In 2018, Beijing Kunlun Tech Co Ltd completed a full buyout of Grindr, the world’s largest social media networking app for gay, bisexual, transgender, and queer people. In March 2019, as reported by several news sources, the Committee on Foreign Investment in the United States (CFIUS)— a governing body created by Ford administration to judge whether or not foreign investments in the US constitute a national security threat—ordered the Chinese company to sell its majority stake.
At first glance, the demand that Kunlun sell its stake in Grindr was a confusing order.
While CFIUS does not comment on particular cases, experts have pointed out that in recent years, the US government has taken a harder line on investments that would make personal data available to foreign entities. The recent passage of the Foreign Investment Risk Review Modernization Act of 2018, for example, gives the US government additional tools to push back against the risks and vulnerabilities inherent in foreign investment in US firms that collect personal data.
Concerns over data are well founded. China passed a law requiring all firms—whether state-owned or private—to relinquish customer data to the government upon request. In the US, GPS tracking, health data, and personal messages are three major areas that a nefarious actor could take advantage of to blackmail or compromise a US citizen, particularly one in the government or military. National security, in other words, now involves monitoring foreign investment to protect Americans’ personal data.
Sarah Bauerle Danzman, Assistant Professor of International Studies at the Hamilton Lugar School, has made it her task to understand these sorts of transactions and decisions, especially since, as she says, there is a perception that “This particular interagency process is quite opaque and secretive.”
Bauerle Danzman has earned a particularly privileged vantage to understand CFIUS and foreign investment generally because, starting in August, she has been an International Affairs Fellow working in the State Department’s Office of Investment Affairs, which oversees CFIUS.
Editor’s note: Bauerle Danzman shares her insights as a private citizen and not as a representative of the government; her research is done as an academic and is not reflective of the policy positions of the US government.
Being awarded an International Affairs Fellowship is a significant honor. Administered by the Council on Foreign Relations, the fellowship is well known in the field of political science, with past fellows including a former secretary and several undersecretaries of state, accomplished academics, and leaders in government and the private sector. The Council on Foreign Relations is a highly regarded, nonpartisan member organization founded in 1921 that seeks to help citizens become better informed on American foreign policy and the wider world. The Council’s current research and wider educational outreach cover topics such as climate disruption, the Fed’s coronavirus response, conflict in the Brazil government’s treatment of the pandemic, and democracy in Africa.
The prestigious and competitive fellowship encourages fellows to build bridges between academia and policy-making, and Bauerle Danzman, trained as an academic, is making the most of the opportunity. Her book, which was published in December from Cambridge University Press and is an extension of her dissertation, focuses on how, from the 1970s through 2015, the global economy was in “a period of successive openings toward foreign investment.” The book considers why markets opened and who drove that openness. But, in the final chapter, she contemplates how that trend toward openness might be arrested and why protectionism might gain ground again. One reason it might, she thinks, is due to countries engaging in “more stringent investment security measures.” As in, there might be more blocked foreign investments by entities like CFIUS, who are concerned with national security.
Bauerle Danzman now has an active role in a process that she formerly theorized about, leading to a deeper and more nuanced understanding of the government’s role in both regulating and promoting investment. At the Office of Investment Affairs, which is part of the Bureau of Economic and Business Affairs at the State Department, she has a variety of duties. One is to work on CFIUS itself, as part of the policy team, which reviews and clears investments that come before the committee. She also prepares public officials within the State Department who are going to speak with their counterparts on matters related to CFIUS, and she provides information on CFIUS to Congressional representatives.
Another of her duties is to provide strategy and policy advice to the Development Finance Corporation (DFC), the US’s development bank that partners with the private sector to invest in projects in the developing world in areas that include infrastructure, technology, healthcare, and energy. As chair of the DFC board, she helps coordinate the State Department’s role.
This varied experience within the federal government will have a positive impact on Bauerle Danzman’s research. First, the understanding she’s gained, she says, will “influence my research to be more relevant to policy-makers.” Since she’s now been involved in the policy-making process, she understands much better “the types of questions that policy-makers want answered.” Her grounded understanding of how experts shape foreign policy will enable her to take the next step in producing scholarship of particular relevance to the policy world.
The connections she’s made through the fellowship will also empower her to take an active role in policy making after the fellowship ends. There might be opportunities to serve as an academic adviser to policy makers, and she hopes to bring students into that process, as well.
Just as important as the fellowship’s influence on her research is the fact that, as a teacher, she will bring the lessons she’s learning in Washington back to the Hamilton Lugar School. One lesson is the fact that, in a typical year, the Secretary of State has more than four thousand papers come across their desk, meaning they can spend only two or three minutes on each paper. These papers (also known as “memos”) and other materials written for influential policy-makers must be concise, compelling, and formatted in a standardized way for ease of reading. One must find a way to make a robust analysis, Bauerle Danzman says, in an extremely succinct way in order to get the reader’s attention.
Bauerle Danzman’s experience writing these papers, she says, has made her think about how to provide “authentic writing assignments that are going to actually help [students] with the type of writing they would have to do if they worked in a government agency like State, which a lot of our students would really love to have an opportunity to do.” Standard academic essays have their place, but writing assignments tailored specifically for the types of positions that students are excited by can add a layer of knowledge and familiarity that will bolster students’ post-graduate success.
“How do I actually use my ability to write memos to have a meaningful impact on US foreign policy?” Bauerle Danzman asks. “And that’s a completely different way of thinking about writing than a standard academic essay.”
One class that her time in government will influence is Global Economic Governance. In this course, students learn about the “global institutions and informal structures that have allowed the global trade and investment environment in which we all live to flourish, since the end of World War II,” Bauerle Danzman says. The course also covers challenges to that governance structure and the ways that our lives are connected to the globalized economy, even if it’s easy to forget about or gloss over those connections in our everyday lives. In a world in which “the politics around globalization have become really fraught,” Bauerle Danzman says, she tries to teach students about both the winners and losers of our current system and the ways diplomacy has maintained or challenged the global economic order.
Bauerle Danzman has been interested in political science since her youth in Pennsylvania. In high school, she became involved in Model Congress and Model UN, and in ninth grade she pursued an independent project in which she assessed the effects of garment factories which provided low-wage jobs on communities in developing countries.
And now, her first book, Merging Interests: When Domestic Firms Shape FDI Policy, has been published. The book seeks to revise previous work on foreign direct investment, which held that the primary reason governments became open to foreign direct investment was because they became democracies. Bauerle Danzman argues that, in fact, democratization has little to do with foreign direct investment, which is the process by which a firm in one country takes a controlling ownership stake in a firm in another country. Instead, she argues that local firms become open to foreign direct investment when reforms make it more difficult for local firms to get privileged access to capital. Thus, it is local economic elites, not regular democratic voters, who are most likely to influence whether or not a country becomes open to foreign direct investment.
Outside her book, Bauerle Danzman has published research that seeks to understand why government officials use tax incentives to attract the economic activity of firms even though the established consensus is that tax incentives are rarely pivotal in a firm’s decision regarding where to expand or invest. One explanation is that government officials with limited private-sector experience are most likely to offer tax incentives because they don’t completely understand what firms want. Other research tackles bilateral investment treaties, the network structure of global finance, automation in the manufacturing sector, and the global nature of financial crises.
The International Affairs Fellowship will help Bauerle Danzman as she continues to research these subjects and others crucial to her work at the State Department. And it’s all been made possible with the support of the Hamilton Lugar School, which, Bauerle Danzman says, is unique because it is both “academically focused but also really values policy engagement and policy relevance.” She is grateful that the Hamilton Lugar School is the rare kind of institution that would allow a young faculty member to take this sort of leave of absence, but she knows her students will benefit from her experience. As a principled and nonpartisan leader in a complex and developing field, Bauerle Danzman is showing how to combine teaching, researching, and contributing to crucial policy debates.