Departments. The chair is authorized to have five days to submit materials for inclusion in the record. This hearing is entitled examining the operations of the committee on Foreign Investment in the United States. I now recognize myself for five minutes to give an opening statement. The free flow of capital is a bed rock tenant of a United States economy. Ensuring that free flow worldwide has always been a bipartisan goal and im proud to serve as cochair of the Global Investment in america caucus along with our colleagues mr. Holding, mr. Himes, and mr. Meeks. It promotes Global Investment in the United States economy and helps educate members about the importance of Foreign Direct Investment. Today, the United States is both the largest Foreign Investors and the recipient of the largest amount of capital investments. That capital has provided a good deal of the energy that kept our enemy vibrant. Compensating to some extent for our low National Savings rate to provides the fuel for growth of u. S. Businesses and jobs. Today almost 5 of u. S. Workers and jobs are related to Foreign Investment. Most of these jobs pay handsomely, far better on average than other u. S. Jobs. But if Foreign Investment is to be a force for good, it must not be welcomed unthinkingly any more than one might leave the front door of the house open around the clock. Investment that might weaken us is not good or welcome investment, and we must guard against it. That investment might come for purely economic reasons but especially in this era of international turmoil, conflict and economic uncertainty, it can come from individual or nation states who might wish to weaken our economy in comparison to theirs or try to spirit away technology or knowhow that could strengthen their military to gain an advantage over ours. To maintain a vigilant watch on investment, the committee on Foreign Investment in the United States or sifius reviews many investments to determine if they pose a threat to National Security. This involves rigorous scrutiny of proposals by all appropriate departments or agencies including a scrub by the Intelligence Community and the president has the power to Block Transactions or order divestment if such concerns cannot be mitigated by a change in the original proposal. Today we face new threats on a number of fronts, not just of a hollowed out industrial sector but also from terrorism and major nations that are economic competitors. Also potential military competitors. Im referring of course mainly to china. Concerns have risen about using that countrys vast reserves to acquire Key Technology with an eye towards taking the lead in the industrial markets of the future. The chinese government, for example, has set aside 250 billion to be used in dominating the vital semiconductor market. This is not a new phenomenon but a new challenger. President ford set up out of concern that the vast inflows coming from opec countries could weaken our economy. In 1988, among concerns japan was seeking to buy critical technology, Congress Gave president reagan the authority to actually block deals. That authority only has been used sparingly. Interestingly, the first use came when president george h. W. Bush blocked the sale of an airplane component maker and President Trump already has blocked a proposed of semiconductors by a Chinese Company. Sifius has also improved Foreign Investment conditionally, approving a deal only when divestment has occurred. The statute under which it operates has not been updated in a decade. We should think about modernizing it. Aside from chinas intentions, there are burdens on the process from the volume and complexity of proposed deals. About 40 more reviews in 2017 than 2016 and a more than fourfold expansion in chinesebacked deals since 2013. To that end, our colleague, representative pittenger and senator cornyn have spent more than a year studying the process and considering possible reforms. I commend their work. This hearing is the beginning of the committees study of sifius and will be followed by further hearings soon. In considering reforms, the committee will ensure that they have the tools and resources it needs to examine Foreign Investment. As members of congress, it is our duty to advance the National Security of the United States. At the same time, we must aspire to the greatest extent possible a welcoming Investment Climate so that u. S. Companies have the capital needed to grow. As well, we need to be mindful that the Investment Climate for u. S. Companies overseas is not unnecessarily compromised. To start that process, the subcommittee has a panel of witnesses with unique abilities to discuss the operations of and challenges that they face. This hearing and their testimony is intended to prepare members make wise and cautious decisions on this vital topic. This should provide the beginning of a strong and thoughtful review. With that, i would now recognize a member of the democratic side, the gentleman from washington, mr. Heck, for five minutes for an opening statement. Thank you very much, mr. Chairman. And mr. Chairman, to begin with, i would ask unanimous consent to enter into the record a letter i sent to you and the chairman of the full committee on december 8 requesting that a witness from the department of treasury be added to this hearing. Without objection. Thank you. While i look forward to hearing from todays witnesses, i believe theres no substitute for hearing from the people who actually are administering sifius. I have given treasury a very hard time in this committee, some of you may recall, it was a very hard time about this issue in past hearings. I want to make clear that they have begun to engage in what i would characterize as a constructive manner. I acknowledge that and express my hope that the committee could benefit from their expertise during a future hearing. I would be happy to yield to chairman barr if he would like to respond . I appreciate the gentleman yielding. Just to clarify, this is the first of a series of hearings. We most certainly will be extending an invitation to treasury officials who have a large role in the process to testify, and you will have that opportunity. Again, thank you very much, mr. Chairman. Im glad to hear that. I thank you again for convening this hearing. I believe the sifius process generally works well for private commercially motivated transactions but in the ten years since Congress Last passed legislation dealing with this issue, we have seen some countries gain the resources and sophistication needed to pursue a comprehensive strategy to acquire u. S. Technology or dominate strategically important industries. Existing authorities were not designed and are not sufficient to deal with that kind of challenge. And although many of our witnesses will note, this is a problem that every part of the u. S. Government will have to Work Together to address. I believe there are some aspects of this problem that can only be addressed through legislative action to close gaps in existing sifius authorities. When i asked secretary mnuchin about this in july, he agreed this was a pressing issue. And that we could not afford to do nothing. I hope we can all bring that sense of urgency to how this committee approaches its work on sifius reform. The kind of urgency and unity which i know this congress can still bring to bear on issues critical to our National Security. Because here we are dealing with just such an issue. And there are certainly things we need to keep in mind as we move forward. Im glad many of todays witnesses have raised issues, will raise issues like the need to improve information sharing and cooperation with our allies and partners, many of whom are also in the process of reevaluating their own sifius equivalent. Im glad many of todays witnesses will raise the need to provide more resources to sifius which i agree are urgently needed to keep pace with the times, the demand, and the need. And im proud the United States is in fact a place that welcomes Foreign Investment, but the broader legitimacy and acceptance of that principle of openness, which i believe in, and the ability of the United States to stand up for a free and open global economy, is in fact dependent on our National Security. As secretary mnuchin affirmed, doing nothing is not an option. But im confident that starting with this hearing, we can find a bipartisan path forward and strike that balance between continuing to allow robust Foreign Investment, which i think does serve our nations needs, our economic prospects, while at the same time balancing it against very legitimate security concerns which are growing in number velocity and in complexity. Sifius needs to be reformed. It starts here with this committee and starts here with this hearing today, mr. Chairman. Finally. Thank you again very much for convening it. Thank you, the gentleman yields back. And today, we welcome the testimony of the honorable mr. Kimmitt, from 2005 to 2009, he served as deputy secretary of the u. S. Treasury where he had significant responsibility for the Departments International agenda, which included a revamp of sifius. He also served in the Reagan White House as National SecurityCouncil Executive secretary from 1983 to 1985. In 1997 he was a member of the National Defense panel, and from 1998 to 2005, he was a member of the director of Central IntelligenceNational Security advisory panel. Mr. Kimmitt served in combat in vietnam with the 173rd airborne brigade, retired as a Major General in the army reserve, and also served as the u. S. Ambassador to germany. National Security Strategy and Logistics Executive at deloitte consulting. Served for 36 years at the department of defense. From 2013 to january 2017, mr. Estevez served as the secretary of defense acquisition and logistics. He represented the department of defense while Chinese Investment in the United States accelerated rapidly. Previously, he held several key positions including assistant secretary of defense, and assistant deputy under secretary of defense for supply chain integration. Mr. Wolf is a partner and from 2010 to january 2017, he was the assistant secretary of commerce for export administration. In this role, he was primarily responsible for the policy and administration of the u. S. Dual use export control system, and as a result of the effort, he helped lead part of the defense trade system. Also during this time, mr. Wolf was the primary Commerce Department representative to sifius. Mr. Segal is the ira a. Lipman chair and director of the Cyberspace Policy Program at the council on foreign relations. An expert on security issues, technology development, and chinese domestic and foreign policy, before coming to cfr, he was an arms control analyst for the China Project at the union of concerned scientists. Hes been a visiting scholar at the hoover institution, at stanford university, the Massachusetts University of technologys center for international studies, the Shanghai Academy of social sciences, and the university in beijing. Ms. Mclernon is president and ceo of the organization for international investment, representing the unique interests of u. S. Subsidiaries. With a strong background in economics, her efforts focus on the Important Role u. S. Subsidiaries play in the American Economy and policy issues that would make the u. S. A more competitive location for Foreign Direct Investment and job creation. Prior to be named president and ceo, ms. Mclernon was ops Senior Vice President where she focused on advocacy. Each of you will be recognized for five minutes to give an oral presentation of your testimony, and without objection, each of your written statements will be made part of the record. Mr. Kimmitt, youre recognized for five minutes. Thank you, mr. Chairman, members of the subcommittee. Thank you for your invitation to offer a perspective on the committee on Foreign Investment in the u. S. This is one of those rare instances where advancing age, including three decades of service on sifis has benefits. My experience with sifis started under general baker. It was then governed by an executive order signed in 1975 by president ford because of concern about saudi petro dollars being recycled to buy american assets. By 1988, concern shifted to japanese purchases which led to an amendment, and in 1992, concern about stateowned Companies Buying sensitive u. S. Technologies led to passage of the byrd amendment. In 2005, i returned to treasury as deputy secretary. After deals involving the Chinese National overseas oil company in dubai courts were blocked by congressional concerns, Congress Passed the Foreign Investment and National Security act of 2007. Today, growing concern about Chinese Investments, particularly by state owned enterprises and especially in the technology sector, has led to legislation proposed by congressman pittenger, senator cornyn, and bipartisan cosponsors. I would like to offer some observations that may assist in your deliberations. Earlier this year, this committee helped legislate the secretary of the treasury as a statutory member of the National Security council, demonstrating the u. S. Economic strength is tightly linked to our overall security. And Foreign Direct Investment as both you and mr. Heck have noted, mr. Chairman, makes an important contribution to the u. S. Economy. Almost 7 million americans will receive their paychecks this month from companies headquartered overseas. Close to 40 of those workers are in manufacturing jobs, and as you noted, fbi jobs pay about 25 more than the economy wide average. More open investment policy is integral to u. S. Economic success, and i urge President Trump to issue the traditional u. S. Open Investment Policy Statement at the earliest opportunity. But in issuing that statement it is important to make clear that the u. S. Government must insure Foreign Investment does not harm u. S. National security interests. Chinese investment has an appropriately high priority for close scrutiny because china seeks to compete strategically against the United States in multiple spheres. Military, diplomatic, and economic. Using all elements of the state, including Stateowned Enterprises in that competition. Current legislation provides significant authority to block troublesome chinese acquisitions. As you noted, mr. Chairman, the first acquisition unwound by a president was under george h. W. Bush in 1990. The acquisition of threecom did not proceed under george w. Bush, and President Trump block ed the semiconductor by a chinese group. As you consider new legislation, i would be sure to address actual gaps in the authority. There is particular concern that Chinese Companies may be using creative legal structures to conclude deals short of ownership and control that could nonetheless impair u. S. National security. I believe this is a very valid area for stricter scrutiny in the United States. I would be careful about extending the reach to transactions occurring outside the United States. Sifius is intended to give the president exceptional authority to protect the United States. Without, however, superseding important authorities in other statutes. For example, if a joint vincher abroad raises questions, the export Administration Regulations or International Tr