All the weapons of American political capitalism against China

8 October 20237 months ago babelfish

The United States uses law as a geopolitical weapon to target China. The review of "The law of the strongest", the essay by the lawyer Luca Picotti for Luiss University Press

Successfully developed by Alessandro Aresu , the concept of political capitalism returns to the foreground in lawyer Luca Picotti's freshly printed essay , The Law of the Strongest. Law as an instrument of competition between States (Luiss University Press), which has the merit of highlighting its legal face represented by the stringent regulations on the control of foreign investments in force in countries such as the USA where special powers – and contrary, in abstract , to the rules of the free market – are attributed to governments in order to block operations detrimental to the national interest. It is the "geopolitics of law" applied in particular to the ongoing conflict between Washington and Beijing. Here is our review that focuses on the American school case.

Free market adieu

The United States of America is universally known as the quintessential free market and a land of opportunity for individuals who, unconstrained by the cumbersome power of the state, can fully pursue their dreams of economic well-being and wealth.

But, as Picotti writes, this image does not reflect a reality in which, rather than the freedoms of citizens, the existence of "a complex bureaucratic apparatus (with) more specifically protectionist features stands out". A reality made up of "presidential powers, links between large companies and intelligence services, public funding in technology, investment screening committees, powerful export control departments".

Political capitalism

To frame this reality, the author recalls the concept advanced by Alessandro Aresu of "political capitalism", to refer to the peculiar situation of a capitalist development deeply intertwined not only with the "imperial projection" of the USA, but above all with the national interest .

The paraphernalia

Picotti observes that the US regulation of foreign investment control fits into this context: that "complex legal arsenal made up of sanctions, export blocks, national priority clauses". This is the way in which the USA enslaves the law according to the strategic aims set by the government.

Relevant legislation

The origins of this legal system date back far, namely to the Defense Protection Act of 1950, which represented one of the first regulations regarding the screening of foreign direct investments.

Applied in a limited way in the first decades, the legislation was strengthened in 1975 with the establishment of the Committee on Foreign Investment in the United States (CFIUS), an interdepartmental committee aimed at assisting the president in monitoring foreign investments.

The Committee has control and investigative powers that reserve it an extraordinarily important role in the decision-making process, which ultimately refers to the president's power to prohibit or suspend mergers or acquisitions of American companies if it is believed that foreign interest could compromise the national security.

This regulation would be strengthened in 1993 with an amendment assigning the Committee the obligation to review investments involving control by a foreign government of the company that will result from the operation.

Expansion of tools

If in the first years this legislation saw a very limited application, with only one denial out of over 1,700 operations notified to the CFIUS, the evolution of the global panorama has brought its activity and powers back to the center of attention in light of some innovations which:

new aggressive operations with significant political impact by foreign companies;
emergence of new Asian and Middle Eastern investors not linked by solid alliances;
renewed attention to national security after the attacks of September 11, 2001;
“clear intersection between security and technology, for which various infrastructures (energy, transport, food) are starting to be considered sensitive also due to data and interconnection”.

This led to the passing of the Foreign Investment and National Security Act in 2007, which tightened the mandatory nature of preventive investigations.

The current legislation emphasizes the preliminary phase of the Committee, which can alternatively "grant the authorization to the operation; condition it on the adoption of certain measures aimed at mitigating the national security risks of the operation; do not make conclusions and leave every decision to the president; propose to the president the exercise of the powers – granted only to him – to suspend or prohibit the operation".

What stands out here is the definitive veto power attributed to the President, who the legislation frames as the "supreme guarantor of national security and the only one who can determine its pre-eminence over economic freedoms".

Growth of interventions

The effects of this decision-making structure can be seen in the light of the interventions of the CFIUS: 65 notifications were made in 2009, compared to 114 in 2012 and 143 in 2015, an increase that signals how the concept of national security is increasingly expanded and applied to market operations.

Last Stand

This reality is sealed by the last act of this sequence, namely the issuing of the Foreign Investment Risk Review Modernization Act (Firrma), which became effective on 11 November 2018. A law that expands "the list of objects of the operations to be scrutinized, including, for example, certain real estate investments which, by virtue of their location close to US military bases, may represent a threat to national security".

The US-China clash

This complex regulatory apparatus is today applied by Washington to face the most important geopolitical challenge of this time, that with China, in a context of intense economic, commercial and technological competition which has broadened the concept of risk for national security to include , Picotti underlines, “the potential loss of technological competitiveness”.

An emblematic case of the discretionary use of special powers from a geostrategic perspective concerned the defense of the competitiveness of US companies in the crucial 5G technology market. And here, the author points out, "we are at the heart of the geopolitics of law: what matters is to assert one's supremacy over the adversary".

In this wake, Donald Trump's veto on the acquisition of Musical.ly by the Chinese ByteDance Ltd., the famous TikTok case motivated by the need to prevent the Chinese from using Americans' data.

Conclusion: the geopolitics of law

The conclusion reached by Picotti is that there now exists a "profound relationship between national interest, sovereign power, geopolitical use of law". The vast legal arsenal with which the United States has equipped itself to defend its strategic interests gives it the "possibility of attacking, sanctioning, blocking and influencing individuals, companies and entire countries".

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/la-legge-del-piu-forte-luca-picotti/ on Sun, 08 Oct 2023 05:31:51 +0000.