Chinese Farm Purchases in U.S., U.S. Outward Investment Controls and U.S. Audits of Chinese Firms — Issues Obscured by Global Politics but Crucial.

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     Three Important China Trade Issues, not well known. Obscured by global politics. But these are critical. (1) Chinese purchase of farmland under 1978 Agricultural Foreign Investment Disclosure Act. (2) Restricting outward investment to China. (3) Requiring audits of Chinese listed firms on US public markets.

     To be competent in understanding and conducting global commerce and trade today it is essential to understand not only the global and national security issues, but U.S. regulatory ones. To me, these business and trade transactions are often in apparent conflict with the broader political trends in the U.S., but sometimes not. Business has a way of going its own way. Nevertheless, these transactions and issues are subject to broader national and international politicization of commercial relations.

     A good piece appeared in the Wall Street Journal today as to one of the above issues — foreign (Chinese) purchase of U.S. farmland. Here are a few excerpts:

 

  • U.S. Department of Agriculture data show that Chinese ownership of U.S. farmland leapt more than 20-fold in a decade, from $81 million in 2010 to $1.8 billion in 2020. Beijing hasn’t outlined a strategy, but large-scale state backing for these investments indicates there is one.
  • We don’t know the full extent of Chinese investment in American farmland. Farm sales are disclosed under a little-known 1978 law called the Agriculture Foreign Investment Disclosure Act, or Afida, which requires investors in American farmland to report property purchases to the USDA.
  • Then there’s the problem of complex corporate structures that help Chinese investors obscure ownership and evade scrutiny.
  • The U.S. has recently imposed sanctions against Chinese tech firms such as Huawei and Megvii as threats to national security. These successes offer a few lessons.
  • Congress should authorize the USDA to cut through byzantine ownership structures and find the true foreign owners of farmland. The recently introduced Farmland Security Act of 2022 would require the department to release all data on foreign investments in American agriculture.
  • The agriculture secretary should be added to the Committee on Foreign Investment in the U.S., which reviews flows of foreign money into sensitive businesses such as surveillance-camera equipment and semiconductors.

     One additional comment. The Biden administration’s trade policies as of today are non-trade or untrade policies. Its push for the Indo-Pacific Economic Framework (IPEF) is merely a cover for not signing the revised Trans-Pacific Partnership. The administration is not proposing any new tariff actions nor market access arrangements. But focusing on promoting non-trade domestic political interests.

“China is Buying the Farm.” Wall Street Journal (Sept. 9, 2022).

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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