[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


           CHINA'S EXPANDING INFLUENCE IN EUROPE AND EURASIA

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

                                HEARING

                               BEFORE THE

      SUBCOMMITTEE ON EUROPE, EURASIA, ENERGY, AND THE ENVIRONMENT

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              May 9, 2019

                               __________

                           Serial No. 116-35

                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]        


       Available:  http://www.foreignaffairs.house.gov/, http://
                            docs.house.gov, 
                           or www.govinfo.gov
                           
                           
                                __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
36-214PDF                  WASHINGTON : 2019                     
          
--------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].                                    
                           
                           
                           
                      COMMITTEE ON FOREIGN AFFAIRS

                   ELIOT L. ENGEL, New York, Chairman
                   
                   
BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking 
GREGORY W. MEEKS, New York               Member
ALBIO SIRES, New Jersey		     CHRISTOPHER H. SMITH, New Jersey     
GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
THEODORE E. DEUTCH, Florida	     JOE WILSON, South Carolina
KAREN BASS, California		     SCOTT PERRY, Pennsylvania
WILLIAM KEATING, Massachusetts	     TED S. YOHO, Florida
DAVID CICILLINE, Rhode Island	     ADAM KINZINGER, Illinois
AMI BERA, California		     LEE ZELDIN, New York
JOAQUIN CASTRO, Texas		     JIM SENSENBRENNER, Wisconsin
DINA TITUS, Nevada		     ANN WAGNER, Missouri
ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
TED LIEU, California		     FRANCIS ROONEY, Florida
SUSAN WILD, Pennsylvania	     BRIAN FITZPATRICK, Pennsylvania
DEAN PHILLPS, Minnesota	             JOHN CURTIS, Utah
ILHAN OMAR, Minnesota		     KEN BUCK, Colorado
COLIN ALLRED, Texas		     RON WRIGHT, Texas
ANDY LEVIN, Michigan		     GUY RESCHENTHALER, Pennsylvania
ABIGAIL SPANBERGER, Virginia	     TIM BURCHETT, Tennessee
CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
TOM MALINOWSKI, New Jersey	     STEVE WATKINS, Kansas
DAVID TRONE, Maryland		     MIKE GUEST, Mississippi
JIM COSTA, California
JUAN VARGAS, California
VICENTE GONZALEZ, Texas                              
                             
                                     
                Jason Steinbaum, Democrat Staff Director
               Brendan Shields, Republican Staff Director               
                   
                 
  
                                 ------                                

      Subcommittee on Europe, Eurasia, Energy, and the Environment

                WILLIAM KEATING, Massachusetts, Chairman

ABIGAIL SPANBERGER, Virginia         ADAM KINZINGER, Illinois, Ranking 
GREGORY MEEKS, New York                  Member
ALBIO SIRES, New Jersey		     JOE WILSON, South Carolina
THEODORE DEUTCH, Florida	     ANN WAGNER, Missouri
DAVID CICILLINE, Rhode Island	     JIM SENSENBRENNER, Wisconsin
JOAQUIN CASTRO, Texas		     FRANCIS ROONEY, Florida
DINA TITUS, Nevada		     BRIAN FITZPATRICK, Pennsylvania
SUSAN WILD, Pennsylvania	     GREG PENCE, Indiana
DAVID TRONE, Maryland		     RON WRIGHT, Texas
JIM COSTA, California		     MIKE GUEST, Mississippi
VICENTE GONZALEZ, Texas		     TIM BURCHETT, Tennessee


                    Gabrielle Gould,  Staff Director
                            
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Le Corre, Philippe, Nonresident Senior Fellow, Europe and Asia 
  Programs, Carnegie Endowment for International Peace...........     7
Segal, Stephanie, Deputy Director and Senior Fellow, Simon Chair 
  in Political Economy, Center for Strategic & International 
  Studies........................................................    18
Kendall-Taylor, Andrea, Senior Fellow and Director, Transatlantic 
  Security Program, Center for a New American Security...........    27
Cooper, Zack, Research Fellow, American Enterprise Institute.....    38

                                APPENDIX

Hearing Notice...................................................    69
Hearing Minutes..................................................    70
Hearing Attendance...............................................    71

            
            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

Resposnses to questions submitted from Representative Pence......    72
Resposnses to questions submitted from Representative Spanberger.    75

             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD

Channeling the Tide Report.......................................    78

 
           CHINA'S EXPANDING INFLUENCE IN EUROPE AND EURASIA

                         Thursday, May 9, 2019

                        House of Representatives

      Subcommittee on Europe, Eurasia, Energy and the Environment

                      Committee on Foreign Affairs

                                     Washington, DC

    The subcommittee met, pursuant to notice, at 10:01 a.m., in 
room 2167 Rayburn House Office Building, Hon. William Keating 
(chairman of the subcommittee) presiding.
    Mr. Keating. The hearing will come to order. We are in a 
different room, I can tell just from the microphones. It is 
reverberating. The subcommittee is meeting today to hear 
testimony on China's Expanding Influence in Europe and Eurasia. 
Without objection, all members will have 5 days to submit 
statements, questions, extraneous materials for the record, 
subject to the length and limitation in the rules. I will now 
make an opening statement and then turn it over to the ranking 
member for his opening statement.
    We are holding this hearing today on China's engagement in 
Europe and Eurasia as part of a series of hearings being held 
within the Foreign Affairs Committee this week, all of them on 
China. I am pleased that the committee is taking this step in-
depth because I firmly believe that failing to develop a 
strategy for engaging with an increasingly competitive China, 
we will be confronted with one of the greatest security threats 
of our generation.
    The goal of today's hearing is not to preemptively 
disqualify Chinese investments as illegitimate. Competition 
after all is the bedrock of a successful capitalist system. 
However, a core value of Western democratic countries is also 
that competition must be fair and everyone must play by the 
same rules. So as we consider the range of China's economic and 
financial endeavors across Europe and Eurasia today, that is 
the principle that we must keep in mind. And the question we 
must ask is this, is China playing by the rules? Unfortunately, 
the overwhelming evidence across the range of China's global 
dealings indicate, really, that at this time they are not.
    In today's hearing, we will be able to assess China's 
investment in Europe and Eurasia through the Belt and Road 
Initiative and by Chinese companies, with an eye toward 
understanding the risks of accepting these investments when 
China does not adhere to the rules and abide by principles of 
free and fair competition. There are real security and economic 
risks if we do not take this opportunity to reaffirm the rules-
based international order.
    And whether it is using Chinese companies to build Europe's 
5G networks or investments in ports and critical 
infrastructure, there are real security concerns for NATO and 
cooperation with our allies. And with the lack of transparency 
around these deals and evidence of predatory lending, the 
economic risks are clear. Further, we see that China uses their 
newfound economic ties for leverage within Europe to avoid 
criticism for their human rights record and other concerning 
policies.
    All of this undermines our shared values around democracy 
and the rule of law and the principles and cooperation that we 
have made in the U.S. and share with our allies and have shared 
for more than 70 years.
    Today is an important day because today is Europe Day, May 
9th, the anniversary of the Schuman Declaration which first put 
forth the idea of a unified Europe on peace. We all can 
appreciate and celebrate that today. It is an important day not 
just for Europe, but for us in the United States as well, 
because a united Europe is a stronger Europe. These are our 
allies and closest partners in security and in business, and 
when Europe is stronger, we are stronger.
    For our part, we can do more here in the United States to 
enforce our standards and make sure China is playing by the 
rules here at home. This is our own companies that embrace free 
and fair competition and make our economy stronger and they are 
not pushing and going to be pushed out by the unlevel playing 
field that China has so far been involved in, so that we do not 
have to also leave ourselves more vulnerable to cyber and 
security threats.
    Europe must do the same, and I am very encouraged by the 
screening mechanism framework which we will hear something 
about I hope that was passed quickly by the EU and went into 
force this year. This is a critical step and we should continue 
to work with the EU and our allies and partners across the 
region to harmonize our screening mechanisms and share 
information on how to watch for risks associated with these 
Chinese investments.
    We should also recommit to working together to offer 
alternatives to Chinese investments. Countries are not wrong to 
want to have investments in important sectors in their 
economies, and we have to make sure that alongside of working 
with governments to avoid predatory and unfair Chinese 
investments, we are also there to offer safe alternatives to 
make our economies and our alliances stronger.
    The U.S. took an important step in this regard passing the 
BUILD Act last year and Europe has announced its similar 
connectivity strategy and spur for greater investment and 
projects around the world. This is something we can work on, I 
believe, together not just independently. We can do more.
    A troubling poll earlier this year in Germany found that 43 
percent of Germans thought China was a more reliable partner 
than the United States on economic partnerships. At a time when 
Russia and China are actively working to chip away at our 
alliance with Europe and undermine the values and rules that we 
have brought for greater security and prosperity for all of us, 
this is a moment where we must reaffirm our alliance, recommit 
to trade, recommit to investment agreements and reinforce our 
shared standards for rule of law. That is how we operate from a 
position of strength in responding to threats from Russia and 
China.
    So I would like to thank our witnesses for being here today 
so we can examine these issues carefully and our policy options 
for moving forward in this way. Now I will turn to the ranking 
member for his opening statement.
    Mr. Kinzinger. Well, I thank the chairman. And I thank the 
witnesses for being here today. And I want to apologize up 
front, I have another hearing in Energy and Commerce I will 
have to leave for, but that does not belittle the importance of 
this issue.
    And I think it is important to note that there is no 
daylight between the Republicans and Democrats, the chairman 
and I, on this threat, this concern. A lot of our differences 
get a lot of media attention, but there is way more that unites 
us than actually divides us, and so that is important to note.
    When President Xi assumed power in 2013, he set China on an 
ambitious path to increase its regional control while expanding 
its global reach. During the cold war, we had this great battle 
of ideas between capitalism in the West and Communism in the 
East. This has shifted to a battle between democracy versus 
authoritarianism and the United States must respond 
accordingly.
    We have seen the CCP conduct influence operations around 
the world to affect how media, business, academia, and 
politicians view the Chinese threat. Whether it be Chinese, 
Russian, or ISIS ideological ideas, we should not be brushing 
them off without a second thought. Yet this is what many 
countries around the world are doing when it comes to China's 
debt-trap diplomacy. Through State-funded projects such as Made 
in China 2025 and the Belt and Road Initiative, the CCP has 
found a way to use capitalism to benefit the spread of their 
authoritarian system.
    By offering incentive-laced ideas, China has gained access 
to European markets which have historically shied away from 
their system of governance. China has had over 350 mergers, 
investments, and joint ventures across Europe. In many cases, 
they can access critical information about how these systems 
work or even steal sensitive IP. More than half of China's 
investments in Europe is in the largest economies, Germany, 
United Kingdom, France, and Italy. What concerns me though is 
that these are linchpins in our NATO alliance.
    China has now passed the U.S. as Germany's largest trading 
partner and they are closing the gap for the EU as a whole. 
They have also bucked American concerns and have stated their 
willingness to integrate their systems with Hauwei's 5G 
networks which compromise our intelligence sharing. In the U.K. 
alone, China has invested over 70 billion. They are trying to 
get a foot in the door in anticipation of any Brexit deal that 
sees the U.K. leaving the EU.
    Italy is becoming the first G7 country to sign a memorandum 
of understanding with China to participate in the BRI. While 
not binding, it is a symbolic win for China to secure such a 
significant nation. Chinese companies now either fully own or 
have sizable investments in Greek and Portuguese ports, a 
British and Portuguese energy system, and airports in London, 
Frankfurt, and Toulouse. As a result, Chinese influence has 
pushed countries like Greek and Hungary to water down EU 
statements regarding China's illegal island-grabbing in the 
South China Sea.
    Following a massive flow of Chinese investment, the Czech 
Republic's President stated that his country would become an 
unsinkable aircraft carrier of Chinese investment expansion. 
Luckily, amidst growing American and European concerns over 
China's intention, the CCP has softened their tone and 
decreased foreign investment over the past few months. By no 
means do I believe that they will back down. This gives 
Congress and the administration time to engage with our 
European partners to formulate a plan as we must be ready for 
China's next investment push.
    Again, I thank the chairman for convening this extremely 
important hearing today and I thank the panel for your 
commitment in testifying for us, and I yield back.
    Mr. Keating. The chair thanks the ranking member.
    I will now introduce our witnesses. Philippe Le Corre is a 
Nonresident Senior Fellow in the Europe and Asia Programs at 
the Carnegie Endowment for International Peace and an affiliate 
with the project on Europe and the transatlantic relationship 
at the Harvard Kennedy School Belfer Center for Science and 
International Affairs. He is a former Special Assistant and 
Counsellor for international affairs to the French Minister of 
Defense. And thank you very much for being here, Mr. Le Corre.
    Stephanie Segal is the Deputy Director and Senior Fellow, 
Simon Chair in Political Economy at the Center for Strategic & 
International Studies, and the former codirector of the East 
Asia Office at the United States Department of the Treasury. 
Thank you for being here.
    Dr. Andrea Kendall-Taylor is the Senior Fellow and Director 
of Transatlantic Security Programs at the Center for New 
American Security and a former Deputy National Intelligence 
Officer for Russia and Eurasia at the National Institute 
Counsel and the Office of Director of National Intelligence, 
thank you.
    Dr. Cooper, Dr. Zach Cooper is a Research Fellow focusing 
on U.S.-China strategic competition at the American Enterprise 
Institute. He is also an Adjunct Assistant Professor at 
Georgetown University with an Associate from Armitage 
International and a National Asia Research Fellow. He 
previously served at the National Security Council and at the 
Department of Defense.
    I would like to thank all the witnesses for being here 
today and look forward to your testimony. You will have the 
opportunity, although we are not going to put a clock over your 
head too harshly, to limit your testimony to the range of 5 
minutes. Without objection, your prepared written statements 
will also be part of the record. As I stated at the outset, 
members will be able to forward other questions in the future 
for your response.
    I will now go to Mr. Le Corre for his statements.

  STATEMENTS OF PHILIPPE LE CORRE, NONRESIDENT SENIOR FELLOW, 
EUROPE AND ASIA PROGRAMS, CARNEGIE ENDOWMENT FOR INTERNATIONAL 
   PEACE; STEPHANIE SEGAL; ANDREA KENDALL-TAYLOR; AND, ZACK 
     COOPER, RESEARCH FELLOW, AMERICAN ENTERPRISE INSTITUTE

  STATEMENT OF PHILIPPE LE CORRE, NONRESIDENT SENIOR FELLOW, 
EUROPE AND ASIA PROGRAMS, CARNEGIE ENDOWMENT FOR INTERNATIONAL 
                             PEACE

    Mr. Le Corre. Thank you very much, Mr. Chairman, Ranking 
Member, distinguished members of this committee, thank you for 
inviting me for the second time in a year. And I have to say, 
this hearing takes place in the context of a shift in the 
attitudes of both the United States and Europe toward China's 
economic and political rise.
    For the past 2 years, the U.S. has taken a tougher stance 
in dealing with China especially in the field of economic 
reciprocity and violations of international norms of 
intellectual property. More broadly, Washington has taken a 
consensual bipartisan approach vis-a-vis Beijing, which now 
appears as the main threat to American interests.
    But I also want to stress that Europe, the Europe we are 
dealing with today is not the one we were dealing with 3 years 
ago in this particular context. True, Europe remains divided 
vis-a-vis the People's Republic of China, but for the past 3 
months a number of important events and developments have taken 
place.
    First and foremost, on March the 12th, the European 
Commission published a document called the ``EU-China: A 
Strategic Outlook''. The tone and the language of this document 
is quite different from what we are used to, those of us 
looking at European documents. It labels China as a systemic 
rival and it lists all the issues that are basically in the way 
of a smooth relationship between China and the EU. For example, 
the role of State-owned enterprises, intellectual property 
issues, the lack of market access in China, 5G, and generally 
different values and issues that have become a problem, and 
also in the eyes of European countries.
    Second, in March again, President Xi Jinping visited 
Europe. He visited Italy and he visited France. In Italy, yes, 
he did sign an MOU with the Italian Government on the Belt and 
Road Initiative, but it is only an MOU and I will come back to 
that in a minute. But in France he was welcomed not just by 
President Macron, but also by Chancellor Merkel and the 
president of the European Commission, Mr. Juncker.
    This is a far cry from the usual attitude, the divided 
attitude of Europeans vis-a-vis China. Of course, you could 
argue that the Chinese Prime Minister who later came to Europe 
and countered the 16 countries, the 16+1 mechanism, but not 
much came out of this except perhaps, you know, it became the 
17+1.
    But I think the most important thing to remember is that 
there is a unified position toward China at least represented 
by the EU. The EU-China annual summit took place on April the 
11th in Brussels in the presence of Premier Li Keqiang, and it 
concluded with a joint communique that sets a date for 
comprehensive agreement on investment that is also quite 
important.
    And fourth and last, but not least, in April again, the EU 
introduced a new screening mechanism as you were referring to, 
Mr. Chairman, on foreign investment after less than 2 years of 
internal discussions. Despite divisions within Europe, no EU 
country, in the end, opposed this new nonbinding scheme.
    At the same time, Chinese investments in the EU have 
declined considerably after peaking in 2016. This is mainly due 
to restrictions of capital outflows from China and also the 
fact Chinese investments are mainly in the area of technology 
and infrastructures, particularly as part of President Xi 
Jinping's signature project, the BRI. I mean the BRI by the way 
targets not just Europe, but pretty much every continent except 
North America. It is true that 12 European leaders attended the 
BRI forum in Beijing, but neither the German Chancellor or the 
French President took part. The EU was represented, but not by 
its most senior officials.
    Division remains, but countries in Europe have become aware 
of China's discourse and feel the need to protect themselves 
through the European Union. The EU today remains one of the 
strongest advocates of liberal and democratic values in the 
world, many of them shared in America, which is why, Mr. 
Chairman, distinguished members of the committee, I would urge, 
in conclusion, that Congress does all it can to collaborate 
with Europe to build consensus over the immediate security, 
technological, and geoeconomic threats of China's expansion.
    As the current U.S. administration continues to send mixed 
messages to America's oldest and most reliable allies, it is 
critical that Congress takes a leading role in reinforcing a 
transatlantic dialog on China's global influence. Thank you.
    [The prepared statement of Mr. Le Corre follows:]

    [GRAPHIC] [TIFF OMITTED] T6214.013
    
    [GRAPHIC] [TIFF OMITTED] T6214.014
    
    [GRAPHIC] [TIFF OMITTED] T6214.015
    
    [GRAPHIC] [TIFF OMITTED] T6214.016
    
    [GRAPHIC] [TIFF OMITTED] T6214.017
    
    [GRAPHIC] [TIFF OMITTED] T6214.018
    
    [GRAPHIC] [TIFF OMITTED] T6214.019
    
    [GRAPHIC] [TIFF OMITTED] T6214.020
    
    [GRAPHIC] [TIFF OMITTED] T6214.021
    
    Mr. Keating. Thank you, Mr. Le Corre, for those comments 
and look forward to coming back to you with some questions 
about some of those comments.
    Ms. Segal, thank you for being here. You may proceed.

   STATEMENT OF STEPHANIE SEGAL, DEPUTY DIRECTOR AND SENIOR 
FELLOW, SIMON CHAIR IN POLITICAL ECONOMY, CENTER FOR STRATEGIC 
                    & INTERNATIONAL STUDIES

    Ms. Segal. Thank you, Mr. Chairman, Mr. Ranking Member, 
members of the committee. Thank you for the opportunity to 
contribute to today's hearing. I have submitted my full written 
statement for the record. My comments today will focus on 
Chinese investments in the context of the Belt and Road 
Initiative and China's strategy to become a global innovation 
leader. I will conclude with a few thoughts on cooperation 
between the United States and Europe.
    While China's going out strategy can be traced back to the 
1990's, initiatives under President Xi have focused on 
strategic and geopolitical goals. These include One Belt and 
One Road, the Asian Infrastructure Investment Bank, and Made in 
China 2025. One Belt, One Road, renamed the Belt and Road 
Initiative, or BRI, is China's most ambitious going out effort 
to date. Over 125 countries have signed BRI cooperation 
documents and, in April, Italy became the first G7 country to 
sign on.
    Here are the concerns with China's investment and critical 
infrastructure and recipient countries' excessive reliance on 
debt to finance such investments. To date, European interests 
under BRI are most directly implicated in Central and Eastern 
Europe. Through its 16+1 format, recently expanded to 17+1 with 
Greece's participation, China has increased its activities in 
the region. Since its inception, criticism of BRI has mounted, 
particularly in the areas of transparency and debt 
sustainability. One cautionary example is Montenegro where a 
Chinese-financed highway project has sent the country's debt 
soaring.
    Moving to another Chinese initiative, Made in China 2025 
aimed to establish China as a global innovation leader. A 
report from the Council on Foreign Relations notes that Chinese 
companies have been encouraged to invest in foreign companies 
to gain access to advanced technology. Here are the concerns 
with China's acquisition of advanced technologies and the 
potential for China to gain unfair competitive advantage that 
will distort global markets. In response to external pressure, 
China has downplayed the formal Made in China 2025 slogan, but 
there is little doubt that China will continue pursuing 
policies that foster homegrown innovation.
    In recent months, Europe has sharpened its approach to 
China. As Philippe just mentioned, in March, the European 
Commission delivered a strategic outlook to the European 
Parliament and the European Council. Significantly, that report 
refers to China as an economic competitor and a systemic rival 
promoting alternative models of governance, echoing language 
from the National Security Strategy of the United States.
    Recently, Europe has taken steps which reflect the growing 
appreciation in Europe that the balance of challenges and 
opportunities presented by China has shifted. As we mentioned, 
the new EU-wide foreign investment screening mechanism mandates 
information sharing in certain circumstances and incentivizes 
all EU members to adopt investment screening mechanisms.
    A recent report attributed last year's decline in foreign 
investment from China in Europe to greater scrutiny in 
recipient countries as well as the macro conditions in China. 
There is also focus on export controls to address potential 
risks from the sale or licensing of sensitive technology. As 
indicated in the Commission's strategic outlook, European 
policymakers are considering modalities to address national 
security risks stemming from outbound investment and emerging 
technologies, in particular to address the challenges of 
different jurisdictions between member States, the European 
Union, and other advanced technology-exporting countries.
    Regarding trade and the WTO, Europe is calling on China to 
adhere to stronger disciplines on industrial subsidies and is 
also working in the trilateral context with the United States 
and Japan. Just a few comments on cooperation, cooperation 
between the United States, Europe, and other like-minded 
countries maximizes the chances for shaping China's behavior 
and protecting U.S. interests.
    Coordination with Europe is essential to ensure problematic 
investments or technology transfers are not simply diverted 
from one country to another. Such cooperation can take the form 
of greater information sharing as well as ex ante coordination 
on possible listings of sensitive technology. With respect to 
trade, cooperation to discipline China's behavior in the area 
of subsidies, self-declaration as a developing country, and 
digital issues will be necessary to shape global outcomes.
    Separate but related, I would like to add that the 
imposition of tariffs, including on U.S. allies on national 
security grounds, undermines trust in the United States as a 
reliable partner. China has capitalized on U.S. rhetoric and 
actions. To reset the narrative, the United States should 
remove steel and aluminum tariffs imposed under Section 232, 
and end the threat of new tariffs on autos and auto parts, 
especially on U.S. allies and partners.
    Again, I thank the subcommittee for the opportunity to 
offer these thoughts and I look forward to answering members' 
questions.
    [The prepared statement of Ms. Segal follows:]

    [GRAPHIC] [TIFF OMITTED] T6214.022
    
    [GRAPHIC] [TIFF OMITTED] T6214.023
    
    [GRAPHIC] [TIFF OMITTED] T6214.024
    
    [GRAPHIC] [TIFF OMITTED] T6214.025
    
    [GRAPHIC] [TIFF OMITTED] T6214.026
    
    [GRAPHIC] [TIFF OMITTED] T6214.027
    
    [GRAPHIC] [TIFF OMITTED] T6214.028
    
    Mr. Keating. Thank you, Ms. Segal.
    Dr. Kendall-Taylor?

STATEMENT OF ANDREA KENDALL-TAYLOR, SENIOR FELLOW AND DIRECTOR, 
   TRANSATLANTIC SECURITY PROGRAM, CENTER FOR A NEW AMERICAN 
                            SECURITY

    Ms. Kendall-Taylor. Chairman Keating, distinguished members 
of the subcommittee, thank you for the opportunity to be here 
to discuss China's influence in Europe. I want to begin my 
statement by briefly highlighting four overarching ideas that I 
think should shape Washington's approach to competing with 
China and Europe.
    First, is the issue of prioritization. As the United States 
develops its approach to Europe, it must recognize that in the 
coming decade China will be our No. 1 challenge. To effectively 
compete with China, the United States will need strong and 
cohesive relations with Europe. On the security front, the 
United States and Europe must divide and conquer. The U.S. 
needs Europe to do more to provide for its own security and 
defense to free up Washington to focus on the Indo-Pacific.
    Outside the security realm, the United States and Europe 
must stand together. The U.S. needs Europe as a partner to 
confront China on economic, democracy, and human rights issues 
globally. This arrangement will require a new deal with Europe. 
Washington will have to accept that greater European autonomy 
will inevitably transform the transatlantic alliance. And, 
finally, Washington must realize that now is the time to engage 
Europe and China. As has been said, in the last 2 years and in 
particularly in recent months, Europe has grown more attuned 
and concerned about China.
    So what does China seek to accomplish in Europe? First and 
foremost, China is pursuing its economic interest, but it is 
looking to translate its investment into greater political 
influence. China seeks to use its investment to secure support 
for China's interests or at least prevent the EU from taking a 
unified position that is at odds with China.
    China is also looking to undermine Western cohesion, weaken 
democracy norms, and is looking to access European innovation 
including technologies, intellectual property, and talent that 
it can use to upgrade its industrial capacity. China goes about 
advancing these interests in a number of ways. I elaborate on 
these tactics in my written statement, but they include things 
like using divide-and-rule tactics to weaken European cohesion, 
leveraging U.S.-Europe fissures, and constructing networks 
among European politicians, businesses, media, think tanks, and 
universities to create support for pro-China positions.
    I also want to call attention to one additional tactic and 
that is the growing synergy between China and Russia. Relations 
between China and Russia are deepening. Although their 
approaches to Europe are different and seemingly uncoordinated, 
taken together they are having a more corrosive effect than 
either would have singlehandedly. So what will China's growing 
influence mean for U.S. interests? The bottom line is that 
China's economic influence in Europe will translate into 
political leverage. This will affect U.S. interests in a number 
of areas like U.S. prosperity and competitiveness. It will 
affect global values and norms from rules governing data and 
privacy to internet freedom, AI, and governance.
    And it is on the issue of democracy where the synergy 
between China and Russia is especially problematic. Russia's 
assault on democratic institutions weakens some actors' 
commitment to democracy, but it is the alternative model of 
success that China presents and especially the revenue that it 
brings that gives countries the capacity to pull away from the 
West.
    China's rising influence also has implications for NATO. 
China does not pose a direct military threat to NATO, but 
Beijing's growing presence will interfere with NATO mobility. 
China's investments in European ports and its construction of 
rail lines in particular could hamstring NATO's ability to move 
troops and equipment across Europe. This is yet another area 
where China-Russia synergy is concerning. It is not hard to 
imagine a scenario, for example, where China uses its control 
of key infrastructure like ports and rail to delay a NATO 
response to Russian aggression.
    And, finally, is 5G. Allowing China to build Europe's 5G 
network would introduce systemic risk, making Europe more 
vulnerable to things like intellectual property theft, and 
weaken data privacy, things that enable China to continue to 
steal the know-how that enhances its competitiveness.
    So what can be done? There are number of approaches the 
U.S. can take to check Chinese influence. The U.S. should 
enhance cooperation and coordination with Europe to combat 
China's unfair and illegal trade and investment practices. By 
combining our shared heft, we can exert much greater leverage 
on the Chinese.
    The U.S. should engage on norms in new spaces, cyber, 
artificial intelligence, and space. The U.S. should encourage 
EU and European defense and security initiatives that would 
better enable the United States to prioritize the Indo-Pacific. 
To counter the adverse effects of the Belt and Road, Washington 
should capitalize on growing disillusion with the Belt and 
Road, particularly in Central and Eastern Europe, and work with 
Europe to provide alternatives to Chinese investment in Europe 
and beyond.
    And, finally, Congress should enable the U.S. Government to 
consider China and Russia together as well as separately. Given 
the trend toward deepening China-Russia relations and the 
significant implications that a more robust partnership would 
pose to U.S. interests, policymakers will have to account for 
the ways in which these players are working together.
    In sum, it is clear that the United States must do more to 
stand up to Chinese threats to U.S. interests, but to do that 
effectively Washington must work with its European allies. 
Thank you.
    [The prepared statement of Dr. Kendall-Taylor follows:]

    [GRAPHIC] [TIFF OMITTED] T6214.004
    
    [GRAPHIC] [TIFF OMITTED] T6214.005
    
    [GRAPHIC] [TIFF OMITTED] T6214.006
    
    [GRAPHIC] [TIFF OMITTED] T6214.007
    
    [GRAPHIC] [TIFF OMITTED] T6214.008
    
    [GRAPHIC] [TIFF OMITTED] T6214.009
    
    [GRAPHIC] [TIFF OMITTED] T6214.010
    
    [GRAPHIC] [TIFF OMITTED] T6214.011
    
    [GRAPHIC] [TIFF OMITTED] T6214.012
    
    Mr. Keating. Thank you very much.
    Dr. Cooper?

STATEMENT OF ZACK COOPER, RESEARCH FELLOW, AMERICAN ENTERPRISE 
                           INSTITUTE

    Mr. Cooper. Chairman Keating and other distinguished 
committee members, it is an honor to join you today. I believe 
that the growing transatlantic divide on China policy is a 
serious challenge not just for our policy on Europe, but also 
for broader American grand strategy. Our greatest strength in 
the competition with China is our global network of allies and 
partners and increasingly we are finding that network put under 
pressure.
    The good news is that there is an emerging and largely 
bipartisan consensus in Washington on the challenges that the 
Chinese Communist Party poses. The bad news, however, is that 
this consensus is not yet shared with many of our European 
allies. Furthermore, there is still no agreement either on this 
side of the Atlantic or the other or on the Pacific as well 
about what kind of China strategy we should be pursuing.
    Although the United States has identified China as a 
strategic competitor, it has not yet adopted a clear set of 
objectives for that competition. In my written testimony, I 
describe three areas that are undermining transatlantic unity 
on China, Chinese investments with noncommercial aims, targeted 
technology acquisition, and coercive economic Statecraft. Most 
notably, our European allies, as has been discussed, have 
largely chosen a strategy of mitigation rather than exclusion 
with regard to the Belt and Road Initiative and 5G 
infrastructure as evidenced by recent decisions in London, 
Berlin, Rome, and elsewhere.
    During a recent trip to Europe to discuss Chinese 
activities on the continent, European leaders expressed concern 
and frustration with some U.S. policies. In particular, they 
singled out the administration's criticism of allies and its 
embrace of unpredictability as sources of concern. These 
divisions make clear that we must do more to fashion a united 
transatlantic strategy on China.
    And with this in mind, I want to suggest three ways in 
which the Congress could help bridge the transatlantic divide 
on China. First, Congress could work with the administration to 
empower our allies and partners to better mitigate the risks of 
Chinese investment and broader economic Statecraft. Many 
countries are choosing to accept Chinese investments and 
infrastructure and technology regardless of U.S. objections. We 
may not agree with these decisions, but we should be helping to 
mitigate the risks. Therefore, Congress could work with the 
administration to help provide greater technical assistance to 
allies and partners, not just in Europe but elsewhere, to help 
them manage Belt and Road and 5G technology challenges.
    Second, Congress could encourage cooperation with allies 
and partners on an overall China strategy with clear aims and 
objectives. We should forge a common position on critical 
issues such as intellectual property theft, market access, 
technology standards, foreign investment review, and human 
rights concerns. I am encouraged that the House Foreign Affairs 
Committee is holding five hearings this week on China alone and 
its role globally, and U.S. strategy on China in particular, 
and I think including allies and partners in these discussions 
is absolutely critical.
    Third, Congress could continue to forge a bipartisan 
consensus on China and increasingly to try and broaden that 
consensus by including the American people in the debate. The 
BUILD Act, FIRRMA, and the Asia Reassurance Initiative were all 
important signals of America's ability to execute a coherent 
long-term strategy. But polls suggest that a gap is emerging 
between views in Washington and those in much of the rest of 
the country. Discussing China policy more directly with 
constituents would ensure that our policies are supported not 
just inside Washington, but outside as well.
    And, finally, while we must be clear-eyed about the 
challenges that China poses. We should always acknowledge that 
our concerns have to do with the actions of the Chinese 
Communist Party, not with the aspirations of the Chinese 
people. Upholding the principles of freedom, democracy, and 
rule of law will strengthen our united position and send a 
clear signal about the seriousness and the sustainability of 
our strategy.
    So I thank you for holding this important hearing and 
providing me the opportunity to testify, and I look forward to 
your questions.
    [The prepared statement of Mr. Cooper follows:]

    [GRAPHIC] [TIFF OMITTED] T6214.029
    
    [GRAPHIC] [TIFF OMITTED] T6214.030
    
    [GRAPHIC] [TIFF OMITTED] T6214.031
    
    [GRAPHIC] [TIFF OMITTED] T6214.032
    
    [GRAPHIC] [TIFF OMITTED] T6214.033
    
    [GRAPHIC] [TIFF OMITTED] T6214.034
    
    [GRAPHIC] [TIFF OMITTED] T6214.035
    
    Mr. Keating. Thank you, Dr. Cooper. I will now recognize 
myself for 5 minutes for questions.
    And I would like to get back to what I mentioned in the 
opening statement that about the screening process that is now 
underway, and in particular what can the U.S. do, if anything, 
to be more influential in that process themselves so it is just 
not a unilateral EU process in screening?
    Mr. Le Corre?
    Mr. Le Corre. Thank you, Mr. Chairman. I do believe the 
lack of information has been an issue for the past few years 
when it came to Chinese investments in Europe and 
infrastructures, especially in ports, airports fields. I do 
believe there is a lack of knowledge about the political system 
in China as well as the economic strategy. The Belt and Road 
Initiative which has been mentioned a few times already today 
is still a fairly vague project that originally targeted 
Europe, but now is looking at across the world.
    And I think some of the sort of work that has been done in 
Washington and other parts of America on sort of looking 
forward to this new superpower that is China, it could be, you 
know, it could be shared with Europeans where the level of 
sinology, unfortunately, is not what it was. So, generally, I 
think more information on what China is about and on the risks 
in the technology fields, for example, as well as 
infrastructures, what it would mean to have, you know, the Suez 
Canal----
    Mr. Keating. So, essentially, it is information from us 
that----
    Mr. Le Corre. Yes.
    Mr. Keating [continuing]. Would be helpful as well.
    So, I am just curious too, just anyone that might want to 
comment on this. It was referenced about Italy's decision as 
just being a memorandum of understanding and trying to downplay 
that. But what risks does that take and with Italy moving 
forward? Anyone that wants to jump in on that would be helpful.
    Dr. Cooper?
    Mr. Cooper. Yes, so I was just in Rome right after the 
decision on the memorandum of understanding was made, and I 
think Philippe is absolutely right that, yes, it is just a 
memorandum of understanding and the real question will be what 
kinds of projects do we see the Italians engaging in.
    But I think the question that many of us should be asking 
is whether the Italian Government has the support it needs to 
actually be able to provide the oversight for those projects. 
And when I was in Rome, there were a lot of questions asked 
about the government's ability to do that and so this is where 
I think we can be very helpful. We know a lot about some of the 
challenges we have seen with Belt and Road, with the lack of 
transparency, with environmental protections, financial 
arrangements, and we should be helping our allies like Italy 
that are engaging in Belt and Road projects so that they make 
sure that, fine, they sign a memorandum of understanding, but 
let's actually make sure that the projects they get are high-
quality, high standards, just like the projects that we would 
expect from any other country.
    Mr. Keating. Yes. It was mentioned too, if I could just 
skip topics too a little bit, would the reaction--I was just in 
Europe, I think, about 6 weeks ago, myself. And I cannot 
understate the feeling of the European leaders--I do not think 
we recognize that fully--with the tariffs imposed. Not just the 
tariffs themselves, but the rationale that was given that they 
are a security risk of the U.S. and they are taking that to 
heart, frankly, and how deep is that fissure?
    And, No. 2, if we move ahead with automobile tariffs or 
something, how much more deeply will the fracturing occur 
between the U.S. and the EU countries in that respect and what 
will be the ramifications, in your opinion?
    Ms. Segal?
    Ms. Segal. So, if I could also go back just to the question 
you asked about the concern or the implications of Italy 
signing the MOU, I would like to highlight the fact that it is 
a G7 country. And when we think about different mechanisms for 
coordination, to have what could be a potentially dissenting 
voice in the G7, I think, is another thing that is problematic.
    As far as the impact of tariffs and how deeply it is felt, 
I have had a similar impression in our trips to Brussels and 
also to member States and I think, there, it is important to 
recognize that when Europe looks at the risks stemming from 
China, they may have less of a focus on national security risks 
as compared to the sentiment here in the United States, but 
there is more of an emphasis on the economic security risks.
    And if their main concern with China is its ability to use 
its State-driven model and to push that out to distort global 
markets and trading relationships, the fact that the United 
States is then relying on tariffs imposed under the guise of 
national security, I think in their perception that has the 
same sort of distortive effect on the trading relationship and 
that is their rationale for why they see that so problematic.
    Mr. Keating. Great. My time is past and I will now 
recognize the ranking member, Mr. Kinzinger.
    He was here a minute ago. The chair will recognize 
Representative Pence.
    Mr. Pence. Thank you, Chairman Keating and Ranking Member, 
for convening this. To all the witnesses, I say thank you for 
being here today.
    Dr. Kendall-Taylor, I was very intrigued by an article you 
and your colleague, Dr. Shullman, wrote titled, ``How Russia 
and China Undermine Democracy.'' In this article, you both 
wrote, ``Russia and Chinese actions are converging to challenge 
a U.S.-led global order.'' You do not argue that China and 
Russia are acting in a coordinated manner with one another, but 
that their actions are converging in new and synergistic ways.
    Your example of Serbia was well taken. I think you 
described quite well how Russian and Chinese actions there are 
destabilizing and reinforcing one another. While you and your 
co-author used Serbia as an example, it is not unique in facing 
this challenge. Russia and Chinese actions are undermining the 
sovereignty of countries across Europe. While this is something 
Europe is waking up to, I am concerned about the potential for 
Russia and China's currently uncoordinated and unintentional 
strategies becoming just that coordinated.
    As you say in your article, ``The countries' strategies 
have become mutually reinforcing in power, if perhaps 
unintended, in different ways.'' Dr. Cooper, you stated that 
Congress could help encourage cooperation with allies and 
partners on an overall Chinese strategy. Republican leader 
McCaul and Chairman Engel, Championing American Business 
Through Diplomacy Act, H.R. 1704, is a good step in countering 
Chinese debt-trap diplomacy and I am a proud co-sponsor of the 
legislation.
    My questions are to all of you. What would be the 
implication for U.S. policy in Europe and beyond if the 
currently unintended efforts of Russia and China become 
unintentional, and what specifically should Congress's response 
be to a coordinated Russian and Chinese effort in Europe?
    Ms. Kendall-Taylor. Thank you for the question. I also 
share your concern. And of the issues that I think that I am 
looking at today, the growing relationship between Russia and 
China, I think, is one that causes me the most concern. So when 
we look down a whole kind of spectrum, all areas, all 
dimensions of their relationship, the trajectory is toward 
closer relations.
    So in economic terms, China has become Russia's single, 
most important trading partner. They are the single, largest 
purchaser of Russian oil and gas. Military ties, Russia 
continues to sell China advanced military systems. They are 
exercising together for the first time with the Vostok-2018 
exercise where Russian and Chinese soldiers exercise together.
    Certainly, the political ties between Putin and Xi are very 
close, but it does not stop there. We increasingly see this 
grow into deeper levels of government in ways that provides, I 
think, a very kind of solid foundation. And the key is, so we 
have thought of this as an issue where Russia and China are 
united in their discontent, that they have these shared 
grievances, but my concern is that as we see these repeated 
interactions that this relationship turns into something more 
deep, meaningful, and sustainable.
    And you can think about Russia's relationship with Iran as 
an example. That had historically been a relationship where 
there was significant mistrust. But given their interactions 
over the JCPOA and in close operations on the battlefield in 
Syria, that is now a very close relationship.
    So my point is that it is because of the repeated 
interaction, this has the ability to turn into something. And I 
will also note that the DNI in his annual threat assessment has 
marked this as an issue where we are seeing increasing 
coordination and collaboration between the partners.
    Simple solutions to drive wedges between them will be 
ineffective. Russia looks at the United States and is more 
suspicious and concerned about our efforts to destabilize his 
regime. There is a very immediate threat that he feels and the 
immediacy of that threat is more important than the much 
longer-term threat that I think he views coming from China.
    And so, he would prefer to trade that risk and he has put 
his lot in with the Chinese. And particularly after 2014 he 
sees no opportunities in the West, and so I think you see Mr. 
Putin increasingly willing to become the junior partner. So 
given his deep suspicions of the United States, driving a 
master wedge between Russia and China is going to be a very 
difficult thing to do.
    And so, I think this is an issue that needs more 
investigation and more thought because certainly labeling both 
as adversaries, although is an important and I think right 
strategy, it also has the unintended consequence, I think, of 
pushing them closer together.
    So one of the things I highlight is to look for 
opportunities to drive mini-wedges, and so the Arctic could be 
one such place where they have interests that are at odds, 
perhaps in the Middle East where they compete for energy and 
military sales and other things. I think it is a series of 
things that the United States will do some kind of careful 
diplomacy I think will be required to put the brakes on the 
relationship.
    And also, I highlighted in my testimony today for the 
Congress to enable the U.S. Government to look not just at 
Russia and at China, but to consider them in a combined 
framework so that we are thinking through how what we are doing 
might affect the relationship between them.
    Mr. Pence. Well, thank you, Doctor. I yield back.
    Mr. Keating. The chair recognizes the vice chair of the 
committee, Representative Spanberger.
    Ms. Spanberger. Thank you very much, Mr. Chairman. Thank 
you to the witnesses today for being here.
    To followup a little bit on what Dr. Kendall-Taylor has 
written, you recently wrote in the Foreign Affairs that 
empowering U.S. ally populations to stand up against foreign 
subversion would be the most effective weapon against Chinese 
and Russian influence. And the success of the strategy does 
rely on the strength of our historic transatlantic ties and our 
shared value.
    But I am very concerned over the fact that of February 
2019, Gallup poll across 133 countries showed that Chinese 
leadership had a higher approval rating than in the United 
States. And then in pivoting over to what Mr. Le Corre was 
saying, my question is as we are looking at many of the larger 
EU States such as France and Germany, and as they wish to adopt 
a coordinated EU approach to China that allows their countries 
to effectively stand up to China as an equal partner, and Mr. 
Le Corre in your testimony you talked about the European 
Commission's recently issued strategic outlook when they look 
at China as a systemic rival and a strategic competitor, my 
question is, what should the U.S. role be in supporting or 
facilitating the coordinated EU approach which would provide a 
greater opportunity to mitigate China's influence in Europe, 
and ideally by extension positively impact the United States' 
challenges that we are facing with China? And I will open it up 
to Mr. Le Corre or Dr. Kendall-Taylor or the other two 
witnesses as well.
    Mr. Le Corre. Thank you, Congresswoman. I think, you know, 
the EU remains the most efficient body that we have in Europe 
when it comes to advocating values and democracy and the rule 
of law and norms which are--in fact, Congressman Pence was 
referring to Serbia earlier. Serbia is not part of the European 
Union and that is one of the reasons why both Russia and China 
are using it as some kind of playing field.
    In Western Europe and I would say in the whole of the EU, 
you have a difference set of values. And the fact that the 
high-speed train project between Hungary and Serbia has not 
even started has a lot to do with the fact the European 
Commission started an investigation in Hungary when Hungary did 
not actually go through the normal competition rules, and 
therefore on the Serbian side they have not even started 
either.
    I think, you know, again the fact that all of the EU 
members supported the screening mechanism, supported the EU-
Asia Connectivity Strategy is a sign that people are sort of 
waking up in many cases. I would say as well that if you look 
at things from a Chinese perspective, they are trying to sort 
of divide the EU by dealing with countries on a separate basis, 
the 16+1, now 17+1 mechanism, and a good example. The U.K. is 
another good example if the U.K. is to leave the European 
Union. And then they also tried to have a 5+1 mechanism with 
Southern Europe.
    So by having the EU as a strong sort of entity--and the 
European Commission is actually mainly a trade body but is now 
handling investment quite interestingly, it was not part of its 
mission originally--I think that is the best thing that the 
United States could do.
    Ms. Kendall-Taylor. Maybe I will just chime in with a much 
broader point on the cohesion issue. And I mean, I think it is 
probably recognized here, but the cohesion and the unity 
between the United States and Europe is key. Both Russia and 
China want to break it. Those are both kind of explicit goals. 
Both Russia and China seek to break the transatlantic unity. 
And I think Russia, but especially China, realized very early 
on that its rise would trigger balancing in the West and it has 
done everything that it can to influence Europe to make sure 
that Europe sits on the fence.
    The worst thing from China's perspective is if Europe is 
firmly aligned with the United States and so where there is 
that break in unity, that is a good-news story from China's 
perspective, because if the United States and Europe could 
combine our collective heft, we hold, the U.S. and the EU, 40 
percent of global GDP. So if we are going to lean on China to 
change its unfair trade practices and all of these other things 
that we are so concerned about, it has got to come from a 
unified position.
    And I think the problem is just as you say, the trust for 
the United States right now is really stymying cooperation, and 
what we see then in Europe is that they are looking to kind of 
go it on their own. So far, I think their attitude has been 
that they are going to look to improve their own capacity and 
not build a joint approach with Europe. And that is going to be 
problematic, because as China is putting pressure on both of 
us, if we fill some holes, they are going to pop up somewhere 
else. And so, you know, in terms of stealing technology and 
global supply chains it has got to be a unified approach.
    Ms. Spanberger. Thank you very much. I am out of time. But 
I did want to State for the record that, Dr. Cooper, I will be 
submitting another question to you because I was particularly 
struck by your comment that there is a bipartisan consensus 
related to China within Washington, within the government, but 
we really need to bring the American people into that 
conversation. I look forward to following up with you on that. 
Thank you. I yield back.
    Mr. Keating. The chair recognizes the ranking member, Mr. 
Kinzinger.
    Mr. Kinzinger. Thank you, Mr. Chairman. And again, thank 
you all for being here. I will get right to it. The access to 
Chinese 5G from companies like Huawei in Europe remains a 
primary concern for the United States.
    Dr. Cooper, what would 5G inclusion in NATO-member 
countries mean for transatlantic security?
    Mr. Cooper. Well, I think we are going to see that it means 
when we are deploying forces abroad, especially flowing them 
through Europe, that there are going to be greater risks to 
those forces because Russia, potentially, could gain access to 
that information as Dr. Kendall-Taylor said. And the Chinese 
likely will have some access to that information depending on 
which parts of the 5G backbone Huawei and ZTE are involved in.
    But I would say that I think that is going to be a reality. 
Even if the Brits and the Germans go along with us on 5G, which 
is looking unlikely at the moment, other countries in Europe 
are going to accept them. So we are going to have to come up 
with a mitigation strategy to manage that risk.
    Mr. Kinzinger. Thank you. Expand a little on what the 
potential harm to NATO operations could be in that case.
    Mr. Cooper. Well, there has been a statement recently by a 
number of retired four-star commanders both in Europe and in 
the Pacific suggesting that increasingly our forces will use 
battle networks that include 5G networks. Those 5G networks 
obviously it would be better if we and our allies and partners 
controlled them. I think the reality though is if you are 
looking in Eastern Europe, Huawei is already in a lot of those 
networks, inside the 3G and 4G networks, and they are 
definitely going to be inside the 5G networks that are going to 
buildupon them.
    So the Chinese are going to have some access to technology 
about U.S. forces as they flow through Europe and maybe through 
Asia as well.
    Mr. Kinzinger. There has been a controversy surrounding the 
firing of British Defence Minister Gavin Williamson as he took 
the fall for the leak of a potential deal between Britain and 
Huawei on 5G integration.
    Dr. Cooper, what should this action tell us about Britain's 
relationship with China?
    Mr. Cooper. Well, I do not know all the details and of 
course there has been a lot of speculation in the press about 
what happened with the firing. I think one question is what the 
decisions are being made within GCHQ on 5G technology. There 
has been some discussion that suggests that the British feel 
confident that they can manage the 5G challenge of having 
Chinese companies inside their 5G networks because they think 
they have been able to manage the 3G and 4G challenge. I think 
we do not know yet because we have not seen the public 
statements exactly where GCHQ has come out, but I hope that we 
will have a better understanding. And I know Secretary Pompeo 
is just returning from a trip to London to talk about those 
issues.
    Mr. Kinzinger. And what do you think that means for the 
future of British and Chinese economic engagement on 
controversial topics?
    Mr. Cooper. Well, there has been no question that the 
British have been trying to get increased Chinese investment in 
London. I think we have seen the same thing in Berlin and 
elsewhere and that is going to be a challenge. And we have seen 
this outside of Europe as well, where the Chinese have 
substantial economic involvement, they gain substantial 
leverage and they are often willing to use it.
    And so, we should not be surprised when many of our friends 
are put in a difficult position and they are basically offered 
either Chinese investment or technology, or the decision to 
side with us on security issues. So I think increasingly our 
friends are going to be put in this kind of tough position and 
we are going to have to work to make sure that they make the 
decisions we want, but also that we keep the alliances together 
by not putting too much pressure on them politically that puts 
them in a difficult position.
    Mr. Kinzinger. And Montenegro has seen their debt rise from 
63 percent to 80 percent over the past few years as the result 
of a deal with China to construct a 103-mile long highway from 
the Adriatic to Belgrade. Unfortunately, the project is not 
complete and the IMF has warned Montenegro to avoid any further 
loans.
    And a question again for you, Dr. Cooper, what would be the 
ramifications of China making Montenegro default on its loans 
for the bridge project?
    Mr. Cooper. Well, this is the much-discussed debt-trap 
diplomacy question and I think many of us will have views. Some 
people think that we have not seen a lot of debt-trap diplomacy 
other than a few cases. But what we definitely have seen is an 
increase in debt that the Chinese often hold that allows them 
to gain access to infrastructure and in some cases to either 
gain leases for 99 years on that infrastructure or to basically 
take over ownership.
    And so, we should all be very concerned, I think, about the 
kind of debt agreements that countries make in making sure that 
the recipient countries when they enter into agreements know 
whether they can handle the debt level or not. And I think in 
Serbia and Montenegro this has been one of the major issues 
with the Chinese investment. The debt levels are very high and 
it is not clear that the payoff and the infrastructure is going 
to be worth the sacrifice those countries are making.
    Mr. Kinzinger. Thank you. And again, even though my 
questions were just to you, I thank all four of you for being 
here and providing your expertise. And I will yield back to the 
chairman.
    Mr. Keating. Thank you very much. The chair recognizes 
Representative Cicilline from Rhode Island.
    Mr. Cicilline. Thank you, Mr. Chairman. And thank you to 
you and the ranking member for this important hearing. Thank 
you to our witnesses.
    I think we all recognize that the United States must have a 
clear-eyed approach to China that seeks cooperation where we 
can, but also ensure that we are able to compete where we must, 
and of course defend our interests where necessary. We have to 
be smart and we have to continue to invest in education, 
infrastructure, technology, and job training here at home and 
we need to work with like-minded countries in Europe and 
elsewhere to stand up for international norms, our rules-based 
world order, and defend fundamental human rights.
    Sadly, working on a coordinated approach with Europe is 
difficult given the Trump administration's erratic policies and 
often confusing rhetoric toward Europe, but I think this is 
where Congress has a particularly important role to play and 
make clear that we will not allow any transatlantic rift to 
prevent transatlantic cooperation in the face of an emerging 
China.
    And so, my first question is, the Chinese Government 
sponsors intellectual property theft through means such as 
forced technology transfer and cyber espionage and it has 
caused an estimated tens of billions of dollars in annual 
losses for American companies. Efforts by the United States 
thus far to deter these practices have had little or no impact. 
And I am wondering what steps European governments might be 
taking to address this issue if there is an opportunity for 
more cooperation between the United States and some of our 
European allies to help protect U.S. intellectual property.
    Are there things that Congress should be doing in this 
regard? Maybe Dr. Taylor, if we could start?
    Ms. Kendall-Taylor. I do not focus explicitly on the kind 
of economic coercion side of this, but as we have been talking 
about with the investment screening mechanisms and the need for 
coordination between the United States and Europe, I would say 
that is kind of the most important, from my perspective, is 
that we are kind of sharing information about what the nature 
of the threat.
    In a lot of these countries too there is not a lot of good 
capacity and area expertise on China, so kind of working with 
especially at the country level vice at the European level, if 
we are working at the national level of government, helping to 
build the capacity in-country to understand the nature of the 
threat to help improve their kind of national level 
legislation. But I think, really, it is the coordination piece 
that we are in lock-step so that we can break down that kind of 
squishing mechanism, I would say, or seeping mechanism.
    Mr. Cicilline. Thank you.
    Ms. Kendall-Taylor. But I will let my colleagues who might 
have some more specific ideas.
    Mr. Cicilline. Sure.
    Ms. Segal. I would just add on trade-related issues and 
economic issues and I would include the protection of IP, that 
it is important then for the United States to be working with 
other like-minded countries. There is a trilateral mechanism 
between the United States, Japan, and the European Union to 
address a number of trade related issues including some in the 
digital economy space, and I think we need to leverage those 
mechanisms. Because as has been pointed out previously, our 
ability to influence China's behavior is going to be maximized 
by bringing together allies and partners and really isolating 
China when it is behaving poorly and is a bad actor.
    Mr. Le Corre. I would just add, Congressman, that the fact 
the Europeans and the Chinese are now looking at a bilateral 
investment treaty as are the Americans and the Chinese, 
although I understand it is not making much progress, is an 
interesting opportunity for both sides of the Atlantic to 
cooperate on IP as well as technology, the issue of technology 
transfers which is as damaging to European companies as to 
American companies.
    And, in fact, referring to reports by the American Chamber 
of Commerce in China as well as the European Union Chamber of 
Commerce in China, you have the same feeling that companies are 
both affected, I mean on both sides affected by this issue. So 
I think it is the right moment to start a kind of conversation 
on norms and on market access.
    And I understand there is some, you know, potential there 
from the Chinese side as well since the recent session of the 
Chinese Parliament that they might actually reduce technology 
transfer requirements to certain investments inside China.
    Mr. Cicilline. Thank you.
    And, finally, Freedom House has ranked China as not free. 
And, actually, in Freedom House's 2019 survey of democracy 
around the world, China ranked as one of the least free 
countries in the world, as you know, stamping out dissent, 
throwing those who speak out in prison, and extraordinary 
surveillance and an effort to stamp out free speech and free 
thought, and while at the same time gobbling up lots of data 
about its citizens.
    And as China emerges as a growing power, the United States, 
in my view, has to speak out against these violations of human 
rights. But sadly, in many instances, European Governments have 
been more vocal than the United States. I wondered if you would 
share what your thoughts are on the impact and the kind of 
message it sends when the United States fails to speak out 
forcefully and what can Congress do to promote stronger 
transatlantic condemnation of human rights abuses and the kind 
of role that as China's power rises and as they emerge, this 
human rights record of course has a greater impact on a greater 
number of people.
    Mr. Le Corre. Congressman, I think it is a serious issue 
that needs to be addressed and perhaps in the context of the 
G7. Unfortunately, the United Nations has become a complicated 
venue for big nations to express their views on this for 
reasons that were expressed earlier with, you know, 
interference and setting the role of China and Russia as 
permanent members of the Security Council.
    I think, you know, again, in Brussels there is a will to 
express strong views on Xinjiang, on human rights records in 
China, and again there should be some kind of discussion on 
both sides of the Atlantic to make it a stronger stance.
    Mr. Cicilline. Thank you. I see my time has expired.
    Thank you, Mr. Chairman. I yield back.
    Mr. Keating. The chair recognizes Mr. Wright from Texas.
    Mr. Wright. Thank you, Mr. Chairman. I thank all of you for 
being here today.
    Ms. Segal, you mentioned something earlier that had been 
discussed a great deal and that is the impact of the tariff 
situation on our allies. We need to maintain strong alliances 
and not create a situation that would make dealing with China 
more appealing. At the same time, we have an obvious need to 
from time to time review all our trade agreements and trade 
situations to make sure that they are working the way they were 
intended and, more importantly, to make sure that they are fair 
to the American people.
    So how do you suggest we reconcile those two goals that we 
maintain strong alliances, but we also have these agreements 
that are fair to the American people?
    Ms. Segal. Thank you very much for that question, because I 
agree a hundred percent with the fact while the U.S. is looking 
out for national security interests as it should, it also needs 
to look out for its economic security and its economic 
interests. My comment was more related to the mechanisms that 
we use, and in particular the mechanism of the 232 tariff is 
one that is based on a national security concern.
    So to the extent that that is the rationale for the 
imposition of those tariffs, I think that is one of the pieces 
that is of concern to Europe, but also of concern to many of us 
that look at the impacts of that on the system. And here there 
are spill-over effects to the United States invoking national 
security concerns as the basis for a protectionist policy and 
there is concern that once the United States does that, that 
basically opens the floodgates for others to do it and to use 
it against us, which would be not in our best interest 
economically.
    Mr. Wright. Right.
    Dr. Cooper, would you have any comment on that?
    Mr. Cooper. Well, the only thing I would add is I was in 
Europe, and overnight before some of our meetings the U.S. 
Trade Representative put on tariffs on some of our European 
allies. And I have to tell you, it made the discussions the 
next day much more difficult on asking the Europeans to work 
with us on 5G and on Belt and Road. And so, I think everything 
that Ms. Segal said is exactly right. We have got to think hard 
before we put tariffs on our friends.
    And I understand what the President's logic is, but the 
downside in Europe is that often it looks like the Chinese are 
coming with money and with technology and investment, and we 
have got to provide something positive in response and I just 
do not think tariffs are the right way to do that.
    Mr. Wright. OK.
    And, Dr. Kendall-Taylor, I have a large Czech population in 
my district and I am co-chair of the Czech Caucus. And we know 
that the Czech President is very cozy with the Chinese, but 
that is mainly a ceremonial office. Do you see any--and I will 
also open this up to you, Mr. Le Corre--concern there that the 
President of the Czech Republic is so cozy with them?
    Ms. Kendall-Taylor. I think, broadly speaking, what is of 
concerning is where we see democratic backsliding in Europe 
leading to closer relationships with Russia and China. So even 
in the academic research there is some good research that 
demonstrates that kind of shared regime-type provides a solid 
foundation for cooperation. And so, when we are thinking about 
the democratic backsliding and the rise of populism in Europe, 
it is not just a democracy and human rights issue, it is a 
national security issue.
    And I think we will have to be highly attuned to where we 
see some of this backsliding taking place, whether or not that 
is creating kind of shared foundation where maybe it did not 
exist before for closer relationships between those countries 
and countries like Russia and China. So, yes, it is a concern.
    Mr. Wright. Thank you.
    Mr. Le Corre?
    Mr. Le Corre. Thank you. If I may just add, I think there 
is actually a debate going on in Prague, a much stronger debate 
than in many European countries, about the relationship with 
China. The fact the Czech President has had dealings with China 
through a number of advisors, one of them being Chinese and 
currently under house arrest in China, has sort of raised an 
awareness among the media and the think tank community in the 
Czech Republic, which I think is quite healthy. On top of the 
fact the Czech Republic is in, you know, situated in the middle 
of Europe, Eastern Europe, and there is a new government, and 
the Prime Minister has expressed very different views about 
China and Russia than the President who, as you suggested 
yourself, is more of an honorary figure.
    Mr. Wright. OK, great. Thank you very much and I yield 
back.
    Mr. Keating. Thank you. The chair recognizes Representative 
Wild from Pennsylvania.
    Ms. Wild. Thank you, Mr. Chair. And thank you to the 
witnesses for being here this morning.
    I have, as I know many people do, significant interest and 
concern about cybersecurity and the use of surveillance by the 
Chinese. Recently, in my home district office, I was visited by 
a young family who are Uyghurs and--I think I am pronouncing 
that correctly--it was a husband, a wife, and their three young 
daughters, two of whom had been born in China, one of whom was 
born in Pennsylvania. And they described for me that the wife 
parents have been sent to a detention camp where they are--
where they have both lost considerable weight, are receiving 
some kind of daily injections, are being generally mistreated.
    They shared with me that the Uyghurs make up approximately 
11-1/2 million of the Chinese population. And they described 
for me the use of facial recognition technology that is being 
widely used to recognize the Uyghur people and that according 
to them, many are being taken right off the streets of China 
and sent to these detention facilities, or I do not even know 
if that is the right word. I honestly knew nothing about this 
until I had the visit from these people.
    But it caused me to do a little bit of followup reading and 
my understanding is that Chinese authorities and companies have 
developed and deployed tens of millions of surveillance cameras 
as well as facial, voice, iris, and other biometric collection 
equipment. And these technologies are believed to be used to 
target and track movements and internet use of ethnic Tibetans 
and Uyghurs, among others, and reports that I have seen suggest 
that Chinese companies have exported these kinds of systems to 
18 countries at least.
    So my question is this and for Dr. Cooper or Dr. Kendall-
Taylor or whoever feels qualified to answer it, what are the 
risks associated with these Chinese exports especially with 
respect to jeopardizing information that we share, the U.S. 
shares with our allies in Europe, as well as with respect to 
global human rights and individual privacy rights and what can 
we do in the cybersecurity and surveillance space to prevent 
this technology from being used in an abusive way?
    Mr. Cooper. Well, thank you for the question, 
Congresswoman. I think this is an important issue and something 
we have not talked about enough in the last few years. And I 
think the human rights community has done an amazing job of 
bringing this to light and some pretty courageous journalists 
as well.
    It is incredibly difficult to report now in Xinjiang. Even 
for the best reporters based in China, there are a lot of 
roadblocks to them reporting on the kinds of stories that you 
are talking about. And the U.S. Government's estimates at the 
moment are that between one and three million Uyghurs are in 
detention in northwestern China, which is a tremendous number 
of people, and it is hard to believe that this story hasn't 
garnered more attention. I think we do not----
    Ms. Wild. That by the way was exactly my reaction.
    Mr. Cooper. Yes, exactly. And I think the human rights 
community here has been working incredibly hard to bring 
attention to this issue. I do not think we have seen a lot of 
great policy answers from anyone around the world other than 
bringing more transparency to the behavior that we are seeing 
occurring. And the one area where I think this touches the most 
on Europe is the current concern that some of us have that 
whether the Chinese are using the 17++1 institution or it is 
Germany or Italy or London's desire to have more Chinese 
investment, that we might see European countries not being as 
willing to speak out on these issues as we would want them to 
be. So I hope that we can address this in a coherent, united 
manner with our European allies.
    Ms. Kendall-Taylor. And could I just add one point?
    Ms. Wild. Sure, please do.
    Ms. Kendall-Taylor. I agree with everything that Zack just 
said. But it really, I mean it is such an important question 
and I am so glad that you raised it, because China is exporting 
its authoritarian tactics and that will create an environment 
more conducive to authoritarianism all around the globe.
    And so--and we should also note that in addition to the 
Belt and Road Initiative, there also is a component of this 
they are calling the Digital Silk Road and that will be an 
important vehicle through which they will be able to export and 
share some of these surveillance and other authoritarian best 
practices.
    And the other concern here is 5G. So why would we allow the 
Chinese Government to be building our 5G networks? Why would we 
put that responsibility in the hands of a government that has a 
long track record of surveillance and a track record of human 
rights abuses, and so that should raise concerns for all of us.
    And so if we are hesitant or it seems like the direction 
that this is going particularly in Europe is that some of these 
countries for obvious reasons do not want to outright ban 
Huawei, but if we can move toward kind of an objective list of 
criteria for selecting vendors that would address some of these 
issues and that are true to our values in the United States and 
Europe, that provides a more objective way, I think, for making 
decisions.
    And that would, because of all of the abuses that you have 
highlighted, effectively screen out Huawei and other providers.
    Ms. Wild. Thank you for that very useful information. I 
have dozens of questions I would love to ask you, but 
unfortunately my time is up. But I would like to followup at 
some point. Thank you.
    Mr. Keating. Thank you, Representative Wild, for those 
insightful questions. The chair recognizes Representative 
Burchett.
    Mr. Burchett. It is Burchett, Mr. Chairman.
    Mr. Keating. Burchett, sorry.
    Mr. Burchett. Burch like the tree, and ett like I just ett 
breakfast.
    Mr. Keating. This is the European influence, I think.
    Mr. Burchett. I guess it is.
    Mr. Keating. It is overtaking me this morning, I apologize.
    Mr. Burchett. That is all right.
    And thank you all for being here. I guess I would, you 
know, dealing with China, it seems that they have a tendency, 
maybe it is just my opinion, but they exploit either our 
stupidity, greed or arrogance, or a combination of all those 
things. And, Dr. Taylor, and I note you all are on the screen 
and currently I am on the screen, and I am wondering if that 
screen is made in China.
    But, Dr. Taylor, in your testimony you mentioned the 
importance of European initiatives such as permanent structured 
cooperation, PESCO, and the European Defense Fund to better 
prioritize issues pertaining to China in the Indo-Pacific 
region. These two initiatives and a potential EU army seem to 
be more duplicative and a competitor to NATO. Would it not make 
more sense for our NATO allies to just to pony up and spend 
more than 2 percent of their GDP on defense rather than waste 
money on silly and unworkable initiatives?
    Ms. Kendall-Taylor. I agree that the 2-percent is an 
important benchmark that all our European allies should be 
working toward. I think even when you talk to NATO officials 
that most of them are confident that the initiatives that I 
have talked about, PESCO, the European Defense Fund, and 
others, are not duplicative, but complementary to what NATO is 
achieving. And as long as they are rolled out in ways that are 
consistent and supportive and not redundant with what NATO is 
doing, then I think the United States should be encouraging 
rather than discouraging European efforts to do more for their 
own security and defense.
    I will also note that things like the EI2 initiative, 
France's European--what is it, EI2--European Intervention 
Initiative, also has the goal of doing more and allowing Europe 
to play a greater role in places like North Africa. Again, the 
more that our European allies can help us police and secure not 
only Europe, but places like North Africa, it allows the United 
States to pivot and focus more on the Indo-Pacific.
    Mr. Burchett. OK. And this is, I guess, for the entire 
committee. I am not sure who would be the most qualified to 
answer, but anybody that feels like they should, please do.
    You know, in Tennessee I was in the State legislature and 
there was an initiative to have these toll roads put in. And I 
am not going to debate the merits of those, one way or the 
other, but there was--I actually had put an amendment on the 
bill that said that they needed to be, at least one end of the 
toll road needed to be owned by an American entity, and 
immediately the support for the bill dropped. And that made me 
wonder too about the reports that Chinese companies currently 
own and have access to about 10 percent of the ports in Europe.
    And I was fortunate enough to go to Israel for 4 days and I 
noticed that their deepwater port was, in fact, constructed by 
the Chinese, which to me is very alarming. What is behind their 
strategy to gobble up these ports in Europe? Is it purely 
economic or do they have some long-term security interests? I 
think I probably know the answer to that, but I would like to 
hear what you all say.
    And could you all discuss the specific security risk to 
NATO allies of Chinese access to these European ports? Thank 
you all.
    Ms. Segal. Thank you for the question. I can start and 
maybe others will have their own views on this. I think the 
fact that China is investing abroad and has increased its 
investment abroad in and of itself is not the primary concern. 
The concern are the potentially strategic motivations behind 
that investment. And the difficulty then for recipient 
countries, including the United States and in Europe, is to 
differentiate which are those investments that an entity in 
China is making for its own economic interest and the recipient 
country is benefiting because it is getting capital that then 
fuels its economy, and which are the investments that actually 
go beyond that are of geostrategic import and have a strategic 
interest.
    And that is what these whole, the motivation behind these 
investment screening mechanisms like CFIUS like what has been 
adopted now at an EU-wide level in Brussels, that is what those 
mechanisms are designed to suss out. And so, I think it is 
important to differentiate those two. And the fact that this 
debate is being had and that the recipient countries are not 
sensitized to look out for what might be the strategic 
motivations behind these investments, that is the important 
balance to strike between pro-growth investments and 
investments----
    Mr. Burchett. Excuse me, but, you know, it is kind of like 
up here when we talk about we are going to form a study 
committee and do some studying and is just going to sit on some 
shelf somewhere. Are they actually doing anything when they say 
that or is it just the money that they are getting? Because I 
have read some reports that some of the ports and projects that 
they have done, they will pull out or they will do subpar labor 
that what we would consider the standard here by our labor 
folks in this country.
    Ms. Segal. Right. And so those are related issues. One are 
the strategic kind of national security concerns which these 
mechanisms would pick up, the other is the quality of that 
Chinese investment. And the concerns behind Belt and Road 
investments are of both categories, but is actually that 
quality question and the debt sustainability question that is 
also something for recipient countries to think about.
    And so, among the initiatives that the U.S. has taken both 
to encourage allies to strengthen investment screening 
mechanisms is also an effort to get countries to strengthen 
their mechanisms for just evaluating the economic worth of such 
projects. So if what China is offering is an investment but one 
that comes with it strings that require Chinese workers to be 
used, come with it returns back to China that actually make the 
project not viable in the country, those are things that 
recipient countries when they are making their decisions about 
who to award the contract to, they should be sensitized to that 
and then make their decisions based on that sort of 
information.
    Ms. Kendall-Taylor. And maybe just really quickly to 
highlight the security concerns as we talked about, NATO 
mobility will be key when we are talking about Belt and Road 
infrastructure, so with the ports and rails in particular 
Chinese investment in those provide the capacity for China to 
slow a NATO response that makes it. They have the ability then 
to leverage to complicate our movement of people and troops 
across Europe and that is something that NATO is going to have 
to grapple with.
    Mr. Burchett. Thank you.
    Mr. Chairman, I apologize for running over, brother. Thank 
you.
    Mr. Keating. Those were great questions. I think also that 
we could followup beyond the ports and look at the rail and the 
testimony that was given before about how that screening 
mechanism did help or has helped delay and give greater 
scrutiny to the rail line between Hungary and Serbia too. So it 
would be interesting to see how that has worked and been 
effective.
    Representative Costa from California?
    Mr. Costa. Thank you very much, Mr. Chairman. I appreciate 
this important hearing.
    I am one of those that believe that Russia and China's 
interests do align and they are increasingly so. While they may 
not as you have testified today be coordinated to the degree 
that would further make their efforts more effective, clearly, 
I think we need to be concerned about it. I have some questions 
that really deal with the comments that I think the four of you 
made, and that is that for a more effective use of our ability 
to deal with both China and Russia that we need to be 
coordinated with our European allies. I think there was a 
consensus by all of you in that statement. And certainly, we 
know that Russia, going back to 2013 when General Gerasimov was 
talking about their strategies to undermine Western democracies 
by using the election process in Europe to destabilize that 
economy and also to undermine NATO as a defensive for all us, 
not only the Europeans but for the United States, and they have 
done that. They have been interfering in European elections for 
years and of course in our elections in 2016.
    So, I want to understand with all the challenges that 
Europe is facing with populism, with nationalism, with the 
refugee challenges that they are getting from the Middle East 
and from Africa, how you believe we can better coordinate our 
efforts with our European allies--they are not our adversaries, 
they are our allies where we share so many common values--in 
the backdrop of the comments that we have been making about 
NATO? Even though three administrations have agreed that 2 
percent-plus is necessary for the NATO countries to commit to, 
but you add as you testified the steel and aluminum tariffs, 
you know, commenting that the basis is national security when 
these are our NATO partners. Very contradictory not to mention 
insulting, the potential of imposing auto tariffs, which is 
crazy, I mean the largest export of cars made in America is 
BMW, and that the statement that Europe is an adversary by our 
President, and then you add to that the cheerleading of Brexit 
that has taken place in this country by some, how can any of 
you on the panel articulate what our current administration's 
policy is toward our European allies?
    Mr. Le Corre. I can start to have a go at it, but it is not 
an easy answer to make.
    You know, I think, there is no evidence that there is 
coordination between Russian and Chinese actions in Europe. 
That there is a Chinese sort of----
    Mr. Costa. No, but there could be in the future.
    Mr. Le Corre. There could be. And certainly, if you look at 
Greece, for example----
    Mr. Costa. There interests align in a number of areas.
    Mr. Le Corre. Right, so the issue is really for countries 
such as Greece, Portugal that are NATO members as well as 
members of the----
    Mr. Costa. And Italy.
    Mr. Le Corre. And Italy, they have been repeating that they 
remain, you know, involved in the alliance and the EU, but 
there might be some discussions to be having at NATO level on 
what it means for countries that are selling some of their 
national assets including, for example, the National Grid of 
Portugal----
    Mr. Costa. Right.
    Mr. Le Corre [continuing]. To a nation like China, or to 
sell some of its territories in the Azores in the middle of the 
Atlantic to a Chinese scientific center.
    Mr. Costa. We have been very concerned about that, many of 
us, and we have tried to make those concerns known to the 
Department of Defense on that. But please, what is our policy? 
Can you articulate our policies toward Europe, our allies?
    Ms. Segal. I do not know if I want to articulate our policy 
not being a member of the administration, but I do think what 
you have identified is that there is a tension between the 
security issues and how we should be engaging with European 
partners and economic issues on how we engage.
    Mr. Costa. I think the Secretary General when he spoke to a 
joint session of Congress put it well. It is nice to have 
friends. And these relationships that we have had with our 
European allies for decades, the longest peacetime period in 
Europe, the last 70 years, in over 1,000 years is the result of 
these coordinated alliances that we have with NATO, with the 
European Union.
    And so I mean, I think you are struggling to suggest what 
the policy is part of the problem. We do not have a 
coordinated, clear policy toward our European allies. If we 
did, we would have a much more, I think, thoughtful address 
toward China and how we are dealing with China. I mean, I think 
that is the answer to the question.
    Mr. Cooper. Can I just make one very brief comment? I think 
there is a philosophical question about what we think leads to 
greater alliance cooperation and contributions. I think the 
administration's belief is you get more alliance coordination 
and cooperation when the leader of the alliance pushes its 
allies hard. I think a lot of the academic literature would say 
that you get allies cooperating more when they think there is a 
higher threat.
    So I think that is where a lot of this disjuncture is 
between the administration's strategy and what we are actually 
seeing from Europe. So as the Europeans get more concerned 
about Russia, they will contribute more to NATO. If they are 
not deeply concerned, they are not going to contribute up to 
the 2-percent level or beyond.
    Ms. Kendall-Taylor. Maybe just a really quick comment. I 
think what the strategy has been and it has been articulated by 
people like Assistant Secretary of State Wess Mitchell before 
he resigned, I mean, so this administration has rightly set out 
this vision of strategic competition putting China front and 
center. But where we break down and fall apart is by not 
prioritizing Europe and that relationship.
    And there has been a belief that we have to go after our 
European allies and correct imbalances in our relationship and 
once we correct those imbalances, then this administration, I 
think, incorrectly believes that we can pick up where we were 
and move on to confront China. So I think in my mind that is 
what the policy has been, China front and center, but with the 
incorrect assumption that if we bash our allies and correct the 
imbalances that then we are in a better place to address China.
    Mr. Costa. Well, and I think that is the feeling that you 
are receiving that the chairman and I receive when we go to 
Europe. We have been there two or three times this year and 
this is the constant questions that we are asked as to what 
really is our policy toward our allies to, you know, we used to 
be consistent in terms of our approach and they could always 
count on us, and there is a deep feeling today that that is no 
longer the case.
    And then therefore why should we cooperate with you if you 
are not going to be that friend, as the Secretary General 
stated last month that it is nice to have friends. And now that 
is all being undermined, I believe, and it is being questioned, 
unnecessarily so. No one disagrees with the 2-percent 
expenditure.
    Let me just ask one final question, if I might, Mr. Chair?
    Mr. Keating. It is all right. Mr. Guest.
    Mr. Costa. Because this is something that you and I have 
talked about. Would it--do you think if this subcommittee 
worked closer together with the European Parliament, they are 
having elections this month, and the European Commission as we 
go forward to address some of these issues that we are talking 
about today that that would be constructive and more helpful in 
terms of our partnership?
    Mr. Le Corre. If I can answer to that I think it would be 
an excellent idea for one simple reason. I believe many of the 
new mechanisms that have been introduced, which I was 
describing earlier, were originated in the European Parliament. 
The status economy, the market economy status that was denied 
to China by the EU 2 years ago originated, again this decision 
originated by the European Parliament and there are strong 
members of the European Parliament that have been sort of 
supporting, you know, actions for China, for example, 
especially on the reciprocity issues and intellectual property.
    So I think, you know, obviously this is a transition year, 
Congressman. There is going to be elections very soon. This 
country knows about elections too. And so it is going to be a 
difficult year for engaging with the European Parliament, but I 
believe from October again there will be new committees and 
people that will look very thoroughly into the issue of Chinese 
influence in Europe.
    Mr. Costa. Well, the chairman and I have expressed interest 
in doing so and I thank you for--I have exceeded my time, but 
we will followup on that.
    Mr. Keating. Thank you, Mr. Costa, for your work. And the 
chair thanks Mr. Guest for being patient through that 
questioning, and now the chair recognizes Mr. Guest from 
Mississippi.
    Mr. Guest. Thank you, Mr. Chairman.
    Before I begin my question, I have a report from the Center 
for International Private Enterprise entitled, ``Channeling the 
Tide: Protecting American Democracies Amid a Flood of Corrosive 
Capital.'' This was published last fall. This report examines 
the impact on the government norms, practices, and economic 
values in the countries that have received Chinese investment.
    I ask by unanimous consent this report be inserted into the 
record.
    Mr. Keating. Without objection.
    [The information referred to follows:]

    Mr. Guest. My question to the witnesses on the panel, as I 
understand it, the Chinese are using basically a multifaceted 
approach to either gain or to expand influence not just in 
Europe but around the world, things such as investment, trade, 
technology, education through the Confucius Institutes, but 
what I would like to talk about and focus my question on is the 
growing Russian-Chinese relationship.
    Of course, we see that in Latin America, particularly as it 
relates to Venezuela, where you have an unholy alliance, if you 
will, between Russia, China, and Cuba as they are continuing to 
prop up the Maduro regime. But I believe at least two of the 
witnesses here spoke of that in your written testimony.
    Ms. Kendall-Taylor, I think you said on page 5, you said 
``The relationship between China and Russia are deepening. The 
growing alignment of their values and visions on how the world 
should be ordered raises the prospect that Moscow and Beijing 
will increasingly coordinate their efforts to undermine U.S. 
influence.''
    And it was also addressed by you, Mr. Le Corre, I think on 
page 7, you actually referred to it as the ``emergence of a 
Russia-Chinese nexus and it directly affects NATO's primary 
mission. The relationship should not be exaggerated, but the 
two countries have conducted joint naval exercises.'' You also 
talk about military exchanges or military leadership exchanges.
    And so, my question to the panel and anyone can answer is, 
how concerned should we be about this growing nexus, as you 
referred to it, Mr. Le Corre, between China and Russia as we 
can see them continuing to work together and to work against 
American interest?
    Mr. Le Corre. Thank you, Congressman. I think, you know, 
the issue is to be looked at not just in Europe, but globally. 
Certainly if you look at the Belt and Road Initiative a lot of 
it has to do with Central Asia, for example, and parts of Asia 
that are under Russian influence. So I would say there is a 
real concern there.
    And the people of some of the Central Asian countries are 
very wary about the rise of China and the economic rise of 
China, and somewhat the Russian umbrella that used to be their 
protectorate, you know, and I am thinking of Kazakhstan and 
Tajikistan, for example, is no longer there because it is 
basically this collusion going on with China.
    As far as Europe is concerned, I think, you know, America 
should basically, you know, rise again in the eyes of many of 
these European citizens and offer an alternative narrative to 
the authoritarian narrative that is now sort of coming up in, 
you know, from China or from Russia. And, you know, this is 
like Greece, should basically look toward Western values and 
not toward, you know, authoritarian values, and unfortunately 
these are the values that China is bringing when investing in 
some of these countries.
    Ms. Kendall-Taylor. We talked about it a little bit earlier 
kind of all of the ways in which the relationship is growing, 
and I think as has been talked about the implication of that 
growing relationship is significant and I would put that close 
to the top of the No. 1 issue, or close to the top of the 
issues that I am concerned about.
    So in a world of great-power competition, there are three 
and the United States is not going to be alone on the side with 
one. We have talked about how the growing relationship, I 
think, is serving to undermine democracy particularly in 
Europe, but it is also the way that they are creating an 
alternative to democracy.
    China in particular demonstrates that the road to 
prosperity and democracy no longer runs through the United 
States. They are exporting their best practices. President 
Putin is showing other leaders that if, you know, that you can 
stand up to the United States and it is emboldening other 
leaders across the world.
    But it is more than a democracy and human rights issue. It 
is very much a national security issue. And I have given a 
couple of examples, I think, of how that synergy or how their 
coordination could affect the United States. But, really, at 
the most basic level you could imagine a scenario where Russia 
and China decide to make moves in their respective spheres of 
influence at the same time.
    So what happens and the United States would, and NATO in 
particular would struggle to respond to coordinated moves 
between Xi Jinping in the South China Sea and Putin in Europe. 
That would severely strain U.S. military capacity to respond to 
those challenges.
    So I think these are the types of things--that certainly is 
a long way off, but I think these are the types of things that 
policymakers need to be thinking about now, because we have to 
plan for those contingencies and also work to prevent the 
closening relationship from coming to fruition in ways that 
would have that much of a consequence.
    And I think there, when we talk about the importance of 
values and democracy, I mean getting our own house in order and 
providing an alternative, an attractiveness of a democratic 
model that other countries will want to emulate I think is one 
of the most important ways, that is kind of a two-for-one. It 
helps deter all of the kind of a hostile, malign actions that 
both Russia and China are taking both in the United States and 
Europe.
    So it is a two-for-one, but these are the types of things 
that I think we need to be thinking about now.
    Mr. Guest. Thank you. I yield back, Mr. Chairman.
    Mr. Keating. Thank you very much. The chair recognizes and 
we are going to let him--give him a chance to sit down, 
Representative Gonzalez from Texas. Thank you for joining us. I 
know it has been a busy morning. Representative Gonzalez.
    Mr. Keating. Thanks. He is yielding back.
    Just following up with what Representative Guest said, I 
think one of the key aspects of this morning's, among many, 
testimony from our witnesses was the concern for this growing 
relationship coordination and collaboration between Russia and 
China. And I think it makes the issue even more compelling from 
a U.S. standpoint of why we have to work hard to strengthen our 
existing relationship with our European Union coalition 
partners, that we have control over more than we do dealing 
with the activities of China and Russia.
    And I think that is one of the more important messages of 
this morning, also even beyond Europe and Eurasia to have the 
U.S. proactively get involved in providing alternatives and 
having a stronger role to try and combat that growing influence 
together it is important.
    I would just as part of my closing, and then I know that 
the vice chair has some final comments and perhaps a question 
as well, just one thought I had digging down to a specific and 
I am worried about the fractures that occur and that I see 
occurring in Europe. I understand Congress has a critical role 
going forward and we are exercising that in this committee and 
in the larger Foreign Affairs Committee. We are doing it in 
Armed Services and so many of our other committees trying to 
project that and actually have been, I think, in this short 
period of time very successful in doing so.
    But I want to give an example of something I hear from time 
to time and it is nothing to undercut our alliance with the 
U.K., our great ally, but we hear conversations from the 
administration, even from other members, talking about having a 
bilateral trade agreement with U.K.
    And even though they have to wait for Brexit to get over 
for anything like that to occur, having these discussions and 
having discussions about, you know, fast tracking when the time 
comes or prioritizing a bilateral agreement with U.K. but not 
having that kind of discussion with the rest of the EU, I see 
that as a growing concern of mine in terms of how that can 
fracture our relationship particularly during these difficult 
times of dealing with the Brexit issue.
    Could you comment on how that kind of discussion, although 
it might be well-intended, could have an unintended effect of 
further fracturing our relationship with the rest of the EU, 
which after all is 80 percent of our trading partners in 
Europe? If anyone wants to comment on that.
    Mr. Le Corre. Mr. Chairman, I do not know if you are 
referring to the missed opportunity of a meeting between the 
Secretary of State and the German Chancellor, but that was 
certainly not well taken in Germany. But meanwhile, I 
understand Secretary Pompeo went to London.
    Obviously, from my point of view as somebody looking at 
China, I think there are real concerns about the bilateral 
relationship between China and the U.K. As we have discussed 
earlier, the level of Chinese involvement, economic involvement 
in Britain is much higher than in any European country already, 
and the U.K. is certainly the U.S.', you know, oldest ally and 
there is a very strong link between the two countries.
    On the other hand, as you pointed out, 80 percent of the 
trade is done with the rest of Europe. And there is an 
integrated European market that is working quite well, and in 
fact, the pro-European sentiment has increased over the past 2 
years ever since the referendum in the U.K. decided for Britain 
to leave, apparently. But it hasn't been done yet and the 
process is not completed.
    So I think, you know, looking at the European Union as a 
strong partner is something the U.S. should certainly do and 
the U.K. should try to be, I mean, you know, looked at as a 
European country not as a standalone country. It will remain 
part of Europe. In fact, you know, British officials do say 
that on a regular basis and I cannot see otherwise in terms of 
geographics. And, you know, vis-a-vis China or vis-a-vis 
Russia, I think, you know, the relationship will remain close 
between the EU and the U.K. and between the U.K. and the U.S. 
So, you know, I think these two things should be done in 
parallel.
    Mr. Keating. Great.
    Ms. Segal?
    Ms. Segal. Just to add to that, I think as your question 
references it has been a very complicated process between the 
EU and the U.K. ever since the Brexit vote and that issue is 
still not resolved. And I would make the argument also on the 
basis of what is in the U.S. national interest that we do not 
really want anything that is going to result in a destabilizing 
resolution of that issue.
    So any sort of interference that actually complicates and 
potentially destabilizes the outcome of how that Brexit vote is 
resolved is actually harmful to the United States.
    Mr. Keating. Yes. Well, I hope that our friends in Europe 
know from this committee and from a very strong bipartisan 
standpoint that we are sensitive to the issues that they are 
dealing with, particularly with elections coming up and dealing 
with the Brexit issue.
    And that as a Congress I can speak for this committee as 
well as the full committee, we are sensitive to that issue. We 
are not taking our relationship with our closest allies and our 
coalition for granted and we will continue to adopt that 
attitude, because the attitude is important too as substance in 
many instances as we see now.
    I now yield to the vice chairman of the committee who may 
have a final comment and a question.
    Ms. Spanberger. Thank you, Mr. Chairman.
    We have talked a lot today about 5G technology threaded 
throughout the conversation, but I did want to followup just in 
a closing statement with a question.
    So as we talk about 5G technology, recognizing the 
potential that it holds to transform telecommunications as we 
know it resulting in huge, potentially huge economic benefits 
to our citizens and American companies, we are facing 
challenges with companies that have close ties to the Chinese 
Government such as Huawei that are currently leading global 
competitors in early 5G equipment and software production.
    According to NATO's Cooperative Cyber Defence Centre of 
Excellence, Huawei's growing influence as a leading supplier of 
5G technology in Europe could be exploited by China to engage 
in espionage, monitor foreign corporations and governments, and 
ultimately support Chinese military operations.
    My question as we close out this discussion is how can we 
ensure that the United States and our allies are not left 
behind by these technological advances and forced to choose 
between putting our data at risk and waiting around for the 
rest of the market to catch up, and how can we improve the 
competitiveness of U.S. companies in this space, specifically 
how can non-Chinese companies compete with Huawei given that 
its telecom networks typically cost 20 to 30 percent less than 
our competing products?
    Ms. Kendall-Taylor. So I think all of the kind of 
advantages that Huawei has you have rightly noted. Currently, 
the discounts that European companies are offered are somewhere 
in the realm of 20 to 30 percent. So Huawei is able to come in 
and because of the subsidies they receive from the State they 
are offering their services at a much discounted price.
    They are also vertically integrated, I understand, which 
means that Huawei is providing a soup-to-nuts solution that 
other providers just are not doing and they are ready to go 
now. So there is very valid concerns in Europe, I think, that 
by banning Huawei that we would delay the deployment of 5G 
networks in Europe. So there are all of these considerations 
and figuring out how to counter it, I think, is something that 
will be and has to be front and center in terms of priorities 
now.
    There is some really excellent work that is being done at 
the Center for New American Security and there should be a memo 
that is coming out soon that lays out a whole host of 
recommendations that would also address what the United States 
should be doing in terms of its own kind of domestic posture. 
And one of the things that you highlighted is rightfully making 
sure that the United States is prioritizing and investing in 5G 
as a foundation for American competitiveness. And we have to be 
able to offer an alternative and that is just not where we are 
at the moment.
    And it also highlights the need to work very closely with 
like-minded countries in Europe to do things like as we have 
already talked about, creating this objective screening 
criteria. So if countries in Europe are reticent to taking 
sides, which they are, they do not want to have to be seen as 
choosing between the United States and China, then going down 
this route where we are coming up with these objective criteria 
that providers have to meet in order to be allowed to be the 
provider of choice. That is an objective approach then, which 
essentially would screen out Huawei given all of the human 
rights and surveillance considerations that you highlighted.
    There are other opportunities too, making sure that 5G 
networks are secure by design from the start. And I think it is 
also incumbent on the United States to continue to make the 
case with Europeans about what our rationale is. Because there 
is obviously concerns by the Europeans that we are being 
protectionist, that we want to keep Huawei out, given the huge 
kind of economic and competitiveness implications that any 
country will have in being the 5G provider.
    So leaning on the intelligence community perhaps to be more 
forward-leaning where they can in terms of sharing intelligence 
or the rationale for why we are making the decisions that we 
can. We have seen that was really useful, for example, with the 
INF treaty. It took the intel community a very long time to 
share the information and data that was ultimately able to get 
the Europeans to come along with us, so that could be kind of a 
best practices case study that we could learn from.
    So, I think, generally speaking, there is a whole host and 
it is not a simple solution, but I would hopefully as soon as 
the CNAS report is out, would kind of recommend it to others 
because I think it has some really excellent suggestions.
    Ms. Spanberger. Thank you, Dr. Kendall-Taylor.
    Dr. Cooper?
    Mr. Cooper. Just one more comment to add on this. I think 
one of the challenges here is that the U.S. approach has 
largely been to exclude Huawei and ZTE and others from the U.S. 
market and there are lots of good reasons for that. But the 
reality is, is that is not going to work in Europe. It will 
work in some places in Europe, but broadly I think the 
Europeans are going to decide to mitigate the challenges 
inherent in Chinese 5G technology just the way they have in 3G 
and 4G. And so, I think we are going to have to come up with an 
approach and we might not like it, but one that accepts that we 
are going to be in a risk-mitigation world.
    And the problem we have is that we have spent so much time 
in the last few months explaining to our friends that you 
cannot mitigate the risk, that now when we come back and say, 
``Well, here, let us help you mitigate it,'' it is a little 
confusing to them. And so we have got to shift our strategy, I 
think, pretty quickly and be just as nimble as the Chinese have 
been in changing how they talk about Huawei and 5G technology 
in general.
    Ms. Spanberger. Thank you.
    Mr. Le Corre?
    Mr. Le Corre. Thank you. Just a few comments. I think I 
agree with what Dr. Cooper just said. It is very difficult to 
change Europe when it comes to dealing with Chinese 
telecommunication companies. They have been there for quite 
some time and in many cases they have invested. They have hired 
local people. Not very many, in fact, and that may be a point 
that should be underlined that they have not created a lot of 
jobs, for example, and it is mainly about bringing technology 
into Europe.
    So investment might be the answer, because as we know 
Huawei was the first to invest in 5G technologies, you know, 
almost 10 years ago, and so the rest of the world and the West 
in particular has not done very much. So I would say that, you 
know, within each European country, especially those strong 
NATO allies of the United States and strong EU members, you 
know, there is a debate inside these countries within the 
security agencies, the defense establishments, let's say, and 
also, you know, the foreign ministries, the economics 
ministries, and the business community.
    But I would say sort of the sort of the very heavy-handed 
discourse coming out of China and which you pointed out 
yourself, or the other Congresswoman, I am sorry, the 
surveillance mechanisms, all this, this is not really helping 
China's image. And again, you know, information and explanation 
of what 5G actually is and what it is going to mean to live in 
a connected house in a connected city, smart city, that is 
something that people will need to know about and having, you 
know, counter offers will be critical.
    Ms. Spanberger. Thank you. I yield back, Mr. Chairman.
    Mr. Keating. Well, thank you. I want to thank our 
witnesses. I will tell you, this was an excellent hearing, 
excellent testimony and in a time when the full committee is 
looking at many of the challenges coming from China, we spent 
most of this morning looking at what the future challenge will 
be, not just the present, and I think that was very helpful to 
us as a committee and certainly helpful as a Congress. So thank 
you very much for your participation and we will look forward 
to further communications and any questions the members might 
have in writing. Thank you.
    [Whereupon, at 11:53 a.m., the subcommittee was adjourned.]

                                APPENDIX
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


                                 [all]