A recently revealed DuPont China deal has highlighted significant flaws in the US national-security screening process, underscoring the ongoing battle over technology between the United States and China. The compromise reached by US officials to allow DuPont to sell its sustainable-materials business to a Chinese company while preserving the technology within the US has proven ineffective.
The review process conducted by the cabinet-level committee responsible for screening deals involving foreign buyers took more than a year due to deep divisions among its members. An unsuccessful appeal was made for President Biden to intervene, which only further showcased the challenges involved. Ultimately, the solution put forward by committee members was undermined within a few weeks.
At the core of the issue is a DuPont technology used in the production of a key component for a more sustainable version of nylon. Although initially considered revolutionary, DuPont decided to sell the business a few years ago. This decision attracted a Chinese buyer, prompting DuPont to seek permission from the Committee on Foreign Investment in the U.S. (Cfius) to proceed with the deal. The panel, led by the Treasury Department and comprising representatives from various government agencies, including Defense, Justice, Energy, and Commerce, is tasked with ensuring that sensitive US technology, data, and real estate do not fall into the wrong hands.
The Biden administration recognized Cfius as a critical element in its strategy to contend with China and redirect the US economy away from its dependence on the country. However, the committee faced internal disagreements on how to handle the DuPont deal. A US intelligence assessment raised concerns that the byproducts of DuPont’s manufacturing process could potentially be used as a superior fuel source for advanced weapons, potentially benefiting China’s military ambitions. Defense Secretary Lloyd Austin argued for blocking the deal, while Treasury Secretary Janet Yellen and others believed the concerns to be too speculative and worried about market interference.
Cfius eventually approved the sale through a complicated compromise, which was finalized in May 2022. However, the committee soon discovered that their efforts to protect the industrial secret within the deal had failed. The investigation into what went wrong is currently ongoing.
The confidential nature of Cfius deliberations limits the availability of detailed information. However, this article draws on interviews with individuals familiar with the discussions among the companies and government agencies involved.
Frequently Asked Questions (FAQ)
Q: What is the Committee on Foreign Investment in the U.S. (Cfius)?
A: Cfius is a committee led by the Treasury Department that screens deals involving foreign buyers to prevent sensitive US technology, data, and real estate from falling into the wrong hands. It includes representatives from various government agencies, such as Defense, Justice, Energy, and Commerce.
Q: Why did the DuPont China deal expose flaws in the US national-security screening process?
A: The deal highlighted flaws in the process due to deep divisions among Cfius members on how to proceed. Concerns were raised about the potential military implications of a DuPont technology and the risk of assisting China’s military expansionism. Disagreements among committee members and the compromised solution ultimately led to the failure of the intended protection measures.
Q: What is the aim of the Biden administration regarding Cfius and dealing with China?
A: The Biden administration considers Cfius a crucial element to safeguard sensitive US technology and reorient the US economy away from China. It is part of broader efforts to address the technological competition and military concerns posed by China.