correspondent, an FDI [00:30:00] podcast. If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden can be found at skadden.com.
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