Down on the Farm

Past columns have mentioned the cutthroat competition in Congress to see who can introduce the most outrageous anti-China proposal, the main effect of which is to provide fodder for criticizing the president for not being tough enough. Few if any of these will be enacted—I hope—but all of them, along with the continuing series of “whack-a-mole” episodes like TikTok and the spy balloon, poison the atmosphere and make trying to maintain civil and constructive conversation with China even more difficult than it already is.

Now, however, if you’re looking for the silliest proposal, I am pleased to inform you we have a winner. Last week, the Senate, in addition to adding an outbound investment reporting mechanism to the annual defense authorization, also added the Promoting Agriculture Safeguards and Security Act (PASS), which would direct the Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) to block investors from China, Iran, North Korea, and Russia from acquiring U.S. agricultural companies and farmland. PASS also adds the secretary of agriculture to CFIUS and requires the president to submit a report to Congress should he approve a covered transaction to a prohibited country.

This is not a new issue, although the perceived culprit has changed. In the late 1980s, a wave of paranoia about Japan led to similar concerns. A 1989 GAO (then the General Accounting Office) report found that in 1988 foreign persons held one percent of U.S. farmland. Of that 1 percent, only 1.7 percent was owned by Japanese. In 2021, nearly 33 years later, foreign persons held 3.1 percent of agricultural land, although 47 percent of that was forest, not pasture or farmland. Less than 1 percent of that was owned by Chinese. In other words, this was small cheese then, and it is small cheese now.

The more important argument, however, is that unlike intellectual property or technology, the Chinese can’t take it with them. The farmland is here to stay, except for the topsoil getting washed down the Mississippi River, but that’s another story. (I was working for Senator Rockefeller when the Japanese bought Rockefeller Center as part of their “buy high, sell low” strategy at the time—and I made the same point. It was not moving to Tokyo.) What is the most likely outcome if the Chinese buy farmland? They will grow soybeans and export them to China, which is probably what the current owners of the property are already doing.

So what, exactly, are we worried about? That they’ll corner the market on wheat, corn, and soybeans, ship it all to China and leave us starving? At less than one percent of 3.1 percent of the land in question, they’ve got a long way to go before we need to worry about that. And, of course, in extreme situations, like war, the United States could ultimately either seize the crops or prohibit their export. Instead, the argument is ostensibly about national security, as it must be, since the president’s authority to block an inbound investment must be based on his finding that allowing it to proceed would threaten U.S. national security.

The national security argument, in turn, is usually based on proximity—the purchased land is near a military base and could provide opportunities for surveillance and intelligence gathering. The case that flamed the current controversy was the proposed purchase of 300 acres to build a corn mill in North Dakota that was 12 miles from Grand Forks Air Force Base. Up to a point, this is a legitimate argument. However, Congress has already dealt with it by making clear in its enactment of the Foreign Investment Risk Review Modernization Act (FIRRMA) in 2018 that CFIUS had authority to review real estate investments. Even before that, President Obama blocked a proposed investment on precisely these grounds. So, we already have belt and suspenders. It’s hard to make the case we need more redundant language.

This also takes us back to the world of “could,” which has plagued the security debate for decades. Could a corn mill in North Dakota end up as a Chinese spy operation? Yes, there is a nonzero possibility that could happen. Is it likely? No. Would we notice if it were happening? Probably. Could we do something about it? Yes. If we allow paranoia to overtake rationality and turn our national security policy into one of zero-risk rather than risk management, we end up wasting time and resources on things that fundamentally don’t matter at the risk of ignoring things that are far more important.

I recall in 2013 when the Chinese company Shuanghui (now WH Group) bought Smithfield, the pork producer, there were a number of politicians who opposed the transaction on national security grounds. They were essentially arguing that bacon was essential to our national security and needed to be protected. That argument did not prevail; the transaction went through; Smithfield continues to function; and the world of pork did not go up in smoke, aside from the occasional barbeque. That was a smart risk management decision. The PASS amendment passed the Senate 91–7, and the House will probably accept it in conference, so paranoia will win the battle, but we should all hope it loses the war.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.