Biden’s national security strategy reinforces tech decoupling and increased focus on regulation
November 18, 2022
Originally published in The hill
The recently published National Security Strategy lays out the Biden administration’s approach to a changing world at an inflection point by providing a roadmap for the administration and for Congress. The administration’s national security priorities largely echo those of previous administrations, but they diverge in emphasizing a “modern industrial and innovation strategy” that promises a thorough use of industrial and economic tools to create a bulwark against autocracies like Russia and China. The resulting message is clear: the administration’s national security goals are intrinsically linked and will necessarily impact a wide range of American businesses.
Five areas of the strategy stand out for their potential impact on business.
First, increased monitoring of investments will ensure the Committee on Foreign Investment in the United States (CFIUS), with its extensive authority to review foreign investments, continues to be a prominent national security tool. The strategy also contemplates new restrictions on foreign investment, which have also gained momentum in Congress. If the “reverse CFIUS” comes into force, companies will have to transform their strategies for investing abroad, plan for longer investment periods, increased control of investments in certain sectors and in certain countries, and potentially restrictions on certain outward investments considered a threat to national security. risk. In addition, tightening export controls will force companies to strengthen compliance programs and reassess offshoring operations. As Department of Commerce recent restrictions on semiconductors demonstrate, new regulations can quickly ripple through an industry, in some cases having a significant impact.
Second, foreign and domestic policy lines are blurring with the focus on making strategic public investments in strategic sectors and supply chains, especially critical and emerging technologies. New laws, including CHIPS and scientific law and the Inflation Reduction Act, illustrate the administration’s commitment — and congressional support — for such investments. These investments can be an important catalyst for technological innovation for the private sector. However, companies will need to be clear about the trade-offs these subsidies present, as business decisions may be impacted, for example whether certain operations may be offshored.
Third, the administration’s focus on supply chain integrity and resilience means companies – especially those in critical technology industries – can leverage this support to further optimize their supply chains. and improve their resilience. But it also means that in the short term, as the administration focuses on tackling Chinese influence, companies may feel compelled to improve knowledge of their supply chain, identify suppliers geographically diversified and to develop shorter-term and more flexible contracts with suppliers to better adapt to changes in supply chains. Many companies have started laying the foundation for better supply chain resilience with the COVID-19 pandemic. These efforts may need to accelerate and companies will need to develop a strong business and legal strategy to enable operations based on complex global supply chains in a fractured geopolitical environment. The impact of the new semiconductor restrictions highlights the complexity of the supply chain and the need to adapt quickly to changing regulatory requirements to minimize operational impact.
Fourth, securing critical infrastructure and strengthening cybersecurity will have a significant impact on the private sector, given that 85% of critical infrastructure is in the private sector. We have seen this begin to materialize with the Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA) which gives the Cybersecurity and Infrastructure Security Agency (CISA) an increased mandate to develop regulations on the cybersecurity of critical infrastructure, l establishment of minimum security standards for the use of federal software. , and recent announcements from the White House that the communications, water and healthcare sectors are next on the administration’s list of cyber priorities. Critical infrastructure companies must not only prepare for incoming cyber regulations, but ensure they are investing in cybersecurity the right way, adopting a “hardened shields” posture to defend against attacks from a range of threats. threatening actors, including Russia.
Finally, the desire to develop an inclusive international technology ecosystem likely means that companies will have to navigate an increasingly regulated environment. An important part of “transformative cooperation“with Europe will focus on adequate privacy protections, building on the recent executive order on data transfers between the EU and the United States. In practical terms, this means companies should ensure that transfer impact assessments are up-to-date, assess the sufficiency of data transfer mechanisms, and adjust their business models where necessary. There is also likely to be a renewed focus on regulating Internet operating standards to ensure that standards governing the Internet continue to promote fundamental principles of democracy, such as freedom of expression.
Top Democrats support the administration’s strategy. Republicans criticized the strategy. The midterm elections will play a key role in determining the likelihood of translating the strategy into legislative action. If Democrats retain control of Congress, expect to see more legislative activity. However, if the House or Senate flips, the administration’s national security priorities may not materialize in congressional action. Instead, the administration will likely focus more on executive national security authorities to advance the goals of the strategy. The recent National Biotechnology and Biomanufacturing Initiative could serve as a model. Regulators have also been assertive in issuing new regulations to meet national security objectives, such as recent export control restrictions on advanced semiconductors and supercomputing. But, since Republicans are already calling for congressional review of the handling of export controls in the event of a House rollover, there could be greater scrutiny from regulators if Republicans take control.
Regardless of how events unfold on election day, the strategy’s focus on the industrial and economic tools of national power portends a significant impact on business.
Stephanie Gosnell Manager is a partner in the Gibson Dunn office in Washington, DC, where she is a member of the Global Business and Privacy, Cybersecurity, and Data Innovation practices. She advises clients on complex legal, regulatory and compliance issues related to international trade, cybersecurity and technology issues. Handler’s legal counsel is deeply informed by his operational cybersecurity and in-house legal experience at McKinsey & Company, as well as his active duty in the US Marine Corps.
Roscoe Jones Jr. is a partner in the Washington, DC office of Gibson, Dunn & Crutcher and co-chairs the firm’s public policy group and is a core member of the Congressional Investigations Practice Group. Recognized in 2022 as one of Lawdragon’s “500 Best Lawyers in America”, Jones has represented corporations, nonprofits, and individuals in legislative and policy matters before Congress and the executive branch. Jones has nearly a decade of experience on Capitol Hill advising three U.S. senators and one congressman and political experience in the executive branch.
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