When Congress revised the “One Big Beautiful Bill” in July to preserve Ford’s eligibility for battery manufacturing tax credits, it arrived at the right outcome, even if the underlying reasoning remained largely unarticulated. The decision allowed Ford’s $3 billion plant in Marshall, Michigan to proceed toward its 2026 opening, but it also established a principle that deserves explicit codification: the relevant criterion for evaluating foreign technology partnerships should be ownership and control of domestic assets, not the national origin of licensed expertise.
Congress should formalize this distinction by directing the Treasury and Commerce Departments to develop clear regulatory guidance distinguishing foreign ownership of strategic assets, which warrants restriction, from foreign licensing to domestically controlled facilities, which should be encouraged as a pathway to industrial capability.
This principle requires defense because the political opposition has not subsided. Critics continue to characterize the Ford-CATL arrangement as dangerously risky. Michigan Republicans seek to claw back state subsidies. A legal challenge sits before the Michigan Supreme Court. The July compromise was a victory for pragmatism, but absent a clearer framework, every future licensing arrangement will face the same ad hoc political gauntlet, and manufacturers will remain uncertain whether partnerships that serve U.S. industrial interests will survive contact with the next legislative session.
The arguments against the Ford deal rest on a confusion worth dispelling. Ford’s arrangement with CATL is a licensing agreement, not a joint venture, and this distinction matters. Ford maintains complete ownership of the plant, the land, and the equipment, and Ford employs the workforce. CATL contributes its lithium iron phosphate battery chemistry and provides engineers to train American workers, after which its involvement ends. There is no equity stake, no board representation, no ongoing control.
This structure mirrors what China required of Western firms for decades: technology transfer paired with domestic ownership. Ford has inverted the dynamic, extracting know-how from CATL, the market leader, while retaining sovereignty over the asset. Policy should recognize and encourage such arrangements.
The case for this model strengthens considerably when we look at the alternatives. In March, Northvolt – Europe’s $14-billion attempt at indigenous battery capacity – filed for bankruptcy. The company had secured backing from BMW and Volkswagen and operated under a mandate to reduce European dependence on Chinese production. It delivered 1 gigawatt-hour of capacity against a target of 16, and BMW canceled a 2-billion-euro contract after years of delays.
Northvolt did not fail for lack of funding or talent. It failed because advanced battery manufacturing is a production knowledge problem rather than a science problem, and production expertise transfers through experience rather than documentation. Chinese manufacturers achieve target yields in months; Northvolt required years to reach 70 percent. No amount of capital can close that gap without learning from those who have already solved the problem at scale.
Had Congress blocked the Ford deal, the company would not have developed domestic battery capacity independently – it would have imported cells from China, as Tesla has done for years. The security concerns that animated opposition would have remained unaddressed, because vulnerabilities in battery management systems exist regardless of where cells are manufactured. The difference is that domestic facilities can be regulated and monitored in ways that imports cannot. Blocking production in the name of security achieves the appearance of toughness while guaranteeing the dependence it claims to prevent.
The historical pattern reinforces this logic. Japan licensed U.S. technology in the 1950s and eventually surpassed its sources. South Korea did the same with Japanese technology in the 1970s. Samsung acquired semiconductor expertise from Micron, over U.S. objections, and now leads global memory production. The United States itself learned factory methods from Britain and lean manufacturing from Japan. Industrial capability has consistently transferred through strategic acquisition, with countries who refuse to learn from abroad achieving stagnation rather than independence.
Congress should act to ensure that the July outcome for Ford becomes a durable policy rather than a one-time exception. Specifically, it should direct the Treasury Department to issue guidance clarifying that licensing arrangements with foreign entities of concern remain eligible for manufacturing tax credits where the domestic partner maintains full ownership and operational control, while directing CFIUS to continue scrutinizing foreign equity investments in strategic sectors.
Security concerns about battery systems should be addressed through direct regulation – of cybersecurity standards, firmware control requirements, and data transmission restrictions – rather than through prohibitions on licensing that leave underlying risks unaddressed while foreclosing domestic production.
Ford’s plant will open next year. U.S. workers will build batteries using technology that represents the global standard, developing expertise that did not previously exist in the United States. The question is whether this becomes the foundation of a coherent industrial strategy or an anomaly that future administrations unwind.
Congress made the right call in July. The task now is to make it permanent.
Image credit: Shutterstock ID 2156426915. This article was originally published in The Diplomat.
Claire Shapiro
Claire Shapiro studied at Middlebury College and Oxford University. Her research has focused on Chinese industrial policy in the developing world.