Sarah Bauerle Danzman testifies earlier than the House Committee on Financial Services on US coverage on funding safety

Explore insights within the Web3 house. This article dives into: “Sarah Bauerle Danzman testifies before the House Committee on Financial Services on US policy on investment security”.

Economy & Business
United States and Canada

Testimony

July 16, 2025

Sarah Bauerle Danzman testifies earlier than the House Committee on Financial Services on US coverage on funding safety

By
Sarah Bauerle Danzman

On July 16, Sarah Bauerle Danzman, nonresident senior fellow with the Atlantic Council’s Economic Statecraft Initiative, testified earlier than the House Committee on Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Services at a listening to titled, “US Policy on Invesment Security.” Below are her ready remarks.

Thank you, Chairman Davidson and Ranking Member Beatty, in addition to your hard-working workers, for inviting me to testify on evolving funding safety problems with concern to this subcommittee, to Congress, and to the American folks. It is an honor to talk with the committee at this time.

I need to begin by clarifying that the views expressed in my testimony at this time are my very own, and don’t essentially replicate the view of my employer, Indiana University, or of the Atlantic Council, the place I’m a nonresident fellow.

I converse at this time as somebody with each an educational and a authorities background. I’m an affiliate professor of worldwide research on the Hamilton Lugar School at Indiana University. My analysis experience contains the politics of funding liberalization, funding attraction, and the intersection of nationwide safety and funding coverage, most notably inbound funding screening.

As a Council on Foreign Relations worldwide affairs fellow, I labored as a coverage advisor and CFIUS staffer within the Office of Investment Affairs on the Department of State from August 2019 to August 2020. Since that point, I’ve regularly engaged in coverage evaluation and thought management on problems with funding safety and American innovation in my capability as a fellow on the Atlantic Council and as a time period member on the Council on Foreign Relations, the place I’m at the moment serving as a member of a job power on financial safety.

In any coverage course of or crucial evaluation of a regulation’s effectiveness, we should begin by defining the issue we want to remedy, the objectives that guide our technique, and the outcomes that will signify success. I outline the problem house earlier than the committee on these phrases:

1. A largely open, market-driven economic system is a key supply of American innovation, financial prosperity, and army power. Therefore, sustaining market-driven, economically open rules ought to be a core nationwide safety precedence.
2. We additionally face substantial near-term challenges producing crucial market failures that require coverage responses. These challenges embody speedy technological advances in computing, power, and weaponry. In addition, China’s measurement, materials assets, and want to immediately problem US pursuits makes its overcapacity, market distortions, and market seize in a number of crucial provide chains each a nationwide safety and an financial competitiveness problem.
3. Our purpose with funding safety technique ought to be to take care of as a lot openness to inward and outward funding as potential—which helps markets allocate capital effectively, conserving us on the technological frontier and creating high-quality, future-oriented jobs—whereas erecting guardrails vital to forestall our openness from being exploited by strategic rivals or malicious actors or from inadvertently producing unfavorable safety externalities that make the United States weak to crucial provide chain disruptions or elementary diminishment of our productive capability.
4. We will know that our insurance policies are working if:
   • Transactions that will be regarding to the United States from a nationwide safety perspective are constantly thought-about below the jurisdiction of related authorities. That is, our insurance policies are scoped to seize the actions that generate nationwide safety dangers.
   • The related businesses constantly and effectively course of CFIUS evaluations and monitor outbound investments such that the US authorities is utilizing its authorities as meant by Congress.
   • US companies perceive their regulatory obligations and may adjust to such regulations with out undue burden to their capability to proceed to function, develop, and innovate.
   • Partners and allies actively collaborate with the United States, notably with respect to outbound funding and dual-use expertise concerns, to make sure that our actions collectively create binding constraints on the aspirations of nations of concern to leapfrog the United States and our army allies within the army expertise area.
   • The United States continues to be a prime vacation spot of FDI, notably in superior manufacturing, prescription drugs, biotechnology, artificial intelligence and quantum computing, and different industries on the intersection of technological development and high-quality employment.
   • The United States and corporations inside its innovation ecosystem continues to function on the frontier of technological innovation and set the requirements for these applied sciences of the long run.

As Congress evaluates present nationwide safety regulation for inward funding—CFIUS —and outbound funding—the Outbound Investment Security Program—I encourage representatives to make sure that any further congressional motion aligns with the next 5 rules:

Clear: Investment safety coverage ought to be clear to US corporations and international buyers. The compliance burden of inbound and outbound funding regulation, notably for personal fairness and enterprise buyers has elevated tremendously in recent times. These compliance prices are compounded by difficult and escalating export controls. Investors want to grasp what their obligations are. To guarantee buy-in and sturdy compliance, the enterprise group must consider these restrictions on their actions serve a legit public good. Frequent updates to funding guidelines make the coverage setting unstable and expectations for the long run regulatory panorama unsure. Retroactive utility of legislation additionally generates concern over future respect for property rights and ought to be prevented.

Consistent: Investment safety ought to be constantly utilized. Investors and corporations shouldn’t be differentially handled based mostly on private relationships with or connections to administration officers. For CFIUS, which means assessment ought to stay fact-based and on the working degree as a lot as potential. Parties earlier than the committee mustn’t obtain favorable therapy if they’re well-connected to the administration or to a member of Congress. Similarly, events earlier than CFIUS shouldn’t be discriminated in opposition to if they’re perceived to be insufficiently deferential to the administration. For the Outbound Investment Security Program, which means the method for receiving an exception to prohibition ought to be clearly publicized, topic to a rigorous, regularized assessment course of, and the end result of such determinations ought to be rapidly notified to Congress and the general public. In the absence of oversight, CFIUS and the outbound program may change into the positioning of particular dealing that’s inconsistent with the rule of legislation or the foundations of a dynamic market-based economic system.

Contained: Investment safety ought to be contained to a slender set of clear nationwide safety considerations. Congress ought to resist temptations to make use of funding safety instruments for functions apart from nationwide safety. The United States has nationwide and financial safety pursuits that intersect, and generally battle, with the funding actions of US multinationals and buyers. Overregulation will scale back funding within the US, which is able to negatively have an effect on jobs and innovation capability. The authority to intervene in an inbound or outbound transaction should be restricted to a fact-based nationwide safety danger evaluation. Congress ought to resist the urge to additional develop CFIUS authorities to deal with broad nationwide curiosity considerations. It also needs to remind CFIUS officers that mitigation agreements ought to be proportional to recognized dangers and may solely be used to deal with nationwide safety considerations slightly than expansive financial competitiveness points. Any outbound laws ought to give attention to nationwide safety dangers related to a really slender set of indigenous technological improvement in international locations of concern. Outbound ought to solely place limits on investments in applied sciences for which the US holds a lead over international locations of concern. The probably innovation prices of proscribing outbound funding in different applied sciences are too excessive to entertain.

Collaborative: Investment safety coverage ought to be collaborative. US energy advantages from centrality in world innovation, finance, commerce, and diplomatic networks and our methods ought to operate to additional embed us in such networks slightly than insulate us from them. Building multilateral assist and coordination is particularly vital for successfully countering Chinese efforts to achieve entry to Western-developed dual-use applied sciences to modernize their army capabilities. Technology, funding, and know-how are very laborious to regulate unilaterally. Acting multilaterally additionally reduces the prices of monitoring and enforcement, which saves US taxpayer cash and frees further assets for investments in American households, employees, and communities. Strategies that emphasize the usage of unilateral monetary sanctions to deal with outbound funding considerations are extraterritorial in nature, unnecessarily divisive to a global funding safety coalition, and are prone to backfire.

Curious: Investment safety coverage ought to be curious. Many of the funding safety insurance policies that the United States has applied in recent times are novel, addressing issues for which there stays an excessive amount of uncertainty in regards to the measurement of the priority and the price of potential options. These uncertainties imply insurance policies on this space are dangerous – now we have much less certainty over their impact and their unintended penalties. Therefore, ongoing evaluation of coverage effectiveness is significant. Investment safety insurance policies ought to be subjected to cost-benefit evaluation at common intervals to raised perceive the trade-offs to financial dynamism and expertise innovation that funding restrictions induce. If measures of innovation drop, Congress ought to be ready to work with business to raised perceive why and ought to be keen to reverse course if it turns into clear {that a} coverage has failed or has unacceptable unintended penalties.

In sum, members of Congress ought to be certain that funding safety coverage is obvious, constant, contained, collaborative, and curious. In doing so, Congress will assemble coverage that may successfully stability the true, near-term nationwide safety considerations of sure sorts of inward and outward investments with the truth that the United States’ dedication to an open, market-based economic system has been the muse of American prosperity, energy, and safety since its founding and can proceed to be a tenet of this nice nation for our future generations.

Image: US Capitol

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This article is tailored from www.atlanticcouncil.org. We’ve restructured and rewritten the content material for a broader viewers with improved readability and website positioning formatting.

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