Transcripts For CSPAN2 Hearing On China And U.S. Economic Policy 20240712

Good morning. This hearing will now come to order. I am pleased to welcome our distinguished panels of Witnesses Today on the economic subcommittee focusing on a very important topic and i think theres a lot of bipartisan interest in and that is the economic geostrategic challenge with the rise of china poses for the United States not just today but in the future. The calmness party led peoples republic of china through unfair treatment practices and intellectual property theft market manipulation and very prominently in my view not reciprocal treatment not just in the economic realm but in many realms has been a force in the Global Economy that undercuts the resiliency of the u. S. Economy. Its been one of the worlds fastestgrowing economies averaging close to 10 growth from 1979 to 2015. In 2014 china overtook the United States as the Worlds Largest country in reducing power according to the International Monetary fund. I believe there is a strong bipartisan interest and hopefully we will see that today and establishing a longterm economic United States strategy with our allies that focuses on reciprocity, intellectual property theft and ultimately from the United States person if outcompeting chinese. In may the white house issued its document called the United States strategic approach to the peoples republic of china. This document stated quote the Chinese Communist party expanding use of economic political and military power to compel acquiescence from nationstates across the globe armed vital American Interest and undermines the sovereignty and dignity of countries and individuals around the world. This document is part of the Broader National Security strategy issued a couple of years ago by the Trump Administration and National Defense strategy issued by the department of defense. These documents in my view has very strong bipartisan support in the congress for laying out the challenge that our nation faces with regard to china. But they lack right now is implementing documents, implementing strategies particularly as it relates to economic challenges that china poses. What our hearing intends to do today is to start the focus on the implementation and execution of these strategies. As i mentioned i think these strategies have broadbased bipartisan support but we are going to need to reintegrate our government and society together for the longterm, literally decades like we did in the cold war with the soviet union if we are going to execute these in a way that protects American Interest their workers are economic and National Security interest that im hopeful that is the path that we are big inning on in the Trump Administration and cabinet members in the last two weeks have started to lay out the strategy. I know secretary pompeo as we speak is testifying on the Senate Foreign Relations Committee and im hopeful with their two panel of Witnesses Today government witnesses and experts from the private sector and inc. Tank community we will be able to start informing the congress on this issue with the think is one of the most important issues facing the United States. That is our goal and im excited to have Ranking Member markey as my Ranking Member here and we feel the same on a lot of issues regarding the challenges that china poses and with that i will turn to the Ranking Member for his Opening Statement. Senator markey. Thank you mr. Chairman. Thank you so much for appearing and for your continued hardship on the subcommittee and i want to thank our witnesses for their willingness to participate today. The Ranking Member i believe meeting the china challenge should he have bipartisan priority. We must defeat beijings efforts to unfairly tilt the Playing Field against American Workers and businesses. Those actions include support for companies as well is increasingly using multilateral institutions to set standards that privilege Chinese Companies and technology appeared china also uses economic tools to threaten freedom around the world. Beijing is already exploiting the size of its market to coerce american citizen sent Business Leaders as well as foreign governments. To selfcensorship to protect official Chinese Government messaging. We know china is using exports and foreign assistance including the initiative to in bed around the world not only surveillance technologies but also the values and practices that activate those technologies for a torah terion use for it as we engaged in the competition we must remember that the Chinese Government is testing their authoritarian tools first and foremost of the people of china. I want to make clear in todays hearing and otherwise we are focused on the threats posed by the chinese. We are focused on the threats posed by the Chinese Government. While countries around the world lead an International Coalition to push back on chinese aggression they know the United States has retreated from our historic support of democracy and human rights as a key pillar of our foreign policy. They know the trump restriction has abandoned International Institutions and the World Health Organization while the Chinese Government has stepped up there and puts campaign and they know this administration is unprecedented support for it or terions over air allies. Pulling together Global Coalition to combat chinese policy directives is a is pursued aggressive approach that swings between pandering to china including an apparent greenlight from president trump. The closing of the chinese consulate in houston without any clear reason or explanation of what we seek in return. We cannot consider china policy in a vacuum but every policy decision on the past three and half years impacts how the rest of the world use us to dissect ss these policies for its clear to me that we have veiled to rise at this moment. As china steps up its Propaganda Campaign in the midst of the coronavirus is hard for United States to point fingers when our own virus response has been so inept. The presence inexplicable failure to lead a National Response to the Coronavirus Crisis and its attacks against science has left the United States flailing as other countries lead in responding to the pandemic rear as china continues to dominate manufacturing and required reporting on sharing of intellectual property in cutting domestic spending has not raised spurred economic involvement that. We should be investing in our research and development and Technology Sectors and putting money into education for a particular focus on s. T. E. M. Agree should be utilizing the defense production act which mobilizes the economy during the pandemic. As china engages in a conference of campaign to exploit International Institutions for their own purposes we have retreated even further from the world stage. United states is absent on the world stage in china is only too happy to fill the void. Or a competition with china is fundamentally about free society versus authoritarian. We must utilize at our disposal making the nice is competitive and resilient as we work with democratic countries around the world to push back in a connected way at the values would hold so dear and the challenges. The stakes are too high and the United States cannot ordered this so thank you mr. Chairman for this very important hearing. Thank you to all of the witnesses who are participate in today as this is really a very important subject. Senate thank you senator markey and i appreciate her ship on the subcommittee where we have spent a lot of hearings and a lot of overall bipartisan agreement particularly as it relates to china. I noticed the chairman of the Commerce Committee senator richter is here and i would ask him to give an Opening Statement as well. Mr. Chairman. Thank you mr. Chairman. I appreciate leadership on this issue and Ranking Member markey has been an ambitious two Panel Hearing this morning and should be quite valuable. The focus is the Chinese Communist party and their predatory economic is and their impact on American Companies both at home and abroad. Protecting our economic advantages in the future will require an aggressive u. S. Government response by congressional action and oversight. Today the white house published its whole of government Response Plan in a document called the United States strategic approach to the peoples republic of china. Todays hearing will look is on the economic overall u. S. Strategy but as the white House Strategic ward points out the ccp uses a variety of weapons to undermine americas economic competitiveness with Cyber Attacks political property that Technology Transfer and illegal subsidies for stateowned enterprises. I hope our witnesses will describe in particular the impacts of the China Campaign with respect to the Commerce Committees jurisdiction such as telecommunications Maritime Aviation and space. Americas future of Economic Trust 30 is not the only thing at stake in the strategic competition as the covid19 pandemic continues chinas apparently using tactics permits military playbook against our Public Health sector. Last week the Department Justice justice for a widespread cyber attack supported by the chinese intelligence service. The target allegedly included at least four u. S. Armistead akel tax working on a covid19 related vaccine and treatment project rate it has revealed unacceptable vulnerabilities by years of letting the ccp be an ott hopefully thats about to change. During the initial phase of the covid19 outbreak chinese exporters and shipping ground to a hault and he was the scissors were forced to go without supplies. In particular the United States pharmaceutical industry has been shown to be over reliant on the chinese buyer. We cannot tolerate economic liabilities. The dcp is unlikely to stop its legislative practices. Therefore the u. S. Government should help congress become more resilient against constant pressure from beijing could i would ask her witnesses from the state department and the Commerce Department to detail the measures they are taking to support they can play a significant role in supporting the efforts of the executive branch. An ott the shtick here and trusted Communications Network act known as rip and replace. Their funds in the face for proposal by the majority leader in this regard. This law will help attacked american Communications Networks threats posed by ct by supporting their mobile update and we welcome suggestions from all of you to bolster the administrations effort rate mr. Chairman and Ranking Member markey you are both champions in this regard and i appreciate your bipartisanship and i think the witnesses. Thank you very much. Thank you mr. Chairman and want to welcome our witnesses. I have instructions here that say the witnesses have not taken their seats please ask them to do so. We have no witnesses here in the room but i think they have taken their seats virtually. I can see them on the screen and i want to welcome mr. Michael wessel commissioner of the u. S. Economic Security Review Commission and mr. Rush doshi director of the China Strategy Initiative has the brookings institution. Gentleman you each will have five minutes to deliver an oral statement or an and your written statement will be included for the record. Thanks again for being here and mr. Wessel we will begin with you. Thank thank you for the annotation to appear before you today. The topic of todays hearing directly affects every one of our citizens could my name is Michael Wessel and im appearing before you today at the the commission of u. S. China economic and security review condition but as a normal washington im speaking for myself although my comments are informed by my service and other works have been involved with for several years todays hearing raises the critical issue of how to respond to the china challenge. While chinas policies are the greatest threat to our competitive posture of innate nations are watching americas response to determine whether they should immolate chinas actions or whether america will stand tall and defendant. Last week chinas foreign minister said quote the Current Situation in chineseu. S. Relations is not what china desires to see. United states is response to for all of this unquote but i agree we dont want to current relations to continue but i strongly disagree that the u. S. Is solely responsible. Years of repeated attacks on our Industrial Base and continuous eft of our intellectual property, countless unfair trade practices massive subsidies statesupported entities and many other predatory and rejectionist policies along with chinas human rights abuses current actions in hong kong and projection of the South China Sea and elsewhere require that we more seriously confront china. Chinas actions with regard to their policies for chinas leadership is made clear their intentions through policy pronouncements and neck cavities. They dont pose their approaches being winwin but the chinese come his partys policies contributed to the halting of reduction that dangerous reliance on sometimes risky supply chains and resilient super countless jobs and lost. In my prepared testimony i outlined many of the policies and practices that form the basis for our concerns. They are welldocumented. We are dependent on china for medicines personal protective equipment but that dependence exists in many other sectors and could increase if the ccp achieves its stated goals. As a relates to policy failures in the west it must be addressed. Our inaction on certain fronts and actions on others have contributed. After the recession of china the World Trade Organization u. S. Businesses began to set up a recent with the stated goal of serving the Chinese Market. Despite facing requirements for joint ventures Technology Transfer and other policies the amount of investment by u. S. Firms in china increased as did their climate which rose by almost 600 to 1. 7 Million People by 2017. U. S. Firms in china have increased an average of 13. 6 her year since 2003 were double the rate of their domestic orders. The promise of serving the Chinese Market has not claimed benefits. Research shows 60 of chinas exports in the u. S. Emanate from foreign invested enterprises. Not all of those are u. S. But any art. Now with chinas rising debt load the capital is beginning to open its Financial Sector to foreign firms its serving its own needs. The risk to Foreign Investors is significant in economic terms of advancing chinas military and technological capabilities. Hundreds of billions of dollars have will flow to china of the next years with strict scrutiny. We should examine some policy options to promote our interests are in my testimony identifies several recommendations made by the commission as well as several of my own. We need a conference of approach and i believe immolating the congressional effort in the autonomous on the best trading act of 1998 which this committee played a role in his work considering. We not only need to confront the policies fostered by the ucc but need to invest in our own competitiveness that will advance our interests. We also need to focus not only in todays challenges but those over the horizon. I thank you for the opportunity to appear before you this morning i look forward to your questions. Singh thank you mr. Wessel and i would like to now ask mr. Doshi for his Opening Statement. Smit thank you representatives sullivan and members of the committee. Thank you for the privilege of being able to testify on the efforts to build u. S. Real resilient think about it. I focus my room or in three subjects. Beijings ambition to Global Technology beijings connectivitys and challenges they pose to Technology Leadership and policy recommendations that ulster competitiveness. First i will talk about chinas technology and patience. A robust statebacked effort in Global Technology leadership. We are in the middle of the fourth congressional revolution by Artificial Intelligence but it wants to lead that revolution. Its also driven by geopolitical. Beijing argues the last three industrial revolutions left some countries and japan local leaders [inaudible] the overview that history argues the First Industrial revolution brought power to build technical empires making the United States a leader in Information Technology could aging missed out on these revolutions and now it hopes to lead in Global Leadership trait china agrees to colleges domain between the us and china. That leads to the second subject what is china doing to seize local first chinas spending award in some cases equal to ours if not greater than that china has a smaller con me for the Technology Central to the fourth industrial resolute revolution china may be outspending us. Second beijing believes its industrial policies has a 1. 42 in dollar deal with chinas launched and initiatives tend sectors of a national revolution. And of course it has technology plans with varying degrees of success but we engage in predatory behavior to close the gap in the United States. Chinese sources agree or are rather argue although the u. S. Is has better innovation we cant or products to market without factories which gives china an opportunity to use reverse engineering and surpassing that states. Beijing understands post covered the free world is trying to diversify supply chains away from china and for that reason general secretary xi jinping has agreed the printing is protecting supply chains is a pop ready. Chinas indicate the vest and remembers are not china is the Worlds Center of supply chain and keeps those companies adversely affecting our security and technology will revolution but at least a third and final question what can we do about this . In my submitted testimony [inaudible] its a community of people thinking of how to compete. We need information and we need to know where we are vulnerable to beijing and that requires an entity to build an institutionalized knowledge. Second we need to better coordinate and. We dont have a National Strategy for competitiveness and resilience. Taiwan is inspired in this regard prepared only government thats been successful in penalizing from china were 33,000,000,001 with the data was to have one office served as a onestop shop for all this is is. Congress could consider pushing corporations of dan quarterly hearing cycles for example tax policies that hold equity positions on committee procompetition for purchase as well. Innovation Frontier Companies are making big on the future can only have one company in hightech industry net makes the wrong bet on semiconductors where out of luck if we have multiple companies we have multiple options and thats an advantage we can uniquely have. Finally we should reinvest in americas strength in the immigration system [inaudible] and closing our superpower marathon with china is not as much about what we do at home but will we do broaden this committee will be at the center of those efforts. Thank you very much for your time and consideration. We have some general openended questions but i spent a lot of time in china have working on the relationship from a lot of different perspectives but one core principle that i think we need to focus on again something that is very bipartisan is the issue of reciprocity right now in the u. S. China relationships across so many spheres to relationship is not difficult at the end of the day reciprocity is an issue of fairness. What we enable chinese journalist or businesses or academic institutions to do in america we cant do over this creates a very long list across many spheres of the relationship ended my meetings with the chinese they sometimes even acknowledge this. Remarkably what they do when they say their relationship is nonreciprocal they say well and ive heard this is u. S. Centric and i. Another positions senator is because we are still a developing country. I have heard that a year and a half ago. Its a ridiculous statement but id like the two of you to comment on this issue of the lack of reciprocity and reciprocity as a corporate small that we need in the relationship between the United States and china and secondly if you can talk about an issue that i refer to as promised fatigue. This is the issue of over the last three decades almost every major agreement that the chinese have undertaken with regard to the United States, they dont follow through on. Two examples during the Obama Administration president obama led the effort to have a comprehensive agreement on intellectual property theft and the Bush Administration prior to the Obama Administration did this. They continue at higher levels. In 2015 xi jinping in the rose garden with president obama said we will not the South China Sea. Within weeks they were that promise but if you look at reciprocity promised fatigue its in the opening question. Thank you for that excellent question which really goes to the heart of the relationship at this point and the challenges we face. Let me first go to promised fatigue and then i will address the question of reciprocity. I am a democrat but one of the great statesman Ronald Reagan said trust but verify and i think we have failed to have the kind of provisions in place that would do just that meaning that when the promises made we need to implement automatic provisions to ensure that from us as our capped. Too often we rely on those promises and hope for the best and find out many years later or even quicker sometimes that the promises are broken and then we look at what tools might be available to fix that. We need more automatic trade measures and provisions to put into place. Number two, and i rely on my colleague who is skilled in the chinese language we need to have a better understanding of what china actually says. That means it requires reading core documents. When one looks at the Bilateral Agreement on cyber hacking for example it was the fundamental misunderstanding here because the chinese said that they would not have for economic benefit alone. The fact is they view economics and military security is inextricably intertwined and the result is when they hacked for economic gain to does for military and National Security gain so we were talking, we were using different definitions. Finally kuechly on reciprocity at think reciprocity is an appropriate tool to use in certain sectors potentially not acrosstheboard. We dont want to be like the chinese that we want them to understand that when they take actions that are adverse to our interests they have to expect the same here. I believe reciprocity has a role and that number of sectors. Before i have mr. Doshi answer that on reciprocity i spoke to the chinese when i was in beijing a couple of years ago and i propose the lack of reciprocity in areas like journalism, they have hundreds if not thousands of journalists in our country pretty much free roaming. We dont have that. They have confucius institutes that are universities through when i was in beijing the investors told me you can get on the campus of beijing University Without we should be able to have James Madison institute of freedom and liberty. I just made that term up but the point was there is not a reciprocal relationship. Their answer was confucius institutes only teach culture and language and the James Madison institute of freedom and liberty would teach propaganda. I think thats a fundamental misunderstanding of James Madison but these are examples of the lack of reciprocity. Mr. Doshi would you care to comment on these questions quickly before he turned to some of the other senators who have questions for you . Thank you very much senator predator will simply say reciprocity should be the cornerstone of our relationship. The question is where we want that reciprocity. Ill note after the cold war the u. S. And china had reciprocal relationships when it came to journalists. We had equivalent numbers. We dont have that approach down some could say the benefits in a state have this more access but its unlikely china and would provide reciprocity. The chinese calmness party is so for them or reciprocity becomes a direct challenge to everything that is what they are and it becomes difficult for us. Sorry to interrupt. They looted a bunch of our journalists recently. Its in our interest to say what you get five chinese journalist. A lot of them are mouthpieces for the Chinese Party anyway and some of them arent even journalists but would that make sense if we were to say you get five journalists in america . The case that the five journalists of the have the United States, would not do nearly as much for china as for the United States in beijing. They were able to talk more that was happening on the craft. The perfect reciprocity, now particularly not as effective. There journalists can be particularly effective in beijing for the media coverage. And you raise a very important question freedom not sure i have a perfect answer for it. And do you have a view on the other before we turn it over to senator colby char. Theres so many products that have been been broken across this. And it goes back to trust. Senator colby char. You very much german sullivan and for holding this very important hearing today. I have long been critical of chinas unfair methods of competition. I hit right at home in northern minnesota. I think we know it is not just manufacturing and trade in which we need to be vigilant. China is using both old and new tools including expansion owned businesses. Required disclosures from private companies to business in china and outright theft of intellectual property. And as we have seen during this pandemic our dependence on china has highlighted weaknesses in ensuring access to critical medical supplies. I will start with you mr. Russell. I mentioned the field something. And under the Obama Administration at the very end, you took the segway and actually made a difference in a continued into the advocacy that i have made with the Trump Administration on this issue. Do you agree with the importance of standing up to philly on them unfair trade practices that harm our workers in the illegal fuel coming. I could not agree more. The fact is that when our workers work hard and play by the rules, they deserve to know that those rules will be enforced in the have a fair chance to compete. China has not only stolen but in so many industries, they have across contractiodesign not toe women but to win and dominate. That is a perfect example example where you know, they will have close to a billion metrics tons of capacity, far more than they need and far more than the Global Community needs. That overcapacity is simply skewing Market Forces and undermining the ability of our companies, and our workers to survive. The steel, fiber optics, rubber, and probably 50 17 different sectors. So standing up to their non market activities, is vital for the preservation of our own industry but also for our economics. A good. In your testimony. I dont reports the intellectual property acroscustomer gets up a year. In a cast for most of that loss in china. Do you believe the administration that intellectual theft it is enough to protect our community from harmful influence. I believe they have taken some initial steps that are helpful. But as i pointed out and 70 alice and myself included believe that stage one for phase one of their agreements was insufficient. It does not get too many of the structural issues, subsidies and state owned enterprises. In the basic core structure of chinese nonMarket Forces. It is also somewhat problematic to believe that intellectual property will change as a result of the phase one agreements. We have already seen the indictments that continue to be issued virtually every day. And continued cyber hacking and theft and etc. In the cost of doing business in china is still depended on joint ventures and 70 sectors. Those joint ventures often require u. S. Companies to share their intellectual property. It is cost of doing business and then is unchanged. Exactly so this would mean trade alliances another thing to try to push these issues. China and i think you would agree that continuing beginning of u. S. Alliances and disengagement around the globe as an opportunity to fill the vacuum left by the u. S. Leadership. How should the u. S. Respond to that first by china. To expand its influence with our largest Economic Partners in regions around the globe. Specifically what will strengthening alliances in the u. S. Leadership and myself entered by date lateral, doing active work with the rest of the world are just boulogne with this in china. A. I think we have seen that going alone is not working as well as it should. We are engaging as you have seen recently, Great Britain is turning the corner i believe on the question of what wa huawei. We have to reform organizations like the wto to make sure they work for us. And i think we are past the point where as well as the past that are allies would we bloodied our nose, they realize now increasingly realizing that the china challenge is not disposed to u. S. Interests for their own as well. They need to come to the front, to the forefront and work with us. If they dont, we need to go it alone because we need to protect our industry and our people. And i think the world is waking up. We have to work on reforming those organizations. Doubling down and participating where we could be helpful for what we need to go alone. We have to do it for people. Thank you. Thank you chairman. So both of the panelists. A couple of questions. One is what is china done in their effort to make it difficult for us to have ownership in other things in china the makes it easy for us to leave. And to is how the dramatic graphic changes in china going to impact their ability to continue to compete, to keep wages low, in a country that will dramatically change in terms of what it looks like. How is that going to affect their global position in their continuing economic model. Start with mr. Wessel. Thank you for that question. It really is a key question in terms of how china will approach its own future. As we have seen, they have an aging population. Fewer replacement workers overtime. That will put new stresses and strains on their system. One where we have seen one of the most evident changes is in healthcare where there 1. 4 Million People aging quickly, or aging at a faster pace than at expected. That is why theyre trying to dominate the biotechnology Synthetic Biology and medical supply areas to make their own needs. And also to dominate worldwide. And also of course was enormous stress on the needs for them to promote economic growth. Productivity and efficiency and as a result they are trying to move up the value chain in terms of products that they produced when china entered the wto, the old view was it was about toys and textiles and now its about computing and bio technology, ai and other Critical Industries. So all the demographic changes are helping influence their economic choices. Thank you server that question. I think thats exactly the question that the president is worried about. The general sector in china. First, make it hard for the companys, running in china and that is to their advantage. So there hoping to get a smart manufacturing. Hoping to make sure that they use and prevent companies from leaving. The person theyre trying to do is to make sure that they have dominance in the supply chain. The second area, the demographic challenges are enormous. The least favorable demographics of any great power in the world today. The worried about it. They are worried the good old before the get rich and is exactly why theyre stepping up to a distro policy and produce to target our Hightech Industries because they are hoping they can graphs that bind before they let go of the last one which is lower wage manufacturing. So they have enormous challenges. And this moment of transition. In many ways why we are taking so much money spent on Chinese Industrial policy. What about the impact of what we have been doing so far. I heard the comment that we need to have more help coming. Certainly australia, and some of our friends have stepped up to resist the chinese inability to be willing to work with others. What about moving forward and where are the likely friends to end this economic bite that we should be making come next. Are they the transpacific countries are coming what you think happens. And again, both of you. Will senator, that is a great question. And again his i had sent him i think countries by now beginning to appreciate better than china challenge, for a long time. They look to the u. S. To lead. Whether it was a wto or elsewhere. And they would not always follow and so on. In overcapacity where there were multi level talks. We got little to no help from our allies. I think the last two or three years, and certainly what is happened with the pandemic has woken or awoken our trade partners in many of our allies to the dangerous vulnerabilities. Lack of resiliency. Unacceptable like dependence on chinese supply chains. I think we are entering an era where there is opportunity to have greater la support. But we need to chart a course that they see themselves winning in as well. When you have institutions which are able to enforce those measures. Those enforcement measures and institutions, are limited. Thank you senator. China believes there allies are the single biggest advantage. They think the Alliance Structure is most important thing that we have. But were actually going to work with them critically in the economic space. And as he just mentioned, post covid19, the ratings for china were plummeting around the world. Including countries that we have very close ties with, european, india, pacific. To work with those countries to create a coalition. In the technology, people talked about the coalition of democracies to Work Together on five g. But theres no reason we cannot expand that and work with other countries. On a variety of issues. Biotechnology to medical supply chains to Artificial Intelligence. So is there any way of the future of the technology is going to be coalitional. I think that is gradually began moving. Largely accelerated by chinas own policies of covid19. Thank you mr. Chairman. Thank you. Senator rosen. Good morning mr. Chairman. Thank you for holding this important hearing today. Thank you for the witnesses, not just for the here but your thoughtful testimony. And what we need to learn from it and the lessons we take away from it. And i want to talk about the shortfalls. Technology is increasingly at the center of u. S. China competitions. But i think we can all agree that our competitiveness with china, we must invest in the capable workforce. It continued to be the most innovative country in the world. We need to maintain a workforce which we can innovate. In the United States, excuse me. Is expected to get shortfall. Nearly 3. 4 million skilled technical workers in just a few workers, by 2022. A recent study found that less than half, there getting any cyber related education. So to promote this, i have introduced multiple bipartisan bill. Was a prepare the students for careers in Stem Education. Excuse me. I apologize i have something stuck in my throat. Mr. You point out that the trade deficit with china is eliminated million americans jobs. In the manufacturing and agricultural sectors. These jobs have not migrated to other industries. What kind of programs you think we should be investing in. And better prepare our students to enter the workforce. Thank you for the excellent question. And you are spot on in terms of the question of the need to invest in our children are young adults and are workers. And not just them but of course lifelong learning. We need to make sure that her workers have the skills to compete in the world economy. It also requires though that we fight more som for some of those hightech jobs the new jobs of the future whether they are in biotechnology or quantum computing or anything else. So the investments that workers make in their own success, the families have with their students. So that they can achieve a good return they know that they have. They know they have a Bright Future ahead of them. But without the skills, we dont have the critical input we need to succeed. In every industry now. It is an advanced industry whether a nest agriculture which as you know, the farms in iowa, for portions of the summer. Every tractor is hightech. And when you look at any factory, theres computerassisted support. It is very different from the factories 100 years ago. We need to constantly upgrade our skills in Stem Education. That is one of the ingredients. I will ask both of you. China prioritizes stem at the National Security issue. The mandate at the primary schools. They have an action plan. In the United States in contrast, doesnt mean we include stem. It doesnt include are nonprofits or are industry partnerships. So for both of you, how can we best help our states, our School Districts and schools. What can we get an invest in the private partnership, government. With legislation, grants and health. Looking we do to create an action plan of our own. And really support our schools. Thats where the learning is what happened. I think that is exactly the right question. Your diagnosis of china. That is exactly right. My belief is that a research and Development Spending has historically supported stem research. An education. In fact that her universities come from our federal grantmaking institution when it comes to science and technologies to support graduate students and we can support the more effectively if we have more funds. Many of us know, our spending is. 6 percent of gdp at the federal level. That is far lower than at any point during the cold war. Its also interesting to be lower than what we spent. On scientific knowledge he sectors. Were actually below now. Theres a lot we can do there. Ev even if the simple money money. If we can raise i. They would make it possible to better educate our population. They are complementary in my view. I believe my time is expired i would like to think of this as an investment. That has a calculated return. And we can project the economic return by investing in stem early in all levels. Universities, and if we dont do it, we will be left behind. Thank you chairman. And Ranking Member. As we know this is a very complicated meeting. [inaudible]. Can you hear me okay. I have little feedback. Okay were good. It is complicated. Chinese officials, phase one trade agreements. As you know, there remain ongoing. Sources have been brought to my attention subsidized, still company was recently acquired by chinese steel manufacturer. They have still production. Continues to acquire and make direct investments into European Countries such as the one that i mentioned in the uk. As a commission conducted a research and in fact that china direct investment in the uk would have on our own domestic fuel industry. Thank you for that question. Know the commission has not yet addressed that. Let me just point out quickly. I also am least after the labor advisory committee. Which advises the department of labor. Another issue has come up. The the question of whether a chinese stateowned entity which is acquired as you point out, the largest Steel Company in Great Britain. They will be dealt with in the u. S. , the uk agreement. In our trade policies need to deal with not only what is happening in our own brackets, but has been ground zero for much of this but also what is happening with our partners like potentially u. S. Uk agreement. So let me just ask you in terms of the say take ourselves out of uk for negotiating other trade agreements say with any another countries. Are we digging down to the active ownership issues. Although i dont think their passive ownership. Yes that something of concern whether or not, the net the primary owner. Louise this is a funneling material through other countries. How do you address that issue. I think it is a fundamental problem. And you are right. It is a problem this going to be increasing the importance. So thank you for raising it. How China Investment the globe, with a do to support those entities. So the uk or india. They can be providing either zero or no cost financing. They be providing inputs like green pipe which goes only minor transformation in that country. And then comes here dramatically higher prices our own firms. That has to be dealt with in these trade agreements. We cannot allow non market activities that china seems to export and create a platform and another company. Our country, be used as a platform to undermine our interests. It. I have great concerns about that but a lot of different levels. Im going to go to a different product. Applicable to west virginia, hard word lumber. They have been very hardhit by the chinese tariffs. In response to Section Three oh one investigations. When the phase one negotiations positive news on both of those. Theyre still not living up to their purchase agreements. To think that is tied to this overall economy or is this something that is consistent across all product lines and what could the hardwood and those to expect in the future whether they will live up to the purchasing agreement. Senator, thank you for the question. I have to say i have to do a bit more research on this particular product. Another is where i have looked for example, soy. We saw that china was actually buying soy rather from brazil rather than from the u. S. Each product is different. But again as i said earlier, as the chairman raise in terms of a promise, we need to make sure that the promises made to the industries and workers in your state are kept. If not, there is a swift response. I think that is absolutely critical. And i think that is something that will impact all of the product all across the state. Unless things that i would mention prayed and is something that we see popping up. Recently our state, to individuals who were tied to china, were prosecuted for income tax, fallout and other things. But they were heavily connected to chinese universities and to china in general. I think that is cascading across the country as you look at what is happening in our universities and colleges. This is part of what you look at. Or i might out of a real house here. [laughter]. We do look at that. On both a classified and unclassified reporting scenario every year. Clearly, the fbi and other Law Enforcement as well as Intelligent Services have been diving much deeper over the last two or three years. Into the activities of individuals. We have seen the various universities. As you point out, researches, etc. We need to have a much clearer understanding of what is going on. In my testimony, talk about re engaging between the fbi had our universities systems. So they have a better understanding of what normally the rules are but was a look out for. And we need to have a much more coherent strategy. Some of that has been done but much more remains to be done. It. A very supportive of that in the realization that a lot of these things have been invented. Theyre not just for a couple of years but maybe even as many as decades. So thank you very much for your service. I thank you mr. Chairman. Thank you. Denman, i will continue on with a few more senators who will be attending this questioning of this first panel. But in the meantime, the may ask followup questions. From missouri. Interesting discussion. Of course there are challenges. But any relationship that will be sustainable. This regards the economic relationships between the United States and china. We talked about the Trump Administrations phase one approach with regard to trade. And that was something that i was quite involved in trying to ensure the president , the u. S. Trade rep. The entire team was focused on many different sectors of this economy including our history sector. Them something that i was very focused on. The superpower of seafood as i like to call it. Over 60 percent of all seafood harvested in the United States comes from alaska waters. And we export a lot. So you may have seen when the president announced phase one. He did talk about the aspects of that agreement. That includes chinas commitment to dramatically increase its purchases of american seafood. Dramatically increases that. However, i worry then that we might be in another promise fatigue moment with regards to phase one. Neither of you talk about how we press really many ways, reevaluating the relationship but still look at opportunities for market workers american fishermen, farmers, to take advantage and benefit from the market. It is a balance. Isnt that correct. I will open that up to both of you. Thank you for the question. Seafood. Im talking beyond seafood. Just talk about the market. I understand. Legacy seafood has been underappreciated and does deserve particular attention has chinese incomes have risen. The desire or the demand for sources of protein rises with income. So there are new markets for u. S. Seafood. Youre aware of not only of all of the products, lobster and many others. China has a critical problem. In his fisheries areas. Primarily around the seafood safety. Because of their factory farming techniques. As youre well aware, many of their shipments of seafood to the u. S. Have been denied entry because of concerns about the safety and healthiness of their products. But china needs to understand that if it doesnt opens market to our products. It will have an increasingly difficult time selling here to the u. S. And we need to work with our allies as well to make sure they understand from your initial question that were Market Access has to be the approach that is taken with china when they have selflimited access. We need to take a responsible approach. Thank you. Given opportunity or of you on that in the many challenges. Thank you senator for that question. I agree very much with the commissioner. There are a lot of opportunities particular in economies with china. They have the dependence on the United States. In partial dependence. If you look at this Food Security in china, its a major concern for the leadership and would like to be able to make sure the more secure in every aspect. And of agriculture. So you see them, read and put that and have stability. Its very long way of saying that there are places where there are opportunities for x to export to them. And i think will be able to make progress on those if are able to speak a more clear way for the trade disagreements. And in addition to export commodities those also the question of High Technology exports. And industrial goods etc. In this piece as we much more direct competition with china. In working out specific areas of agreement. Some american titanic technology. We rightfully are able to provide. So there are areas that we can make progress with. We have be very careful about managing the risks and the rewards pretty. Thank you mr. Chairman and i am so happy we are doing this hearing today. And i know that it is difficult many times for you all to join us virtually. But we do appreciate that youre doing that. I want to ask you all and this is a question for the panel. Some of it appreciate a response from each one. Looking at the budgets for r d. As we talk about china, constitution. This ability china in effect you never know where the commercial conflicts. And where they begin and end. China has traditionally brought about new products in the country. No by innovations. Thats from them, but when they do is to reverse engineer and a steel information and looking at what they have spent on the r d. They were not spending much on r d at all since 2000. They have gone through some explosive throws with her r d budget. In 2017, i was looking at what the commitments was from the u. S. Party for r d. And it was 549 billion. And in china, they spent or hundred and 96 billion. On r d. So each of you can you comment on the potential consequences that this will help if we look at the next century. As we look at great power competition. And we talk about their digital silk road initiative. And also as we talk about what huawei, that is worthy of our time to discuss. Lets look at those r d numbers. And then i would like to hear from yall. I would like to hear your take on the consequences of the expenditures. Thank you. This is such an important question and is one i think about that as well. We have r d, we have the federal component in the business component. We have this together, u. S. And china are actually according to some estimates even there, the china even though has a smaller economy, is concerning. Well be such a redundant upon it. They support Research Also supports Stem Education. In a wide variety of science. Our federal component has been followed in the gdp for a long time. Right now its lowest level in six years. Worse china, things that u. S. Had an r d system and the cold war, a good one. And in many ways a safe we should do a little bit more with the United States as. And United States stops doing what he does offering a very concerned about this. And relatively small amount of money or even an increase would make a monumental difference. Just add onto that. If you would address, where are they primarily focusing their r d. Or do you know. Is it intel communications. Incident super communing. Artificial intelligence. What is getting their attention. Thank you senator. Theres been a lot of capacity about where these funds go. We have some big numbers. As the documents suggest those numbers cannot give the answers the documents indicate. That a lot of that investment or other r d spending is going to the technologies of the so called, Artificial Intelligence, is probably the top of the list. Manufacturing manufacturing very high up there. Tele communications is high. Telecom five g all across china. In many extraordinary advanced soccer entrance sectors. Many of them are identified in chinas in 2025 plan which targets transpacific sectors for r d settings for state support. I can give you more specific answer after the hearing. We would appreciate thats pretty clear very concerned about the national labs. And the focus that is there with our national labs. In tennessee, we have the worlds fastest computer. We are looking at those applications to hypersonic summit 21st century warfare. Artificial intelligence, autonomous vehicles. So Additional Information would be appreciated. Senator blumenthal. Thank you mr. Chairman. And thanks to both of the witnesses who are here today. This morning, we are sending a letter to the department of justice requesting a National Security investigation into zone and tiktok. As tens of millions of americans turned to both zoom and tiktok. A few of them know they are vulnerable to surveillance, data harvesting and censorship. By the Chinese Government. There are now a number of reports that zoom and tiktok engaged in censorship on behalf of the Chinese Government. Those reports are reliable and truly alarming. In early june, several chinese prodemocracy activists including, basin United States were suspended by zoom following a demand by the Chinese Communist party. For the crimes. Holding a peaceful commemoration. There were demonstrations on zoom. In their calling in on other members of congress that repeatedly sought answers from both companies about who had access to the personal data of the american users. And how the content moderation are made. And tiktok and so have utterly failed to answer even the most basic questions about their business operations. Zoom has still failed to answer information to the Chinese Government. About people who attended that meeting. And that failure among others supports the request that we have made for investigations by the department of justice. So my questions to both of you is, do you prove me about zoom and tiktok entering and collecting information, disclosing information to the Chinese Government based on request from that government are, alarming and need investigations. Thank you red and thank you for your leadership along with senator holly and us. And others. This is a critical issue. We seen it not only with these two platforms but others. Putting the very lives of citizens at risk. As well as our own economic intelligence and security interests. So what you are doing is critical. For me, i quite rightly dont trust the answers of those companies because chinese basic law requires the National Security law, requires that any chinese firm hanover when requested, the information that the government requests. We have seen over many years, criticisms of the security and confidence we can have it chinese based platforms of equipment. Huawei, tiktok and others as you know. In time after time we have seen from Law Enforcement and the Intelligence Community but also the private sector continuing cyber intrusions. And the lack of security. The espionage. A shipment of data through multiple acts of u. S. Citizens that for those of uncommon many others. The very lives. Thank you. Thank you senator for your leadership on this party dont just want to add the Chinese Communist party has a discourse on the social media platforms and instruments like them and argues clearly that according to control his platforms, if it doesnt, it simply will be an information content provider. You need to actually control it in order to shape it. It simply information that might be stolen but also the possibility of interference should tiktok become more centralized. And come to be more popular social media. Think about three comments. I think there is really strong bipartisan agreements that the United States needs to protect our privacy, and our liberties from this kind of invasive and potentially illegal action. Demand for investment is currently considering new conditions. And how it operates tiktok. But so far, this government has failed to act to protect americans. In this way believe that investigation by the department of justice and actions is necessary. Im so glad that you are supporting it. And how we can have actions by this committee as well. Thank you pre work on these important issues. I agree with you the vast majority of this is bipartisan. I think we should keep it this way. And this is important to the future of our own nation. And have it turn into a partisan issue. Someone asked the witnesses as we get ready for our second annual. I was asked speech at the heritage foundation. Last september. And entitled the speech, winning the new cold war with china and how the United States should respond. I emphasized five areas of response that i thought they would gain bipartisan support but we talked about a number today. I would like each one of the witnesses to comment on these and what you see is an important element of the strategy. And im sure we are missing things. Over those be that i would also submit the speech for the record without objection braided to focus, in my remarks . Demanding reciprocity. Weve already talked about this next one. Reinvigorating american competitiveness. To outcompete china. Rebuilding our military strength and capability. We have not talked about that. Deepening and expanding our Global Network of alliances. We have talked about that. And importantly, i think it was a critical element of winning the cold war. Employing our Democratic Values as a comparative advantage in countering chinas global authoritarian influence. I think also the authoritarians, at the end of the day i think they fear their own people and look at what is going on in hong kong. And i think this is an enormous advantage that we have. It certainly benefited us during the long twilight struggles of the cold war. With the soviet union, who also feared their own people. Would you gentlemen care to comment on any of those. These key aspects of the strategy and what we think or what you think we are missing. Thank you. For your questions and leadership in looking at this across the various platforms sectors. And of policy that are critical. I think you and all of the major areas and appreciate that. And theyll need to be dealt with at the same time with an understanding of what a clear comprehensive and consistent policy is. The fact is that weve failed on the last point to identify consistency to the chinese at times. And also our people. So they know what her plans are. What are red lines are, and what our objectives are. So in each of the areas you identify, we need to be clear. We need to have more comprehensive identified plans of what the limits are. Without plans are. It has been noted from your colleagues, everything from Stem Education to dealing with the surveillance platforms etc. Braided so the china understands what we view as acceptable and unacceptable behavior. Again, these a fairly automatic response when those lines are crossed. Thank you. You have any views on that. Thank you senator. I do have yes. I think you for your leadership. Our murray speech. I think its externally comprehensive not only a very small point which is simply this will be a longterm proposition. It will continue for many years to come as you mentioned afraid and wanted to ask a rather indicate is important and will be public support for this as well. In this debate consistent approach and the Trump Administration and that will often i think the houses of congress. And has in spite of the large partisan cooperation. We snacks on hong kong. In all that to me indicates there is a greater consensus which is going to be the bedrock for sustainable grand strategy going forward. I will simply leave it there. But i think the important thing will be having consistency. And make sure that we continue to make progress in each of those five areas of the systematic ways. Currently strategy containment which defined our relationship with the soviet union. That was very bipartisan. And it was consistent over decades and ended up successfully winning the cold war. Correct. Yes absolutely. Thats exactly when thinking about the kind of consistency that we sometimes more so the past and it will take multiple parts of society. And consistent bipartisan leadership which in many ways we already have. Thank you predict. Let me ask one final question before we turn your next panel. Both of you have testified of the importance of securing our supply chains. In the National Defense authorization act, i was proud to have a provision included. It is very strong bipartisan vote. Just last week on the bill that passed the senate. Critical minerals. Which we rely on. We rely on it too much with china and yet we have in our own nations, certainly have my own great state of alaska where we mine and process and produce in a much more environmentally responsible way than the chinese deal. And yet, we continue to rely on ties elements and other things. Of course the supply chain, theres been a big focus with regard to medicines and with ppe in the pandemic and the republican heels act that we are debating now and hopefully have compromises with her democratic colleagues to get through some additional relief for the people wearing this pandemic. And again broad bipartisan support i believe in some of the issues that were discussed today but on making sure that we are not relying on china for medicines, for ppe eat. For Semi Conductors, for Critical Minerals. Theres a lot of legislation like i said. In my, a bill that we cosponsored is in the current version of a bill that we are debating and trying to move forward on in the senate now. Im Critical Minerals pretty can youtube talk briefly about the importance of the longterm importance and benefits to america of securing our supply chains and ways were not so vulnerable china. And we can enhance manufacturing help our brothers pretty to me it is the silverlining of this pandemic they were already starting to see Bipartisan Legislation on. I think we need to continue it. Thank you senator for your leadership but the mba they and with other actions that you and the community has taken as well. I think the American Public has woken up because of the pandemic is too hard dangerous dependence in reliance on china. China is you will know, your state and several others has shown his willingness to weapon eyes supply chains to achieve its goals. It did that with an otherwise as we also saw with this pandemic. He used ppe as a diplomatic tool to try and gain access and concessions from many of our allies. In fact is we do have the ability to reclaim some of the supply chains. If we have a concerted plan. And we have the ability to have a fully magnet strategy. We used to produce here not only at a facility in california but we also had indiana, they did the shuffling and the production of maintenance. In 1996, as you know, we sold that facility to the chinese. I believe that was shortsighted. In the chinese predatory practices put california going into bankruptcy. Lift make clear what a long term needs are. What are key to our economic success and our technological military competitiveness. And we need to invest in short that we have the ability to meet our needs. With allies at times but clearly meet her needs were the interest of the American Public park. Thank you very much. That was an excellent answer and under your service on these issues. In this very commendable. Thank you. Wanted to add to to his excellent point. A few thoughts predict china recognizes it has a position in our supply chains. They want to keep that position. So we will have to work with them. It will be a long term competition sort of thing. The slight change. There are indications of the Chinese Media has suggested that we face repercussions from some of the political stances when it comes to ppes rated in the official and unofficial levels. So many different approach what concerns me the most would be that were not always sure exactly where we are vulnerable to beijing. So we need more entities that can effectively audit. In the same way with that we stress and the Financial Institution and build those interconnections. I think if we have that, will be in a better condition to compete but also a little bit more effectively but how the Global Economy will center on china and were taiwan has been very inspiring. [inaudible]. With over 30 billion. And we can learn lessons from their approaches. Thank you for that very detailed and wise cancer. On the think of witnesses again. I think this is exactly what we need. Not only in the senate but with regard to as you mentioned the American Public. There is growing bipartisan support. You sought in the strong participation of numerous senators on both sides of the aisle. In this first panel. And expertise. And i want to both of the witnesses who showed very strong expertise. And insight on what i believe is when be an issue that is really of the forefront of american domestic and foreign policy. Fifty 100 years. We need to wake up to it. We have. We need to address attend executed in a bipartisan way. And i think we are. Thats an important beginning. But again, to our first panel of witnesses, thank you again. Im sure this would be additional questions for the record. And you are now excused. We are going to turn the second part of our hearing today. Im very pleased actually happen the hearing room, two Senior Administration officials who can talk more specifically with regard to the policies that the Trump Administration is not only formulating but beginning to implement. And that is mr. Keith who is the undersecretary of state. For economic growth, energy and the environment and is been given a very Important Role in the executive branch on the development and implementation of americas u. S. China strate strategy. Particularly as it relates to the economic and geostrategic realm. And the assistant secretary for Industry Analysis from the u. S. Department of commerce. And she is also an expert in this area. So i want to welcome them. Mom to walk them physically here. About the committee and the secretary, you will have a fiveminute Opening Statement. In your longer written statement will be submitted to the record if you so desire. Mr. Secretary welcome. Thank you. You need to turn your micron. Thank you. I appreciate the opportunity to discuss the china challenge. Because his the epicenter. The Economic Security threat. Last week and landmarks and what secretary pompeo said. Today we are seeing where and why are mass and watch the pandemic body count rise. Reading headlines every day. Same staggering statistics of chinese trade abuses. Watching the Chinese Military go stronger. On the backs of stolen americans innovation spread of experience Economic Warfare firsthand. I grew up in smalltown ohio where my father ran a machine shop. I saw china wills of mass production getting my fathers shop. When im to be a Vice President of General Motors rendered when you build a plant in china can be good access to the market. You dont just have them the blueprints. You give them and you train their labor force. I spend the rest of my career in Silicon Valley where i had my intellectual property ripped off and i saw firsthand, china strategy of seducing with money while reinforcing with intimidation and retaliation. Every big company, now the largest 7 trillion of commerce conducted over the network last year. I remember the late 90s, we welcome chinese visitors to our airports. Only to have them steal one of our concepts. Couple years ago, i spent two weeks in china explain what that might be working opportunity spread been going there since 1981. But this time it was different. I met with members who spoke so passionately about global domination. I saw how cleverly the d position the United States spread then i got an in depth look at their technology. That is when it hits me. As soon as i get back, i went to washington. And i spoke to anyone who would listen. And asked, do you understand the country with the best technology. Usually when. And thats what i was asked to serve. And that is why am here today because of china challenge. My first week on the job, secretary pompeo, the global strategic plan, and chinese aggression. Strategy we have developed as three pillars. The first is the turbocharged economic evidence by driving productivity and prioritizing emerging technology. I can tell you the communist partys biggest fears the United States would have a sputnik moment. Safeguarding americas assets including core freedoms. Securing this requires the us and partners to demand reciprocity, transparency and laws. Must also understand and use our assets against us including our openness and values. We must view every chinese action with skepticism. As mike pompeo recently said, mistrust and verified. The next part of the plan turns the table on ccp by reclaiming our core freedoms as our strength. We will answer mike pompeos call to build a new a democracies to oppose china. We invention this to be Civil Society operating under a set of just principles for all areas of economic collaboration and those principles are american values, things like integrity, accountability, transparency, respect for rule of law, respect for property of all kinds, respect for sovereignty of nations, respectable planets, respect for human rights. When i talk to my counterparts from other countries about this the reaction is we have been waiting for an alternative as one of the Southeast Asian nations the chinas 1way toll road to beijing. The new alliance of democracies are present unifying of global cleanup during this and speaking of clean let me update you on the state departments Clean Campaign which is unlocking a global movement. Mike pompeo also said last week they urge countries became the same country so their information doesnt end up in the hands of the Chinese Communist party and it starts with a 5g Clean Network. For years the ccp has pressured them to purchase the infrastructure. Huawei is the backbone of their surveillance and it extends the great 1way china firewall where data comes in but not out and reciprocal propaganda goes out but truth does not come in. The state department is leading by example through a 5g Clean Path Initiative which requires all data entering Us Diplomatic facilities to transit only across trusted equipment making a difference in encouraging parnas to turn the tide against huawei and toward cleanness and huaweis deals are evaporating. We saw earlier this month that the uk last week with friends. There are now 35 clean countries and the most largest elbow companies have done that. Cell phone data, the top three telcos in canada. The Clean Campaign is so successful we are preparing to expand beyond clean numbers and clean systems including clean apps, clean store, clean cloud and clean currency. Also important to have clean supply chains with clean labor. The state Department Joins other agencies on the issue of Business Advisory regarding entities engaged in forced labor and other human rights abuses and as i said in a followup letter to all us ceos and their boards your institutions have a moral responsibility, fiduciary duty to establish clean Governance Principles and divest from companies that contribute to human rights abuses. They should this close the Chinese Companies they invest in at a minimum. Donald trumps working group on Financial Markets will make recommendations on the transparency of chinese Public Companies to enhance protections and ensure american exchanges during the Gold Standard for the world. In conclusion, many facets require all 3 branches of government, powerful private sector. As mike pompeo said, a new alliance of democracies, americas moment is now. Choose a path to the future for the sake of our children and grandchildren, thank you very much and i look forward to your questions. Thank you members of the subcommittee, thank you for the opportunity to testify. We are at a historic crossroads in the Us China Relationship and steps we take now will chart the course with us economic and technological leadership for decades to come. In 2017 the us began for the first time to confront head on the challenges posed by chinas predatory practices, those practices had been ignored for decades and as a result the United States lost the capabilities and sector after 63 manufacturing and technology that are so critical to the nations security. To understand the predator Economic Strategy its important to understand the specific tactic. Indeed chinas most effective tools, by design are those governed by week or not consistent International Rules. Case in point the prc takes advantage of the absence of International Rules over state owned enterprises to funnel massive amounts of resources with the intent of dominating strategic sectors worldwide. The government also distorts prices and costs throughout the economy in order to explore undervalued goods and services worldwide. The goal is to underpriced competitors to force them out of the market. The goal is to hollow out our industry. Next the prc government takes advantage of rules governing global overcapacity, for uncompetitive prices. This has been a strategy in steel, aluminum, chemicals at the infrastructure of 5g. Accurate Critical Industries like semiconductors will be targets next. The prc is further exploiting opportunities abroad to monopolize strategic assets. For example the prcs increasing control of the Raw Materials necessary for hightech products by purchasing mines abroad. Cobalt, lithium, nickel and platinum to name a few. The impacted countries are the United States and our allies and because the materials are finite assets that cannot be a place china is able to exert influence over the rest of the world by withholding access to them. Next the prc regularly supports and directs the appropriation of us intellectual property. This is well understood what it was discussed is this. Even when chinese firms are perceived to collaborate in Technological Development like huaweis announcement that it is planning to build in the uk the 1. 2 billion optical fiber Cable Research facility the gains are only 1sided. Chinese companies will benefit from collaboration with International Scientists abroad and repatriate the technology to china to generate overcapacity, eliminating competition, in sectors like 5g where optical cable provides infrastructure, National Security infrastructure is obvious, chinas engagement in International Standard is also of great concern. It is worth emphasizing that because china is a sovereign state foreign laws can never be sufficient to fully address its conduct. It is not the actor that has shown a great interest in adhering to International Laws at all. The qualities of the us have failed to prevent chinas economic access. To the build an efficient supply chain, china is a lowcost producer which traded are most sensitive intellectual property in exchange for shortterm access. As a result we willingly transferred our debt and exported Manufacturing Capabilities and jobs to a nonmarket economy where market transparency does not exist. By doing this we create a Global Economy by distorted prices and nonmarket positions that proliferate rather than markets but understanding what is left of the supply chain, it stands to reason another strategy must remedy those causes. At the outset the United States must identify all items critical to our National Security and assess our dependency on imports. This administration has begun to do this. We need to do this on a permanent basis. The second component is in sacrificing in Word Investments in manufacturing capability for economic growth. And this is critical to providing capital to you, American Investments and to generate immediate demand for those in youth section operations. This compels any companies to take a leap of faith. It is axiomatic that for us investments to grow we must have a strategy to fight against predatory import companies, those that need to undercut us production. These elements are essential to the comprehensive strategy. It will require a whole of government approach but i can tell you is a trade lawyer and an economist they will be effective in rebuilding supply chains that are robust. I would like to conclude by emphasizing that the Global Economy of the Twentieth Century was developed by the United States and although china is aggressively seeking to shape the Global Economic order of the 21stcentury is not too late to act which supplychain vulnerabilities are too great to way to National Security crisis that may expose the country to more peril. Thank you. Mister secretary, thank you. I want to begin with the critical question here and that is this issue of alliances. Some of my colleagues have been critical of the old administrations approach. I believe certainly in our Previous Panel, mentioned something i believe, ally rich nation, china is an ally poor nation, maybe north korea is their only true ally and a strategy of deepening and expanding our alliances is one that is very important. I think this administration has been working hard on that in areas such as vietnam, india but your statement about a new coalition, the Previous Panel talked about a democracy coalition. Can you talk about that in more detail and what you and mike pompeo are starting to do in that regard and the success you are seeing and how we in the senate, and i think there strong bipartisan support to help you with this. One of many anecdotes. We see World Leaders and senior officials from all over the world come to the senate, a number of them saying it has to be the United States leading on this coalition against china. We want it to happen but if we step out, we feel we will get things by the chinese. If the United States leads we will support that under us leadership. Can you give us more detail. It is very promising. It terrifies countries and it terrifies companies. This is the whole reason for an alliance of democracies. Which would also include the private sector. Because there is strength in power, in unity and solidarity and if you look at chinas tactics their bullying. You believe the panelists the testified before the china recognizes that this is our ultimate strength right now, our longterm, deep Global Network of alliances, that we have and they pretty much dont have at all . Yes. By the way if you look at what the strategy is comprised of, taking our comparative advantages and amplifying those and create compound advantages and the big one is our likeminded partners and friends. Time to turn the table on that and use that against china because they been using it against us and the biggest opportunity strategy, i said this when i got confirms, further strengthening relationship with our allies and friends, leveraging the innovation and resources of the private sector and amplifying them to the high ground of american values. To combine that is huge. Boules back down when they are confronted. They really back down if you have your friends by your side. That is why Boris Johnson said we would reconsider that huawei decision. You can see immediately the retaliation by the ccp. The chinese uk ambassador threatened to take away their billiondollar infrastructure investment. Mike pompeo said we stand with our allies in the uk against this, we will do whatever we need to do and that is the most powerful concept. What china has done is fragmented, they go after the week gazelle of the heard. We see success in that realm in terms of building a coalition of democracies with other countries. What we see in this coalition is to build a network of trusted partners and the fastest way to build a network is to build a network of networks. The Blue Dot Network which is a network for infrastructure for highquality privatesector led infrastructure particularly in developing nations. Another one is the 5g addition to the network as well. There is another one in Rare Earth Minerals that we announced last year. Nine initial nations and we are growing that. We envision Energy Security network as well as also a healthcare and Prosperity Network and if you think of it the pandemic kicked that into big kier. All areas of collaboration so it is investment, trade, commerce, infrastructure research, education, those are the things that will take advantage of that momentum and it is based on those trusted principles and they are trying to take over International Standards. The way to counter that is to have an overriding set of principles that all these standards have to comply with and you cant participate unless you do. If you have a National Intelligence act requires a Chinese Company, stateowned or otherwise to turn over any proprietary technology or intellectual property upon request or suffer consequences then need not apply. Focusing on our allies is what you are talking about, strong support here, bipartisan support here, your focus on Critical Minerals, energy, the great state of alaska, these are Important Competitive advantages. Senator young. Welcome mister undersecretary, grateful for the Incredible Service you are doing. We know that a new power competition is unfolding before the eyes of the world. Americas predominant challenge with china is an unscrupulous authoritarian regime that doesnt share our values, their values are the inverse of our own and to meet these challenges we have to once again show america has the resiliency and dynamism that it has shown in the last century. We can harness our economy. We can renew the american project itself if we make the right moves during this moment in history. The analyst frontier act is a piece of legislation i coauthored with senator schumer and we believe it will provide the rocket fuel for americas innovators and entrepreneurs moving forward. In this bill we propose. In us leadership in science and Tech Innovation and boldly increasing premarket investment in emerging tech. We propose providing in this frontier act 100 billion of strategic investment in the National Science foundation to bolster science and Tech Research and deliver 10 billion to establish regional tech pubs around various areas of the country where there is existing pockets of expertise, particular sectors and technologies. That will lead to the launching of innovative companies, reviving American Manufacturing and creation of new jobs across the country and in coming years it will strengthen american power. It will increase our prosperity and carryon americas neverending quest to continuously improve the world through innovation. Weve done this before in the Twentieth Century. Do you believe the United States government should ramp up investment in largescale domestic innovation efforts to ensure American Leadership in key technologies . Absolutely. I want to thank you, senator young and senator schumer for the endless frontiers act because that will tremendously move the needle in these 10 critical National Security sectors and will be a great catalyst for kicking off that sputnik moment by talk about and one thing i learned in Silicon Valley is american innovation, entrepreneurs are the best in the world but youve got to give them time, and time equals money. Talking about 100 billion is huge. We discussed before that we could get from the private sector, we could get it from our allies too. Lets explore that a little further. How could we utilize our relationships, arguably our greatest geopolitical resource as a country, those alliances we have developed, how can we leverage those relationships with close partners and allies to speed up development and broaden the base of innovation . Chairman sullivan alluded to a similar concept. We call it the technodemocracy test, 10 of our closest technological allies and two main objectives. One is to protect strategic assets for these allies but the other would be from an offensive position in terms of joint collaboration, joint research, all of that as well as collaboration and export controls and investment screening and there is no doubt about it, china competition, the battlefield is high tech, their soft underbelly is they need hard currency. To be able to put this amount of funds coupled with the private sector is going to dramatically move the needle. As we think about competition with china did i hear you saying we shouldnt only play defense. Not only apply tariffs although tariffs have a role, not only encourage our partners and allies to forswear Huawei Technology for fear there is a backdoor, that our partners and allies are aware of the implications of accepting foreign aid, but also invests in our self, outgrow, outcompete, out innovate the chinese which is arguably the most important thing we did to take down the soviet union. That is by far the number one thing. If theres anything i learned about an economic statecraft, we practice on Silicon Valley, the best defense is a strong offense. This puts us on the offensive and get us out of the reactionary posture. This is the communist partys biggest fear. We turn up the heat on developing these new technologies and put a serious amount of money behind it. Let me change my line of inquiry. We met privately on this before. Can you envision a future where countries around the world have to choose between either the United States or china . Can you avoid this decoupling, this economic decoupling between china and the United States . We envision alliance of democracies, not asking them to choose between the United States and china. 80 bilateral meetings with ministers of finance. Where is it like. And this is bilateral those first principles, with people you trust. The greatest geopolitical resources in the system. I challenge people to name one ally, Chinese Communist party, the peoples republic of china has, they have none. They have vassal states like north korea, they dont have genuine alliances although i did write an oped in the wall street journal about the terror radical twins deal between china and iraq. They havent had an agreement. Carving up poland. There was a marriage of convenience, subject to divorce at that time. That is the one road, 1 way toll road in beijing. There is a lot going on. Thank you for your support and encouragement as pertains to the endless frontier act. Grateful to the service of your team, you elevated that department. Colonel sullivan served there before and i didnt think it could go any further but it is especially an important period to ensure our economic statecraft is properly scoped. Im grateful for your presence here today. It is important you are highlighting how important the section of the Us State Department is, senator blumenthal . Thank you, mister chairman, thank you both for being there today. I dont know whether you were here for the last panel to hear my questions to Michael Wessel, let me repeat them. Senator holly and i wrote to the assistant attorney general of the department of justice, and investigation and ticktock. Because of their report and repeated surveillance of United States citizens and censorship of participants on their platforms and essentially suppression for people in this country. Those in the justice department, along with other members of congress repeatedly asking them about their practices of collecting information and providing into the china government of china and they failed to answer these questions. We have turned to the United States government for United States citizens. Is the administration aware of the cooperation between zoom and ticktock, and the peoples republic of china and what do you plan to do about it. That picks up what i was talking about, if you look at apps like ticktock, we chat, the cloud providers, drones, if you look at underwater cable it is all part of that nervous system and not just the Clean Network side and the entire system. For that surveillance state, the Summer Campaign we did with 5g, i couldnt agree more. I hope you will take that view to the department of justice, the administration is going to put its money where mouth is. And investigation has to begin, has to be swift and short and fair. This surveillance and censorship, the tracking of a lot of data to the government of china is a direct intrusion. They been great allies. And and clean the store in different areas. They have been great, they really have. Glad they have been great. Respond to senator holly and myself and respond favorably and you will support it and i support your endorsement of it. Are there measures, us to see us review that could impose on chinese firms, the data will not wind up in the hands of the Chinese Government. Can you state your question again . The review by the committee on foreign investment. On chinese firms. The barrier prohibition against sharing that with the chinese. I think there are a number of tools in the United States government. On that dimension, everchanging landscape, i have seen it change and there are all kinds of ways to get around mitigation and those kinds of things. The other is the executive order with regard to the ict industry. I dont want to get ahead of the president on that one but that gives us all the tools we need to do what we are talking about. Tell us why we should be concerned about this. 80 of the worlds drones, sold in the United States, collect information and send it back with the chinese. They probably have 90 . Imagine doing something with your son or Something Like this, take a video from up there. Those go back to china unless you are pretty tech savvy, and download to your iphone. Drone technology is some of the scariest military technology, that is what i saw on my last trip to china and why i came to washington, Drone Technology and i dont know how you defend against it. I know we are working on it. We are working on clean drones because those are dangerous. How we defend against it. Im on the armed and 90 of the market. Doing the same thing ticktock is. And i have 5 children and i want the chinese spying on them. And chinese drones. An incredibly important thing to consider. It is on the table. But we want to manufacture our own. Senator young, best defense is a good offense. We need to invest in our drone business. Last i checked it was 90 market share. We held a hearing on that topic on this subcommittee. Senator sullivan is right. In order to ban we have to manufacture and submit it to a matter of National Security that we do it in this country that is the only way to protect our rights and liberties but that is easier said than done. A company with 90 of market share and outcompete in predatory pricing. On the future, on the table i am hoping you will report back to us, what is planned. You got it. You are absolutely right we have the entrepreneurs to build Drone Companies and the problem is it takes capital, it takes money and the way it works at all comes out of the same pot and i deeply appreciate what congress is doing to make sure we have those funds. Another is semiconductor business. It was our godgiven right to add the Semiconductor Application business, we invented it. Asian countries came over and bought it from us and subsidize the Semi Conductor business between 30 percent50 , to kind of best a little bit so to speak and you pass the chips act, 96numfour and that money goes to only 12 of Semi Conductor applications done in the United States. These things make it at a Tipping Point and boils down 20. Mister secretary, thank you, senator blumenthal. Thank you for your testimony today. I want to start with something discussed in the first panel which was supply chain issues. I am deeply concerned about chinas supply chain. And and considers mineral supplies. The onshore rareearth act or or act, to bring rareearth mining back to the United States. The chinese control of Rare Earth Minerals and what affected the problem. Please turn on the mike. Rare earth, comprehension of reassuring strategy, comprehension being led by that. Cannot underscore the importance of it. When you look at rareearth and Critical Minerals, our supply chain vulnerabilities, China Threatens to withhold access, we cant stand. The solution is what we are discussing is going to have certain pillars. One of the first pillars across the United States. The next part of it is Technology Sharing with our allies, the supply chains are located far away, with any adversary tensions escalate we wont have enough ships to go back and forth so we need to enhance processing, clean processing, to collaborate on all fronts, we have to be able to realign in this respect. To incentivize investments but at the end of the day what company is going to invest in the United States if they achieve what is going to displace them and what measures when you think about nobody likes to talk about restricting import. Im speaking as an economist. Chinas predatory low prices, have a conversation about that and look at the downstream impacts, rare earths are more effective and financial incentives, for the defense sector. What are some of the measures you put in place against the fact that predatory priced imports are coming in and eroding our basis. We studied this through the economic and legal lens a lot for a resilient supply chain. We made an important point the chinas strategy, their objective, the way the Chinese Communist government has approached, they are engaged in a battle of global domination, identified key vulnerabilities and determines to dominate. It is not even predatory pricing in the antitrust context. It is in fact, these are not moneymaking endeavors, these are military dominance efforts, to attack americans, someone watching at home as a practical matter, why do rareearth and criminal minerals matter. Why should we care if china has a stranglehold. They are essential to microelectronics, everything that is critical of National Security, a quote you will appreciate, china hollowing out our industry, it actually khrushchev said we need a soviet bloc, declare war upon you, the United States. The Peaceful World of trade we will declare a war we will win over the United States again quoting from khrushchev. We again refer to the communist state value trade released for economic reasons and most for political reasons from the hearing transcript of 1960 trade apps, one of the purposes is trade agreements for economic penetration in the 50s it is a sustained problem, for the first time tackling these problems simultaneously, looking closely at it, welcome congressional support because these complex problems were decades in the making, we need to do it now. I want to comment on the rare earth and Critical Minerals, we have been in america. Mining them and producing them is much higher in terms of the environmental standards. For National Security. We should utilize that. Minerals are not that rare. And i agree with you their aim is not to compete. Where they are going off and doing it in the next sector. Underlie everything, when you look at the work in congress and state in terms of analyzing strategic bench points. Then get to a level of specificity, what is the company, what is the product and how do we get him in our allies and ideally in the United States and you have to dig in. Let me turn to one final question, i would like your comment on this very challenging issue we have seen over decades and that is the temptation of us companies on the Chinese Market and us companies are forced to transfer their Company Beyond what they want to do or kowtow to chinese interests like the nba on broader statements china finds objectionable and we have American Companies or organizations that tell the china line. It has taken place in decades in the privatesector. Ceos making these calls for shortterm profit, longerterm in terms of us strategy it might be undermining broader strategic goals as a nation, through the Chinese Market so what should we as a government. This is beyond this state or congress do about this important issue where our privatesector is leveraged to get access to the market of china but then has to give up things or toe the line for broader issues relating to taiwan to make statements that are in line with Chinese Communist party i will hear from both of you. The economist perspective, the chinese in their valued exports. To go into the Chinese Market to benefit from the same cost structures, not only have to transfer your technology, for distorted prices. The chinese confederates have to flock to the markets. It is interesting what is happening, a few things. The anticipation of a Corporate Credit rating system, to hand over the most Sensitive Technology in their ip. The chamber of commerce, the Chinese Government, with respect to that, significant threats hit no kia and ericsson, if europe was going to ban huawei from the eu, for 5g networks, it will face restrictions on the exports of now can ericsson from china. What should we be doing in terms of government policy, mostly taking place in the sphere of the privatesector. What should we be doing, it might backfire. What is the government of the United States executive branch due to in some ways give ceos backbone not we certainly dont do this to Chinese Companies for a succinct actor. To compete with china for the financial boost. We have to amplify the risks of doing business given everything the European Companies amplify the risk to be cost competitive if you leave china. The government position in the privatesector. I would make 3 points, you hit on a really important issue. At the beginning of the year, corporate responsibility, social responsibility, National Security, a real and urgent threat to democracy, now, the elephant in the room is the retaliation. It is all about having your friends behind you. If you think the laws we put in place in terms of anticorruption. And some of the things us Companies Need to say to china. I cant do that because they will obey the laws. Doing that, globally over chinese practices that we certainly dont want to help promote, we do it with our allies, think that is a leverage point. This is also one, collaboration with the private sector. That has got to be crafted just right. The other thing we want to do is shine a light on china but sometimes we shine a light on ourselves. If you look at what Chinese Companies on stock exchanges, the only companies that dont obey far veins oxley, it makes me mad but thats not the point. It puts our American Investments at risk. It creates in a level Playing Field, anyone in business understands the financial strategy, the competitive strategy and this allows them to mistake their earnings or subsidize revenue. Count things as eventual revenue, gives the Chinese Company a competitive advantage and sacrifices the Gold Standard of american exchanges and the other thing is the average american bondholder, the emerging index fund, it is buried in there and that is one of the things i wrote in an oped. It is incumbent on us companies to disclose who are the Financial Institutions who have state pension funds, University Endowments and mutual funds and shining that light in terms of disclosure, reciprocity is a great tool just like enforcement is a great tool. We should use this for concepts that are simple, right on and easy to understand. I want to thank you. A number of senators submitting questions for the record but i want to thank the witnesses. In the implementation and execution, a number of senators focusing on the concepts. Both of you, start to establish a policy that can be utilized and implemented for decades for Economic Policy against the soviet union that was well regarded, well accepted and continued throughout administrations, and this hearing is a helpful beginning. The record will remain open for two weeks during this time. Senators may submit questions for the record. Upon receipt, back to this committee by no later than friday, i want to thank our witnesses for appearing here in the good work you are doing for educating the broader American Public and challenges. A lot of work to do but we are finally realizing the challenge and we are off to the start. The hearing is adjourned. [inaudible conversations] [inaudible conversations] good to have you guys, thanks for coming. [inaudible conversations] booktv on cspan2, no books and authors every we can. Sunday on in depth, live two our conversations with us combat veteran and Rhodes Scholar was more, author of several books including the other westmore, the work in his latest 5 days, fiery reckoning of an american city, taking your phone calls, Facebook Comments and tweets. At 9 00 pm eastern on after words founder and president of environmental progress on what he calls apocalyptic environmentalism, interviewed by Columbia University earth institutes andrew rivkin. Watch booktv on cspan2 sunday. Environmental progress Founder Michael shellenberger offers his thoughts on what he calls apocalyptic environmentalism. And tomorrow were live with u. S. Army combat veteran and author wes moore. Hell discuss issues that africanamericans in inner cities are facing and the 2015 uprising in baltimore following the death of freddie gray. Find more information about these and