[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]





                MODERNIZING EXPORT CONTROLS: PROTECTING
                      CUTTING-EDGE TECHNOLOGY AND
                         U.S. NATIONAL SECURITY

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 14, 2018

                               __________

                           Serial No. 115-116

                               __________

        Printed for the use of the Committee on Foreign Affairs



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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                LOIS FRANKEL, Florida
SCOTT PERRY, Pennsylvania            TULSI GABBARD, Hawaii
RON DeSANTIS, Florida                JOAQUIN CASTRO, Texas
MARK MEADOWS, North Carolina         ROBIN L. KELLY, Illinois
TED S. YOHO, Florida                 BRENDAN F. BOYLE, Pennsylvania
ADAM KINZINGER, Illinois             DINA TITUS, Nevada
LEE M. ZELDIN, New York              NORMA J. TORRES, California
DANIEL M. DONOVAN, Jr., New York     BRADLEY SCOTT SCHNEIDER, Illinois
F. JAMES SENSENBRENNER, Jr.,         THOMAS R. SUOZZI, New York
    Wisconsin                        ADRIANO ESPAILLAT, New York
ANN WAGNER, Missouri                 TED LIEU, California
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia
JOHN R. CURTIS, Utah

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
                            C O N T E N T S

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                               WITNESSES

The Honorable Mario Mancuso, partner, Kirkland and Ellis, LLP 
  (former Undersecretary for Industry and Security, U.S. 
  Department of Commerce)........................................     3
The Honorable Alan Larson, senior international policy advisor, 
  Covington and Burling, LLP (former Undersecretary for Economic, 
  Business, and Agricultural Affairs, U.S. Department of State)..    10
The Honorable Kevin Wolf, partner, Akin Gump Strauss Hauer and 
  Feld, LLP (former Assistant Secretary for Export 
  Administration, Bureau of Industry and Security, U.S. 
  Department of Commerce)........................................    17

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Mario Mancuso: Prepared statement..................     6
The Honorable Alan Larson: Prepared statement....................    12
The Honorable Kevin Wolf: Prepared statement.....................    19

                                APPENDIX

Hearing notice...................................................    50
Hearing minutes..................................................    51
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    53
Written responses from the witnesses to questions submitted for 
  the record by:
  The Honorable Adam Kinzinger, a Representative in Congress from 
    the State of Illinois........................................    54
  The Honorable Ann Wagner, a Representative in Congress from the 
    State of Missouri............................................    55

 
                      MODERNIZING EXPORT CONTROLS:
                   PROTECTING CUTTING-EDGE TECHNOLOGY
                       AND U.S. NATIONAL SECURITY

                              ----------                              


                       WEDNESDAY, MARCH 14, 2018

                       House of Representatives,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 10:00 a.m., in 
room 2172 Rayburn House Office Building, Hon. Edward Royce 
(chairman of the committee) presiding.
    Chairman Royce. This committee will come to order. And 
today the committee is going to review our export controls and 
our foreign investment review process. Both are critical to 
protecting our national security and, of course, protecting our 
economic edge.
    The United States, as we all know, is the world's largest 
exporter of goods and services, and our trade relationships as 
well as our leadership in science, engineering and 
manufacturing support between them tens of millions of good-
paying American jobs.
    Alarmingly, our competitive edge is increasingly under 
attack by policies from China and Russia and from others that 
seek to obtain advanced technologies and intellectual property 
by hook or by crook. As some may recall, in 2011 this committee 
held a hearing on China's ``indigenous innovation'' policy and 
at that time I noted the Chinese Government has been turning up 
the pressure on U.S. and other foreign business to share 
sensitive technology with Chinese state-owned enterprises as 
the cost of selling in the Chinese market. This is especially 
true today.
    Making matters worse, our outdated regulatory safeguards 
have potential gaps. Those gaps could permit transfers to 
potential adversaries of the ``know-how'' essential to 
sensitive emerging technologies like artificial intelligence as 
well as robotics.
    In this global economy, turning inward is not the solution 
to these challenges. But we also cannot allow others to cheat 
U.S. employers or, worse, use our sensitive technology to 
undermine our own national security.
    And that's why Ranking Member Engel and I have introduced 
the Export Control Reform Act of 2018, which would repeal the 
expired Cold War era Export Administration Act of 1979. We 
would replace it with a modern statutory authority to regulate 
dual-use items. Under our approach, we would modernize U.S. 
export control laws and regulations and they will continue to 
have broad authority governing the transfer of less sensitive 
military and dual-use in technology to foreign persons whether 
that transfer takes place abroad or here in the United States.
    As governments like Beijing and others pursue their hard-
edge strategies to acquire advanced technologies from the U.S. 
and from our allies, our bill utilizes unilateral controls 
where necessary and it also will improve coordination with 
allies to strengthen export controls and inward investment 
security.
    Meanwhile, the Committee on Foreign Investment in the 
United States--and that's CFIUS--would continue to review 
certain ``covered transactions.'' Those are defined as the 
acquisition or control by foreign persons over a U.S. business. 
The vast majority of these investments are productive and 
should be welcomed.
    Modernized U.S. export controls and appropriately crafted 
CFIUS reforms are complementary responses to the challenges we 
face. Together, they should improve the ability of the U.S. to 
remain a leader in innovation and to strengthen the industrial 
base and to protect the technologies essential to national 
security.
    Our goal is an efficient regulatory system that promotes 
both our national security and our economic prosperity and we 
have with us today three practitioners in the field, each with 
long experience in the CFIUS process and with U.S. export 
controls, and we hope their testimony today will provide the 
committee with insights into how to proceed on these important 
and challenging issues.
    And I will turn to the Democratic side in case we have any 
members who would like to make an opening statement, if they 
would. Otherwise, we will go to the witnesses.
    Mr. Sires. No, I don't have any statement. Thank you very 
much. Thank you for being here.
    Chairman Royce. And so this morning the distinguished panel 
includes Mr. Mancuso. Mario is a partner at Kirkland & Ellis 
and previously he served as the Undersecretary of Commerce for 
Industry and Security, and as the Deputy Assistant Secretary of 
Defense for Special Operations and Combating Terrorism.
    We have Ambassador Alan Larson. He serves as senior 
international policy advisor at Covington & Burling. 
Previously, Ambassador Larson served in a series of senior 
government positions including as the Undersecretary of State 
for Economic, Business, and Agricultural Affairs, and as the 
Ambassador for the Organization for Economic Cooperation and 
Development.
    And we have Mr. Kevin Wolf, partner at Akin Gump Strauss 
Hauer & Feld. Previously, he served as the Assistant Secretary 
of Commerce for Export Administration within the Bureau of 
Industry and Security.
    So without any objection, the witnesses' full prepared 
statements are going to be made part of the record and members 
here are going to have 5 calendar days to submit any statements 
or questions or any extraneous material for the record.
    And we will begin with Mario Mancuso. And we will ask him 
to summarize, sir, your remarks and we will go down the panel.

STATEMENT OF THE HONORABLE MARIO MANCUSO, PARTNER, KIRKLAND AND 
 ELLIS, LLP (FORMER UNDERSECRETARY FOR INDUSTRY AND SECURITY, 
                  U.S. DEPARTMENT OF COMMERCE)

    Mr. Mancuso. Thank you. Chairman Royce, Ranking Member 
Engel, and other distinguished members of the committee, thank 
you for the opportunity to testify this morning. I am 
delighted, obviously, to be with all of you and with my fellow 
panelists.
    As Chairman Royce mentioned, my name is Mario Mancuso. Over 
the course of my career in government I've had the great 
privilege to serve in a variety of roles in the U.S. national 
security and foreign policy enterprise.
    I served as Undersecretary for Industry and Security, as 
Deputy Assistant Secretary of Defense for Special Operations, a 
member of the Global Market Board at the National Intelligence 
Council, and as a forward-deployed military officer in combat.
    In these roles, I learned a great deal about how U.S. 
national security is conceived, debated, and articulated in the 
interagency, how statecraft is actually operationalized and how 
U.S. national security is advanced on the ground.
    I learned a great deal about the differences between ideas 
and execution, between inputs and outputs, the importance of 
legal authorities, resources, and accountability and the need 
for modesty, especially in presuming what we know and do not 
know and cannot know and do.
    Today, I am a visiting senior fellow at the Hudson 
Institute for International Security where I continue to work 
on questions that relate to U.S. national security strategy and 
statecraft in the emerging security environment.
    I am also a partner at Kirkland and Ellis where my practice 
focuses on matters that relate to U.S. national security 
regulation of international activities.
    I want to be clear from the outset I am here today in my 
personal capacity. The views I express here are mine alone and 
they should not be construed as the views of Kirkland and Ellis 
or its clients.
    I am here to offer some observations in my capacity as a 
former government official about these topics and to answer 
your questions.
    I will not discuss any specific case or matter that has 
been or is current before the U.S. Government.
    As this committee knows well, both CFIUS and export 
controls are important instruments of U.S. statecraft. By 
design, they aim to effectuate a selective denial strategy, 
which itself is premised on an important assumption--that the 
U.S. has certain things that others want and don't have.
    While globalization has rendered that assumption outdated 
in many areas, for certain emerging and foundational 
technologies--for example, artificial intelligence, robotics, 
augmented and virtual reality, et cetera--that assumption is 
still generally true today.
    On the other hand, while globalization has diminished our 
lead in certain technology areas, it has also been central to 
our economic and, by extension, our national security success.
    One need only look at U.S. overmatch advantages in nuclear 
and electronics-enabled capabilities at critical junctures in 
our history to see how economic scale and technological 
superiority worked hand in hand in service of our global 
preeminence.
    In this connection, as this committee considers the 
contribution of CFIUS and export controls to U.S. national 
security, I would invite the committee to keep in mind two 
questions which may help frame the discussion.
    First, at this time in our history, what's the optimal 
balance for the U.S. to strike between economic openness and 
restrictiveness in order for our country to secure the most 
important advantages of openness while mitigating its greatest 
risks; second, whether in light of that equilibrium CFIUS and 
the current export control regime is by virtue of its resources 
and authorities properly configured to effectively implement 
and maintain this balance.
    In the interests of facilitating this, I'll just offer some 
observations. I won't offer all of them. All of them will be in 
my written testimony, but just a few to start things off here.
    First, foreign direct investment--FDI--is critical to U.S. 
economic vitality. The collective economic strength and 
vitality of our economy to which FDI clearly contributes helps 
resource our investment in national defense and extends our 
soft power reach around the world.
    While the U.S. remains a preferred global destination for 
FDI, our global share of FDI has declined in recent years. 
Because of its many benefits, this should be concerning to U.S. 
policymakers including U.S. national security policymakers.
    Indeed, nations today must compete for foreign direct 
investment. A failure to consistently attract benign FDI into 
the U.S. would present a long-term systemic national security 
risk to the United States.
    But while FDI is generally good, certain transactions do in 
fact present transaction-specific national security risks. The 
policy question to consider, therefore, is not how to balance 
economic and national security interests but how to balance 
systemic and transaction specific national security risks.
    In recent years, strategic competition between the U.S. and 
China has increased across multiple domains--economic, 
political, diplomatic, and military--and there is no reason to 
believe that that competition will abate in coming years.
    China is actively pursuing a well-resourced coordinated 
science and technology strategy that seeks to bolster 
indigenous Chinese innovation and to position China to be the 
world's technology leader.
    A number of pillars of this strategy, as Chairman Royce 
rightly pointed out, have been described in various official 
Chinese Government pronouncements such as ``Made in China,'' a 
number of Five-Year Plans, and certain published technology 
roadmaps.
    If successful in its articulated form, this strategy would 
have important Chinese economic and social benefits. It would 
contribute to the U.S.-China and economic relationship but it 
would also have deleterious impacts on U.S. national security.
    As a matter of legal authority, export controls apply to 
the transfer of specific or general types of technology to 
foreign persons generally. In other words, their reach is not 
limited by law to a prescribed set of commercial 
circumstances--for example, corporate transactions.
    The controls vary by technology type, end use and end user, 
and are designed to advance one or more national security 
foreign policy or other goals. The system is highly complex and 
nuanced.
    As a matter of legal authority, CFIUS has legal 
jurisdiction over many but not all transactions. Three things 
must be true for a transaction to be a covered transaction and 
thus fall within CFIUS' jurisdiction.
    First, the buyer or the investor has to be a foreign 
person, the transaction must be a controlled transaction, and 
the target business must be a U.S. business. All of these 
things are terms of art, and while CFIUS' reach is broad, it is 
not infinite.
    Export controls and CFIUS have different, independently 
important, and complementary responsibilities. As Congress 
considers reforming one or both, it should focus its review 
primarily on gaps in resources and authorities.
    I will end by saying U.S. technology leadership is 
essential, particularly with respect to certain emerging and 
foundational technologies to long-term U.S. national security 
interests.
    To achieve this, the U.S. should pursue and not shrink from 
pursuing a whole of government strategy that does not rely 
exclusively on CFIUS and export controls or see these areas as 
the exclusive vectors of national security risk but builds 
strength on strength by countering illicit technology transfer 
however that may occur, enhancing the U.S.' economic 
competitiveness and technological superiority.
    Thank you again for the opportunity to be with you today 
and for your commitment to exploring these important issues. I 
look forward to the committee's questions.
    [The prepared statement of Mr. Mancuso follows:]
    
    
    
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    Chairman Royce. Thank you, Mario.
    We go to Ambassador Larson.

 STATEMENT OF THE HONORABLE ALAN LARSON, SENIOR INTERNATIONAL 
      POLICY ADVISOR, COVINGTON AND BURLING, LLP (FORMER 
    UNDERSECRETARY FOR ECONOMIC, BUSINESS, AND AGRICULTURAL 
               AFFAIRS, U.S. DEPARTMENT OF STATE)

    Ambassador Larson. Mr. Chairman, Mr. Engel, and 
distinguished members, I am delivering my testimony today on my 
personal responsibility, not on behalf of the organization 
where I work nor its clients.
    Nevertheless, my views have been informed by over a dozen 
years at Covington and Burling and 32 years at the State 
Department. At each organization, I had responsibilities for 
CFIUS, trade controls, and sanctions.
    As Congress considers CFIUS reform and export control 
reform including the export control----
    Chairman Royce. Excuse me. Alan, here's a suggestion. Just 
pull the microphone a little closer. The people in the back 
indicate they couldn't hear it. There you go.
    Ambassador Larson. Is that okay? Thank you.
    Chairman Royce. Ambassador, thank you.
    Ambassador Larson. As Congress considers reform of CFIUS 
and export control reforms like the Export Control Act, we 
should remember that the United States benefits greatly from 
foreign investment and foreign trade.
    Foreign investment promotes economic dynamism, creates 
jobs, spurs innovation, and contributes to our ability to fund 
strong military and national security capabilities.
    In my view, CFIUS works best when it focusses narrowly on 
protecting national security. Certain investments that give a 
foreign person control over a U.S. business can have national 
security implications.
    CFIUS has been effective and adaptable in addressing such 
national security concerns. Other broader and vague economic 
goals such as economic security in my view should not replace 
national security as the standard for CFIUS.
    Similarly, reciprocity or concerns about another county's 
trade policy, while very important issues, should be addressed 
by other policy tools and not by CFIUS.
    Congress and the executive branch should regularly review, 
modernize, and reform CFIUS and export controls to address 
emerging national security risks. In the case of CFIUS, they 
did so in the Foreign Investment and National Security Act of 
2007.
    During the 10 years since FINSA was enacted, however, new 
security challenges have emerged. Today, China has become both 
an economic competitor and an economic partner of the United 
States.
    In addition, China is both a strategic competitor of the 
United States and, at the same time, China works with the 
United States to promote certain shared security objectives 
including on containing the threat of North Korea's nuclear 
weapons and fighting terrorism.
    U.S. policy should reflect the complexity and importance of 
our relationship with China. We should avoid actions that 
unnecessarily feed perception that we believe conflict between 
our countries is inevitable.
    Now, China and the United States each have strong 
commercial reasons to pursue leadership and critical emerging 
technologies including artificial intelligence, semiconductors, 
and robotics, among others.
    Some of these technologies have both commercial 
applications and also national security applications. As we 
consider the implications of these and other technologies on 
national security, we should very seriously consider reform and 
modernization of CFIUS in tandem with reform and modernization 
of U.S. export control regimes including the EAR and ITAR.
    CFIUS and export control regimes can and should complement 
each other and be consistent with one another, not overlap and 
not contradict each other. Each regime, in my view, should 
focus on its areas of core expertise.
    Other countries often criticize CFIUS and U.S. export 
controls and exaggerate their impact on legitimate commerce. My 
view is that the United States should do what we need to do to 
protect U.S. national security, notwithstanding such criticism 
and misunderstanding.
    At the same time, we should take a clear-eyed, thoughtful, 
and balanced approach. We should protect national security in 
ways that promote economic dynamism at home. We should protect 
national security while avoiding to the maximum extent possible 
actions that unnecessarily foment misunderstandings.
    The United States can and must build deeper and stronger 
economic and strategic cooperation with China while protecting 
national security and, in my opinion, we should see reform of 
CFIUS and of U.S. export control laws as complementary to such 
a clear-eyed strategy.
    Thank you, Mr. Chairman.
    [The prepared statement of Ambassador Larson follows:]
    
    
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    Chairman Royce. Thank you, Alan.
    Mr. Wolf.

   STATEMENT OF THE HONORABLE KEVIN WOLF, PARTNER, AKIN GUMP 
  STRAUSS HAUER AND FELD, LLP (FORMER ASSISTANT SECRETARY FOR 
 EXPORT ADMINISTRATION, BUREAU OF INDUSTRY AND SECURITY, U.S. 
                    DEPARTMENT OF COMMERCE)

    Mr. Wolf. Thank you, Chairman, Ranking Member for holding 
this hearing, for introducing the bill, raising the topic. 
Thanks also to Senators Cornyn, Feinstein, and Congressman 
Pittenger for raising the issue in their bill as well.
    This is a very important topic, and from my time in the 
government I agree that the underlying motives and concerns to 
be addressed by each of the bills and the topics should be 
addressed and they're real and legitimate, and this has been a 
terrific example of a quality public debate on a very serious 
difficult issue.
    By the way also, the views I express today are my own and 
not on behalf of my firm or any of its clients.
    So I think most people agree with the underlying issue to 
be addressed and the concern that you described well in your 
opening statement. The issue is how best to address it in a way 
that does more good than harm.
    And in general, with export controls and CFIUS there are 
two primary approaches that are being discussed and one 
approach is a very broad open-ended scope of controls or 
investment authorities that is safe that catches large numbers 
of transactions and one decides later whether there is a 
transaction of concern or technology to be transferred that 
would be of concern.
    And the other approach is a much more tailored specific set 
of controls where the government does the hard work up front to 
identify what the threats are and to address the controls more 
directly with fewer collateral consequences, less uncertainty, 
and less harm to foreign direct investment.
    So my role, in my view, is that to the extent that any of 
the concerns that are being discussed in either of the bills 
deal with technologies of concern that are not now controlled 
by the export control system but that should be. The best way 
to address it is through the existing export control 
authorities.
    Very simply, all of export controls can really be reduced 
down to one sentence. They are the set of rules that govern the 
export, re-export, and transfer of technology, software, 
services, and hardware to specific end uses, to specific 
destinations, and to specific end users for various national 
security and foreign policy purposes.
    That's my entire professional life in one sentence. I feel 
very small all of a sudden.
    Anyway, within the Export Administration regulations there 
are lots of tools to address each of these issues depending 
upon what the threat is in very tailored ways to avoid 
unintended consequences and strains on government resources.
    The rules are capable of being adapted unilaterally and 
quickly for emerging technologies that are of concern that 
weren't identified as part of our list review efforts.
    They are capable of addressing specific end uses, specific 
end users, and specific destinations. The descriptions of the 
technology and the types of information that could be captured 
and controlled by these regulations is infinitely variable, 
going from at its earliest stages of information and 
developmental technology or know-how and leading up all the way 
through production and operation and use technology.
    So to go right to the answer to the question of this 
hearing--how do we best address and regulate cutting-edge 
technologies for national security reasons--frankly, I think 
the answer is in your bill in Section 109 and it lays out a 
process of requiring the government, through an interagency 
process, drawing upon all of the experts that are within the 
government and outside the government and industry and academia 
to identify what the threats are and what the choke point 
technologies and other information are to address the concerns 
that you well described in your opening; to publish those as 
drafts so that industry has a chance to review it and comment 
on it, to avoid unintended consequences and to make sure that 
it's clear and understandable; if it's an emergency situation 
use the existing authorities within the Export Administration 
regulations, to tag those and control those technologies 
immediately but to the extent it is not an emergency, work with 
our interagency friends to submit to the multilateral regimes, 
these same technologies, so that our allies are controlling it 
as well for the same reason; to support and fund the 
administration of these regulations for education and outreach 
and for very aggressive enforcement of the controls for a level 
playing field; and then have a process in place to regular 
review and update the controls as threats and technologies 
evolve.
    This bill--the statutory authority for this system--was 
last addressed 40 years ago. The world is a very different 
place now than it was then. And so I applaud the members in 
this committee for raising this topic and moving forward.
    And with that, I am happy to answer whatever thoughts or 
questions you might have.
    [The prepared statement of Mr. Wolf follows:]
    
    
    
    
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    Chairman Royce. Mr. Wolf, thank you, and for the committee 
members here the reason Eliot and I have introduced this bill 
is--this new export control statute is because the Export 
Administration Act, which has been around for a long time, it 
was designed to handle trade controls on the Soviet bloc.
    So that was before most of the members were on this 
committee. And it's never been comprehensively updated since 
then.
    It's been in lapse, actually, for most of the last quarter 
century and as a result what we've done is we've had to rely on 
emergency authorities to uphold our dual use and that's why we 
are focused on this legislation.
    As Mr. Wolf noted, it is key to control emerging critical 
technologies that may become essential to national security. 
The Export Control Reform Act that we've got here before us on 
the committee would explicitly assign this authority to U.S. 
export control agencies.
    So I will ask Ambassador Larson first. Are you concerned at 
all that attempting to control emerging critical technologies 
primarily through an expanded CFIUS process may negatively 
impact U.S. innovation and, indirectly, technology advantage?
    Ambassador Larson. Well, thank you, Mr. Chairman.
    I think that one of the things I learned in government was 
that we were usually most effective if we had used the parts of 
our Government that had the expertise and knowledge to lead.
    And so in respect of controlling and export or transfer of 
critical U.S. technologies, my first point of emphasis would be 
on the export control regimes that we've used in the past.
    I support the idea that those need to be updated to take 
into account the changed geopolitical situation, the changed 
technological situation. But I think that's the first way to 
start.
    I think CFIUS does a good job on its mandate and its 
mandate has been to ensure that there are not acquisitions by a 
foreign person of control of a U.S. company that would impair 
the national security; and that can include instances where 
that U.S. company has critical technology and I think CFIUS has 
handled that responsibility well.
    Chairman Royce. I think they're complementary but I think 
we've got to have export controls----
    Ambassador Larson. Precisely.
    Chairman Royce [continuing]. In statute and that's what we 
are focused on.
    Ambassador Larson. Precisely.
    Chairman Royce. So here's another question and I will ask 
this one of Mr. Mancuso or Mr. Wolf.
    If one of the most pressing concerns driving this debate is 
technology transfer to China, could U.S. export controls be 
tailored to address this national security concern without 
excessively impact trade with other countries or without 
creating undue uncertainty about whether other transactions 
could come within the scope of CFIUS review?
    Mr. Wolf, if you'd like, sir.
    Mr. Wolf. Yes, absolutely. That's my primary point about 
the beauty of the export control system in that it is 
infinitely tailorable to address specific technologies at 
whatever stage of their concern--at whatever stage of their 
development that are of concern for transfer to specific end 
users or specific destinations or for specific applications and 
that way once you identify what the threat--once the national 
security experts identify what the concerns are that would harm 
our national security in terms of altering our edge on a 
variety of different areas you can, through the export control 
system, either unilaterally or multilaterally or both identify 
those technologies specifically and clearly and tailor them in 
such a way so that it doesn't affect the types of transactions 
or countries or end users which are not a threat, particularly 
with respect to the allies.
    To the extent that the concern is not related to technology 
transfer, then the export control system may not be your best 
vehicle and other tools such as the espionage rules or the IT 
theft rules or CFIUS for other topics should come into play.
    But I agree with the essence of your question completely.
    Chairman Royce. And Mario, do you concur?
    Mr. Mancuso. So, Chairman Royce, I do concur but I would 
like to add some additional detail because I certainly think 
that the export control regime has the existing authority, has 
built within it the capacity to be flexible and fast and all 
the things that Kevin mentioned.
    But I would point out that, as a practical matter, in the 
execution of these responsibilities the system operates very 
differently today.
    So, for example, even the taxonomy of creating CIFs between 
destination, end user and end use, kind of suggests the Cold 
War and 9/11 era thinking around export controls and products 
outside the United States.
    I think the fact of the matter is that for some of these 
emerging technologies that transfer is occurring within the 
United States.
    So while I agree the authorities are broad enough, I am not 
sure the resources are there or the practice sufficiently 
developed that we focus on illicit tech transfer inside the 
United States because I think that's critical and that's 
fundamentally different than the Cold War.
    One other point, Chairman Royce, if I may. The other thing 
that's difficult is during the Cold War we--our U.S.--there was 
tremendous agreement with U.S. strategic allies about the Cold 
War threat and at the time our strategic allies were not our 
economic competitors.
    Today, they are both strategic allies and we are thankful 
for them but they also happen to compete with us globally. And 
so we just have to keep in mind that the context is a little 
different even though the authorities are robust.
    Chairman Royce. Thank you, Mr. Mancuso.
    Here's one more question for you. So we've had a 30 years 
timeframe here. We've had a number of U.S. Presidents but 
they've only blocked a total of five CFIUS transactions, two of 
which happened under this administration here recently.
    So given the news yesterday about the White House stopping 
what would have been the largest deal in tech history, is it 
fair to conclude that the CFIUS process is evolving toward a 
stricter review process irrespective of potential legislation 
here by Congress?
    Mr. Mancuso. I will take that question first. I am not 
going to comment on that specific transaction but I will just 
comment on the fact that----
    Chairman Royce. Yes, I remember your caveat coming into the 
testimony.
    Mr. Mancuso. Yes. The two transactions have been blocked in 
really as many years, right.
    Chairman Royce. Right.
    Mr. Mancuso. Actually, now three.
    Chairman Royce. Right.
    Mr. Mancuso. I think, frankly, the current--the pharma bill 
largely but not completely would implement current agency 
practice with CFIUS, okay, and you can quibble about whether or 
not CFIUS is acting beyond its current authorities but I think 
it would largely implement that.
    Chairman Royce. Yes.
    Mr. Mancuso. But I do think the blocking of the 
transactions suggest that the United States Government, the 
executive branch, is taking these issues seriously--perhaps in 
a blunt way, but it's taking these issues more seriously and I 
think that the U.S. Government needs to take these issues more 
seriously.
    Chairman Royce. Thank you, and Mr. Wolf, you wanted to 
comment on that.
    Mr. Wolf. So just to follow up and repeat, the key with all 
of this is to spend the time and the resources and to have the 
creativity to identify those emerging technologies of concern 
that aren't normally looked at in the traditional export 
control system which we are used to in terms of weapons of mass 
destruction or traditional military items.
    And for this effort to succeed and the former efforts to 
succeed and the policy objectives in both to be achieved, that, 
I agree, what really needs to be spent is a lot of very clever 
thinking, the addition of new resources to the existing system 
to reach outside the box to identify what those technologies 
are that are not now controlled but are emerging but should be 
and to list them and regulate them to the end users and end 
users of concern.
    With respect to the CFIUS question you asked, it all goes 
down to the deliberate non-definition of national security. 
National security evolves.
    It changes the legislation either the current bill and 
the--now, the existing statute does not define what that means. 
It's up to those in charge in order to apply their discretion 
to what the threat is today.
    I believe that the CFIUS system today and before is 
adequately addressing those and not approving transactions that 
would leave unresolved national security concerns.
    So there can be a guide to what national security means but 
trying to restrict it or identify or specifically tailor it I 
don't think would be a good idea because threats and issues 
evolve.
    Chairman Royce. Thank you, Mr. Wolf. I appreciate it.
    Mr. Engel, ranking member.
    Mr. Engel. Thank you, Mr. Chairman.
    I was happy to join with you a few weeks ago in introducing 
the Export Control Reform Act in a bipartisan way and, to me, 
that's been a hallmark, as we've said so many times, of the way 
this committee operates in a bipartisan way. I wish that more 
of the committees in this Congress were that way. But I am very 
pleased that we do.
    I am pleased we are following up with this hearing which 
will help bring members of the committee up to date on our 
system for controlling the export of dual-use goods and 
technology, and it isn't something, obviously, we talk about a 
lot.
    But oversight of the export of dual-use items--that is, 
items that have both military and commercial applications is an 
important part of our committee's jurisdiction.
    In my view, it's just as important as our work regulating 
the export of military items. A few decades ago, the defense 
sector nearly always drove the development of high tech, which 
later ended up on the commercial sector, and today the opposite 
is often quite true. High tech in the commercial sector is now 
often a precursor of advanced weapons.
    So your bill, Mr. Chairman, will help us take a fresh look 
at our export control system to bring it up to date with the 
modern reality of the way these technologies are developed and 
sold, and it would give us an updated charter that grapples 
with the global risks of sensitive technology falling into the 
hands of our adversaries. So this update is long overdue.
    As was mentioned, previous law was last revised in 1979 in 
the depths of the Cold War and is replete with out-of-date 
provisions that don't reflect national security's provisions 
today.
    It also expired in 2001. It means the authority granting 
export licenses is no longer based in statute but relies on 
temporary authority that is now nearly two decades old.
    Last year, some 34,000 licenses were processed for exports 
of sensitive technology, and if you ask me, this isn't 
something we ought to be doing willy-nilly.
    We need a sound updated and permanent statute and that's 
why, Mr. Chairman, I was so happy and proud to join with you on 
this.
    Let me ask Mr. Wolf and Mr. Mancuso first--each of you 
managed the export control system while it was under temporary 
emergency authority and while it was under legal challenge.
    So I would like to get you on record. Would you agree that 
it would be better to have a sound statutory authority for this 
system?
    Mr. Mancuso. Absolutely, Mr. Engel, and I would go further 
and say that I think that U.S.' whole of government strategy 
should be built around export controls, not built around CFIUS.
    Mr. Engel. Thank you.
    Mr. Wolf.
    Mr. Wolf. While the existing IEEPA authority is sufficient 
legal authority for the existing regulations and enforcement 
there under--I am not denying that--I agree with you that 
having permanent legal authority in the form of this or a 
similar bill is very important for a variety of reasons and 
also to express the will of Congress with respect to a very 
different world that exists now than existed in 1979. So I 
agree with the point of your question.
    Mr. Engel. Thank you.
    And let me ask you another one, Mr. Wolf and Mr. Mancuso. 
Last year, the Export Control Bureau at Commerce and its 
partners at DOD and State processed 34,000 licenses, and the 
trend will continue to be upward.
    Are the government's resources adequate to handle that 
volume and make good decisions? I will start with Mr. Mancuso.
    Mr. Mancuso. So just like any enterprise, the government 
can't do everything everywhere all the time. The number of 
those licenses--I think BIS has historically been under strain.
    I will defer to Kevin on his recent experience. I served 
for President Bush in that role. But I think as a general 
proposition, yes, my recollection is that the bureau needs more 
resources.
    But I don't think of resources only in terms of financial 
resources. I actually think injecting the Bureau of Industry 
and Security with additional national security acumen and 
additional connectivity with the rest of the government is 
important.
    I am not suggesting that isn't there. I just think that as 
an agency that's embedded within a Cabinet department whose 
principal clients, if you will, or broader commerce I think 
it's imperative for that agency to remain connected with its 
national security and foreign policy colleagues to effectively 
carry out its mandate.
    So resources are both financial--would be important--but 
also in terms of enhanced capability and connectivity with the 
national security enterprise of the United States.
    Mr. Engel. Thank you.
    Mr. Wolf?
    Mr. Wolf. It's great no longer being in government because 
I could answer your question without being limited to 
instructions to stick to the budget given.
    And, yes, absolutely it's for enforcement both in the 
United States and outside the United States are critical and 
the authorities to do it in order to keep the level playing 
field and to deter those who would violate the regs--for more 
industry education and outreach, particularly to small and 
medium-sized businesses I think would be critical, and then 
going to the point of this hearing, more resources in terms of 
both money and personnel but creative thinking to identify the 
types of emerging technologies that aren't traditionally part 
of the export control system and working with people that 
aren't traditionally part of the export control world to 
identify those threats that are novel and not previously 
considered.
    And then with respect to resources, that then leads to what 
I would advocate and always wanted to do on the dual-use side, 
which is, frankly, a top to bottom list review effort of 
everything in the very long list of controlled items to see 
what's there that no longer needs to be--in light of evolving 
technologies and going back to the emerging point, what isn't 
there but should be, and that just requires a substantial 
multi-year effort working with industry, working with experts 
and the Defense Department, largely, and other parts of the 
government to figure that out as opposed to the sort of regular 
process that exists today, which is adequate and good but I 
think it should be a lot more robust and aggressive.
    Mr. Engel. Thank you.
    And Ambassador Larson, I have one quick one for you. Given 
your experience at State, are the budget and staff cutbacks 
that we are seeing at State having a negative effect on the 
department?
    Ambassador Larson. I haven't worked there for 12 years but 
my judgment is that it's very hard for the State Department to 
do the missions that it's been asked to do with such a tight 
budget situation, certainly in the areas I was responsible for 
in economics. I think that's true.
    Mr. Engel. Thank you. Thank you, Mr. Chairman.
    Chairman Royce. Thank you, Mr. Engel.
    We go to Mr. Chris Smith of New Jersey.
    Mr. Smith. Thank you very much, Mr. Chairman. I want to 
thank our witnesses for their insight and recommendations.
    Mr. Chairman, I am very concerned by reports that U.S. 
companies are selling equipment and technology that is being 
used by the Chinese Government in its ubiquitous surveillance 
and detention program, including the targeting of Uighur Muslim 
ethnic minority persons in western China.
    Some estimates suggest that something like 500,000--some 
put it much higher--Uighurs are being detained in political 
education centers, which are really just detention centers.
    This is a staggering figure. Included in the crackdown are 
family members of Voice of America, Uighur-language 
broadcasters.
    Chinese police are gathering and storing DNA samples, 
fingerprints, iris scans, and blood types, and other biometric 
data from all Uighurs between the ages of 12 and 65.
    Human Rights Watch identified a Massachusetts-based 
company, Thermo Fisher Scientific, as supplying the Chinese 
Government with DNA sequencers.
    Other companies are providing surveillance cameras or 
software for facial recognition equipment.
    Would you say that United States law bars U.S. companies 
from exporting technology that aids in the crackdown of the 
Uighurs?
    To me, that would seem clear. The 1978 amendment to Section 
502(b) of the Foreign Assistance Act of 1961 states that export 
licenses may not be issued under the Export Administration Act 
of '69 for the export of crime control and detection 
instruments and equipment to a country, the government of which 
engages in a consistent pattern of gross violations of 
internationally recognized human rights, unless the President 
certifies in writing to the Speaker of the House and the 
chairman of the Committee on Foreign Affairs and the Senate 
Foreign Relations that extraordinary circumstances exist 
warranting provision of such assistance and the issuing of such 
a license.
    We've checked with the House Foreign Affairs Committee and 
Speaker's office and neither have received a certification for 
this sale of detection and surveillance equipment to China.
    So the question is: Are companies allowed to export that, 
especially now that we know that it's being used against the 
Uighurs?
    Are you aware of any company selling equipment and 
technology that China is using for its massive police state 
surveillance efforts, and how can U.S. companies sell 
technology and equipment that is being used for these purposes?
    Is that a problem that the Commerce and the State 
Departments are not policing this area very well? Is it a 
matter of negligence, or is the problem with the law and does 
that law have to be rewritten in a world where DNA sequencers, 
biometric data gathering, and the use of artificial 
intelligence for surveillance is now becoming commonplace?
    Ambassador.
    Ambassador Larson. Well, thank you, Mr. Smith. I would like 
to defer to the two colleagues who actually ran export 
controls.
    Mr. Smith. That's great.
    Mr. Wolf. Sure. So most of this discussion today is about 
national security controls. But foreign policy controls, crime 
controls, which includes human rights issues that you raised, 
are very much a part of----
    Mr. Smith. If I could interrupt.
    Mr. Wolf. Yes.
    Mr. Smith. I would always say that human rights violations, 
particularly on such a massive scale, absolutely rise to the 
level of a national security issue for the United States.
    Mr. Wolf. Okay. Fair point. Fair point. I often--but in any 
event, it covers both, either national security, foreign 
policy, human rights, however defined.
    And the key to the point of your question is with respect 
to the technology, and I don't know the facts involved, is 
whether the items of concern are listed on the commerce control 
list and there are long lists of items that are controlled for 
crime control--CC reasons--such as fingerprint equipment and 
things like that that are controlled for exactly the reasons 
that you just described.
    With respect to the facts that you're dealing with, the 
question would be whether they are on the list now and, if not, 
should they be or if there are reasons where they're not.
    Again, I don't know but that would be the question to ask 
and to work with BIS, and even to the extent that it's not the 
equipment at issue but the act of the foreign parties that are 
of national security or foreign policy concern, then BIS and 
the EAR have the authority to list particular entities which 
could result in the prohibition on the export of any items--
coffee cups, biometric equipment, et cetera--for the sake of 
exerting pressure on companies outside the U.S. or entities 
from engaging in bad acts, and that's called the entity-less 
process and it's a tool that BIS has to address issues such as 
along the lines that you describe to the extent that listing 
the equipment for control would not achieve the objectives 
sought.
    Mr. Smith. Thank you.
    Mr. Mancuso. Congressman Smith, my experience at BIS has 
been, you know, somewhat dated but I will answer your question.
    The authority exists to stop those kinds of items. In the 
last decade, of course, the technology, I believe, in this area 
in particular has really developed.
    But during my time at BIS we took this very seriously. Some 
of those items we in fact interdicted but some of these items 
were essentially dual use so we did not.
    But I agree with the premise of your question, which is 
that this is an area that the export control regime should look 
at and consider against U.S. policy objectives.
    So the legal authority is there and it's a policy question 
about whether it's done on any given basis.
    Mr. Smith. Thank you so much.
    Mr. Mancuso. Thank you.
    Chairman Royce. Thank you.
    Mr. Brad Sherman of California.
    Mr. Sherman. As others have noticed, we are operating for 
the last quarter century under an expired dual-use export 
statute--the Export Administration Act.
    Its regulations are kept in force under IEEPA. This is not 
regular order. This is not the rule of law as it is supposed to 
be carried out.
    It has worked, more or less. This is a critical area of 
jurisdiction for this committee and we've allowed the executive 
branch to run the policy.
    We've got to change that, of course, so that's why I 
commend Chairman Royce and Ranking Member Engel for introducing 
5054--that's H.R. 5054--to update the statute in this area.
    This is not the first attempt. There have been many 
attempts over the years. About a decade ago, we faced a bit of 
a crisis because DDTC in the State Department was taking many, 
many months to process applications and tens of thousands of 
applications were languishing.
    Pressure by this committee and the subcommittee that the 
chairman chaired and then I chaired and then he chaired again 
at least pushed the administration to solve that problem.
    The major effect of legislation in this area was to move 
satellites from the munitions list back onto the commerce list. 
There are many who believe that the maximum national security 
can be achieved by putting the maximum controls on the maximum 
number of items.
    This may not be the case. When we don't export goods we 
weaken our industrial base, setting back the money that's 
available to develop the weapons and technologies of the 
future.
    When we don't sell something, the buyer goes somewhere else 
and strengthens the industrial base of a country willing to 
sell to them and perhaps willing to sell to an even worse 
country.
    And so I've been a proponent of having a taller fence 
around a smaller field and that is to figure out what we are 
going to control and control it very well.
    I should point out that China blames our technology 
controls for the enormous trade deficit. That is just their 
attempt to lie about the real reasons for the enormous trade 
deficit.
    Let's see. One area that I would like to address to the 
witnesses--believe it or not, I have a question in here, which 
is new for me--is should we make the decisions based--
especially at the Commerce--well, does Commerce look at the 
impacts the technology transfer will have not just on the 
narrow security issue of whether that particular item will be 
misused in a way that hurts our security but from an employment 
standpoint, from an industrial base standpoint?
    Do we take a look at how the transfer of that technology 
will lead to the outsourcing of whole areas of production?
    So, Ambassador, I will start with you. Does Commerce take a 
look at the industrial base and especially the jobs issues?
    Ambassador Larson. Thank you, Mr. Sherman. If I may, 
because my expertise doesn't lie primarily in the Commerce 
Department----
    Mr. Sherman. Then I will go to Mr. Wolf.
    Ambassador Larson [continuing]. I would like to answer the 
question in a broader frame. Is that all right or should I just 
turn----
    Mr. Sherman. Why don't we go to the people who will answer 
it their own way?
    Ambassador Larson. That's fine.
    Mr. Wolf. Sure. I am not of the view of those who subscribe 
to there should be a balance between national security and jobs 
or economic security. National security is paramount and all 
decisions are to----
    Mr. Sherman. Yes. I am asking here are there times where we 
should say no, not because that one item could hurt our 
national security but because the export of that particular 
technology will allow a competitor to enter a whole new field 
that previously had been dependent on U.S. technology. I am not 
saying say yes to create jobs. I am saying are there times we 
should say no to protect jobs.
    Mr. Wolf. That variable is not a factor in what the 
Commerce Department considers when deciding whether to approve 
or deny an individual license. It's if that technology would 
create a national security threat you approve--you deny it or 
mitigate it----
    Mr. Sherman. So if there's a crown jewel that supports tens 
of thousands of jobs in America because we have that 
technology, Commerce may allow it to be exported?
    Mr. Mancuso.
    Mr. Mancuso. So, Congressman Sherman, I would take the 
approach no, we wouldn't because we don't balance national 
security against jobs. We certainly balance----
    Mr. Sherman. I think you're making the same mistake on the 
question.
    Mr. Mancuso. No, actually----
    Mr. Sherman. Do we say no, you can't export that item even 
it may be consistent with national security, but because the 
export of that item means a whole industry is being exported.
    Mr. Mancuso. I think it's important to keep in mind the two 
risks you identified--the transaction risk and systemic risk--
this industrial base issue.
    I think with respect to certain crown jewels where the 
actual law--national security loss in any given transaction--an 
export of the crown jewel, to use your example--I would take 
the position we don't balance that. If it's a crown jewel, it's 
a crown jewel.
    On the other hand, we have to be very discerning about what 
is a crown jewel because there are many technologies that might 
be sensitive but are not crown jewels and with respect to those 
economies of scale matter.
    Semi--lower-grade semiconductors are a good example of why 
we export them around the world and why it's important to 
export those around the world because the U.S. has an interest 
in protecting crown jewels but has no interest in creating 
protected foreign markets.
    Mr. Sherman. I've gone over time. I yield back.
    Mr. Mancuso. Has no interest in protecting--creating 
protected foreign markets if it's not advancing a U.S. national 
security interest.
    Chairman Royce. We go to Mr. Ted Yoho of Florida.
    Mr. Yoho. Thank you, Mr. Chairman, and I appreciate you 
guys being here. I could sit here all day and talk to you guys 
about this stuff because I think it's so important.
    Mr. Mancuso, you brought up that the U.S. Government should 
build its policies around export controls, not CFIUS. Did I 
hear that right?
    Mr. Mancuso. Yes, and what I meant by that, Congressman, is 
that export controls is a big piece. Obviously, CFIUS plays a 
very important role. But we have to think of complementary----
    Mr. Yoho. That's what I want to--they need--that can't be 
and/or.
    Mr. Mancuso. They can't be separate. It's not and/or. It's 
both.
    Mr. Yoho. They've got to be together. You know, we were 
talking about intellectual properties and we just came back 
from a trip to Thailand and they were talking about the special 
311 report on IPRs and how Thailand is on the watch list. But 
they're doing the things necessary to make sure that they 
protect our IPRs of our entrepreneurs.
    We are talking about intellectual property and it seems to 
rotate more around national security interests or the Broadcom 
or Qualcomm deal that the President stepped in, and as Chairman 
Royce brought up, the current administration did step in twice 
of the five times that were done in a period of years.
    And if you have an aggressive executive office that's well 
but we need to make sure that the rules are in place and I 
bring up--it's not just the intellectual property on a national 
security or with semiconductors, things like that.
    I was in a meeting yesterday where our researchers from our 
land grants were working with biogenomes with plants and he 
says, ``I am an adjunct professor in China because they pay me 
three times what I am paying here.''
    And what they're doing is they're taking our intellectual 
property in research and development in the ag science fields, 
taking them over there and it's not benefiting us.
    They're benefiting from our beginning research and I think 
this too is something that should be looked at different than 
we do now.
    And we've seen this over and over again. We saw the story 
up in Iowa where the Chinese operatives were stealing GMO corn, 
taking it over there and, again, it's a competitive advantage 
that they will get over us.
    So with that, is anybody looking at the biosciences? Before 
you answer that, the Chinese Government plans to force $9 
billion into the National Precision Medicine Initiative before 
2030.
    That's a lot of money and it's similar--the U.S. has only 
put in $215 million to their $9 billion and it's clear that 
they're going to get the competitive advantage.
    And then one has to wonder why is China building such a 
large pool. Right now, they have 30 percent of the world's 
genomics that they control and I can see this as a weapon in 
the future, you know, when you can start manipulating genes 
against a population and, again, we've had our medical 
researchers say that they'll start drug trials. They run out of 
money here. China picks it up and finishes it.
    So this drug that we put the initial research into it gets 
developed with an Asian population and it may not work the same 
in a Western population.
    And so are we looking at those as strong as we are on 
radars and semiconductors, in your experience? And that's for 
all of you.
    Mr. Mancuso. So, Congressman, export controls and CFIUS are 
complementary but they're only two instruments we have to 
counter some of the things.
    So things like industrial espionage, frankly, the 
purposeful stealing of technologies export controls is likely 
not going to catch.
    We need other instruments for that, and other parts of the 
government have been working on that. I can't tell you that my 
information is up to date what the progress of those efforts 
are.
    But if the premise of your question that we should be 
watching that is what--if that's what it is, I agree with it. 
So that's when I----
    Mr. Yoho. Well, let me narrow that down. Do we have the 
controls in place now to protect all the sciences that we are 
doing? Are we mainly just focused on the telecommunications and 
the semiconductors?
    Mr. Mancuso. This goes to--and then I will pass it over to 
Kevin--we have the authorities to control all of that.
    The government as a whole needs to and regularly does 
discuss, you know, views about what technology should be 
controlled but whether those specific technologies are 
controlled.
    Certainly, some radars are controlled. Certainly some 
therapies are controlled. But I am not quite sure if all of 
them, at least the ones that you're thinking about are.
    Mr. Yoho. I think that's something we need to weigh in and 
you brought up. Countries not individuals today are spying and 
they've always done that and they're always going to do that.
    But what we are seeing is a different geopolitics today 
than we had 15, 20 years ago. We have a very aggressive China 
going after things by hook and crook and it's not just the 
individual out there doing the espionage. It's a country and 
that country is taking that stuff from us.
    Mr. Wolf, if you want to weigh in, in 5 seconds.
    Mr. Wolf. No, export controls are not the solution to all 
those issues. They're not good for industrial policy. They're 
not good for economic espionage or IP theft or funding issues 
or R&D advantages.
    So all of those things that you mentioned are very 
important. But the EAR, the Export Administration Regulations, 
are probably not the best place to try to address them, given 
the national security and foreign policy focus of them.
    Mr. Yoho. I thank you for your time and I would like to 
follow up with you later.
    Mr. Wolf. Sure.
    Mr. Yoho. Mr. Chairman.
    Chairman Royce. Thank you. Thank you, Mr. Yoho.
    We go now to Mr. Albio Sires of New Jersey.
    Mr. Sires. Thank you, Mr. Chairman, and thank you for the 
panel that's here today.
    And I just want to follow up on my good friend from Florida 
on some of the things that he said. I know the title of this 
hearing today, but I really want to get it down to basics so I 
can understand some things.
    First thing, I remember a few years ago with solar panels--
we developed the panels--energy. China gets it and then they 
dump the solar panels on us.
    I represent New Jersey. I constantly hear from the 
pharmaceutical industry how Canada dumps things in America, 
some of the things that we develop here.
    Now we have India. Now South America is getting into the 
act. I know that--I keep hearing that we have the authority to 
control these things--these imports.
    How does that happen? How do we develop the energy--the 
solar panel energy, goes away from here, comes back here. Don't 
we have any kind of control on that stuff?
    And how, if we develop these medicines in the 
pharmaceutical industry and we have places like Canada, which 
is supposed to be our best trading partner, dump the stuff 
here. I meant, to me, I am missing something.
    And I know Mr. Wolf, I hear you going back and forth. 
Sometimes you talk too fast for me. Maybe I'm stupid this 
morning.
    But, you know, I would just like to get some sort of a 
response.
    Ambassador Larson. Well, I thought--yes. Congressman, maybe 
I could begin to address some of your very good questions.
    You know, I think all of us have emphasized the fact that 
we need to use a multiplicity of tools. We can't just use one 
tool.
    CFIUS has a role to play. The Export Administration Act and 
the new legislation that's been introduced has a role to play 
on export controls.
    A lot of the problems that you're raising are ones that 
have to be addressed through traditional trade policy 
measures--things that are led by the U.S. Trade 
Representative's office but where the White House, State 
Department, Commerce Department play important roles.
    Now, you know, solar panels--there's been a decision that's 
been taken under the authority of Section 201 of the Trade Act.
    Some of the issues related to pharmaceutical products also 
have been a key concern. We heard earlier about some of the 
concerns about intellectual property theft in Thailand and 
measures to get Thailand to do a better job of protecting 
against those things.
    There is a very focused effort--very quickly--on China and 
the Section 301 investigation that is currently underway to 
address those practices.
    So those are other tools that will address some of the 
concerns that you're talking about, sir.
    Mr. Sires. I just don't know if we have the ability to get 
some of these countries to stop doing these things. I mean, 
what controls do we have?
    I mean, Thailand, for example, they don't have much of an 
economy. I mean, do we want them to stop? How do we do that?
    I am sorry, Mr. Mancuso?
    Mr. Mancuso. So I actually think, Congressman, it's a very 
good question. The U.S. Government has different agencies that 
have those responsibilities.
    I think the world in which we--I mean, there are lots of 
problems. We can talk Thailand. We can talk China. But I think 
they're all different.
    The U.S. Government has the capability and has the 
authority to do those things. But with respect to certain--both 
economic partners and strategic competitors like China, I think 
our game has to be better. It has to be more coordinated.
    And so it's a legitimate question for Congress to ask in a 
specific way vis-a-vis this threat--are we configured--are we 
resourced to address this threat, and those are important 
questions to ask.
    I wish I had better answers. We can do it. I am not sure we 
are doing it well against the numbers--the various threats that 
we are----
    Mr. Sires. Can somebody address the pharmaceutical 
industry? Because that is very important to my state.
    Mr. Wolf. Yes, but not in the Export Administration 
Regulations. The subject of this bill and the regulations at 
issue couldn't solve your problem but many other areas like 
201, 301--yeah. No, I mean, it's a legitimate issue but it's 
not the subject or capable of being addressed by the Export 
Administration Regulations, which are focused on more 
traditional national security and foreign policy issues of the 
threat as opposed to the economic considerations at issue 
behind your question. These regulations don't get to that 
point.
    Mr. Sires. Right. I get it but do you have any regulations 
that get to it? Not you. How about----
    Ambassador Larson. Well, I think the key----
    Mr. Sires. I am specifically talking about Canada and the 
United States. Let me put it this way.
    Ambassador Larson. Well, and so on Canada and the United 
States I think you raised an issue that must be at the heart of 
the NAFTA renegotiations that are underway right now and, 
certainly, the broad question of protection of intellectual 
property rights of companies like pharmaceutical companies that 
invest billions of dollars in developing new products lie at 
the heart of most of the trade negotiations that USTR leads on 
behalf of our Government.
    Mr. Sires. Well, I just want to thank you.
    Thank you, Chairman.
    Mr. Yoho [presiding]. Thank you for the questions.
    Next, we'll go to Ann Wagner from Missouri.
    Mrs. Wagner. Thank you, Mr. Chairman, for hosting this 
important hearing.
    This issue is important to my district, as China has been 
looking to expand its footprint in the Midwest. Representatives 
from the Chinese consulate in Chicago spent the past year 
networking with Midwestern government offices including a stop 
in my district office and they stated that, and I quote, 
``Suspicion of Chinese foreign direct investment and excessive 
national security reviews would be bad for the bilateral 
relationship.''
    However, I was quick to remind them that failing to 
properly control our exports would be bad for America.
    I am committed to working with the committee to re-evaluate 
our export control regime to ensure that it is up to the 
challenge. And I thank you.
    Mr. Mancuso, I appreciate your insights on the Foreign 
Investment Risk Review Modernization Act, or FIRRMA. You noted 
that the bill encourages heightened engagement with our allies.
    The more closely we coordinate with foreign partners, the 
better our own export control regime will work. There is an 
opportunity here to expand the list of countries that 
participate in multilateral export control regimes, especially 
in Asia.
    For example, the U.S. has strong ties with Singapore and 
Malaysia, which have struggled to prevent controlled goods from 
making their way into North Korea and China.
    What, sir, can Congress do to help these countries become 
productive partners in our export control system?
    Mr. Mancuso. Good morning, Congresswoman. So I will do my 
best to answer that question.
    First things first. I do think international trade and 
investment--foreign direct investment in most cases is 
overwhelmingly positive, including with respect to China.
    But I think we have to be very sober about those areas 
where it's not. This is true for foreign investment. This is 
true for tech transfer export controls.
    In terms of the things this--our Government should do with 
respect to our partners and allies around the world, I would 
distinguish between treaty partners and treaty allies and 
partners.
    They're all important. We value their relationships. They 
all contribute something. But treaty allies, I think, are 
special.
    With respect to those, I think the United States should 
engage in this kind of diplomacy to ensure that people--our 
colleagues understand our perspective. They may disagree and 
they're entitled to disagree. They're sovereign nations.
    But they should understand our perspective of why 
technology transfer is important and why the regulation of 
certain foreign investment is important.
    I would just point out in response that that some of our 
NATO allies are now considering either implementing or 
upgrading their CFIUS-like regimes.
    I think, if done well, that is a good thing. I think it is 
in the U.S. interests that our treaty partners have resilient 
economies and they have economies that support their national 
security interests as well, which tend to coincide with ours.
    Mrs. Wagner. Both the United States and China are deeply 
aware that economic and national security can't be separated, 
as we've stated here today at the hearing.
    Ambassador Larson, I am curious about how China might 
respond to FIRRMA. Can you give us a status update on Beijing's 
foreign investment law?
    Also, what might the Chinese version of CFIUS look like and 
how would it affect our bilateral relationship?
    Ambassador Larson. Well, thank you for the question.
    First of all, I've had a lot of conversations with the 
Chinese when I was in government and the role I have now, and 
the complaints about CFIUS and about export controls are sort 
of a persistent theme.
    And I've been a pretty strong, a very strong defender, 
actually, that the way that our Government in the United States 
has implemented CFIUS has been very targeted and has focused on 
those transactions that could present a threat to national 
security.
    And I will continue to take that position and I think that 
should be a position that will be embodied in the reforms that 
are contemplated in FIRRMA.
    China does have a national security law that affects 
investment in China right now. I don't think it is implemented 
in as sophisticated way as CFIUS is administered.
    I think that it will be important when some of our Western 
allies implement national security-based investment laws as 
well because I think having a relatively common approach, 
whether it's on export controls or on inward investment 
controls, is a strong point for us. When we can do that with 
our major allies, that's important.
    I think we are just going to have a very candid set of 
conversations with China that start from the point that we 
understand that a two-way investment is good for both of our 
economies.
    We understand that we do depend on each other's economies. 
But we will take the steps that we need to take to ensure that 
investment is not permitted or acquisitions are not permitted 
that impair our national security.
    So I think it's a time where very candid conversations with 
China on the nature of our economic relationship--trade and 
investment--are going to be required to work out the problems 
that we have in the relationship.
    Mrs. Wagner. Thank you very much. My time has expired.
    Mr. Chairman, I will submit the rest of my questions for 
the record. Thank you.
    Chairman Royce [presiding]. I thank the gentlelady.
    Tom Garrett of Virginia.
    Mr. Garrett. Thank you, Mr. Chairman, and I would tip my 
hat, in his absence, to Senator Cornyn for working on this 
important legislation and to the chairman and ranking member of 
this committee.
    And I would point to a quote from someone I don't quote 
that often, Vladimir Lenin, who said, ``We will hang the 
capitalists with the rope that they sell us,'' and I would 
submit that, anecdotally, as a young Army officer I heard a 
story of Q36 and Q37 Firefinder radars finding their way to 
China during the Clinton administration only to have American 
military Warrant Officers sent to help the Chinese put them 
back together I presume to reverse engineer them and those of 
us who knew what that counter battery radar allowed us to do 
wondered how the hell they got to China.
    Now, it's anecdotal. It's hearsay, as I would say in a 
later career. But I know this stuff happens. It blows my mind 
that Gen3 GPS signals were given to our enemies under President 
Clinton and have literally been used at the very least to take 
the lives of our allies.
    And I understand that there was much made about the 
transfer from the NTIA to ICANN of controls over the internet 
and some of it was hyperbolic and overstated but some of it 
wasn't, and I wonder what the heck we are doing.
    So let me ask about FIRRMA and CFIUS as it relates to EB-5 
visas. Would the FIRRMA Act extend into the realm of the 
granting of EB-5 visas?
    Mr. Mancuso.
    Mr. Mancuso. Congressman, I don't think so. I would be 
surprised if they would. I don't know.
    Mr. Garrett. Does anybody at this table believe that that's 
not the case? I believe that that's the case, that you're 
correct.
    Mr. Wolf. It does not. But in the export control system, 
there are prohibitions on what are called deemed exports, which 
are the released technologies to foreign persons in the United 
States regardless of the visa or other reasons they're----
    Mr. Garrett. All right. Mr. Wolf, with all due respect, and 
I mean that----
    Mr. Wolf. Yes.
    Mr. Garrett [continuing]. I got a finite amount of time.
    Mr. Wolf. Okay.
    Mr. Garrett. But so it doesn't.
    Mr. Wolf. So no, but yes.
    Mr. Garrett. And so might it make sense to extend some sort 
of congressional oversight and review to the EB-5 visa issuance 
process, Mr. Larson?
    Ambassador Larson. I think that Congress can and should 
look at all things that it thinks could be important to----
    Mr. Garrett. And do you think it could be important to make 
sure that we are giving EB-5 visas to the right people who 
might not have dual-source technology at their fingertips by 
virtue of a permanent residence in the United States and a 
business that essentially manufactures what might be sensitive 
technology? Yes or no, please.
    Ambassador Larson. I--if I were in the State Department I 
would not want to give a visa to someone that was coming to the 
United States for the purpose of stealing technology.
    Mr. Garrett. So when the Washington Post--the Washington 
Post, noted conservative-leaning paper, right--that's tongue in 
cheek--says that Virginia Governor Terry McAuliffe garnered 
special privilege in receiving EB-5 visas through the 
Department of Homeland Security under the Obama administration, 
we know that he lined his pockets.
    We know that GreenTech Automotive is now defunct and that 
the taxpayers of the state of Mississippi have lost millions of 
dollars.
    But to the extent that things like lithium ion batteries, 
which is undergird by the Chinese monopolization of the global 
cobalt markets, et cetera, can have dual uses, would not 
selling permanent residence to the United States potentially 
compromise technology that might be that proverbial rope that 
Lenin says they will buy from us to use to hang us, Mr. 
Mancuso?
    Mr. Mancuso. The answer is that's--let me answer this 
differently. I don't think we should--I think citizenship is 
special. Citizenship goes to how you feel about your country 
and your commitment to your country.
    This is an existing program. I think it's certainly 
something that this Congress could look at as part of a broader 
view of how we think about the U.S.' engagement with the rest 
of the world.
    Mr. Garrett. Again--and again, sincerely thank you all for 
being here. I intend absolutely no disrespect. I have a finite 
amount of time.
    EB-5 visas grant not citizenship but permanent residence 
under green card status for people who invest $500,000 in under 
developed areas or $1 million in developed areas of the United 
States to engage in the discourse of commerce.
    However, in 2014 I believe we granted just over 10,000 EB-5 
visas. I am not that good at math but 85 percent of them, or 
north of 8,500, were to Chinese nationals to engage in commerce 
on American soil wherein, I would presume, they would have 
lower barriers to entry as it related to obtaining technology 
that might have dual uses.
    Mr. Wolf, you're nodding.
    Mr. Wolf. Yes, I agree you have a legitimate issue with 
that exact point for that reason. Just because they become a 
citizen through that process that their motives with respect to 
acquisition of dual-use technology should be part of the 
process.
    Mr. Garrett. And so that's something that you gentlemen 
would concur. And, again, I am out of time but I am going to 
ask real quickly, Mr. Chair, that we might ought to review as 
well in conjunction with CFIUS and the actual sending overseas 
of technology itself.
    Mr. Mancuso. Absolutely.
    Mr. Garrett. Thank you. Thank you, Mr. Chairman.
    Chairman Royce. Thank you very much, Tom.
    Let me just conclude our hearing here by thanking all three 
of our members of this panel for coming and testifying and also 
for giving us your insights on the pending legislation, and if 
none of you would mind, we'll, of course, have some additional 
questions, as we move forward.
    So thank you very much, and we stand adjourned.
    [Whereupon, at 11:26 a.m., the committee was adjourned.]

                                     

                                     

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