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Published Date: 2024-08-21
Publication:2023.12
Principal Investigator:顏慧欣Yen, Huai-Shing
Researchers:蘇怡文Su, Yi-Wen、鄭昀欣Cheng, Yun-Hsing、羅絜、聶廷榛、蔡晴雯、黃哲融、劉真妤
This study focuses on
the regulatory mechanisms adopted by various countries in the recent years to protect
critical technologies, with the aim of safeguarding national security
and economic security. Firstly, the study examines the foreign investment screening
mechanisms of the United States, the European Union, Germany, Japan, and South
Korea. It reveals that all five nations have amended legislation within the
last five years.
After the U.S. passed the Foreign Investment Risk Review
Modernization Act of 2018 (FIRRMA) in 2018, the scope of the Committee on Foreign Investment in the
United States (CFIUS)
review has expanded, specifying that non-controlling investments and specific
real estate transactions are included in the national security review, and
classifying sensitive personal information, critical technologies, and critical
infrastructure as TID
U.S. business that should be subject to mandatory declaration before
proceeding the investment.
Following the promulgation
of the EU Regulation 2019/452, the EU has granted the European Commission and
Member States the right to express opinions on foreign investments in the territory
of other Member States or on projects or programs that may affect the interests
of the EU. In addition, Germany has amended the Foreign Trade and Payments
Ordinance (AWV) and Foreign Trade and Payments Act (AWG) to make alignment with
the EU Regulation 2019/452. It is worth noting that the new screening threshold
for "cross-sector investments" to strengthen national security and
public order protection was added.
In 2019, the Foreign
Exchange and Foreign Trade Act in Japan was amended, requiring the designated
or core sectors to declare in advance and subjecting them to investment screening.
In South Korea, the Regulations on Operation
of Security Review Procedures for Foreign Investment enacted in 2022 requires
that foreign investments that will result in gaining de facto control and fall into one of the five scenarios that may
hinder the maintenance of national security should be proactively declared and
subjected to screening. In addition, this study also examines factors regarding
the national security and public order that each state should take into
consideration for its foreign investments, concluding that each country should
prioritize the following factors: "whether the transaction is under the
control of a foreign government," "whether the transaction involves critical
technologies, energy assets, critical raw materials, or critical technologies
that could potentially impact national security," and "whether the
investment poses a threat of national security or cybersecurity."
To prevent the leakage
of critical technologies, this report also further analyzes various countries'
dual-use export control regimes. It reveals that the majority of
these countries have related rules between export control and foreign
investment screening. Moreover, since the US has initiated export control
against Russia and China in 2022, the European Union, Germany, Japan, and South
Korea have all responded positively and further developed international
cooperation initiatives or working groups with the US to regulate critical technologies.
Moreover, this report also analyzed outbound
investments screening mechanism. Out study has found that Japan and South Korea
require domestic investors to obtain prior authorization or engage in prior
declaration and screening procedures based on the scale of the overseas
investment, on the impact to investor's home state’s national security and social/
economic aspects, and on whether or not such overseas investment involves a
designated industry. On the other hand, the United States, the European Union,
and Germany are still in the stage of advocating such mecahnism. Still, these
policies have shown that advanced countries are highly aware of the national
security risks that enterprises investing in sensitive critical technologies
overseas can bring and are, therefore, expected to promulgate formal
regulations on oubtound investment screening mechanisms in the near
future.
Based on the above research, this study proposes three
policy recommendations:
1. While various countries implement policy
instruments to regulate critical technologies through their national
security strategies, Taiwan should adopt a comprehensive strategic approach:
At present,
Taiwan lacks a comprehensive national strategy to coordinate how
the critical technologies should be protected against external national
security threats and supply chain risks, as well as to maintain its
leading position in developing advantaged industries. Thus, it is advisable
that Taiwan establish a consensus on the technical standards or items related
to critical technologies within the Ministry of Economic Affairs, and then adopt
a more cohesive strategy on regulative methods to enhance the efficacy of
managing Taiwan's critical technology exports.
2. The existing foreign investment screening mechanism
should be modified to align with the screening threshold of China's
investment review mechanism:
In recent years, various
countries, including the United States, Europe, and Japan, have reassessed or amended their
regulations regarding foreign investment screening mechanism considering the
overall national security or public interest factors. Those countries do not
differentiate between the sources of foreign investment, regardless of
whether they are derived from countries such as China or
Russia. Given the globalization of capital flows, this approach
can strengthen the protection of domestic industrial security by not
distinguishing the source of funds. Since there are differences between the
existing mechanisms for screening foreign and Chinese investments in Taiwan,
it is recommended that Taiwan's screening criteria for general
foreign investments be appropriately incorporated into the existing
standards and considerations for screening Chinese investments. It is also
advisable to make an assessment and promulgate specific considerations
regarding national security to enhance others’ understanding of Taiwan's policy
direction for foreign investment screening and the key points for
assessment.
3. Regulation of critical technologies must rely on
multilateral cooperation. Apart from continuously observing international
trends of development, we should take the initiative to discuss relevant
cooperation with the United States:
Taiwan should leverage
its current friendly and interactive relationship with the US to further enhance
cooperation and exchanges on critical technologies. This includes
actively participating in standard-setting activities for critical technologies,
striving to become a CFIUS Excepted Foreign State, and establishing a bilateral
relationship with the US on cooperation regarding investment screening and
information sharing. Additionally, Taiwan should follow the pace of export
regulation implemented globally and coordinate as much as possible with the international
trend in such environment of economic sanctions, aiming to secure the best
interests for our nation.