Biden Admin Still Working Through Scope of Outbound Investment Restrictions, Official Says

The Biden administration is still considering a range of “very technical questions” on its upcoming outbound investment restrictions, which is partly why the rules haven’t yet been released, said Mike Pyle, deputy national security adviser for international economics. He said officials are still working through how to define the types of technologies that would be captured by the program and the types of investments that would be screened, and are still speaking with industry about how to best scope the restrictions.

“It's hard to get right,” Pyle said during a June 29 event hosted by the Carnegie Endowment for International Peace. The U.S. wants to “make sure that we're doing this in a thoughtful, targeted way that gets it right.”

Administration officials have been considering a new outbound investment screening program for months, which could seek to restrict China and other countries from acquiring sensitive technologies or American know-how that may not be captured by traditional export controls. A Treasury Department official last month said the regime could look to restrict capital flows in the advanced semiconductor, artificial intelligence and quantum computing sectors, among others (see 2305310075).

The U.S. believes it’s “critical” that “for a handful of sensitive national security related technologies, that we have a toolkit that includes restrictions on outbound investment that can prevent those handful of critical technologies from enabling China's military and surveillance modernization,” Pyles said.

Pyles several times referenced the administration's small-yard, high-fence concept -- a strategy to place strict trade controls around a small, advanced set of sensitive technologies. The U.S. wants to “get it right when it comes to the shape of the garden, get it right with respect to the height of the fence,” he said, which is “why you still haven’t seen an official announcement.”

He added that calibrating the restrictions correctly “requires getting into the weeds of the particulars. And getting that right means being really thoughtful about how you do some of these definitions, and that's what we're hard at work doing right now.”

Pyles also underscored the importance of making sure trading partners introduce similar outbound investment restrictions. The U.S. over much of the past year has been working to “achieve that alignment” with allies, including the EU, the U.K. and other Group of 7 nations, Pyles said. G-7 countries in Japan earlier this year committed to explore new restrictions on outbound investments into China (see 2305220017), and the EU said it plans to propose ways to tackle outbound investment concerns by the end of the year (see 2306200052)

“Part of the way to make it durable over time is to make sure that we are aligned with our closest allies and partners and taking steps in common to do that,” Pyles said. “I think what you've seen over the period of the past few months has really embodied that degree of alignment, that sense of common purpose.”