Biden to work with Mexico on Chinese investment restrictions
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The Biden administration has reached a new agreement with Mexico aimed at preventing countries like China from investing in North American companies and finding a backdoor into U.S. supply chains.
Why it matters: The accord marks another effort by the Biden administration to keep China from gaining access to U.S. technologies in critical industries.
Driving the news: Yellen announced a formal memorandum of understanding in Mexico City, Mexico where she is meeting with her counterparts on a range of issues.
- The goal is to help Mexico bolster its screening of foreign investment by sharing information and best practices from the U.S. Committee on Foreign Investment in the United States (CFIUS).
- "Both countries benefit when they work together to guard against foreign investments that pose national security risks," Treasury Secretary Janet Yellen said in a statement.
- "This engagement is further evidence of the close partnership between our two countries, not only on matters of trade but also on critical issues of national security."
- For nearly 50 years, CFIUS, composed of U.S. departments and agencies, reviews foreign investment into U.S. companies with the express purpose of protecting national security.
Between the lines: Trade and commerce with Mexico is expected to increase under the Inflation Reduction Act, which included an estimated $400 billion in various clean energy tax credits and subsidies.
- Companies based in Mexico and Canada, who have free trade agreements with the United States, can benefit from some of the spending.
Zoom out: Over the last three years, the Biden administration has made it a priority to prevent China from gaining a military advantage in critical technologies, like semiconductors and artificial intelligence.
- In October, the Commerce Department tightened export controls on chips and the equipment used to make them.
- Over the summer, Biden signed an executive order to impose an entirely new set of rules on U.S. firms and funds that want to invest in China as a way to prevent Chinese companies from gaining access to American capital and know-how.
Zoom in: Biden and Yellen have insisted that they do not want to "decouple" the U.S. and Chinese economies. The word officials prefer to use is "de-risk."
- That involves producing more critical components and technologies at home and working closely with allied countries.
- Yellen has called for democratic countries to embrace "friend-shoring," meaning supply chains for critical technologies to friendly countries.
The bottom line: Officials stressed that today's announcement is just a first step in bolstering the two two countries' collective security.
- "This working group recognizes the fact that U.S. national security is linked to the security of our allies and partners, including our neighbors in North America," said Paul Rosen, Assistant Secretary for Investment Security at the U.S. Department of the Treasury.
