By Nancy Fischer, Aimee Ghosh, Marques Peterson, Amaris Trozzo, Arielle Heffez, Samantha Franks and Whitney Alston
On March 7, 2024, Sweden joined the North Atlantic Treaty Organization (“NATO”) as the 32nd member of the transatlantic alliance. Spurred by Russia’s 2022 invasion of Ukraine, Sweden’s ascension will more closely bind the allied nations, creating opportunities for Swedish businesses to participate in the U.S. market and NATO collaborative initiatives.
Making the Most of U.S. Investments
In response to tensions with China, supply chain disruptions during the COVID-19 pandemic, and shifting geopolitics around the globe, the U.S. government is heavily investing in critical sectors, including defense, domestic manufacturing, clean energy, technology, and innovation.
Three U.S. laws – the Infrastructure Investment and Jobs Act, the CHIPS & Science Act, and the Inflation Reduction Act – invest trillions of dollars in federal spending over the next 10 years through grants, loan guarantees, tax credits, and other incentives. Designed to spur U.S.-based manufacturing and innovation, these laws have attracted European companies and other private investors into the U.S. market, often for the first time.
Further, national security concerns are driving increased focus on replacing Chinese products embedded in critical infrastructure with those manufactured by trusted partners within allied countries, like Sweden, creating opportunities for Swedish innovators, manufacturers, and suppliers. The significant federal investments and prioritization of trusted suppliers is coupled with domestic policies – like steep tariffs on Chinese imports and domestic content requirements for products purchased with U.S. government funds – designed to create a friendlier economic environment for companies, including European companies, doing business in the U.S.
Sweden’s ascension to NATO may also support opportunities for Swedish companies to participate as contractors to the U.S. government, the largest purchaser of goods and services in the world, or to NATO itself. Further, as a NATO member nation, Swedish companies can now access NATO’s Defence Innovation Accelerator for the North Atlantic which brings industry, government, and academia together to develop solutions to safeguard NATO members.
The December 5, 2023, Agreement on Defense Cooperation between Sweden and the U.S. established an important framework for enhanced defense and security cooperation between the two nations. In addition to reinforcing the countries’ existing defense cooperation, this Agreement established conditions for U.S. forces to operate in Sweden and, as a result, likely provides new opportunities for Swedish companies to contract with the U.S. government.
Navigating the Regulatory Environment
To take advantage of opportunities, Swedish businesses will need to navigate several areas of U.S. law.
Foreign Investment Reviews
Swedish companies are likely familiar with the country’s recent Foreign Direct Investment Screening Act which is designed to prevent certain foreign investments that may negatively impact Sweden’s national security. The U.S. has long subscribed to similar rules.
In the U.S., transactions that could result in the control of a U.S. business by a foreign company and investments by foreigners conveying certain rights in U.S. businesses involved in critical technology, critical infrastructure, or the collection and maintenance of sensitive personal data are subject to review by the Committee on Foreign Investment in the United States (“CFIUS”), which is empowered to block transactions for national security reasons. Additional rules apply to acquisitions of U.S. companies that hold security clearances.
Domestic Content Requirements
Recent U.S. funding and procurement opportunities are subject to domestic content threshold requirements. This has increased the demand for U.S.-made products, including goods manufactured by foreign companies in the U.S.
Supply Chain Integrity
Swedish companies seeking to partner with the U.S. will have to demonstrate that their supply chains are not reliant on China. The U.S. strongly enforces the Uyghur Forced Labor Prevention Act, which prohibits import into the U.S. of any goods manufactured or produced at any level in the Xinjiang Uyghur Autonomous Region of China. Further, certain federal incentives, like subsidies for semiconductor manufacturing, include security supply chain requirements.
Protecting IP
Swedish companies investing in research and development are encouraged to protect the ownership and control of their intellectual property before participating in innovation consortiums and accelerator programs. While government contractors generally maintain ownership of their technical data or computer software, contractors should understand that the Government does obtain certain use rights.
2024 U.S. Presidential Elections
U.S. economic and foreign policy priorities could shift in the wake of the 2024 presidential election. However, while many policies will be in flux, policies targeting economic competition with China and support for domestic manufacturing, onshoring, and supply chain resiliency are expected to remain in place, regardless of the election outcome.
For companies who are able to navigate the complexities, Sweden’s ascension to NATO and enhanced relationship with the U.S. make this an exciting, unprecedented time for innovators to explore new opportunities.
About the Authors
Nancy Fischer is a Partner and Global Head of Regulatory at Pillsbury Winthrop Shaw Pittman. She advises a global clientele on international trade matters, export controls, economic sanctions, supply chain and domestic content requirements.
Aimee Ghosh is a Partner at Pillsbury, where she provides strategic counsel on government affairs strategy and regulatory obligations.
Marques Peterson is the managing Partner of Pillsbury’s Washington, DC office, where he advises clients on a wide array of U.S. and international government contracts matters
Amaris Trozzo is an Associate at Pillsbury, where her work focusses on the intersection of public policy, national security and international law.
Arielle Heffez is an Associate at Pillsbury, advising on international trade matters, including export controls and other regulatory and public policy issues.
Samantha Franks is an Associate at Pillsbury, advising global and U.S. companies on matters of international trade, including sanctions law, export and import controls, and international arbitration.
Whitney Alston is an Associate at Pillsbury, advising on a broad range of government contract law, including contract formation, compliance obligations and internal investigations
