Trump sends signal with Broadcom veto

Trump sends signal with Broadcom veto

President Trump’s decision to block Broadcom’s hostile takeover of Qualcomm, which would have been the biggest tech acquisition in history, shows that he is taking a broader view of what constitutes a national security threat than his predecessors.

The administration’s perspective is infused with Trump’s protectionist instincts, blurring the lines between economic and national security, and seems to place heavy importance on emerging technologies like 5G wireless networks.

“They are more willing to link economic and national security than previous administrations might have been,” said Adam Segal, an expert on emerging technologies and national security at the Council on Foreign Relations.

Trump issued an order blocking the deal on Monday, citing the advice of the Committee on Foreign Investment in the United States (CFIUS), an interagency panel tasked with investigating such deals for national security threats. The panel had warned that Broadcom’s takeover of Qualcomm could slow the company’s work on developing 5G.

A White House official, who was not authorized to discuss the matter publicly, also told The Hill that Broadcom’s “relationships with third-party foreign entities” weighed on the president’s decision, but declined to elaborate.

Asked for comment, a Broadcom spokesman referenced a statement from Treasury Secretary Steven Mnuchin that says the veto was not intended to cast suspicions on the company itself.

Trump’s veto highlights the concern that officials have about developing next-generation networks, which will be inextricably linked to the country’s infrastructure in years to come. The White House has explored the idea of nationalizing 5G networks in order to ensure their security, according to a leaked National Security Council document published by Axios in January.

China figures heavily in these concerns. The CFIUS said in a letter to attorneys for Broadcom and Qualcomm last week that it worries that a decline in Qualcomm’s 5G investments could open the door for Chinese tech firms like the telecom giant Huawei.

Huawei has effectively been barred from doing business in the U.S. since 2012, when Congress released a report warning the public and private sectors against dealing with the company over concerns about its ties to the Chinese government.

But it’s unclear whether Broadcom has any ties to China or Huawei. The company is based in Singapore and is in the process of moving its operations to the U.S. (A plan that was revealed in a White House ceremony in November during which Trump praised it as a major investment in domestic jobs.) And the company had emphasized its commitment to 5G research in the days after the CFIUS intervened in the deal.

For those reasons and others, it’s possible that previous administrations would have allowed the deal.

Presidents have rarely acted on CFIUS recommendations to veto a transaction, but in the few cases where they have, the decision was driven mainly by concerns about a direct foreign investment in the U.S. market. Trump’s veto of the deal was only the fifth time a president has blocked a potential foreign acquisition, but it was the second time his administration has taken that step.

The new approach may be influenced by Trump’s suspicions of China and his inclinations toward protectionism. This month he ordered heavy tariffs on steel and aluminum imports, igniting fears of a trade war. He’s also exploring the idea of imposing a tariff on Chinese goods, with a focus on their tech industry, Reuters reported this week.

In an unusual move, Qualcomm, which had rebuffed Broadcom’s acquisition offers, sought to take advantage of the administration’s views to head off the hostile takeover. In January, it alerted the CFIUS about potential national security concerns posed by the deal and urged the panel to review it. Several high-profile Republican lawmakers backed the company’s plea, including Senate Majority Whip John Cornyn (R-Texas). He sent a letter to Mnuchin, who chairs the CFIUS, asking for an investigation.

But, at least in the case of the Broadcom review, the new approach to foreign deals has won support from lawmakers who are otherwise at odds with the administration.

Senate Minority Leader Charles Schumer (D-N.Y.) applauded the veto of the Broadcom deal on the floor of the Senate Tuesday, saying it will protect against China’s “rapacious” efforts to dominate the tech and telecom markets.

“We need to preserve [Qualcomm] as American because it has security concerns, both economic and national security,” Schumer said. “As China seeks our dominance in the semiconductor and wireless industries, the United States must be wary of attempts to acquire US leaders in those industries.”

Schumer added that Democrats have endorsed efforts to expand the CFIUS’s jurisdiction so that it can better police the U.S. tech market for foreign investments. That effort is being spearheaded by Cornyn, who says that the digital age requires the government to expand its view of what types of deals constitute a national security threat.

But Segal warns that there could be drawbacks to such an approach. While he notes that it’s not inconceivable that the Obama administration would have made the same decision on Broadcom, Segal says that there’s a reason why previous presidents have been more restrained in vetoing such deals.

“The focus on national security as a justification is pretty broad, and traditionally we haven’t wanted to use it because it opens up the door for other countries to use it,” he said.

Source by:-thehill

Share:

rajtechnews