Several Important Trade-Related Issues Discussed at First U.S.-China Strategic and Economic Dialogue

Today marked the conclusion of the first U.S.-China Strategic and Economic Dialogue held in Washington, DC. At the conclusion of the meetings, the U.S. and China issued a Joint Fact Sheet summarizing the issues and action items agreed to during the two days of discussions.

The fact sheet contained several items of note on U.S. trade-regulatory issues.

Regarding foreign direct investment in the U.S., the fact sheet indicates that the U.S. "confirms that the Committee on Foreign Investment in the United States (CFIUS) process ensures the consistent and fair treatment of all foreign investment without prejudice to the place of origin."

On antidumping issues, the United States recognized "the continued progress China has made in its market reforms and will earnestly consider China's concerns, and will consult through the JCCT [US-China Joint Commission on Commerce and Trade] in a cooperative manner to work toward China's Market Economy Status in an expeditious manner." This has been an important issue for China, since for antidumping purposes China is treated as a non-market economy, a designation that typically leads to higher antidumping duty margins.

With respect to export controls, the U.S. and China agreed "to accelerate the implementation of "Guidelines for China-U.S. High Technology and Strategic Trade Development" and expeditiously formulate the Action Plan on Expansion of China-U.S. High Technology and Strategic Trade Cooperation in Priority Sectors.

The Guidelines referred to in the fact sheet were signed in December 2007 by former Under Secretary of Commerce Mario Mancuso and MOFCOM Vice Minister Wei Jiangguo. Under the Guidelines, the Commerce Department and MOFCOM agreed to jointly identify and carry out steps to enhance secure high technology and strategic trade. For example, the Commerce Department and MOFCOM will continue to review U.S. dual-use policy to identity and implement appropriate processes to streamline the licensing process for legitimate civilian trade. The Guidelines also recognized the critical role of end-use visits conducted by BIS in ensuring the protection of U.S. national security interests in the enhancement of high technology trade.

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CFIUS Publishes Guidance on Types of Transactions Having National Security Considerations

The Treasury Department, as chair of the Committee on Foreign Investment in the United States (CFIUS), and as required by the Foreign Investment and the Foreign Investment and National Security Act of 2007 (FINSA), has for the first time issued guidance on the types of mergers, acquisitions and takeovers by foreign persons that CFIUS has reviewed and presented "national security considerations."

The guidance, published in today's Federal Register (pdf), also provides insight into how CFIUS identifies the national security effects of covered transactions.

Some of the types of covered transactions involving foreign control of U.S. businesses that have presented national security considerations include:

• Transactions involving U.S businesses that provide products and services—either as prime contractors or as subcontractors or suppliers to prime contractors—to agencies of the U.S. Government and state and local authorities, including, but not limited to, sole-source arrangements.

• U.S. businesses in the energy sector at various stages of the value chain. This includes the exploitation of natural resources, the transportation of these resources (e.g., by pipeline), the conversion of these resources to power, and the provision of power to U.S. Government and civilian customers.
  

• U.S. businesses that affect the domestic transportation system, including maritime shipping and port terminal operations and aviation maintenance, repair and overhaul.

• Transactions involving U.S. businesses that could significantly and directly affect the U.S. financial system.
  

• Transactions involving U.S. critical infrastructure, including major energy assets.

• U.S. businesses’ production of certain types of advanced technologies that may be useful in defending, or in seeking to impair, U.S. national security. Many of these U.S. businesses are engaged in the design and production of semiconductors and other equipment or components that have both commercial and military applications. Others are engaged in the production or supply of goods and services involving cryptography, data protection, Internet security, and network intrusion detection, and they may or may not have contracts with U.S. Government agencies.

• CFIUS stated that a significant portion of the covered transactions that it has reviewed and that have presented national security considerations have involved U.S. businesses that are engaged in the research and development, production, or sale of technology, goods, software, or services that are subject to U.S. export controls.

On November 21, 2008, the Treasury Department published in the Federal Register the final regulations implementing the new CFIUS reporting and review process.

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