[Senate Hearing 116-627]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 116-627

                         EXAMINING THE AMERICAN
                MANUFACTURING INDUSTRY'S RESPONSE TO THE 
                             COVID-19 PANDEMIC

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON MANUFACTURING, TRADE,
                        AND CONSUMER PROTECTION

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 17, 2020

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation
                             
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                             


                Available online: http://www.govinfo.gov

                              __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-854 PDF                  WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------     
               
       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                  ROGER WICKER, Mississippi, Chairman
JOHN THUNE, South Dakota             MARIA CANTWELL, Washington, 
ROY BLUNT, Missouri                      Ranking
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
CORY GARDNER, Colorado               TOM UDALL, New Mexico
MARSHA BLACKBURN, Tennessee          GARY PETERS, Michigan
SHELLEY MOORE CAPITO, West Virginia  TAMMY BALDWIN, Wisconsin
MIKE LEE, Utah                       TAMMY DUCKWORTH, Illinois
RON JOHNSON, Wisconsin               JON TESTER, Montana
TODD YOUNG, Indiana                  KYRSTEN SINEMA, Arizona
RICK SCOTT, Florida                  JACKY ROSEN, Nevada
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Jason Van Beek, General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
                      Renae Black, Senior Counsel
                                 ------                                

                 SUBCOMMITTEE ON MANUFACTURING, TRADE, 
                        AND CONSUMER PROTECTION

JERRY MORAN, Kansas, Chairman        RICHARD BLUMENTHAL, Connecticut, 
JOHN THUNE, South Dakota                 Ranking
DEB FISCHER, Nebraska                AMY KLOBUCHAR, Minnesota
DAN SULLIVAN, Alaska                 BRIAN SCHATZ, Hawaii
MARSHA BLACKBURN, Tennessee          EDWARD MARKEY, Massachusetts
SHELLEY MOORE CAPITO, West Virginia  TOM UDALL, New Mexico
MIKE LEE, Utah                       TAMMY BALDWIN, Wisconsin
RON JOHNSON, Wisconsin               KYRSTEN SINEMA, Arizona
TODD YOUNG, Indiana                  JACKY ROSEN, Nevada
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 17, 2020................................     1
Statement of Senator Moran.......................................     1
    National Association of Manufacturers--American Renewal Plan.     4
Statement of Senator Blumenthal..................................    13
Statement of Senator Cantwell....................................    43
Statement of Senator Thune.......................................    45
Statement of Senator Klobuchar...................................    46
Statement of Senator Baldwin.....................................    48
Statement of Senator Rosen.......................................    50

                               Witnesses

Ravi Bulusu, Founder, MolMas, Inc................................    15
    Prepared statement...........................................    17
Neil Gilman, President, Gilman Gear..............................    18
    Prepared statement...........................................    21
Rick Krska, President and Chief Executive Servant, InkCycle, Inc.    22
    Prepared statement...........................................    25
Tiffany M. Stovall, CEO, Kansas Manufacturing Solutions, Kansas 
  Manufacturing Extension Partnership (MEP)......................    27
    Prepared statement...........................................    29
Michael Wessel, Commissioner, U.S.-China Economic and Security 
  Review Commission..............................................    32
    Prepared statement...........................................    34

                                Appendix

Response to written questions submitted by Hon. Jacky Rosen to:
    Ravi Bulusu..................................................    53
    Tiffany M. Stovall...........................................    53
Response to written questions submitted to Michael Wessel by:
    Hon. Dan Sullivan............................................    54
    Hon. Jacky Rosen.............................................    61

 
                         EXAMINING THE AMERICAN
       MANUFACTURING INDUSTRY'S RESPONSE TO THE COVID-19 PANDEMIC

                              ----------                              


                       TUESDAY, NOVEMBER 17, 2020

                               U.S. Senate,
Subcommittee on Manufacturing, Trade, and Consumer 
                                        Protection,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2 p.m. in room 
SR-253, Russell Senate Office Building, Hon. Jerry Moran, 
Chairman of the Subcommittee, presiding.
    Present: Senators Moran [presiding], Thune, Fischer, 
Sullivan, Young, Blumenthal, Cantwell, Klobuchar, Baldwin, 
Sinema, and Rosen.

            OPENING STATEMENT OF HON. JERRY MORAN, 
                    U.S. SENATOR FROM KANSAS

    Senator Moran. Good afternoon, everyone. Thank you for 
being with us or being near us, at least in the technology 
sense.
    As Chairman of the Senate Commerce Committee on 
Manufacturing, Trade, and Consumer Protection, I welcome all of 
you to today's hearing that we have entitled ``Examining the 
American Manufacturing Industry's Response to the COVID-19 
Pandemic.'' The Subcommittee, as of the pound of the gavel, 
will come to order.
    As the Nation continues to fight the unprecedented public 
health crisis brought on by the COVID-19 pandemic, Americans 
have worked to protect against further spread of the virus 
while trying to maintain a certain degree of normalcy, 
including maintaining a job and earning a paycheck. There is 
not a corner of the United States' economy that has not felt 
the impact of the pandemic, and today's discussion will focus 
on particularly harmful effects that this public health 
emergency has had on the manufacturing sector.
    During this pandemic, many in the manufacturing community 
have adapted their operations to help provide products needed 
to prevent the spread of the virus. Whether it is an early 
stage pharmaceutical wholesale distribution company that 
completely pivoted to manufacturing face masks in response to a 
dire national supply shortage or a successful printer cartridge 
remanufacturer shifting to production and distribution of hand 
sanitizer and other innovative sanitation solutions, we have 
examples of manufacturing businesses in Kansas taking the lead 
bolstering the U.S. manufacturing to compete globally and to 
assist in meeting the needs that arrive with the pandemic.
    There are a variety of Federal programs intended to provide 
assistance to our nation's manufacturers, and in response to 
the pandemic, Congress and the administration took action 
through the CARES Act to improve existing programs and to 
create a few new ones.
    As Chairman of the Senate Appropriations Subcommittee on 
Commerce, Justice, Science, and Related Agencies, I am 
particularly involved in the oversight of the National 
Institute of Standards and Technology Hollings Manufacturing 
Extension Partnership, MEP, which distributes resources to 51 
State designated centers to assist small and medium sized 
manufacturers. The CARES Act specifically provided an 
additional $50 million to the Fiscal Year 2020 appropriation to 
augment support in response to the pandemic. The law provided 
additional assistance by waiving the statutory non-Federal cost 
match requirement for all MEP funding for that fiscal year.
    The comprehensive pandemic response package offered 
assistance to manufacturers and other businesses, including but 
not limited to Small Business Administration's Paycheck 
Protection Program, the Treasury's Main Street Lending Program, 
the Manufacture USA Institutes, and the Economic Development 
Administration's Recovery Assistance Grants. Congress must 
uphold its oversight responsibilities to determine what worked 
in administrating these programs and make refinements, where 
appropriate, to ensure effective Federal investment.
    In addition to resources, the manufacturing community 
requires regulatory and technical guidance to enable new 
manufacturing venues such as production of masks, gloves, 
gowns, ventilators, and other relevant items.
    While I understand the U.S. Food and Drug Administration, 
the U.S. Centers for Disease Control and Prevention, the 
National Institutes of Health are fundamental in forming and 
sharing critical information needed to enable solutions, the 
private sector has played a critical role in the disbursement 
of this information.
    In addition, liability relief to the nation's small 
businesses, coupled with robust resources dedicated to testing 
and PPE, will play an enormous role in the nation's economic 
recovery.
    As Congress enters negotiations for a future COVID-19 
response package, I urge my colleagues to use today's 
discussion to reinvigorate their efforts to provide thoughtful 
Federal policies and resources to our nation's job creators and 
innovators.
    Additionally, I would like to highlight Senate bill 3705. 
It is a bipartisan piece of legislation that I have developed 
with Senator Warner designed to allow the aviation 
manufacturing sector to retain workers who are at risk of 
permanent reduction through furlough. This proposed cost 
sharing program would enable the private and public sector to 
come together to preserve a uniquely hard-hit industry and 
overall major contributor to the U.S. trade balance.
    Finally, I would be remiss if I did not address the unique 
national security and economic consequences if the U.S. does 
not immediately fortify and increase its manufacturing 
capacities and supply chain, specifically as it relates to the 
national strategic stockpile of PPE.
    The threat from China to our manufacturing sector is real. 
In 2019, U.S. imports of pharmaceuticals, medical equipment, 
and related products from China were estimated to have an 
approximately $20.7 billion of value according to the 
Congressional Research Service calculations based on official 
U.S. data. This number likely understates the current extent to 
which the U.S. relies on China for pharmaceuticals and medical 
equipment, products and supplies as demand in the United States 
for these products rose during the pandemic.
    All in all, the American manufacturing industry has played 
a critical role to date in mitigating harm stemming from this 
pandemic from both public health and economic perspectives, and 
it is vital for Congress to acknowledge this work by providing 
appropriate support through thoughtful policymaking.
    Kansas is home to the Air Capital of the World in Wichita 
which remains our nation's leader in industry and academic 
collaboration and manufacturing and workforce development. This 
type of innovative collaboration takes the form in various 
other manufacturing capacities across the State of Kansas, so 
today's conversation is personal to me and to my constituency.
    I look forward to hearing from our witness panel today that 
provides a variety of different perspectives to the same 
important issue.
    Joining us today is Mr. Ravi Bulusu, founder of MolMas, 
Inc. based in Haysville, Kansas; Mr. Neil Gilman, President of 
Gilman Gear in Connecticut; Mr. Rick Krska, Chairman and Chief 
Executive Servant of InkCycle, Inc. based in Shawnee, Kansas; 
Ms. Tiffany Stovall, Chief Executive Officer of Kansas 
Manufacturing Solutions which serves as Kansas' MEP center to 
our State's small and medium sized manufacturers; and finally, 
Mr. Michael Wessel, Commissioner of the U.S.-China Economic and 
Security Review Commission.
    Finally, the National Association of Manufacturers provided 
their American renewal action plan for the hearing record 
describing their collaborative efforts of their member 
companies in responding to the pandemic, and I ask this 
document be submitted for the record. Without objection, so 
ordered.
    [The information referred to follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    

    Senator Moran. With that, I turn to the Ranking Member, Mr. 
Blumenthal, or perhaps the Ranking Member of the Full 
Committee. Richard, I have never seen you not in person. So 
glad you have joined us. Thank you.

             STATEMENT OF HON. RICHARD BLUMENTHAL, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thank you so much, Mr. Chairman. 
Ordinarily I would be with you in person. I am here in 
Washington, D.C., but I am taking this extra precaution to 
participate remotely just for today.
    And for you and for me and for many of us, this issue is 
indeed personal, and I am so glad that you and the Chairman, 
Senator Wicker, have agreed to do this hearing and especially 
grateful to Neil Gilman of Bozrah, Connecticut for 
participating remotely as I am doing.
    I want to just make a couple of quick points, and I know we 
have a vote so we may have to take a recess. But the 
coronavirus pandemic has created a surge in demand for personal 
protective equipment and other public health products all 
across our country and the world. Everyone, particularly health 
care professionals and essential workers, our heroes today, 
urgently needed face masks, gloves, and hand sanitizer, among 
other products. This sudden and universal need for critical 
supplies exposed alarming vulnerabilities in our system and our 
supply chain. The United States relies heavily on imports of 
key medical supplies and equipment, but China and other 
countries restricted exports and focused solely on their own 
national health response. As a result, supplies severely 
dwindled, and our health care professionals, first responders, 
and frontline workers were put at unacceptable risk.
    Fortunately, American manufacturers took up the mantle. 
They worked tirelessly to produce PPE, ventilators, and other 
supplies. All around the country, companies began repurposing 
existing manufacturing lines and investing in new equipment. 
They often paid to upgrade their infrastructure out of their 
own pockets during this crisis.
    Gilman Gear is a model American success story. It is a 
Connecticut story, but it also is a model for America. And I am 
very proud of Neil Gilman's family and all of the companies in 
Connecticut that stepped up, stood out, and spoke up to help 
address this crisis. And they helped really address this public 
health crisis.
    In Shelton, Connecticut, Modern Plastics created a new 
business division. They are currently producing 300,000 face 
shields every day. By early next year, they aim to ramp up to 1 
million face shields per day. They are growing. They are 
planning to open a facility in Derby. They are going to hire 
more employees to meet demand. I look forward to visiting with 
them and other companies in Connecticut such as in South 
Windsor, I spent some time at Preferred Protective Equipment. 
They put their expertise as a global leader in manufacturing 
high end retail stores display to public health use. Preferred 
Protective Equipment heard first responders' complaints of 
headaches and discomfort from extended face mask use, as well 
as concerns about the single use nature. They used their 
expertise to design a new face shield that is comfortable. It 
can be reused. It is affordable, and it is a great public 
service. The smart business sense and public service of Gilman 
Gear, Modern Plastics, Preferred Protective Equipment, and 
countless others that our first responders and essential 
workers have been served by is really a great success story.
    Safeguarding our supply of PPE is not only a matter of 
public health and national security, it is also a consumer 
protection issue. Throughout the pandemic, consumers and even 
hospitals were desperate to find face masks and other crucial 
equipment. Out of desperation, many turned to middlemen and 
online marketplaces. Unfortunately, counterfeit PPE such as 
fake 95 face masks flooded the market. There was little 
information available to consumers that could guide them 
through the morass of con artists and fakes. Online 
marketplaces often took inadequate measures to find and remove 
fake or suspicious PPE. The health consequences of fake medical 
supplies are potentially life-threatening.
    That is why it is so important to ensure a robust and 
reliable domestic supply of PPE, to have products from trusted 
companies close to their communities. Manufacturers can work 
with State officials and hospitals in hand.
    Congress and the Federal Government should do more for 
these business leaders. The Defense Production Act provides 
useful tools to the President to incentivize and require the 
production of key medical supplies. Regrettably and really very 
unfortunately for all Americans, the President has failed to 
fully utilize the Defense Production Act and support American 
manufacturers. They deserve it. So do the American people.
    The House-passed HEROES Act would provide tens of billions 
of dollars in funds to assist health care providers and boost 
domestic supplies. It would also require the President to use 
his authorities under the DPA to support more production of 
diagnostic tests, medicine, and other crucial medical supplies.
    I look forward to hearing from the witnesses.
    Again, my thanks to the Chairman and Senator Moran for 
holding this hearing. Nothing is more important than providing 
this kind of affordable, reliable, and robust supply of PPE, 
medical supplies, and other aid to our frontline workers and to 
Americans as a whole. Thank you, Mr. Chairman.
    Senator Moran. Senator Blumenthal, thank you. In my 
mistaken view that you were at least temporarily absent, I 
failed to compliment you and thank you for your cooperation and 
work in putting this hearing together. When you and I first 
discussed this, I think we thought this would be looking back. 
Unfortunately, we have not escaped the challenges that lie 
ahead, and so while we are looking at what has transpired in 
the past, we are doing so in preparation to make sure that our 
country is prepared for today and tomorrow. So thank you for 
your cooperation and your assistance. Thanks for working 
closely with me to see that this hearing took place.
    We are going to now turn to witness testimony. The order 
that our witnesses will testify is Mr. Bulusu, Mr. Gilman, Mr. 
Krska, Ms. Stovall, and Mr. Wessel. So, Mr. Bulusu, I now call 
on you for your 5 minutes of testimony. Welcome and thank you 
for being here. I would report it is a Kansan who is in the 
room testifying.

        STATEMENT OF RAVI BULUSU, FOUNDER, MolMas, INC.

    Mr. Bulusu. Chairman Moran. Thank you, Senator Blumenthal. 
I much appreciate this opportunity and thanks a lot for all 
your team that supported and guided us all through the way 
here.
    So we co-founded MolMas, Incorporated. I co-founded MolMas, 
Incorporated, and we are based out of the greater Wichita area 
in Kansas.
    I would like to take us through the journey that we have 
gone through so far since the COVID pandemic struck in the 
early part of this year.
    The COVID pandemic, which started at the beginning of this 
year, continues to impact how we live as a society. It exposed 
critical gaps in our health care system and opened up fault 
lines that we never knew existed. At the root of all of this is 
one sad, harsh reality. We do not have a strong manufacturing 
base for PPE or the equipment that is used to make PPE.
    At the ground level, single-use, disposable masks were 
being reused, going against the established practice for well 
over 50 years. Our PPE supply chain, including the machinery 
used to manufacture them, is oversees dependent, from masks to 
ventilators. They were throttled before and can be throttled 
yet again.
    For instance, we bought our machinery and raw material from 
overseas at many times the pre-COVID prices. The raw material 
was available at a minimum of 30 to 65 times from overseas.
    Domestic production continues to not meet the demand, so we 
rely on imports. However, do we have a handle on the quality? 
Are there quality controls on the manufacturing process 
overseas? We do not know. All these questions leave gaps in our 
preparedness that need to be addressed.
    How can we set up our economy and society for resilience in 
this pandemic or, God forbid, future disasters? Sirs, the 
simple mask was pioneered here in America. Why is it then that 
we have a scarcity of good quality face masks today?
    How can we achieve self-sufficiency? The only way to 
actually achieve that is through producing our own medical 
manufacturing equipment as well and to secure our raw materials 
supply chain.
    The very first case of COVID in our country was identified 
in my home State of Washington. The factory itself is based out 
of the greater Wichita area in Kansas. And this was a few miles 
north of where I live. My wife, a physician, works on the front 
lines in an underserved area. My younger daughter at that time 
was 9 months old and was still nursing. So I requested her, 
maybe selfishly, if she would consider quitting her job. She 
shot me down immediately and said that was what I had signed up 
for when I married her.
    So I started looking for solutions, solutions to keep her 
and also her colleagues safe. Quickly I realized that charity 
was just not going to cut it. We had to manufacture it, and we 
had to do that to address the three critical areas of 
availability, product quality, and supply chain reliability. We 
could not compromise on either. We needed to make PPE here in 
America out of American raw material. So we pivoted to make 
face masks.
    A whole range of new discoveries ensued. We quickly learned 
that the bulk buyers of PPE, that is, the State and local 
governments, were by policy procuring them at the lowest price. 
So the overseas product that is being dumped in the U.S. ends 
up being the default choice. Ironically, the best opportunity 
to strengthen our supply chain is instead perpetuating our 
dependence, not weaning us off of it.
    The direct-to-consumer sales front was very challenging as 
well. Well-intended policies by our social media and the e-
commerce channels, aimed at preventing price gouging and 
protecting the consumer, were inadvertently stifling start-up 
American manufacturers like us. We were prevented from 
directly--we still are prevented from directly advertising to 
the consumer. We are forced to rely on old-fashioned cold 
calling. Net-net, the American manufacturer, who in the true 
American spirit of grit and fortitude, in the face of threat 
and stood up to fix the problem, is facing pressure on either 
end.
    I take inspiration from the race to the Moon. 1961 
propelled our dominance in space and the human race benefited. 
The superior technology is what inspired me, a first generation 
immigrant, to come to America, to contribute positively to 
change. We look at this honorable chamber to help evolve policy 
that unleashes the latent spirit of innovation, the prowess to 
manufacture at superior quality, and the zeal to take the human 
race forward. Let us not ask can America do it because America 
has done it multiple times before and very successfully so.
    I humbly submit a few recommendations for consideration.
    Treat self-sufficiency in the production of medical 
equipment as a national priority just like we treat national 
security, economic security, and some nations do food security.
    Incentivize startups in the area. Democratize to release 
the animal spirits of the innovators.
    Supportive policy in the immediate 3-year term will help 
them thrive, especially so in the face of relentless dumping of 
overseas product.
    Reduce regulation. Statistically speaking, 99 percent of 
startup businesses die in their infancy, and we are talking 
about the first 1 to 2 years. Regulation during this phase can 
be very detrimental to this very critical industry that is 
already under significant stress. If we do have to regulate, 
however, or restrict, let us remember that America has always 
produced more than enough, not just for ourselves, but for the 
entire world. The human race always benefited from America's 
progress. This will still be the same.
    As opposed to blanket restrictions, consider publishing a 
very nuanced data-driven policy that keeps the doors open for 
foreign markets. Such a major thrust of this nature will most 
certainly result in secondary and tertiary benefits that, in 
the post-pandemic world, will put us in a much, much better 
position much like the goal to land on the moon did.
    I take this opportunity to also urge my fellow 
manufacturers let us fix this.
    Thank you all for the opportunity.
    [The prepared statement of Mr. Bulusu follows:]

  Prepared Statement of Ravi Bulusu, Founder, MolMas Inc.--Face Mask 
                              Manufacturer
    The Covid19 pandemic which started at the beginning of this year 
continues to impact how we live as a society. It exposed critical 
faults in our healthcare system and opened up faultlines that we never 
knew existed. At the root of all of this is one sad yet harsh reality--
We do not have a strong manufacturing base for PPE or the equipment 
used to make PPE.

  1.  At the ground level, disposable masks, meant to be disposed off, 
        after a single use to prevent cross infections were being 
        reused. This goes against the prescribed and established 
        practice for well over 50 years.

  2.  Our PPE supply chains including the machinery used to manufacture 
        them, have been overseas dependent, whether for a simple mask 
        or life saving ventilators. These supplies can be throttled at 
        their origin like they were earlier this year, anytime!

     As a startup, we have first hand experience of such challenges. We 
        bought our machinery and raw material from overseas at many 
        times the pre-covid prices. The raw material was available at a 
        minimum of 30--65 times from overseas. Worse, the prices were 
        moving upwards on a daily basis. Many times the spike driven by 
        apparent market forces, surprised us also in how there was not 
        much variation in prices across vendors.

  3.  Domestic production continues to not meet the demand. So, the 
        scarcity continued for months! While that might have since 
        improved due to imports, it is not very clear if we do have a 
        handle on their quality due to lack of adequate quality 
        controls on the manufacturing process. The supply itself 
        continues to be at risk as it may be throttled yet again like 
        it was before.

    The above open questions leave gaps in our preparedness that need 
to be filled.
    States competed with each other to procure PPE at any price. When 
availability itself is a challenge, quality and reliability are far 
secondary considerations.
    How can we set up our economy, nay our society for resilience in 
this pandemic or God forbid, future disasters? Sirs, the simple mask 
was pioneered here in America in the 1920s. Why is it then that we have 
a scarcity of good quality masks? How can we achieve self-sufficiency 
in PPE and medical equipment?
    The only way to achieve that confidently and reliably is to produce 
our own medical supplies and also the equipment used to manufacture 
them and while simultaneously securing our supply chains for raw 
materials as well.
                              Our journey
    The very first case of Covid in our country was identified in my 
home state, Washington, a few miles north of where I live. My wife, a 
physician, is contributing on the frontlines, in an underserved area. 
My younger daughter at the time was 9 months old, and still nursing. 
So, I asked my wife maybe selfishly, if she would consider quitting her 
job, because of the PPE scarcity. She immediately shot me down 
reminding me that, that was what I had signed up for when I married 
her. So, I started looking for solutions to keep her and also her 
colleagues safe. Charity just wasn't going to cut it.
    After some research it was clear that, to address the three 
critical issues of 1) availability, 2) product quality and 3) supply 
chain reliability, there was an urgent need to make face masks 
ourselves. The decision was not too difficult to take. So, we pivoted 
MolMas to manufacture face masks here in America!
    That, however, was only the beginning of a whole range of new 
discoveries in the process. We quickly learnt a few things:

  1.  The bulk buyers of PPE, especially face masks, i.e. the state and 
        local governments were by policy, procuring them at the lowest 
        price. This meant that overseas product that is being dumped in 
        the U.S. ends up being the default choice. Ironically, an 
        opportunity to strengthen our medical equipment supply chain is 
        instead, benefiting the very same unreliable overseas 
        manufacturers that we have over decades become accustomed to 
        relying on.

  2.  On the direct to consumer sales front, was challenging as well. 
        Well intended policies by our social media and e-commerce 
        channels, aiming to prevent price gouging, were inadvertently 
        stifling American manufacturers of the opportunity to directly 
        advertise to the end consumer. As a consequence of the above 
        two, our sales process was forced to rely on old fashioned cold 
        calling to distributors, or on e-mail campaign strategies from 
        20 years back.

    As a net effect, American manufacturers like us are stifled not 
because we are unable to manufacture but because the sales channels are 
at the very best severely throttled.
                         Policy Recommendations
    I take inspiration from the race to the moon! 1961 propelled our 
dominance in space and the human race benefited. That is what inspired 
me, a first generation immigrant to come to America, to contribute 
positively to change. We look to this honorable chamber to evolve 
policy that unleashes the latent spirit of innovation, the prowess to 
manufacture at superior quality, the zeal to take the human race 
forward. Let us not ask ``Can America do it?''. America has done it 
multiple times before. Supportive policy making will accelerate it and 
get us to where we need to be quicker. Below are a few recommendations 
for consideration.

  1.  Treat self-sufficiency in the production of medical equipment, 
        including PPE as a national priority just like we treat 
        national security, economic security and some nations do food 
        security.

  2.  Incentivize startups in the area. Democratize to release the 
        animal spirits of the entrepreneurs and innovators.

  3.  Supportive policy in the short to medium term will helps these 
        startups thrive, especially in the face of relentless dumping 
        of overseas product.

  4.  Avoid regulation--Statistically speaking, 99 percent of startups/
        new businesses die in their infancy, across sectors. Regulation 
        during the startup phase can be detrimental to a very critical 
        industry that is already under stress.

  5.  As opposed to blanket restrictions, consider publishing a nuanced 
        data driven policy that specifies the quantities of products 
        that could be allocated to exports.
                           Long term Benefits
    Innovations for the pandemic will directly help improve the quality 
of healthcare and quality of life of our baby boomers in specific and 
the society in general. Merely through requiring stricter quality 
checks and higher quality bar, cross contamination can be brought down. 
Innovation in this space will further reduce it thereby directly 
contributing to improving the quality of life and quality of care. That 
will in turn reduce the stress on medicare and medicaid.
    By going beyond incremental process improvements the medicare, 
medicaid funding situation could benefit directly.
    A major thrust of this nature will not merely improve our response 
to the pandemic, it will also result in secondary and tertiary benefits 
in the post-pandemic world much like the goal to land on the moon did.

    Senator Moran. Mr. Bulusu, thank you for your testimony and 
the passion with which you presented it.
    Mr. Bulusu. Thank you.
    Senator Moran. Let us now hear from Mr. Neil Gilman. Mr. 
Gilman?

        STATEMENT OF NEIL GILMAN, PRESIDENT, GILMAN GEAR

    Mr. Gilman. Senator Moran, Ranking Member Blumenthal, 
distinguished Senators, ladies and gentlemen, thank you for the 
opportunity to provide testimony today on the urgency of 
sustaining a domestic supply chain for PPE during the COVID 
pandemic.
    I come before you as a second generation business owner who 
runs a manufacturing business in Connecticut. My ancestors 
built one of the first textile mills in New England. My father 
built a business that pioneered the development of football 
training equipment, which he started in 1929. My company is the 
nation's leading manufacturer of blocking and tackling dummies 
and sleds.
    When the pandemic struck and the nation's Governors were 
issuing stay-at-home orders, most, if not all, the high schools 
and colleges closed, as well as the entire National Football 
League. The game of football was on hold. College football at 
591 schools was canceled or moved to the spring. High school 
football in 24 states was canceled or moved to the spring. Our 
whole market cratered and collapsed. We were on the brink of 
shutting down and laying off all of our employees and 
potentially going out of business.
    I thought of my grandfather, Nathan Gilman, who repurposed 
his textile mill to make Army blankets during World War II. I 
too wanted to contribute in some meaningful way to help the 
medical professionals on the front lines battling this deadly 
COVID virus. I read about the terrible shortage of PPE in our 
hospitals, nursing homes, assisted living and urgent care 
facilities. I saw pictures of doctors wearing rain ponchos as 
gowns, using ski goggles as eye protection, and recycling N95 
masks for days on end.
    I later learned that the whole domestic PPE market had 
moved their manufacturing mainly to China to take advantage of 
cheap labor and material. At the time, the Chinese were dealing 
with their own domestic pandemic and had decimated their own 
supply of PPE. When COVID spiked in the United States, 
hospitals found their normal supply chain choked off and the 
Chinese market was unable to meet their demand.
    Gilman Gear has a large cut and sew operation. I was 
determined to make an isolation gown because we had the 
equipment to cut and sew them.
    [Pause.]
    Senator Moran. I think we have lost Mr. Gilman. My 
suggestion is that we probably need to recess anyway so that I 
can go cast a vote, the other members can cast their votes. 
There are two votes, and by leaving now, I will arrive at the 
end of the first vote and vote the first one and return.
    Senator Thune is expected to come here and replace me to 
help accomplish that. If he arrives before I come back, he can 
reconvene the hearing.
    And, Mr. Gilman, if you can hear me, we will start that 
second phase of our hearing with the conclusion of your 
testimony. Thank you.
    So the Committee will stand in recess till the sound of the 
gavel.
    [Recess.]
    Senator Moran. There is a potential of a third vote now, 
which we will not know until--I do not know--a half hour from 
now whether that is happening, but maybe we can work it so that 
we can tag team the chairmanship. Senator Blumenthal I think is 
back with us, and I will make certain that maybe he and I can 
trade positions so we can both vote at different times, if that 
happens.
    The Committee is reconvened.
    Mr. Gilman, if you are available, you have about a minute 
and a half time left. I think we heard your testimony to that 
last point and would love to hear your concluding remarks.
    Mr. Gilman. Senator Moran, can you hear me?
    Senator Moran. Mr. Gilman?
    Mr. Gilman. Yes. Can you hear me?
    Senator Moran. Yes, sir.
    Mr. Gilman. OK. So I am going to pick up my testimony from 
where I left off.
    Senator Moran. Yes, sir.
    Mr. Gilman. OK.
    I was determined to make isolation gowns because we had the 
equipment to cut and sew them. I quickly got a sample from a 
local hospital, designed my own pattern, researched the 
materials the gowns were made of, and built a prototype. I sent 
it over to Yale New Haven Hospital. They evaluated it and 
awarded me my first big order. I was able to get business 
because there was surge demand. The hospitals needed more gowns 
than they could buy from their normal supply chain, and they 
turned to me to bridge the gap.
    The problem was twofold. The hospitals wanted the gowns 
fast and they wanted them cheap. To meet the aggressive supply 
schedule, I had to invest in new machinery and hire more 
employees. We went from making 200 gowns a week to making more 
than 12,000 gowns per week.
    Pricing was an even more difficult hurdle. The hospitals 
were reluctant to pay more than the price they had paid for the 
product exported from China. I could not match that price 
unless I moved my factory to China. My gowns are 100 percent 
American made. I am at a competitive disadvantage. My labor 
costs are higher. My material costs are higher. I am able to 
mitigate some of the cost disparity with technology. But at the 
end of the day, my American made gown is two to three times 
more expensive than those made in China. However, my American 
made gown is of a higher quality and meets a higher level of 
protection. But in the PPE market, an isolation gown is 
considered a commodity item and buyers in the medical community 
are just looking for the cheapest price.
    I am here with an urgent plea for the Federal Government to 
do more to help the private sector sustain the PPE business in 
the United States. China dominates the market for PPE. The 
Chinese Government has made manufacturing PPE a priority not 
only from a national security standpoint, but also with a view 
to creating domination over a globally critical marketplace. 
The Chinese Government has implemented this strategy by taking 
the following measures:
    First, factory owners get cheap land courtesy of the 
Chinese Government.
    Second, factory owners get loans and subsidies.
    Third, Chinese hospitals are told to buy local, giving 
China's suppliers a vast and captive market.
    The Federal Government can play a vital role in sustaining 
United States companies that have pivoted to making PPE if it 
will do the following:
    First, implement a Buy American preference across all 
Federal agencies that purchase PPE.
    Second, create a subsidy for companies investing in new 
plant and equipment for manufacturing PPE.
    Third, establish a tax credit for every job created to 
manufacture PPE.
    We are not looking for a handout. We want, to use a 
football term, a level playing field so we can compete with 
China.
    What is at stake here is the future of manufacturing PPE in 
Connecticut and, for that matter, across the United States. If 
we let China dominate the market for PPE, if we let them 
control the supply chain for PPE, does that not compromise our 
ability to cope with this pandemic? Do we want to be at the 
mercy of China when and if there is a pandemic in the future?
    What is at stake here is jobs. The 50 jobs we support at 
Gilman Gear are precious. If we lose them to China, they are 
not coming back.
    What is at stake here is our ingenuity and ability to pivot 
on a dime from a mature business making football equipment to 
making PPE to serve the medical community. We evolved and we 
reinvented ourselves during a national emergency and sustained 
50 jobs during the worst economic downturn in our history. Help 
us to sustain this critically important business today and in 
the future.
    Thank you.
    [The prepared statement of Mr. Gilman follows:]

   Prepared Statement of Neil Gilman, President and CEO, Gilman Gear
    Senator Moran and Ranking Member Blumenthal, distinguished 
Senators, ladies and gentlemen, thank you for the opportunity to 
provide testimony today on the urgency of sustaining a domestic supply 
chain of PPE during the COVID pandemic.
    I come before you as a second-generation business owner who runs a 
manufacturing business in the State of Connecticut. My ancestors built 
one of the first textile mills in Connecticut. My father built a 
business that pioneered the development of football training equipment 
in 1929. My company is the Nation's leading manufacturer of blocking 
and tackling dummies and sleds. When the pandemic struck and the 
Nation's governors were issuing stay at home orders, most, if not all, 
the high schools and colleges closed, as well as all of the NFL. The 
Game of Football was on hold. College football at 591 schools was 
cancelled or moved to the spring. High School football in 24 states was 
cancelled or moved to the spring. Our whole market cratered and 
collapsed. We were on the brink of shutting down and laying off all my 
employees, and potentially going out of business. I thought of my 
grandfather, Nathan Gilman who re-purposed his textile mill to make 
Army blankets during World War II. I, too, wanted to contribute in some 
meaningful way to help the medical professions on the front lines 
battling this deadly COVID virus. I read about the terrible shortage of 
PPE in our Hospitals, Nursing Homes, Assisted Living and Urgent Care 
Facilities. I saw pictures of doctors wearing rain ponchos as gowns, 
using ski googles as eye protection and recycling N95 masks for days on 
end. I later learned that the whole domestic PPE market had moved their 
manufacturing mainly to China to take advantage of cheap labor and 
material. At the time, the Chinese were dealing with their own domestic 
pandemic and had decimated their supply of PPE. When COVID spiked in 
the US, hospitals found their normal supply chain choked off and the 
Chinese market was unable to meet their demand. Gilman Gear had a large 
cut and sew operation. I was determined to make Isolation Gowns because 
we had the equipment to cut and sew them. I quickly got a sample from a 
local hospital. Designed my own pattern. Researched the materials the 
gowns are made of and built a prototype using a non-woven polypropylene 
material. I sent it over to Yale New Haven Hospital. They evaluated it 
and awarded me my first big order. I was able to get business because 
there was ``surge demand.'' The hospitals needed more gowns than they 
could buy from their normal supply chain, so they turned to me to 
bridge the gap.
    The problem was twofold. The hospitals wanted the gowns fast and 
they wanted them cheap. To meet the aggressive supply schedule, I had 
to invest in new machinery and hire more employees. We went from making 
200 gowns a week to more than 12,000 gowns per week. Pricing was an 
even more difficult hurdle. The hospitals were reluctant to pay more 
than the price they paid for the product exported from China. I 
couldn't match that price unless I moved my factory to China. My gowns 
are made 100 percent American made. I'm at a competitive disadvantage. 
My labor costs are higher. My material costs are higher. I'm able to 
mitigate some of the cost disparity with technology. But at the end of 
the day, my American made Gown is two to three times more expensive 
then those made in China. However, my American made Gown is a higher 
quality and meets a higher level of protection. But in the PPE market 
an Isolation Gown is considered a commodity item and buyers in the 
medical community are just looking for the cheapest price.
    I'm here with an urgent plea for the Federal Government to do more 
to help the private sector sustain the PPE business in the United 
States.
    China dominates the market for protective and medical supplies. The 
Chinese government has made manufacturing PPE a priority, not only from 
a national security standpoint, but also with a view to creating 
domination over a globally critical marketplace. The Chinese government 
has implemented this strategy by taking the following measures:

   Factory owners get cheap land courtesy of the Chinese 
        government.

   Factory owners get loans and subsidies.

   Chinese hospitals are told to buy local giving China's 
        supplier's a vast and captive market.

    The Federal Government can play a vital role in sustaining U.S. 
companies that have pivoted to making PPE if it will do the following:

   Implement a Buy American preference across all Federal 
        agencies that purchase PPE.

   Create a subsidy for companies investing in new plant and 
        equipment for manufacturing PPE.

   Establish a tax credit for every job created to make PPE.

    We're not looking for a hand-out. What we want, to use a football 
term, is a level playing field, so we can compete with China.
    What's at stake here, is the future of manufacturing PPE in the 
State of Connecticut and for that matter, across the United States. If 
we let China dominate the market for PPE. If we let them control the 
supply chain for PPE. Doesn't that compromise our ability to cope with 
this pandemic? Do we want to be at the mercy of China, when and if 
there is a pandemic in the future?
    What's at stake here is jobs! The 50 jobs we support at Gilman Gear 
are precious. If we lose them to China, and they are not coming back.
    What's at stake here is our ingenuity and ability to pivot on a 
dime from a mature business making football equipment to making PPE to 
serve the medical community. We evolved and re-invented ourselves 
during a national emergency and sustained 50 jobs during the worst 
economic downturn in our history. Help us to sustain this critically 
important business today and in the future!

    Senator Moran. Mr. Gilman, thank you for your testimony and 
for the response that it describes that you provided to COVID-
19.
    Mr. Krska, Mr. Rick Krska, is our next witness. Mr. Krska, 
you are recognized for five minutes.

STATEMENT OF RICK KRSKA, PRESIDENT AND CHIEF EXECUTIVE SERVANT, 
                         InkCycle, INC.

    Mr. Krska. I am the founder of InkCycle located in Shawnee, 
Kansas, and I would like to thank Senator Moran and Senator 
Blumenthal for the opportunity to share my thoughts and 
testimony.
    After early careers in the industry of producing components 
for nuclear weapons, we started InkCycle in 1992 in the 
basement of our Kansas farm home. My wife Carol and I embarked 
on a new quest to bring manufacturing jobs to Kansas by 
starting a business which was and remains focused on four 
primary principles: number one, operate with the principles of 
servant leadership; two, serving our clients with high quality 
products; build a significant business that positively impacts 
a significant number of people internally and externally; and 
strive to create area employment and economic development.
    Prior to starting the business, my partners and myself were 
working for Allied Signal where we were involved in the 
production of components for nuclear weapons. We absolutely 
loved the engineering, production, and quality roles that we 
served in.
    With the end of the cold war, the demand for our products 
declined, and we, like thousands of others, found ourselves 
looking for a job. So looking to the future, we found a sense 
of purpose. We all had a deep love for manufacturing. We had a 
desire to provide manufacturing jobs and employment to as many 
people as possible. After all, we had personally experienced 
firsthand what happens when a large employer has to downsize.
    So here we are in 1992. We launched a new business. We 
began remanufacturing printer cartridges and rapidly became one 
of the largest toner cartridge remanufacturers in the USA. By 
1995, 3 years later, we had become fourth out of 500 companies 
and we began to expand in the growing inkjet market. So 10 
years later, by 2005 we had become the largest inkjet cartridge 
remanufacturer in the world employing over 800 people in 
Lenexa, Kansas.
    The demand for remanufactured cartridges was being fueled 
by: number one, skyrocketing growth of laser and inkjet 
printers both in the office and at home; two, consumer savings 
of 25 percent or more versus name brand; and three, the 
realization that hundreds of millions of empty name brand 
cartridges were ending up in landfills and a more sustainable 
solution was needed.
    So as the demand for remanufactured products continued to 
increase, this of course caught the eye of the Chinese. Many of 
the remanufacturing components were starting to be developed in 
China. Within a few years, China had become the dominant source 
of remanufacturing components and then, probably 5 to 10 short 
years later, the largest producer of newly built compatible 
after market cartridges in the world.
    They were called ``clones'' in those days because they were 
basically knock-offs of the original cartridges that were 
exported to the USA with absolutely no respect for intellectual 
property and patent law. China quickly began to flood the 
market to make it impossible for the U.S. remanufacturers to 
compete. Over time, China, using infringing products, built 
such a size and scale that they were becoming impossible to 
compete with, and U.S. patents were expiring while Chinese 
manufacturers developed their own intellectual property. As 
time went along, the Chinese suppliers did begin to pay a lot 
more attention to patents, but by that time, they had so much 
scale it was unbelievable.
    We found ourselves in a position where a Chinese product 
was available in China for $5. The same product remanufactured 
here would cost $20.
    So by around 2015, 90 percent of the 5,000 U.S. 
remanufacturing companies and their manufacturing jobs were 
gone. Today that number of companies that are viable is 
estimated to be no more than 100 companies in the U.S. that are 
left.
    So although we continue to remanufacture, we were forced to 
choose between buying and reselling a line of Chinese products 
or going out of business. I am proud to say that over the last 
5 years, somewhere around two-thirds of the products that we 
sell still continue to be remanufactured in our factory. But we 
do supplement that with Chinese products in some areas where we 
just cannot compete.
    Today, the two China-based companies now control over 80 
percent of all aftermarket cartridge chips which, of course, is 
a technology barrier, and they set the global price. And what 
we see is those two chip companies in China do things that are 
against the law here in the United States where they 
collaborate on the pricing. And I am sure there is a different 
name for that here in the U.S.
    But anyway, China-based Apex and affiliated companies is 
now the largest producer of newly built aftermarket cartridges 
and chips in the world.
    Summarizing, China has decimated a U.S. remanufacturing 
industry of over 5,000 companies of all sizes.
    However, our love for manufacturing has never wavered. As 
one of the last U.S. remanufacturing companies, we were 
frustrated with China's chokehold on our industry, but we were 
committed to producing what we could even if it meant also 
buying some products from China.
    So fast forward to this year. Early 2020, late January, we 
were returning from a sourcing trip to Asia that started in 
Wuhan, China. We obviously witnessed firsthand the beginning of 
the global COVID pandemic. This inspired us to begin exploring 
how we might serve and do a business pivot into manufacturing 
PPE supplies. After all, we had filled hundreds of millions of 
plastic objects with high quality fluid and powder. So quickly 
we found that most of the PPE products came from China, as has 
been mentioned in earlier testimony.
    The first product that we launched in our factory was a 
hand sanitizer that we used our manufacturing experience--and I 
have to say much of our equipment here too--to bottle this hand 
sanitizer in Kansas. Ironically, as we ramped up, we found that 
we would need to buy some of our materials still from China 
once again. The U.S. no longer has any real small bottle 
manufacturing capabilities. So we had to go to China to get the 
bottles.
    As we continue to create opportunities for U.S. 
manufacturing jobs, we are now engaged in a new and exciting 
endeavor, the production and bottling of an ultra-effective and 
very safe surface disinfectant called hypochlorous acid. It is 
also known as HOCl. This is the safest, very safe for humans, 
pets, plants, the environment, but 80 times more powerful than 
bleach against all the viruses and all the pandemic bugs out 
there, including COVID-19.
    So we are partnered up with another Kansas company here 
called Danolyte, and we are using our operations background and 
making preparations to produce and bottle HOCl in our factory. 
And we have been doing that now for some time. Our goal is to 
grow our company and once again bring in more production jobs. 
But interestingly, even in this area, we are still facing 
pressures from China as plastic bottle production, as I 
mentioned earlier, is still located primarily in China.
    I am not here today to complain about China. They are smart 
and ambitious people. One cannot blame them for taking 
advantage of the opportunities that are in front of them and 
the political realities. It has been my experience and 
observation from spending much time in China that the top 
manufacturing companies in China are strongly backed and 
supported by their government. It is my belief that if we 
seriously desire to bring manufacturing and critical supply 
chains back to the U.S., it will require strong support and new 
policy from Washington.
    Moving forward, we welcome any discussions about how to 
help bring manufacturing back to the U.S. Our core team 
consists of experienced manufacturing engineers, production 
teams, quality assurance, and labor. In short, we have a huge 
passion for manufacturing products in Kansas, and we look to be 
of service however we can.
    Thank you for your time.
    [The prepared statement of Mr. Krska follows:]

    Prepared Testimony of Rick Krska, President and Chief Executive 
                        Servant, InkCycle, Inc.
   I would like to thank Senator Moran and Senator Blumenthal 
        for this opportunity to share my thoughts and testimony.

   We love manufacturing and serving people with high quality 
        products

   After early careers in the manufacturing industries of 
        Telecommunications and Nuclear Weapons, we started InkCycle in 
        1992 in the basement of our Kansas ranch home.

    1992: My partners and I embarked on a new quest to bring 
manufacturing jobs to Kansas City by starting a business which was (and 
remains) focused on three primary principles:

  1.  Design and produce high quality/high demand products

  2.  Create area employment and economic development

  3.  Build a business of significance--solve significant challenges 
        and positively impact a significant number of people (internal 
        and external)

  4.  Operate with principles of Servant Leadership

    Prior to starting the business, myself and my partners were working 
for Allied Signal where we were involved in producing triggers for 
nuclear weapons. The products we were directly responsible for, 
properly functioning triggers, absolutely had to fire when they were 
supposed to and not fire when they shouldn't. There was no margin for 
error.
    We absolutely loved the engineering, production and quality roles 
we served in and the challenging work environment. Our products 
demanded the utmost quality assurance and were subject to rigorous 
testing and audits daily.
    With the end of the Cold War, the demand for our products declined 
and we, like thousands of others, found ourselves being downsized from 
what was a large Kansas City employer. Looking to the future, we found 
a sense of purpose.

  1.  A deep love for manufacturing. A passion that began for me in 
        high school when I went to work for Western Electric. A passion 
        that still exists to this very day.

  2.  A desire to provide manufacturing jobs and employment to as many 
        people as possible. We had experienced firsthand what happens 
        when a large employer has to downsize,

    1992: We launch the new business. We began refurbishing printer 
cartridges and rapidly became one of the US's largest toner cartridge 
remanufacturers. By 1995 we had become the fourth largest in the 
country and began to expand into the growing inkjet market. By 2005 we 
had become the largest inkjet remanufacturer in the world, employing 
over 800 people in Lenexa, KS.
    The demand for remanufactured cartridges was being fueled by:

  1.  Skyrocketing growth of laser and inkjet printing, both at the 
        office and in the home.

  2.  Consumer savings of 25 percent or more vs. the name brand.

  3.  Realization that tens of millions of plastic and metal name brand 
        cartridges were ending up in the landfill and a more 
        sustainable solution (refurbishing) was needed.

    As the demand for remanufactured products continued to increase, 
many of the remanufacturing components were being developed in China. 
Within a few years, China had become the dominant source of 
remanufacturing components and then later, the largest producer of 
newly built ``clone'' aftermarket cartridges in the world.
    These early-stage ``clones'' were imported with absolutely no 
respect for U.S. intellectual property and patent law. China quickly 
began to flood the market to make it impossible for U.S. 
remanufacturers to compete. Over time, China, using infringing 
products, built such size and scale that they were becoming impossible 
to compete with, and U.S. patents were expiring while Chinese 
manufacturers developed their own intellectual property.
    By this time, the prices for a newly built cartridge from China 
were less than our direct remanufacturing costs here in the US.
    The tipping point came when we saw that a cartridge that cost us 
$21 to refurbish was available newly built for $5.95 in China. $5.95 to 
cover all of their costs AND make a profit to produce something brand 
new vs. $21 to refurbish! Seemingly impossible, yet this is what we 
were competing with.
    By around 2015, 90 percent of the U.S. remanufacturing companies 
and their manufacturing jobs were gone. Today that number has dropped 
from over 5,000 to an estimated 100 or fewer companies.
    Until this time, we were producing in our Kansas factory 98 
percent+ of everything we sold. However, as China began shipping more 
and more newly built products into the US, we began to find ourselves, 
like every other U.S. remanufacturer unable to compete. We were forced 
to choose between buying and reselling a line of Chinese products or 
going out of business.
    Today, estimates are that over 90 percent of the U.S. aftermarket 
cartridge business is produced in China compared to less than 5 percent 
15 years ago. And prices continue to come down, along with U.S. 
refurbishing jobs.
    Yet it was not just that China was selling newly manufactured 
products at less than what it costs in the U.S. to refurbish those 
products. China was beginning to acquire the necessary technology for 
U.S. remanufacturing companies to refurbish the cartridges, giving 
China the ability to strangle the U.S. remanufacturing industry.
    In 2016, US-based Lexmark (printer manufacturer) was purchased by a 
Chinese consortium led by Apex Technology and PAG Asia Capital. Apex 
had already purchased the global leader in aftermarket print chips (US-
based Static Control).
    Two China-based companies now control over 80 percent of all 
aftermarket cartridge chips and set the global price. APEX (and 
affiliated companies) is now also the largest producer of newly built 
cartridges in the world.
    As Apex/Lexmark controversial acquisition was finalized, it was 
apparent that China would control the U.S. aftermarket cartridge 
industry.

  1.  Set their new build prices at far under the cost for a U.S. 
        remanufactured cartridge.

  2.  Provide chips only on specific models so there could be no 
        competition from a U.S. reman company.

  3.  Control the cost of components so that their new-build cartridges 
        would always remain priced under a U.S. reman version.

    Summarizing, China has decimated a U.S. re-manufacturing industry 
of over 5,000 companies of all sizes.
    Our love for manufacturing has never wavered. As one of the last 
U.S. remanufacturing companies, we were frustrated with China's 
chokehold on our industry, but we were committed to producing what we 
could, even if it meant also buying in some products from China.
    2020: In late January we were returning from a sourcing trip to 
Asia that started in Wuhan, China. We obviously witnessed firsthand the 
beginning of global COVID pandemic. This inspired us to begin exploring 
how we might serve and do a business pivot into manufacturing PPE 
supplies. Quickly we found that most of the PPE products came from 
China. Very few U.S. produced products were available.
    The first product we launched was a hand sanitizer that we used our 
manufacturing experience to bottle here in Kansas City. Ironically, as 
we ramped up, we found that we would need to buy materials from China 
once again. The U.S. no longer had any real small bottle manufacturing 
capabilities anymore.
    Interestingly, the strange Chinese ``economics'' we had seen in our 
core business was to be found in Chinese bottle manufacturing industry 
as well. Forced to buy bottles in China, we were purchasing our labels 
from a local Kansas label manufacturer at around $0.15. The Chinese 
bottle supplier offered to print and apply the labels for a single 
cent. The cost to print a label in the U.S.--15 cents. The cost to 
print the same label AND apply it to the bottle in China--1 cent. The 
U.S. loses label printing jobs and manufacturing application jobs.
    As we continue to look to create opportunities for U.S. 
manufacturing jobs, we are now engaged in a new endeavor, Hypochlorous 
Acid. At 500 ppm, the EPA recognizes certain registered brands of 
Hypochlorous Acid as an ultra-strong and ultra-safe way to kill 
bacteria, germs, and viruses, including COVID-19.
    We are moving forward with preparations to produce and bottle HOCL 
in our factory. Our goal is to grow our company and once again bring in 
more production jobs. Interestingly, we are again facing pressures from 
China as plastic bottles' production is controlled primarily by China.
    It has been our experience and observation that manufacturing 
companies in China are strongly supported by their government. It is my 
belief that if seriously desire to bring manufacturing and critical 
supply chains back to the US, it will require strong support from 
Washington.
    Moving forward, we welcome any discussions about how to help bring 
manufacturing back to the U.S. and insulate our country from unfair 
trade practices of other countries. Our core team consists of 
experienced manufacturing engineers, production teams, quality 
assurance, and labor. In short . . . we have a huge PASSION for 
manufacturing products in KANSAS!
    Please let us know how we can be of service,
                                                Rick Krska,
                             President and Chief Executive Servant,
                                              TonerCycle InkCycle, Inc.

    Senator Moran. Mr. Krska, thank you. Thank you for your 
passion for what you do and for Kansas, as you mentioned.
    Ms. Tiffany Stovall is the Chief Executive Officer of the 
Kansas Manufacturing Solutions. And Ms. Stovall, you are 
recognized now as well for 5 minutes.

          STATEMENT OF TIFFANY M. STOVALL, CEO, KANSAS

         MANUFACTURING SOLUTIONS, KANSAS MANUFACTURING

                  EXTENSION PARTNERSHIP (MEP)

    Ms. Stovall. Good afternoon, Chairman Moran and Ranking 
Member Blumenthal and members of the Subcommittee. Thank you so 
much for this opportunity to appear before you to discuss the 
manufacturing community's response to the COVID-19 pandemic.
    I am Tiffany Stovall. I am the CEO of Kansas Manufacturing 
Solutions, and as Senator Moran said, we are the MEP center for 
Kansas.
    I am sure the Subcommittee is familiar with the 
Manufacturing Extension Partnership, also called MEP, but as a 
reminder, we are the nation's only program providing hands-on, 
in-depth support to small and medium sized manufacturers to 
help them compete more effectively in the global marketplace.
    As a public-private partnership, the MEP national network 
has 51 centers. We have got one in every state plus Puerto 
Rico. MEP also has 1,300 manufacturing experts on staff, 400 
service locations, and nearly 2,100 third party service 
providers and partners. We interact with over 28,000 
manufacturers per year. MEP centers truly are the go-to experts 
for advancing U.S. manufacturing.
    It is because of this history of working with manufacturers 
as trusted advisors that KMS, Kansas Manufacturing Solutions, 
and the MEP network was uniquely positioned to help support 
U.S. manufacturers when they had to adapt to this exceptional 
challenge that was presented to them during the COVID-19 
pandemic. Manufacturers have had to respond to COVID-19 
challenges within their own facilities, like we have heard 
about today, but they are also helping our Nation respond to 
the COVID-19 pandemic by producing critically needed personal 
protective equipment, PPE, ventilators, and other equipment and 
goods essential to the nation's public health efforts.
    We heard stories today of manufacturers shifting their 
capabilities to meet U.S. PPE needs, and the stories that we 
have heard are very similar to what is happening all across 
Kansas, as well as all across the United States.
    When the lockdowns began in March, manufacturers across the 
country had to close their doors. Their suppliers could not 
supply them. Their customers could not buy from them, and they 
faced a series of mortal threats, none of which had been seen 
before. KMS and the other MEP centers across the national 
network have been here for them, and we are here for them now 
as manufacturing continues to lead the way toward economic 
recovery.
    I would like to acknowledge and thank Congress for 
providing temporary cost share relief to the MEP for the 2020 
Fiscal Year. Ordinarily the cost share requirement leverages 
Federal funding with a non-Federal match, but this temporary 
cost share relief has allowed KMS and the other MEP centers 
across the national network to provide much needed services to 
manufacturers during these unprecedented times.
    Over the course of the last several months, thanks to the 
CARES Act funding and the temporary cost share relief, the MEP 
centers have done incredible work with manufacturers to help 
them retool, stay afloat, modify their processes and 
procedures, and to adapt to the new health and safety 
protocols. Many centers remain working remotely and have had to 
adjust their service delivery to protect their own staff and 
adjust to the changing protocols that are happening at 
manufacturing clients, as they are trying to protect their own 
staff as well. So, again, thank you, Congress, for the 
temporary cost share relief.
    Supply chain issues have also been heightened because of 
the pandemic. Believe it or not, there is no national supply 
chain data base. So organizations were scrambling to figure out 
where to go to get specific parts, materials, and PPE. KMS and 
other MEP centers worked around the clock in the early days of 
the pandemic and beyond to keep manufacturers viable by 
matching companies to suppliers and getting them the supplies 
they needed. We were building supply chain data bases 
particularly around PPE and critical need equipment as we went 
state by state and we linked them through our National Supplier 
Scouting System.
    An example of that and how that has worked in Kansas with 
the MEP is with the manufacturer Fuller Industries. They 
produce FDA-approved disinfectants, hand sanitizers, soaps, and 
other industrial strength janitorial products and cleansers. 
They also sell dispensers for soap and sanitizers. These 
dispensers had previously been sourced overseas, and Fuller was 
suddenly facing long lead times, short supplies, and a reduced 
ability to deliver this product to clients, along with medical 
centers after the onset of the pandemic. We were able to 
quickly match them with another manufacturer in southeast 
Kansas that could help them bring the production of the 
sanitizers not only back to the United States but in-house. So 
by connecting Kansas manufacturers, we were able to really keep 
the supply chain going.
    We just heard from Rick at InkCycle about the issues with 
bottling. That is another thing that we are really working 
across the national network with connecting manufacturers to 
those that are manufacturing bottles and those that have 
expanded their capabilities to meet the bottling needs of 
manufacturers.
    Workplace safety is also a huge concern for manufacturers 
during the best of times, and it has really heightened during 
the COVID pandemic. While a portion of the U.S. workforce could 
shift to remote work, manufacturers could not do that. So the 
MEP centers have helped manufacturers really understand the 
safety protocols and adjust everywhere from the front office 
all the way to the production floor and shipping facilities and 
beyond.
    In helping manufacturers respond to COVID-19, we are 
helping them build resiliency and to keep their workforce 
steady. As we know, manufacturers are driving economic recovery 
while also suffering an economic hit and uncertainty 
themselves. And so the role of KMS and the entire MEP national 
network is to help manufacturers get back on their feet and to 
deliver the tools to them to address the uncertainty while they 
help our country continue to get back on its feet by providing 
the critically needed equipment, as well as continue everything 
else that we need to have produced from our food supply to 
everything else that the manufacturers in the United States 
make.
    In the face of so much economic uncertainty, we really have 
worked hard to help manufacturers look forward. An example of 
one of these programs is a service developed by KMS called 
Future State Optimization. It really works to help 
manufacturers look forward and sustain profitability throughout 
the pandemic while building for their future. It provides a 
three-part framework delivering expert consultancy, 
comprehensive manufacturing centered assessment, and a 
strategic road map for manufacturers to ensure the future of 
their facilities, as well as the future for their employees.
    I hope that what I have shared today has given some insight 
on how KMS has responded to these unprecedented conditions here 
in the United States with COVID-19 and how the MEP national 
network has responded across the United States. In a strong and 
coordinated response to this pandemic, together we are 
partnering with manufacturers on their top COVID-19 concerns.
    And I certainly appreciate the opportunity to appear before 
the Subcommittee today, and I look forward to answering any 
questions you might have. Thank you.
    [The prepared statement of Ms. Stovall follows:]

  Prepared Statement of Tiffany M. Stovall, CEO, Kansas Manufacturing 
      Solutions, Kansas Manufacturing Extension Partnership (MEP)
    Good afternoon Chairman Moran, Ranking Member Blumenthal and 
members of the Subcommittee. Thank you for the opportunity to appear 
before you to discuss the manufacturing community's response to the 
COVID-19 pandemic.
    I am Tiffany Stovall. I am the CEO of Kansas Manufacturing 
Solutions (KMS), the Kansas Manufacturing Extension Partnership (MEP) 
Center. I have been with MEP since 2010 and began leading, as CEO, in 
2017.
    I am sure that the Subcommittee is familiar with the Manufacturing 
Extension Partnership, but as a reminder, we are the Nation's only 
program providing hands-on, in-depth support to small and medium-sized 
manufacturers to help them compete more effectively in the global 
marketplace. The MEP National Network has 51 centers--one in every 
state plus Puerto Rico. MEP has over 1300 manufacturing experts on 
staff, 400 service locations, nearly 2100 3rd party service providers 
and partners, and we interact with over 28,000 manufacturers per year. 
MEP Centers are the go-to experts for advancing United States 
Manufacturing.
    As a public-private partnership, MEP delivers a high return on 
investment to taxpayers. The Upjohn Institute for Employment Research 
conducted a study of MEP this past year and found that the program 
generates a 14.4:1 return on investment. Each year, an independent firm 
surveys manufacturers regarding the impact they have achieved from MEP 
Center services. In 2019, MEP clients reported $15.7 billion in new and 
retained sales and the creation or retention of 114,650 jobs. 
Considering that the average U.S. manufacturing worker earns more than 
$87,185 in wages and benefits per year, MEP clients are economic 
drivers in their communities. MEP clients are also increasing their 
capacity for the production of goods. MEP clients reported $4.5 billion 
in new investments directly attributed to their work with MEP.
    It is because of its history of working with manufacturers as 
trusted advisors that MEP was uniquely positioned to support U.S. 
manufacturers when they had to adapt to the exceptional challenges 
presented to them during the COVID-19 pandemic. Manufacturers have had 
to respond to COVID-19 challenges within their own facilities, but they 
are also helping our Nation respond to COVID-19 by producing 
critically-needed personal protective equipment (PPE), ventilators, and 
other equipment and goods essential to the Nation's public health 
efforts. I would also like to mention the other manufacturing 
industries that have kept our food supply going as well as all of the 
other essential goods that may not be directly related to COVID-19 
response but need to stay in production.
    When the lockdowns began in March, manufacturers across the country 
had to close their doors. Their suppliers could not supply them, and 
their customers could not buy from them. They faced a set of mortal 
threats, none of which they had seen before. KMS and the other MEP 
Centers were there for them then, and we are there for them now as 
manufacturing leads the way to economic recovery. We helped 
manufacturers create new supplier networks, navigate stay-home orders, 
apply for Paycheck Protection Program (PPP) funds, develop and 
implement best practices for internal COVID-19 safety, and in many 
cases, retool their factories to make COVID-19-related products.
    I would like to acknowledge and thank Congress for providing 
temporary cost share relief to MEP for the 2020 Fiscal Year. 
Ordinarily, the cost share requirement leverages Federal funding with a 
non-federal match. When the pandemic hit, our non-federal funding 
stopped, which would have prevented us from unlocking the Federal 
funds. Temporary cost share relief has allowed KMS and the other 
Centers across the National Network to provide much-needed services to 
manufacturers during these unprecedented times. Over the course of the 
last several months, thanks to CARES Act funding and temporary cost 
share relief, the MEP Centers have done incredible work with 
manufacturers to help them re-tool, stay afloat, and modify their 
processes and procedures to adapt to the new health safety protocols. 
Many Centers remain working remotely; they have had to adjust their 
service delivery to protect their own staff and adjust to the changing 
policy protocols of their manufacturing clients. The temporary cost 
share relief has been critical in allowing them to do so.
    Some examples of the kinds of work that Kansas Manufacturing 
Solutions and other MEP Centers have been able to do as a result of the 
temporary cost share relief:

   Work with companies that needed to invest in pivoting their 
        operations instead of paying for MEP services in the short 
        term;

   Keep specialized expertise on staff at MEP Centers to 
        provide guidance to manufacturers during this critical time;

   Provide webinars, instructional materials, and guidelines to 
        manufacturers about how to get specific PPE and information 
        regarding critical resources like PPP;

   Focus solely on meeting the needs of U.S. manufacturers and 
        provide them with critical services at their time of greatest 
        need, without worrying about the Center meeting payroll or 
        paying rent; and

   Shift the delivery of direct services and training to online 
        and virtual platforms when we could not meet with companies in 
        person.
Supply Chain and Supplier Matching
    Supply chain issues have been heightened because of the pandemic. 
Believe it or not, there is no national supply chain database, so 
organizations were scrambling to figure out where to go to get specific 
parts, materials, and PPE. KMS and other MEP Centers worked around the 
clock in the early days of the pandemic and beyond to keep 
manufacturers viable by matching companies to suppliers and getting 
them supplies they needed. We built supply chain databases as we went, 
state by state, and linked them through our National Network Supplier 
Scouting system.
    KMS and the MEP National Network have been working tirelessly to 
build and strengthen PPE supply chains to ensure the United States has 
the critical PPE to meet the needs of our citizens during this 
unprecedented pandemic.
    One example of how this has worked here in Kansas is with a 
manufacturer, Fuller Industries, that produces FDA approved 
disinfectants, hand sanitizer, soaps and other industrial strength 
janitorial products and cleaners. They also sell dispensers for soap 
and sanitizer. These dispensers had been previously sourced overseas 
and Fuller Industries was suddenly facing long lead times, short 
supplies and a reduced ability to deliver this product to clients 
including medical centers after the onset of the pandemic. Fuller 
reached out to KMS with the urgent need to gain more control over their 
supply chain.
    KMS was able to quickly match them with another manufacturer in 
Kansas that could help them bring production of the sanitizer 
dispensers in-house. While the project is still ongoing, this a great 
example of the supply chain building that is happening by connecting 
one manufacturer to another--reshoring a production capability that 
helps meet the Nation's PPE needs. This effort will generate more U.S. 
investment, U.S. revenue, and U.S. jobs. An upside for Kansas is that 
it also is a significant investment in a rural community.
    This is the kind of work MEP is doing right now, every day, every 
month and as long as we need to help manufacturers weather the COVID-19 
storm.
Adjusting to New Safety Protocols
    Workplace safety is a huge concern for manufacturers during the 
best of times, and is incredibly heightened during the COVID-19 
pandemic. While a portion of the U.S. workforce shifted to remote work, 
this is not an option for the manufacturing sector. MEP Centers helped 
manufacturers understand the recommended safety protocols and adjust 
everywhere from the front office to the production floor to shipping 
facilities and beyond.
    Centers have helped by creating and updating Safety Guides for 
manufacturers on COVID-19 practices in their facilities based on 
current best practices, including the appointing an infection control 
officer, use of thermometers, face shields, masks, and other PPE to 
keep staff safe.
    These safety protocols also include considerations on plant layouts 
to increase safety of the workforce and encourage six-foot distancing 
when possible, without disrupting production or efficiency. Again, MEP 
staff was already well positioned for this type of work because of the 
ongoing trusted advisor relationships we have had with manufacturers 
and the shop floor expertise within the Centers. MEP and KMS 
understands their business and has earned this trust.
    KMS has provided manufacturers throughout the state with COVID-19 
safety guidelines and updated COVID-19 policies for HR handbooks. This 
helps give companies peace of mind that they are doing the right things 
to keep their employees safe and communicating expectations effectively 
to their employees.
Moving Forward: Sustaining and Growing U.S. Manufacturing
    In helping manufacturers respond to COVID-19, we are helping them 
build operational resiliency and keep their workforce steady. 
Manufacturers are driving economic recovery while also suffering an 
economic hit and uncertainty themselves. The role of MEP is to help 
manufacturers get back on their feet, deliver tools to address the 
uncertainty so the Nation can continue to get back on its feet.
    Throughout this pandemic, MEP Centers like KMS are continuing to 
provide critical services to help sustain and grow manufacturing, even 
if those services have to be delivered in different ways. We have long 
been known for working elbow-to-elbow with companies anywhere from 
strategy in the board rooms to process and efficiency on the shop 
floor. While we miss the face-to-face interaction, we have been able to 
pivot to meet the restrictions many manufacturing companies have had to 
set by putting our existing services on virtual platforms and 
developing new services that can be effectively delivered remotely.
    An example of one of these newly developed services from KMS is an 
on point new program called Future State Optimization. It is a 
proprietary multi-faceted program to help manufacturers sustain 
profitability throughout the pandemic while building for their future. 
This program provides a three-part framework for delivering expert 
consultancy, a comprehensive manufacture centric assessment and a 
strategic roadmap for manufacturers to ensure their future and the 
future of their employees.
    This comprehensive program will help manufacturers understand 
through the deployment of the assessment what will and has to change 
only temporarily, what will need to change permanently, and how to make 
good strategic decisions without full information in rapidly changing 
economic environments with the help of high level consultation from 
planning experts, financial scenario planning and a roadmap of how to 
pivot to sustained profitability.
    In the face of so much economic uncertainty, this program is 
designed to ensure manufacturing leaders get back into the driver's 
seat and be proactive with their current business strategies instead of 
reactive. The process can make the future much less daunting, and the 
feedback from the first few companies that have gone through the hands-
on, intensive process has been outstanding. In the words of one early 
participant:

        ``KMS was able to take a very complex set of opportunities 
        facing Mid-State Aerospace, distill them down to very 
        understandable and prioritized list of actions to grow our 
        business as well as develop a roadmap to address the COVID-19 
        impacts from both an operational and economic standpoint.''--
        Robert Rogers, President, Mid-State Aerospace

    I hope the foregoing information has given insight on how Kansas 
Manufacturing Solutions has responded to the unprecedented COVID-19 
pandemic in Kansas and how the MEP National Network has responded 
across the United States. In a strong and coordinated response to this 
pandemic, together we are partnering with manufacturers on their top 
COVID-19 concerns about adjusting to new safety protocols, building 
operational resilience, supply chain concerns, and workforce needs 
while giving critical insight into investment plans and regional 
infrastructure need. Manufacturing generates the kind of jobs that come 
with benefits and a paycheck. Manufacturing matters to the health of 
Kansas and to the health of the US. Whenever, wherever, and however we 
can, we need to support domestic manufacturing. KMS does that and MEP 
does that!
    I sincerely appreciate the opportunity to appear before this 
Subcommittee. I look forward to answering any questions you may have.

    Senator Moran. Ms. Stovall, thank you. We appreciate your 
testimony, your willingness to appear.
    Our final witness is Mr. Michael Wessel, Commissioner, 
U.S.-China Economic and Security Review Commission. Mr. Wessel?

STATEMENT OF MICHAEL WESSEL, COMMISSIONER, U.S.-CHINA ECONOMIC 
                 AND SECURITY REVIEW COMMISSION

    Mr. Wessel. Chairman Moran, Ranking Member Blumenthal, 
members of the Subcommittee, thank you for the invitation to 
appear here today.
    My name is Michael Wessel, and I am appearing as a 
Commissioner on the U.S.-China Economic and Security Review 
Commission, but as the normal Washington disclaimer, I am only 
speaking for myself.
    The pandemic has put stress on supply chains and our 
manufacturing base, and it has spurred a debate about our 
preparation, the availability of public resources and public 
policy responses. We need to address today's needs and prepare 
for a possible future pandemic.
    Early on in the pandemic, I was contacted by some 
manufacturers wanting to contribute in confronting the crisis, 
much as my colleagues on this panel discussed earlier. The 
Federal Government was overwhelmed, and it became easier to 
match some of these firms up directly with States and hospital 
systems to meet their needs including, I should point out, Yale 
New Haven Hospital, Senator Blumenthal's home.
    Our nation owes a great debt of gratitude to our 
manufacturers and their workforce who have come to the aid of 
our country to meet the critical needs of our sick, our health 
care workers, first responders, and our entire population in 
this time of crisis. Today, as we all know, while supplies are 
more available, there are still shortages. Health care workers 
and others are having to reuse equipment, stressing safety 
protocols and putting their health at risk. America must do 
better to support our manufacturing base to help them protect 
our citizens.
    The Chinese Communist Party's industrial policies and our 
own shortsightedness in some ways have added to an unacceptable 
and dangerous reliance on China for our pharmaceuticals, active 
pharmaceutical ingredients, APIs, medical devices and 
equipment, including PPE.
    The virulence, breadth, and impact of the coronavirus was 
unexpected. But our increasing dependency on China is not news, 
and China is willing to use and abuse their manufacturing 
power. For example, the CCP leadership was willing to engage 
in, quote/unquote, mask diplomacy by using shipments of PPE to 
garner political support and foster diplomatic gains. The CCP 
has been willing to weaponize supply chains. We cannot allow 
the health and safety of our people to be held hostage during a 
diplomatic, economic, or military confrontation.
    We are overly dependent on China for our medical needs. We 
no longer have the fermentation capacity in the U.S. to make 
penicillin and are completely dependent on foreign sources. 80 
percent of the APIs we use come from abroad with a substantial 
portion coming from China. Of the 10 active ingredients in 
remdisivir, one of the therapeutics for treating COVID-19, 
eight come from China. For many other products, we are 
partially or entirely dependent on China. One DOD official 
testified that, quote, the national security risks of increased 
Chinese dominance on the global API market cannot be 
overstated. Unquote.
    Since China joined the WTO, U.S. business operations have 
expanded dramatically. China's policies were designed to 
promote that. But troubling is not just the loss of production 
but the expansion of R&D. U.S. multinational firms increased 
their R&D spending in China at roughly twice the rate of their 
domestic R&D spending. U.S. R&D expenditures in China on the 
improvement of manufacturing capability of chemicals, including 
pharmaceuticals, surged nearly 30fold between 2000 and 2017.
    Chinese state-directed and -controlled entities have 
engaged in massive cyber intrusions in the U.S., with many 
focused on the health care sector, including efforts to obtain 
vaccine information. Actors in China have used legal and 
illegal means to obtain the longitudinal health data of U.S. 
citizens that may allow their firms to dominate the 
increasingly important biosynthetic sector. Today the focus is 
on medical supplies, but our dependence on China for many 
products, some of them critical products, is broad and deep. In 
certain areas, this dependence reduces our potential 
resilience. Congress should carefully evaluate supply chain 
risks to determine what the potential impact is on our national 
health and economic security.
    Again, thank you for the opportunity to testify today. Your 
work on these critical issues will help lay a base for making 
sure that we never face these challenges again.
    [The prepared statement of Mr. Wessel follows:]

Prepared Statement of Michael Wessel, Commissioner, U.S.-China Economic 
                     and Security Review Commission
    Chairman Moran, Ranking Member Blumenthal, Members of the 
Subcommittee. I want to thank you for the invitation to appear before 
you today to examine the American manufacturing industry's response to 
the COVID-19 pandemic. Clearly, the COVID-19 pandemic has put stress on 
supply chains and our manufacturing base, and has spurred a debate 
about our preparation, the availability of public resources, and public 
policy responses. Your Subcommittee's jurisdiction covers many of the 
key issues that demand attention and forward-leaning approaches to 
better prepare America for the future. Our citizens want to know that 
our ability to respond to the ongoing pandemic, and to contain a future 
pandemic, should it occur, is being addressed.
    My name is Michael Wessel and I am appearing before you today as a 
Commissioner on the U.S.-China Economic and Security Review Commission 
(Commission), where I have served since its creation 20 years ago. But, 
as a disclaimer, I am speaking for myself, although my comments are 
informed by my service on the Commission and other work I have been 
involved in for many years.
    The Commission was created by Congress in 2000 in conjunction with 
the debate about the grant of Permanent Normal Trade Relations (PNTR) 
to China, paving the way for its accession to the World Trade 
Organization (WTO). The Commission was tasked with monitoring, 
investigating and submitting to Congress an annual report on the 
national security implications of the bilateral trade and economic 
relationship between the United States and the People's Republic of 
China, and to provide recommendations, where appropriate, to Congress 
for legislative and administrative action.
    The grant of PNTR ended the annual debate about whether to extend 
most favored nation status to China. But as it passed PNTR, Congress 
created the Commission because it did not want to forego the annual 
review of our relationship with China. Since the creation of the 
Commission, our mandate has been extended and altered as the U.S.-China 
relationship evolved.
    The Commission is a somewhat unique body: We report to and support 
Congress. Each of the four Congressional leaders appoint three members 
to the Commission for two-year terms. The Commission is scheduled to 
release this year's report in a couple of weeks, with unanimous 
support. In eight of the last ten years, we have issued unanimous 
reports. In the two years where it was not unanimous, there was only 
one dissenting vote. In many ways, the evolving challenges and 
opportunities posed by the relationship with China have united us in 
our analysis. All of our hearings, testimony, annual reports and 
research are available at our website www.uscc.gov.
    Our nation owes a huge debt of gratitude to our manufacturers and 
their workforce who have come to the aid of our country to meet the 
critical needs of our sick, our healthcare workers, first responders 
and our entire population in this time of crisis. Many worked 
tirelessly to retool and revamp operations to produce personal 
protective equipment (PPE), ventilators and other needed products and 
equipment.
    Indeed, early on in the pandemic, I was contacted by companies and 
their representatives wanting to contribute in confronting the crisis. 
A group of textile firms in the Northeast wanted to know what 
specifications they should use in producing masks, gowns and other 
equipment. A firm in Mississippi similarly wanted to know what they 
could do. The Federal government was overwhelmed, and it became easier 
to match some of these firms up directly with states and hospital 
systems to meet their needs.
    Today, as we all know, while supplies are more available, there are 
still shortages. Healthcare workers, and others, are having to reuse 
equipment, stressing safety protocols. And, as experts suggest a surge 
in cases will continue in the coming months, manufacturers will 
continue to face rising demand and limited capacity.
    Mr. Chairman, I want to focus my comments on questions relating to 
U.S.-China policy and its impact on meeting the crisis and future 
challenges. Other panelists can add to the Subcommittee's examination 
of the critical issues you have identified for this hearing.
    The debate about the impact of China's policies and practices on 
the U.S. continues to be divisive. There are some who view China's 
willingness to subsidize and dump products into the U.S. makes our 
people better off because it lowers consumer costs. While fewer and 
fewer people subscribe to this view, some still cling to it.
    I couldn't disagree more and believe that the wealth of opinion has 
concluded that China's predatory and protectionist trade and economic 
policies undermine U.S. economic, health and national security 
interests. The cost of products cannot be the only measure of economic 
benefit. The public understands that while the flat screen television 
in their living room may be cheaper, the manufacturing jobs to support 
that product are not here in the U.S. They know, all too well, that 
globalization has increased the downward pressure on wages and our 
standard of living. It has contributed to rising income inequality. 
And, if we lose all these jobs, few will have the income to even 
purchase the subsidized and dumped products.
    As predatory pricing drives outsourcing of jobs and offshoring of 
production, it can lead to a severe loss of domestic productive 
capacity. Industry after industry has faced this problem. Steel, 
aluminum, solar cells, rare earths have gotten the bulk of the 
attention. But China's industrial policies, as well as our own short-
sightedness, have also created an unacceptable and dangerous reliance 
on China for our pharmaceuticals, active pharmaceutical ingredients 
(APIs), medical devices, and equipment, including PPE. In the early 
days, as we all know, the offshoring of manufacturing limited our 
capacity to surge production of ventilators and other critical 
equipment.
    China's economic policies, driven by the Chinese Communist Party 
(CCP), have contributed to the hallowing out of the U.S. industrial 
base. After years of these policies, the reality of our dependence, as 
well as the impact on our own capabilities, has been all-too-evident in 
the response to the current pandemic.
    While the virulence and impact of the coronavirus was unexpected 
and, to some degree, our unpreparedness is a function of 
underestimating how broad a health crisis could be, our increasing 
dependency on China is not news.
    In putting the spotlight on supply chains for medical equipment, 
the COVID-19 crisis taught the American public not only about our loss 
of productive capacity, but also China's policies that contributed to 
that problem and its ability to control supplies and use them as 
foreign policy leverage. The Chinese government's failure to conduct 
adequate inspections of manufacturing facilities and lack of quality 
control all became nightly news stories. Masks sold as meeting the N95 
standard were often found to be almost ineffective--possibly less 
effective than simply using a bandana as a face mask.
    We also saw that the CCP was willing to engage in ``mask 
diplomacy'' using shipments of PPE to garner political support and 
foster diplomatic gains.\1\ For many, it raised significant questions 
about the CCP's actions. We have seen prior examples of the CCP's 
willingness to ``weaponize'' supply chains, most notably with regard to 
rare earth exports to Japan in 2010. We cannot allow the health and 
safety of our people to be held hostage during a diplomatic, economic 
or military confrontation.
---------------------------------------------------------------------------
    \1\ Brian Wong, ``China's Mask Diplomacy,'' The Diplomat, March 25, 
2020.
---------------------------------------------------------------------------
    While the COVID-19 crisis brought all of this to the front pages 
and to the nightly news, the threats to our economic health and 
security have been building for years. In 2014, the Commission held a 
hearing entitled ``China's Healthcare Sector, Drug Safety, and the 
U.S.-China Trade in Medical Products.'' In July 2019, former Senator 
Jim Talent and I co-chaired a hearing on ``Exploring the Growing U.S. 
Reliance on China's Biotech and Pharmaceutical Products.'' Our work, 
and the witness testimony we heard, along with staff research, 
identified broad and deep dependence on China for our medical needs and 
deep vulnerabilities.
    We no longer have the fermentation capacity in the U.S. to make 
penicillin and are completely dependent on foreign sources. Eighty 
percent of the APIs we use come from abroad,\2\ with a substantial 
portion coming from China. Of the ten active ingredients in Remdisivir, 
one of the therapeutics for treating COVID-19, eight come from 
China.\3\ For many other products, we are partially, or entirely, 
dependent on China. As Christopher Priest, the Acting Deputy Assistant 
Director of the Defense Health Agency told our Commission, ``the 
national security risks of increased Chinese dominance of the global 
API market cannot be overstated.'' \4\
---------------------------------------------------------------------------
    \2\ U.S. Food and Drug Administration, FDA at a Glance: FDA-
Regulated Products and Facilities, April 2017.
    \3\ Mary Denigan-Macauley, written testimony for U.S. House of 
Representatives Subcommittee on Oversight and Investigations, Committee 
on Energy and Commerce, Hearing on Securing the U.S. Drug Supply Chain: 
Oversight of FDA's Foreign Inspections Program, December 10, 2019, 1.
    \4\ Christopher Priest, testimony for U.S.-China Economic and 
Security Review Commission, Hearing on Exploring the Growing U.S. 
Reliance on China's Biotech and Pharmaceutical Products, July 31, 2019. 
https://www.uscc.gov/sites/default/files/Priest%20US-China%20Commis
sion%20Statement.pdf.
---------------------------------------------------------------------------
    Today, the focus is on medical supplies, but our dependence on 
China for many products--some of them critical products--is broad and 
deep. In certain areas, this dependence reduces our potential 
resilience. Last year, despite rising trade tensions and the imposition 
of Section 301 tariffs, the U.S. ran a trade deficit in advanced 
technology products with China of more than $100 billion and an overall 
goods deficit of $345 billion. As has been seen with 5G, the predatory 
actions of China's Huawei have undermined the ability of market-
oriented firms to develop the technology to ensure safe sources of 
supplies. Our dependence on China for telecom products has created 
dangerous vulnerabilities that our nation--and an increasing number of 
our allies--is only now really grappling with.
    Mr. Chairman, this Subcommittee's jurisdiction over consumer 
protection issues is also important in this area. There were numerous 
reports of masks and other supplies that were imported from China, but 
which did not meet appropriate regulations and safety standards. We saw 
this in the past with imports of tainted heparin that killed numerous 
citizens. We learned about blood pressure medications that were tainted 
with traces of rocket fuel, as both the APIs in the medication and 
rocket fuel were produced in the same facilities. The quality, 
efficacy, and safety of many Chinese-produced medical products must be 
addressed.
    Congress should carefully evaluate supply chain risks to determine 
what the potential impact is on our national, health and economic 
security.
U.S. Business Activity in China and Its National Security Implications:
    At the beginning of July, the Commission issued a staff paper 
entitled ``Trends in U.S. Multinational Enterprise Activity in China, 
2000-2017.'' \5\ Since China's accession to the WTO in 2001, U.S. 
business operations in China have expanded dramatically. The staff 
report found that ``as U.S. MNE [multinational enterprise] activity in 
China increasingly focuses on the production of high-end technologies, 
the risk that U.S. firms are unwittingly enabling China to achieve its 
industrial policy and military development objectives rises.'' \6\
---------------------------------------------------------------------------
    \5\ Kaj Malden and Ann Listerud, ``Trends in U.S. Multinational 
Enterprise Activity in China, 2000-2017,'' U.S. China Economic and 
Security Review Commission, July 1, 2020. https://www.uscc.gov/sites/
default/files/2020-06/
US_Multinational_Enterprise_Activity_in_China.pdf.
    \6\ Ibid, at 3.
---------------------------------------------------------------------------
    Several of the report's findings are relevant to today's hearing:

   China's vast consumer market and the Chinese government's 
        coercive policies have incentivized many U.S. MNEs to move 
        their manufacturing operations to China. U.S. Department of 
        Commerce Bureau of Economic Activity (BEA) data explored in 
        this report indicates the major destination for goods and 
        services supplied by U.S. MNEs in China is the Chinese market 
        itself. In 2017, U.S. MNE foreign affiliates in China sold 82 
        percent of the goods and services produced in China directly to 
        Chinese customers. At the same time, trade barriers, including 
        localization requirements and export restrictions on key raw 
        materials, have further induced production within China. Sales 
        to Chinese consumers may also constitute sales of intermediate 
        goods and services which might be used in final goods for 
        export to the United States.

   China is the fourth-largest destination for U.S. MNE 
        research and development (R&D) expenditure and increasingly 
        competes with advanced economies in serving as a key research 
        hub for U.S. MNEs. The growth of U.S. MNE R&D expenditure in 
        China is also comparatively accelerated, averaging 13.6 percent 
        year-on-year since 2003 compared with 7.1 percent for all U.S. 
        MNE foreign affiliates in the same period. This expenditure is 
        highest in manufacturing, particularly in the production of 
        computers and electronic products, but has diversified over 
        time. For example, R&D expenditure on the improved manufacture 
        of chemicals, including pharmaceuticals, surged nearly 30-fold 
        from a low base of $13 million in 2000 to $392 million in 2017.

   China has grown from the 20th-highest source of U.S. MNE 
        affiliate value added in 2000 ($5.5 billion) to the fifth 
        highest in 2017 ($71.5 billion), driven primarily by the 
        manufacture of computers and electronic products as well as 
        chemicals. The surge is especially notable in semiconductors 
        and other electronic components, which accounted for $5.6 
        billion of total manufacturing value added in 2017, up 250 
        percent from $1.6 billion in 2009. Separately, pharmaceutical 
        manufacturing serves as the largest chemical sector in terms of 
        value added, accounting for $2.6 billion in 2017.

    The impact of the CCP's industrial policies is broad and deep. 
China's government uses an ``all of the above'' approach to advancing 
its interests. For example, work by private sector forensic accounting 
experts \7\ uncovered acts of espionage to undermine the market value 
of firms which were later acquisition targets for Chinese firms. In 
other words, they undermined a company's value to put it into a 
``distress'' situation, to reduce its attractiveness to other companies 
and to make it cheaper for them to acquire.
---------------------------------------------------------------------------
    \7\ Jeffrey Z. Johnson, testimony for the U.S.-China Economic and 
Security Review Commission, Hearing on Chinese Investment in the United 
States: Impacts and Issues for Policy Makers, January 26, 2017.
---------------------------------------------------------------------------
    Chinese state-directed and -controlled entities have engaged in 
massive cyber intrusions in the U.S. The first major indictment on this 
was brought forward by David Hickton, U.S. Attorney for the Western 
District of Pennsylvania, who alleged in 2014 that between 2006 and 
2012 five People's Liberation Army hackers had accessed the computer 
networks of the United Steelworkers union and five major U.S. firms to 
obtain trade secrets and other information.\8\ The next year, President 
Obama reached an agreement with General Secretary Xi whereby China 
agreed that they would not engage in hacking for economic gain. The 
premise of the agreement was faulty from the start as China treats 
economic and national security as inextricably intertwined. In short, 
all hacking undertaken by entities directed or controlled by the 
Chinese government was for national security reasons and, therefore, 
not covered by the agreement.
---------------------------------------------------------------------------
    \8\ U.S. Department of Justice, ``U.S. Charges Five Chinese 
Military Hackers for Cyber Espionage Against U.S. Corporations and a 
Labor Organization for Commercial Advantage,'' May 19, 2014. https://
www.justice.gov/opa/pr/us-charges-five-chinese-military-hackers-cyber-
espionage-against-us-corporations-and-labor.
---------------------------------------------------------------------------
    Massive hacking continued with incalculable harm. Indeed, press 
reports indicate that China, as well as Russia, has been trying to hack 
into our major medical firms to obtain vaccine information. As former 
FBI Director James Comey said, ``There are two kinds of big companies 
in the United States. There are those who've been hacked by the 
Chinese, and those who don't know they've been hacked by the Chinese.'' 
\9\ The current FBI Director, Christopher Wray, recently said ``The 
greatest long-term threat to our Nation's information and intellectual 
property and our economic vitality is the counterintelligence and 
economic espionage threats from China . . . It's a threat to our 
economic security and, by extension, to our national security.'' \10\
---------------------------------------------------------------------------
    \9\ Maria Tadeo, ``FBI's James Comey accuses China of hacking into 
every major American company,'' The Independent, October 6, 2014.
    \10\ Christopher Wray, Director, Federal Bureau of Investigation, 
``The Threat Posed by the Chinese Government and the Chinese Communist 
Party to the Economic and National Security of the United States,'' 
remarks as delivered, Hudson Institute, July 7, 2020.
---------------------------------------------------------------------------
    In the area of medicine, multiple hacks attributed to actors in 
China, have obtained the longitudinal health data of U.S. citizens. 
While today's medicines are largely composed of APIs and other chemical 
compounds, tomorrow's medicines are likely to be biosynthetics. With 
the massive amount of data that Chinese entities collect--legally and 
illegally--they have the opportunity to develop new drugs and 
biosynthetics as a faster pace because of ``big data.'' Industries that 
fall under the umbrella of biotechnology are worth hundreds of billions 
of dollars annually, and their development will have a profound impact 
on U.S. economy and national security. There is also the potential to 
enable personalized medicine, to produce vaccines faster and more 
effectively and develop other products which have enormous national 
security implications. Earlier this year, the Theodore Roosevelt 
aircraft carrier was sidelined because of COVID-19. The implications 
are endless.
    The Chinese government is aggressively working to obtain America's 
secrets. The Chinese government maintains many talent recruitment 
programs, with the Thousand Talents Program being the most prominent 
example, that are aimed at attracting high-quality researchers, often 
with expertise in emerging technologies or areas with potential 
military applications.\11\ These programs offer a variety of 
incentives, including salaries, recruitment bonuses, and living 
allowances of up to $150,000.\12\ Chinese government guidance funds--
more than 1,800 \13\ of them according to some estimates--seek to 
invest in, and obtain, technology and trade secrets to support the 
CCP's industrial policies.
---------------------------------------------------------------------------
    \11\ Anastasya Lloyd-Damnjanovic and Alexander Bowe, ``Overseas 
Chinese Students and Scholars in China's Drive for Innovation,'' U.S.-
China Economic and Security Review Commission, October 7, 2020. https:/
/www.uscc.gov/sites/default/files/2020-10/Overseas_Chinese_Students_
and_Scholars_in_Chinas_Drive_for_Innovation.pdf.
    \12\ In the indictment of former Harvard professor Charles Lieber, 
the Justice Department alleged that under the terms of Lieber's three-
year Thousand Talents contract, Wuhan University of Technology (WUT) 
paid Lieber a salary of up to $50,000 per month, living expenses of up 
to $150,000 and awarded him more than $1.5 million to establish a 
research lab at WUT. It is alleged that in 2018 and 2019, Lieber lied 
to Federal authorities about his involvement in the Thousand Talents 
Plan and his affiliation with WUT. U.S. Department of Justice, 
``Harvard University Professor Charged with Tax Offenses,'' July 28, 
2020. https://www.justice.gov/opa/pr/harvard-university-professor-
charged-tax-offenses.
    \13\ Karen Sutter, `` `Made in China 2025' Industrial Policies: 
Issues for Congress,'' Congressional Research Service, August 11, 2020. 
https://fas.org/sgp/crs/row/IF10964.pdf.
---------------------------------------------------------------------------
    In many other areas the Chinese government and the CCP are 
aggressively pursuing opportunities to advance their interests, often 
at the cost to our own national, health and economic security.
Conclusion
    The policies of the CCP and the actions of their government have 
already triggered a reaction by the U.S. While the honeymoon period 
after China's entry into the WTO lasted too long, and the period of 
engagement and dialogue yielded too few results, policy makers have 
identified many actions that will make a difference.
    But the challenges posed by China's policies and practices are 
broad and deep and countering their negative impact on our interests 
will require concerted and long-term action. Action is needed not only 
in the economic policy realm, but on the diplomatic, human rights, 
health policy, military and other fronts.
    Mr. Chairman, Ranking Member Blumenthal, Members of the 
Subcommittee, thank you for the opportunity to testify today. Your work 
on these critical issues will help lay a base for making sure that we 
never face these challenges again. The Commission members and our staff 
and at your, and your staff's, disposal.

    Senator Moran. Mr. Wessel, thank you for your testimony. I 
know you indicated you speak for yourself, not the Commission, 
but I understand that in a short period of time, there will be 
a--first of all, let me say I agree with your assessment that 
China's predatory and protectionist trade and economic policies 
undermine U.S. economic health and national security interests. 
I appreciate you saying that and agree with you.
    But your Commission is expected to release this year's 
report in the next few weeks. Can you describe any formal 
recommendations that you would expect to be included in terms 
of assessing and improving production capacity in the United 
States, the manufacturing industry producing PPE, medical 
supplies, and even pharmaceuticals? What would those 
recommendations--what do you expect them to be?
    Mr. Wessel. Thank you for your question, and let me point 
out that in fact we have had already a public report on this 
matter. Former Senator Jim Talent of Missouri and I co-chaired 
a hearing on this issue in 2019, and the China Commission 
unanimously, six Democrats and six Republicans, released its 
report in 2019 and were unanimous behind a number of 
recommendations regarding this sector.
    Let me quickly review just three of those, if I could, 
which is Congress has the ability to dive deep, as you are 
doing today and as we have all been forced to as we look to 
address this pandemic. But we can harness Federal procurement 
policy through Medicare, Medicaid, Veterans Affairs, DOD to buy 
American products, to use our existing authorities and leverage 
those to try and bring these supply chains back to the U.S.
    Second, we have to do a much better job of having the FDA 
use its existing authority to ensure that we are protecting 
Americans in terms of their safety for many of these products. 
You are well aware of the heparin products that caused a number 
of deaths here in the U.S. coming from China. Two years ago, we 
found that the blood pressure medicine, valsartan, was actually 
tainted with rocket fuel because both the APIs and the rocket 
fuel were being produced at the same facility, and that product 
made its way to U.S. consumers.
    The FDA should be allowed to go into every facility in 
China that is sending their products to the U.S., and we need 
to make sure that that happens or that those products are 
unable to come here.
    Finally, we need to disclose where essential drugs and 
products are coming from, and again, we can do that through 
Federal procurement standards so that citizens and our 
officials know where the supply chains are linked, where the 
products are coming from, and how we can best prepare and 
protect.
    Senator Moran. Thank you very much for explaining that to 
me.
    Let me ask Mr. Bulusu and Mr. Krska and Mr. Gilman. Your 
companies have worked to create PPE manufacturing capabilities 
here in the U.S. in response to COVID-19 with the goal of 
creating a homegrown American product. However, not only does 
China dominate global PPE production, they also dominate PPE 
component and manufacturing equipment sectors. You have 
described some of those circumstances or at least those facts 
to us in your testimony. I wondered if you could go into more 
detail describing the challenges in finding PPE components and 
manufacturing equipment.
    Mr. Krska, you mentioned the bottles that are unsourceable 
in the United States. I just want to hear more about the 
challenges that you face. I would tell you that we had numerous 
Kansas counties, hospitals, nursing homes, and others call our 
office and ask for help in locating PPE. Often when it was 
discovered what they had purchased--what we discovered was 
sitting in a port in California waiting to be approved by the 
FDA, which was, in many instances, denied based upon quality. 
So I also would give you the chance to tell me or tell our 
committee about the quality nature of your competitors and 
their products from China.
    Mr. Krska. So one of the stories that I had in my 
testimony, but my testimony was too long already--I cut it out. 
But when we started our bottling operation, we started looking 
for bottles in the U.S. and we could not find manufacturers of 
it, and distributors were all sold out for 3 or 4 months. So 
having a lot of experience in China, we did go to China and 
start looking and narrowing down the field to find the right 
company. But here is an example of, you know, to give you an 
idea of the situation we ran into.
    So we found a bottle manufacturer in China that could 
produce the bottles for us. We inspected them. The samples were 
fine, and we started buying the bottles. We were currently 
purchasing a label from a Kansas label manufacturer for 15 
cents. The Chinese bottle manufacturer offered to make the 
label, print the label, and apply the label for one penny.
    So I think those are the kind of headwinds that we run 
into, and we have to change the game in regard to how we source 
and buy these products. And I think it is going to take some 
type of government involvement because right now it is all 
about just--as Mr. Gilman talked about, it all boils down to 
the mighty penny. Right? And if we get some type of help from 
our politicians to help us with this, I think it could change 
that.
    Anyway, that was an example that I wanted to share earlier. 
Here we have got a bottle that we are buying. We got a label 
that we have sourced in the U.S., and we have been buying it 
here in Kansas, but here this Chinese company offered to print 
the label, apply the label for one penny compared to 15 cents. 
Those are the kind of pressures that you run into.
    Senator Moran. [Inaudible] but what you would tell me is 
that they would be more expensive?
    Mr. Krska. Yes.
    Senator Moran. Mr. Bulusu or Mr. Gilman?
    Mr. Krska. What I was saying earlier--sorry--was that the 
bottles were not available in the United States at all. So this 
was just kind of an extension of that process of buying the 
bottles and then getting into the process of buying the label 
versus the labor and the extra process to apply the label. But 
here the Chinese supplier of the bottle was willing to do it 
for 1 penny versus probably spending somewhere around 20 cents 
in the United States to do it.
    Senator Moran. Thank you.
    Senator Moran. Mr. Bulusu?
    Mr. Bulusu. I will answer this in two different aspects.
    The first one, which is right now the most critical aspect, 
is that anecdotally what I understand from our counterparts in 
some of the best testing facilities in America, SGS, Nelson, is 
that the testing lines are really clogged up right now. And if 
we take a product, if we iterate on top of it, another testing 
cycle to complete on it takes months, and that slows us down. 
Part of the reason why is because there is so much product that 
is being tested which is not necessarily manufactured in 
America and is, what I hear, not of very good quality but is 
constantly clogging these lines. The net loser is the American 
consumer because the American product is not going to get to 
them faster and, two, whatever product they get is going to 
continue to be of inferior quality. This is not good.
    And the second aspect I am going to touch on is the abuse 
of dominant position. Back when we started, about 6 to 7 months 
back, the machines that we were trying to procure were 
available at least 5 to 10 times their pre-COVID prices. A 
typical machine which would cost $70,000 pre-COVID from China 
was costing us $75,000, and that was a bargain, by the way, to 
$150,000. We still went ahead.
    And the other thing is the raw material. Raw material pre-
COVID that used to cost about $1,000 to $2,000 was being sold, 
offered to us at $115,000. If I remember right, I might have 
even seen $135,000 price on it. That is like 65,000, 67,000 
times more.
    The worst part, while I cannot really claim to put my 
finger on this, is that as we watched these prices go up day 
after day after day, week after week, we wanted to get into the 
market quickly because we did not want to be priced out. Every 
day these prices went out. No matter whether we spoke to one 
vendor or to half a dozen vendors, the prices were almost 
within a band. Are these guys marching to a beat? I do not 
know, but they were definitely very synchronized. Will market 
forces alone really achieve that kind of synchronization? I do 
not know. That is an open question I have not been able to 
figure out.
    But these are the kind of things that we have to brave. And 
we were still putting our faith in the American consumer, and 
we continue to believe that the American consumer, while they 
know what a bargain is, they still prefer quality.
    Thank you.
    Senator Moran. Let me turn to Senator Blumenthal for his 
questions. And, Senator Blumenthal, I am on my way to the 
Senate floor to vote.
    Senator Blumenthal. OK. I will be shortly as well.
    Senator Moran. Senator Sullivan is here, Senator 
Blumenthal, if we need to turn to him to chair the hearing 
while both of us are gone.
    Senator Blumenthal. OK. I will be brief in my questions 
because we do have a vote that is ongoing.
    I just want to make a quick point about Neil Gilman and 
about Gilman Gear just to impress some of my colleagues, 
including my friend from Kansas. Gilman Gear actually led the 
Nation in developing a product called ``pylon cam'' that was 
developed with ESPN, which now is an indispensable part of 
every NFL and college game day broadcast. And in 2015, Mr. 
Gilman designed and brought to market the roll tackle ring, 
which revolutionized the way tackling and blocking are taught 
in high school and elsewhere for the game of football to 
prevent concussions from being as prevalent as they have been. 
So he is a highly talented designer and manufacturer in that 
area of sports equipment but then had to pivot using what we 
know in Connecticut as good old Yankee ingenuity, not always 
Yankee ingenuity, but certainly innovative and inventive 
spirit, and began making the isolation and surgical gowns, 
isolation hoods, hairnet caps, and other PPE, which is now 
serving to protect countless health care workers across 
Connecticut and the country.
    I want to thank again Neil Gilman for being here and want 
to ask him and other members of the panel whether they think 
that the Defense Production Act would be useful in developing 
the supply chain and providing the kind of support that you 
have made reference to because it would, in fact, help to 
develop and make more robust that supply chain and perhaps even 
reduce the cost of the raw materials and equipment that you 
need to produce the equipment that you do?
    Mr. Wessel. Senator, I do not see Mr. Gilman responding, so 
let me jump in very quickly, and thank you for your question.
    I think the DPA is a critical part of what the solution 
needs to be. I think we saw in this pandemic that it was not 
utilized quickly enough, effectively enough, and there has been 
a lack of transparency and accountability. For many of the 
small businesses, all the way up to the big businesses, but 
small businesses, as you heard today, are in need of quick 
capital that can be effectively deployed to meet many of the 
gaps that exist in the supply chains to retool and do what they 
need to do. So DPA I think is a critical tool but needs to be 
enhanced for the future.
    Senator Blumenthal. Thanks for that comment, Mr. Wessel.
    I do not know whether Mr. Gilman is on. Probably not. I 
apologize that those technical difficulties have prevented us 
from connecting.
    Mr. Krska, I do not know whether you have any comment on 
the DPA.
    Mr. Krska. I personally like the idea. I think that when 
you are starting a new industry and you are competing with the 
Chinese, very established businesses with a lot of leverage, a 
lot of volume--you know, having purchased items in China for a 
long time, it is hard to figure out the pricing even, the 
expense. How could it be so cheap? Right? When I first started 
going there, the cost of labor was somewhere around 80 cents an 
hour. Now in some areas, it is $7-$8 an hour, but still the 
pricing is so low that you cannot even make sense of it.
    So if we were to have some environment, some part of the 
economy that was set aside to allow us to achieve momentum and 
get leverage--right--in all parts of the supply chain, it would 
go a long way to restarting many of these industries to get 
them going. That is my impression.
    Senator Blumenthal. Those comments are very, very pertinent 
and timely because as you know--or there is no reason you 
should know, but we have been pushing the President to use the 
Defense Production Act. In fact, in the HEROES Act, there is a 
specific measure that has been led by our colleague, Senator 
Baldwin, a member of this committee--we will be hearing from 
her shortly--that would compel the President to use the DPA 
which, for reasons difficult to comprehend, he has not done.
    But the points that you make and others, Mr. Krska, are 
very, very powerful. They relate to unfair competition from 
China. Some of us have been complaining about it for years. 
They affect Kansas. They affect every State in the country, 
including Connecticut. We hear the same kind of complaints, and 
using the Defense Production Act I think is an essential part 
of the picture and also developing the skilled labor that is 
needed to provide the human resources that you need. It is not 
only parts and components that are in the supply chain. It is 
very much the men and women who do these jobs and who have to 
learn new skills. When you convert to new PPE, when you 
reengineer your assembly lines, I think that is an important 
part of the picture.
    So thank you all for being a part of this panel. I have to 
go vote. You can see that just like you, we as Senators have to 
multitask. I am going to turn, I think, the gavel over to--I 
guess I am being told we are going to have to take a short 
recess. That is the last direction from our Chairman, Senator 
Moran, who is now on the floor voting, but he has communicated 
to me through the wonders of a text that I am instructed to 
declare a recess. So we will be in recess I hope for just a few 
minutes. Thank you all. Thanks for your patience and thanks for 
being a part of this hearing.
    [Recess.]
    Senator Moran. The Subcommittee will reconvene. This is the 
most clunky hearing I have ever participated in let alone 
chaired, and that is saying a lot for the U.S. Senate for 
clunky. So I apologize to our witnesses in particular but to 
all who are paying attention to this hearing how challenging it 
has been with a series of votes.
    I think it is Senator Cantwell who is next to question.

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Well, thank you, Mr. Chairman. So thank 
you for inviting a witness that is both a business owner in 
Kansas and a Washington State resident to boot.
    Senator Moran. [Inaudible] well for you and I to work 
closely together.
    Senator Cantwell. Exactly. And I do want to work with you 
on the manufacturing workforce issue that you and Senator 
Warner have introduced as it relates to helping keep the supply 
chain in aviation manufacturing.
    So I appreciate this hearing, and I know that we are all 
dealing with an increase in the number of cases and the 
challenges that we face. I am very proud that our State has 
kept our rates of infection and hospitalizations down and 
appreciate the ongoing efforts there.
    But I am also impressed by the manufacturing efforts in our 
State, everybody working together. Outdoor Research converted 
one of its Seattle facilities into making surgical masks. They 
used to make outdoor equipment. Now they are making 400,000 
surgical masks and 60,000 N95 respirators per week, creating 
200 new jobs. Aerospace manufacturers, GlobalTech Plastics in 
Fife and Tool Gauge in Tacoma, worked with Design that Matters, 
a Redmond nonprofit, on other medical expert designs to help 
with the shields. At one point in time, I know that Boeing was 
creating face shields as well. Kent-based Flow International 
produces high pressure jet cutting systems and has delivered 
over 200,000 medical grade face shields to the state and nearly 
40,000 different distributors--I am sorry--distillers, 
including the Chehalis Tribe that had just opened up this great 
new facility, switched over immediately to hand sanitizer. So I 
feel like the American spirit is alive and well by these 
manufacturers who had adjusted their production levels.
    So I wondered if our witnesses, Mr. Bulusu or any of the 
others, could talk about--obviously, we have had a lot of 
frustration here on the Defense Production Act. But what do we 
need to do to give clear indications to manufacturers that we 
still need this production level, and how can we gain their 
help now that we are seeing a spike again on this necessary 
equipment?
    Mr. Bulusu. Could you please repeat the first part of the 
question, please?
    Senator Cantwell. What do we need to tell manufacturers? 
What kind of guidance, directive do we need to give them to get 
these production levels up that we need because of the changing 
conditions we are now facing for the next several months?
    Mr. Bulusu. If I may take this opportunity. The biggest 
challenge that we face is being able to sell. There are two 
different channels that we pursued. One was to go after the 
opportunity to sell to governments at the local levels or the 
Federal level. The biggest challenge we ran into there was by 
default the policy favored the lowest price, which just meant 
that the product that is being dumped into the United States is 
the default choice.
    I would not say that we cannot necessarily compete, and I 
am not going to necessarily say that the American consumer has 
to pay a higher price. But before we achieve that level of 
economies of scale, there is a need for the American 
manufacturing industry to be supported. That is not going to 
happen over a day or two. It is a process through which we have 
to buildup scale to achieve the economies of scale.
    But the first helping hand could come from modifying policy 
to at least set aside a part of the procurement funds to go to 
American manufacturers. That will help us put our roots in the 
medium term.
    And the second one, which is probably not super relevant 
right here but is nevertheless affecting us significantly, is 
our organic growth is unfortunately--it is stifled given the 
fact that we cannot advertise directly to the consumer. The 
prominent search engines, Google, Bing, or social media like 
Facebook, Twitter--none of them really allow us to advertise 
because they are worried about price gouging. And the barriers 
that are established are making it difficult for us to 
establish ourselves, put our roots by reaching out directly to 
the consumer at least.
    Senator Cantwell. I am pretty sure this mask I am wearing 
right now--I am sure it was gotten off of Amazon. So what do 
you mean? There are manufacturers that are producing supplies 
and they are unable to sell them because----
    Mr. Bulusu. The modern way in general, if I wanted to reach 
the customer, would be to advertise on Google, maybe make it 
available on Amazon, and then send a link that would appear on 
Google and put an advertisement there or maybe on Facebook. And 
I come from the technology industry initially. So I worked to 
some extent on Bing, the search engine by Microsoft. All of 
these opportunities are blocked because the companies are 
worried--and rightly so--that there is price gouging practices 
that are due to false advertisement and everything.
    But the matter of fact is that American manufacturers, once 
we have a company on American soil, are completely traceable. 
So it is not like we should be scared of or we are not so prone 
to--or we cannot easily abuse the ability to sell to an 
American customer like maybe others could.
    Senator Cantwell. Yes. So basically we need something of a 
clearinghouse----
    Mr. Bulusu. Yes, ma'am.
    Senator Cantwell.--besides the funding.
    I know of another case, Mr. Chairman, of a point-of-care 
technology that just needed a little bit of funding to go to 
scale on what would be, you know, an airport test within 20 
minutes, which for aviation would be incredibly important. So 
we do have these manufacturers that are trying.
    So I agree with your first point about the funds. I agree 
that we should help with some sort of clearinghouse on making 
you feel comfortable that you can advertise these products. You 
need to know that they meet a standard.
    Was there a third point on this?
    Mr. Bulusu. That was it. And I tried, by the way, by 
reaching out to executives in Amazon. My partner--he actually 
worked for a very long--if for 3 and a half to 4 months we find 
it difficult and we cannot get into Amazon, then there is a 
problem.
    Senator Cantwell. OK. So basically funding and some way to 
make sure that you feel comfortable that you are meeting the 
standards and then advertising that people will feel 
comfortable that you are meeting that standard. OK, great.
    Thank you, Mr. Chairman.
    Senator Moran. Ranking Member, thank you very much.
    Senator Thune.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman.
    Commissioner Wessel, throughout the COVID-19 pandemic, we 
have seen the United States supply chain and manufacturing 
industry face a number of challenges to keep up with the demand 
of certain resources particularly personal protective 
equipment. What steps should the United States take today to 
ensure we have a more resilient supply chain?
    Mr. Wessel. Thank you for your question, Senator. And I 
think we face it all too clearly in this sector, PPE, 
medicines, et cetera, that has raised public attention, but 
this exists across a broad cross section of industries.
    First of all, in this sector I think we need to make sure 
that we have a strategic national stockpile that is adequate to 
the task. Again, as I said earlier, no one expected the 
virulence and breadth of this pandemic, but I think we have to 
understand that similar situations could arise in the future 
and we need to make sure that we are prepared. That means 
having domestic production available, including surge capacity. 
It may be idle, but we need to support it potentially with 
Federal funds. And we need to make sure that we have the 
stockpiles necessary to quickly deploy to meet needs. The fact 
is our health care workers, those on the front lines, should 
not be having to search for equipment, having to potentially 
use substandard equipment or having to reuse that equipment.
    The DOD has been looking at how to make sure that our 
industrial base is able to meet surge needs for any of a number 
of defense procurement needs. We need to focus more on our own 
security and what types of manufacturing capabilities must 
exist here to support our national economic health and 
agricultural security.
    Senator Thune. Thank you.
    Ms. Stovall, in your testimony you highlighted at the 
beginning of the pandemic, several manufacturers struggled 
finding suppliers to support their business needs. What other 
issues did you see with the supply chain, and how has the 
Manufacturing Extension Partnership program at NIST been able 
to help alleviate some of those issues?
    Ms. Stovall. Thank you for the question.
    Like I mentioned in my testimony, there is no national 
supply chain data base. And so early on in the pandemic, we all 
were looking around. Right? We all were saying where can we 
find ventilators, where can we find more masks, where can we 
find hospital gowns, hospital curtains, all of the things that 
were critically essential needs to help this public health 
emergency.
    So what we did very early on--I am reminded of a story that 
happened. I will never forget it. It was a Sunday afternoon 
back in March, and we got a call. We, center directors across 
the national network, got an e-mail from our executive director 
of the MEP program, Carol Thomas. And she sent out an e-mail. 
There was a request from the White House looking for what 
manufacturers across the United States could manufacture PPE 
equipment. We were very early in this pandemic. Everybody was 
trying to still kind of figure out what this was and what the 
needs were going to be.
    We had 2 hours to respond on a Sunday afternoon. And within 
2 hours, we as a national network were able to look in our 
own--each of the center directors were able to look into our 
own states, see what was being manufactured, even though there 
was not a national database and even though we did not have, 
frankly, at the State levels data bases of who manufactures PPE 
equipment in our state. Because of the relationships that we 
have, because of the work that we had done in our state and 
across the national network, we were able to come up with a 
pretty exhaustive list just within a couple of hours on what 
manufacturers, not just in Kansas but across the United States, 
could meet these PPE needs. So that is one of the things that 
we have been doing.
    One of the other things that we have been doing is we heard 
earlier from InkCycle from Mr. Krska talking about the need for 
bottles. We hear those kinds of needs all over the place. 
Manufacturers have really invested on their own to pivot their 
production to critical need PPE goods, but there are still gaps 
in the supply chain. And so what we at the State level MEP 
centers, as well as linking across the national network, have 
done are really build an understanding of what capabilities are 
in our states, what capabilities that are in our states that 
can help meet this crisis. And that is anything from bottles 
and caps to dispensers, hand sanitizers, masks, N95 masks, all 
of the things that might go into any part of this supply chain. 
So we have been doing this state by state, but we have also 
been linking that through the national network that we have. So 
we were able to help meet the needs not just in our state but 
across the country.
    Senator Thune. Thank you.
    And, Mr. Chairman, my time has expired. Thank you, and I 
will perhaps have some questions to submit for the record.
    Senator Moran. Senator Thune, thank you very much.
    The next Senator to inquire is Senator Klobuchar. You are 
recognized.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Well, thank you very much, Mr. Chairman. 
Thank you to all the witnesses on this really important topic 
of manufacturing.
    A few days ago, I talked to a number of manufacturers in my 
state, smaller companies who are really struggling in the 
pandemic because of employees with coronavirus, quarantines, 
everything. And so I would urge all of my colleagues that it is 
time to do pandemic relief in the next month, that we cannot 
wait until a new President comes in. I really think we have to 
do it now. So that is my only political statement here, Mr. 
Chair.
    So I will start with you, Mr. Gilman. Bold action is 
required to help newly unemployed American people who did not 
actually think they were going to lose their jobs. And then we 
are going to, I think, have--when we get to the day after 
tomorrow when a vaccine comes out, we will have different types 
of jobs available. And we were already seeing we did not have 
enough people in manufacturing to fill some of the jobs. We 
still have openings right now actually in my own state.
    So we have a bill for a skills training credit. It is 
bipartisan with Senators Sasse, Booker, and Tim Scott that I 
have led, and it can be applied to cover the cost of a wide 
range of training programs that build skills.
    Mr. Gilman, do you believe that increasing a worker's skill 
set through appropriate training will help workers to reenter 
the workforce now or after we get on the other side of this?
    [Pause.]
    Senator Klobuchar. Hello?
    Mr. Wessel. I am not sure, Senator, that Mr. Gilman is 
still there. Let me just say that is critical. If we do not 
have the skills, we cannot meet the needs of the manufacturers 
to get things back on line, get people back to work, and meet 
our needs.
    Senator Klobuchar. Very good.
    Anyone else want to chime in on this? Thank you, Mr. 
Wessel. That was very kind.
    Ms. Stovall. Hi, Senator. This is Tiffany Stovall.
    Senator Klobuchar. Yes.
    Ms. Stovall. I would like to comment on that as well.
    One of the things that--so we know that the workforce issue 
is one that is ongoing. It is not new to the COVID pandemic, 
obviously. Finding a skilled workforce has been a challenge for 
manufacturers for quite some time, and I think the 
manufacturers on the call would agree with that.
    But one thing that has been a particular challenge and a 
particular concern during this COVID pandemic is--as 
manufacturers have had to navigate how they keep operations 
going, one of the things that they are really worried about is 
keeping their work force.
    Senator Klobuchar. Some people are at home and they could 
go, and especially for smaller ones, it is hard.
    Ms. Stovall. Yes, absolutely.
    And so they are trying to avoid layoffs at all costs.
    We have helped, and I know it is not just us, just KMS, the 
Kansas MEP, but other MEPs across the network--we have really 
been hands on and helpful with manufacturers trying to get them 
access to the PPP and other resources that are available to 
them so that they can stay open and keep their folks employed.
    Senator Klobuchar. All right. Very good. Thanks. And I am a 
big fan of the MEP and thank you for the work you do.
    I have one last question and I will give this one to Mr. 
Wessel. Back in July when you testified before the full 
Commerce Committee, you talked about the importance of standing 
up to illegal and unfair trade practices such as steel dumping, 
particularly important to my state. My grandpa was an iron ore 
miner. Our northern part of our state--that is a large part of 
the workforce up there.
    Now we are going to have a new President coming in who I 
believe can usher in, I will say, the somewhat strategic era of 
U.S. trade policy, kind of go away from the ?go it alone? 
approach.
    But what should Congress do, Mr. Wessel, to best work with 
the new administration to stand up to unfair trade?
    Mr. Wessel. Well, thank you for your question. And that, 
you know, is the $64,000 or $64 trillion question I guess.
    First of all is not move quickly to dismantle what this 
administration has put in place. As you noted, there is 
questions about strategy, but that strategy must be based on a 
long-term approach and not simply responding to the tactics of 
the day.
    As you know, clearly over-capacity in steel, in aluminum, 
in fiber optics, and 15 or 18 other industries, mostly caused 
by China's economic policies, is what is threatening so many 
industries. We need specific disciplines that are enforceable, 
and those need to be done in a multilateral setting.
    But we have not had enough support from our allies and 
partners in the past. We have had, as you know, the Global 
Steel Forum and the OECD Steel Committee. I think they now 
understand that America is serious about addressing unfair 
trade. We want to do so with their support and cooperation. And 
I believe Congress is going to be a strong bipartisan partner 
with the incoming administration to do that.
    But no one should be confused by America's resolve to 
support our producers and our workers. That is steadfast. The 
question is what the long-term strategy is.
    Senator Klobuchar. OK. Very good. Thank you.
    Thank you, Mr. Chair.
    Senator Moran. Thank you, Senator Klobuchar.
    Now I will recognize Senator Baldwin.

               STATEMENT OF HON. TAMMY BALDWIN, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Baldwin. Thank you very much, Mr. Chair.
    Commissioner Wessel, I am going to ask some questions, but 
I also just want to note for the record, as I have been 
shuttling back and forth to the floor to take votes, as 
sometimes happens, they may have been things you have tackled 
already, but that is OK.
    Look, we are 9 months into this pandemic, and I am still 
hearing on a routine basis from Wisconsin health care workers 
who cannot get a reliable supply of N95 masks that they need to 
protect themselves and provide care for their patients. And 
that is absolutely unacceptable in the United States of 
America.
    Since the pandemic began, I have been calling on the Trump 
administration to use the full power, all the power, of the 
Defense Production Act to alleviate these supply shortages, 
including the shortages of PPE that our essential workers need. 
So far, it is my observation that the Trump administration has 
only used it sporadically, well short of its full potential, 
failing to use all the tools that are available under the 
Defense Production Act.
    Also, I have been concerned that supposed DPA contracts 
have gone to shady middlemen, and when priority orders were 
issued to major U.S. companies under Title I, they failed to 
utilize the full weight of the U.S. Government backing to 
incentivize these companies to truly expand their manufacturing 
capacity.
    So, Commissioner Wessel, what would it have meant and what 
would it mean going forward to fully unlock the power of the 
Defense Production Act specifically from a manufacturing 
perspective?
    Mr. Wessel. Thank you for your question, Senator. Also 
thank you for your leadership on this issue. You have helped 
provide some critical thinking and policy approaches to address 
this issue.
    I think it would have been of immeasurable benefit to 
Americans, to the economy, to our health care workers, first 
responders, as well as patients avoiding sickness and worse, if 
we had utilized DPA effectively quickly with accountability and 
transparency. It is not only about getting the funds, which you 
have been a leader on and those authorities should have been 
triggered early, there was no accountability, no transparency 
as to where contracts were going for production or where the 
products were being deployed. And that needs to be fixed. We 
need legislation to make sure that never happens again.
    Senator Baldwin. Well, I appreciate that.
    I will note that in May of this year, I introduced the 
Medical Supply Transparency and Delivery Act with my colleague, 
Senator Chris Murphy, and many others, which does lay out a 
framework for an effective COVID-19 response by Federalizing 
and adding critical oversight and transparency to the supply 
chain for critical medical supplies and equipment. It also 
unlocked the full array of authorities under the Defense 
Production Act. I certainly hope that when President-elect 
Biden takes office in January, that he will use executive 
action to implement this framework and unleash that power as we 
will still have work to do.
    I know I have just a few seconds left but, Commissioner 
Wessel, the Trump administration claims to prioritize economic 
security as a national security issue. Peter Navarro in a 2018 
op-ed in Real Clear Politics stated that we are in an era of 
intense economic competition and that into this breach comes 
Donald Trump with a new organizing principle for strategic 
policy. Economic security is national security.
    In April, Acting Director of DHS Chad Wolf tweeted that 
economic security is homeland security and has made similar 
statements in testimony to Congress.
    Can you elaborate on how--well, when push comes to shove, 
it was a lot of talk and little action. While China views 
economic and national security as inextricably linked, as you 
note in your testimony President Trump has failed to underpin 
his economic policies with the national security concern. Can 
you elaborate on how this failure put us in a strategic 
disadvantage in relation to great power competition with China?
    Mr. Wessel. That is a great question--thank you--and a 
potentially long answer, but I will shorten it.
    Those interests are inextricably intertwined, and the 
workers in your state who provide countless benefits for making 
sure that we support a strong economy, that we are able to 
support industries, critical industries, critical 
infrastructure--their interests, their ability to support 
America has been undermined by China's non-economic, predatory 
policies over a long period of time. But the impact of those 
has accelerated as China has passed its industrial policies, 
Made in China 2025, its 5-year plan, which will be updated in 
March.
    We have seen tactics applied to China's policies but not a 
long-term strategy to address the overall problems. You know, 
tariffs, which I have supported, are not a long-term strategy. 
We need to, again, multilateralize our responses. We need to 
make sure they are sustainable, and we need to make sure that 
we have the ability here--manufacturers and others--to compete 
on a level playing field. So it is an all-of-the-above strategy 
that needs a coherent framework which we join with our allies 
on and where Congress is a true partner.
    Senator Baldwin. Thank you, Commissioner.
    And I yield back.
    Senator Moran. You have nothing to yield back.
    Senator Rosen is the last Senator I think to be able to 
question our witnesses, and we need to conclude our hearing 
shortly thereafter. This committee room is to be occupied 
again, and the preparation to do so needs to take place soon. 
Senator Rosen.

                STATEMENT OF HON. JACKY ROSEN, 
                    U.S. SENATOR FROM NEVADA

    Senator Rosen. Thank you, Mr. Chairman. I want to thank 
everyone here for being here, for what you are doing.
    I want to build a little bit upon what my colleagues have 
already asked you about workforce training and retraining 
because during the pandemic, of course American ingenuity has 
been a bright spot, and our Nation has exhibited with many of 
your companies and those in my State the ability to tackle 
these insurmountable problems.
    For example, when the pandemic hit, there was a plastics 
manufacturer in Sparks, Nevada. They started making face 
shields and safety partitions for casinos, restaurants, and our 
government agencies. The University of Nevada-Reno's Innovation 
Center teamed up with our State's MEP center, Nevada Industry 
Excellence, to produce gowns for local health care workers. 
This August I had the opportunity to virtually visit with Frey 
Ranch. It is in Churchill County--their distillery. They make 
whiskey and bourbon and they shifted to producing hand 
sanitizer, and similarly a Las Vegas distillery--in the 
Henderson area in the greater Las Vegas area--they pivoted 
their operations from vodka, rum, and whiskey to produce hand 
sanitizer.
    And so I want to thank you for addressing some of the 
challenges that we have doing this for PPE and some of the 
other things, workforce training, because you know that having 
a skilled workforce that is able to be nimble and readily adapt 
is going to impact how quickly our businesses come back.
    But I would like to build on that a little bit because I 
also believe that we have to build consumer confidence for 
going back indoors. What are we all worried about? The quality 
of our air. Indoor air quality is what stops us from going to 
restaurants, to marinas, to concerts, hotels and casinos like I 
have in Nevada.
    So, Ms. Stovall, in your experience working with small and 
medium sized manufacturers, do you know of companies that are 
working to produce the very important type of HEPA filters and 
the filtration systems that we are going to need, those 
electronic air cleaners that will help jump start an economy 
and make us feel more confident to go back indoors through this 
pandemic?
    Ms. Stovall. Thank you for the question.
    Yes, as a matter of fact. So one of the things--early in 
your comments, you referenced ingenuity and the ingenuity of 
manufacturers. Manufacturing is built on innovation. Right? We 
are a country of makers. We make things. And so it is in times 
like this where we have critical needs, needs that may be a 
little bit different than they were 6 months prior to that, 
that companies are looking to say how can we do better at 
meeting the need. That is where this innovation comes from.
    The companies are doing this on their own. I keep pointing 
that out because I want you all to really understand that the 
time, the dollar investment, what manufacturers are doing on 
their own and what we need to be able to do to support them.
    So back to your question of, are there companies that are 
looking at indoor air quality? Absolutely, they are because 
that is a need. So while we are looking at what are our needs 
right now, masks, ventilators, those kinds of needs, we are 
also looking at what gets us back to some sense of normalcy, 
which is what will make the public comfortable with going into 
buildings and to retail spaces and office spaces. And that is 
an increased focus on air quality. So, yes, that is something 
that is being looked at by manufacturers not only in Kansas but 
across the country.
    Senator Rosen. Well, I thank you for that. I would like to 
speak a little bit more about that, but I know that there is 
another committee coming in right after us, so I will submit 
those questions for the record. I think it is really important 
that we talk about indoor air quality because it is key to 
getting folks back to sports and school and all of the things 
that we all miss so dearly. So I will yield back my last few 
seconds, and I thank you all for being here today.
    Senator Moran. Senator Rosen, thank you for your 
cooperation. Thank you for your participation today.
    We are just about to conclude this hearing, but it is 
always my practice to ask any of our witnesses if they have 
anything they want to try to clarify or something they wish 
they would have been asked, something that they wish they would 
have said.
    [No response.]
    Senator Moran. Very good. Thank you all for joining us this 
afternoon. This is a very important topic, and we need to 
figure out the policies that are necessary to strengthen and 
grow our manufacturing economy, creating jobs in Kansas and the 
United States, but also a better way to protect our citizens 
from the pandemic and other emergencies and crises that will 
occur by having access to the various manufactured products 
that are necessary for our country's well-being, both health 
and economic.
    Senator Blumenthal. Mr. Chairman?
    Senator Moran. Yes, sir.
    Senator Blumenthal. Mr. Chairman, I note that Neil Gilman 
evidently is back on the line. I want him to know that I was 
bragging about him. He may not have heard it. I want to say to 
him how much I admire what he has done and all the 
entrepreneurs and manufacturers on this call. I think this 
hearing has really been very inspiring to see the kind of 
ingenuity and creativeness and innovativeness, which is really 
the hallmark of America.
    The Chinese can steal our intellectual property. They can 
exploit their workers, and they can try to undercut us, but I 
think in the long run our system will beat theirs and we will 
be safer in terms of our health care and our economy because of 
the patriots that we had at this hearing today you and I had a 
chance to talk about a little bit on the floor.
    And I think that your leadership here has been very 
important. I hope that you and I can work together in 
continuing showing how manufacturing of PPE and these health 
care supplies is so important to our country. So my thanks to 
you for holding this hearing and to all of our witnesses.
    Senator Moran. Senator Blumenthal, thank you for your 
assistance, your leadership, and I look forward to continuing 
our efforts to pursue this topic and others within the 
Subcommittee's jurisdiction.
    We are going to conclude. The hearing record will remain 
open for two weeks. During this time, Senators are asked to 
submit any questions for the record. Upon the receipt of those 
questions, the witnesses are requested to submit their written 
answers to the Ccommittee as soon as possible. That concludes 
today's hearing.
    And again, I thank our witnesses. I thank our staff, and I 
apologize for the on again/off again nature of today's hearing 
through no fault of anyone in this room's efforts. We just had 
a disjointed chance to have the testimony told, but it was very 
compelling and very useful and I am grateful for that.
    With that, the hearing is now adjourned.
    [Whereupon, at 4:42 p.m., the hearing was adjourned.]

                            A P P E N D I X

    Response to Written Questions Submitted by Hon. Jacky Rosen to 
                              Ravi Bulusu
    Question 1. During this devastating pandemic, American ingenuity 
has been a bright spot, demonstrating our capacity as a nation to 
tackle seemingly insurmountable problems. Having a skilled workforce 
that is ready to quickly adapt to rapidly changing conditions has made 
a difference for these businesses and will impact how quickly our 
economy will recover from the pandemic.
    a.) How did you go about retraining your workforce to manufacture 
health and safety products? What do you recommend to small and medium-
sized manufacturers who want to pivot into the PPE space and that need 
to do workforce retraining?

  a.  We are a startup that started from scratch and so are primarily 
        focused on adding employees. Recommendations for manufacturers 
        who want to pivot into PPE would be as follows:

      i.   Study the market and the players in the market. This will 
            help establish a niche in a chaotic market in unusual 
            times.

      ii.   Reach out to potential buyers, find out their requirements 
            and also quantify potential demand.

      iii.  Ensure there is a reliable supply chain of the raw 
            materials needed. Establish sufficient redundancy to avoid 
            interruption in manufacturing.

      iv.   Traditional marketing strategies might not always work for 
            your product. In such cases, the flexibility to think out 
            of the box becomes important.

      v.   Get the product certified as early as you can.

    b.) How can Congress best assist manufacturers in providing a 
trained workforce? What actions can Congress take to support small 
manufacturers' efforts to meet product demand and retrain their 
employees to respond and adapt quickly to an evolving pandemic?

  a.  To help build a trained workforce, incentivizing training 
        programs would be very helpful. The post-pandemic world is 
        likely to be very different.

  b.  To help small manufacturers:

      i.   Allocate some percentage of government procurement to 
            domestic PPE and medical equipment manufacturers for 5 
            years. It will help our companies get competitive. Due to 
            the established practice of procuring at the lowest price, 
            most American small manufacturers of PPE are by default not 
            able to compete with China made PPE despite significant 
            difference in the quality.

      ii.  Establish a priority channel for American manufacturers in 
            the testing and certification process during national 
            emergency situations either through DPA or a different act. 
            Despite having made a product, the certification pipeline 
            is very crowded causing 3-4 months of delays. EUA is 
            helpful but most consumers in the market prefer a certified 
            product.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Jacky Rosen to 
                           Tiffany M. Stovall
    Question 1. During these challenging times, Nevada's manufacturers 
and their workers have been resilient in ensuring that our communities 
have the protective equipment they need to keep our first responders, 
frontline workers, and families safe. However, despite these efforts to 
ramp up PPE production, as COVID-19 cases continue to climb, challenges 
remain--particularly our overdependence on global supply chains. I am 
curious, however, if American companies--through innovation--can help 
pave the way to creating new, domestic supply chains.
    a.) Are there COVID response-related sectors where small and 
medium-sized businesses can still step up and fill domestic supply 
chain needs? Where are the biggest gaps where American manufacturers 
can jump in to not only contribute, but even create jobs because unmet 
demand is so high? What would failure to fill these gaps mean for the 
American economy as a whole?
    There are absolutely COVID response related sectors where small and 
medium sized businesses can still step up and fill domestic supply 
chain needs. Notably, supplies related to prevention of spread as well 
as medical professionals such as masks, shields, gloves, gowns, hand 
sanitizer and such will continue to be in high demand for some time to 
come. Additionally, supplies that allow our country to remain in 
business are also critical such as physical barriers like those seen in 
retail check out lines, janitorial cleaners, and disinfectants for use 
in a wide variety of spaces and types of businesses from medical 
facilities and restaurants to manufacturing and distribution.
    Further, within the manufacturing industry there are a number of 
small and midsized companies with knowledge, expertise, and facilities 
to manufacture various scales of biological materials and 
biopharmaceuticals within sterile environments. Biomanufacturing is the 
application of manufacturing processes and biotechnology to produce 
products from biological origins. Through biomanufacturing, companies 
are able to produce important biologics and biomaterials that have 
broad applications across medicine, research, construction, 
engineering, foods and beverages, and other industrial application.
    The Biotechnology Innovation Organization and Boston Consulting 
Group identified three bottlenecks that need to be prioritized to 
manufacture COVID-19 related biologics:

   Biologics drug substance production

   Sterile fill and finish capacity

   Lyophilization capacity

    To increase capacity, existing biopharma and biologics 
manufacturers can partner or contract with small to mid-sized contract 
drug manufacturing companies (CDMOs/CMOs) to increase capacity to 
address supply shortages. Even in the absence of increased demand due 
to COVID-19, the changing biopharmaceutical industry will continue to 
have an increased demand for these types of manufacturing capabilities.
    By leveraging and building upon our existing companies that have 
the above capabilities, we can create additional jobs while also 
increasing the U.S. market share of the manufacturing and 
biomanufacturing industry.

    b.) What actions can Congress take to strengthen our Nation's 
domestic supply chains?
    Congress can strengthen our Nation's domestic supply chains by 
establishing and funding a National Supply Chain Database as proposed 
in the National Defense Authorization Act of 2020. COVID-19 has 
demonstrated the devastating effects of a global pandemic on public 
health and safety, our local economies, and global markets. Plant 
closures, a reduction in manufacturing operations, and in some cases, 
retooling of manufacturing plants to produce Personal Protective 
Equipment (PPE) and other products highlight the critical need to have 
a nationwide real-time understanding about the strengths and 
vulnerabilities of our national supply chain across various industries.
    Global pandemics are not the only threat to our supply chain. 
Natural disasters, cyber threats, trade agreements, and raw material 
shortages are but a few examples of threats to our supply chain. Since 
March, we have watched as our states, hospitals, and employers have 
struggled to secure access to PPE and other products necessary to 
protect our communities during the COVID-19 outbreak. It is clear that 
we need a centralized source of information on our Nation's supply 
chain of PPE and other products.
    Establishing a National Supply Chain Database will ensure the 
Nation's ability to minimize disruptions in the supply chain by having 
an accurate and real-time assessment of U.S. manufacturers' 
capabilities and inventories.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Dan Sullivan to 
                             Michael Wessel
    Question 1. The U.S.-China Economic and Security Review 
Commission's July 1 report on U.S. Multinational Enterprise Activity in 
China identified a number of concerning trends from our growing 
reliance on China for the production of goods. Globalization has not 
led to reliability through supply chain diversification across numerous 
countries in various parts of the world. Instead, we have increased our 
reliance on a single country--China, in ways that make us vulnerable to 
catastrophic supply chain disruptions like those that we see with the 
pandemic.
    1. The U.S.-China Economic and Security Review Commission's July 1 
report on U.S. Multinational Enterprise Activity in China identified a 
number of concerning trends from our growing reliance on China for the 
production of goods. Globalization has not led to reliability through 
supply chain diversification across numerous countries in various parts 
of the world. Instead, we have increased our reliance on a single 
country--China, in ways that make us vulnerable to catastrophic supply 
chain disruptions like those that we see with the pandemic.

    a. What initiatives are underway to encourage U.S. multinational 
enterprises to diversify outside of China?

   The U.S. government is considering strategies to bring 
        supply chains in critical industries closer to home. Some 
        initial steps have focused on addressing U.S. supply chain 
        dependence on Chinese medical supplies \1\ and critical 
        minerals.\2\ For example, in May 2020, the Trump administration 
        authorized the Development Finance Corporation to execute loans 
        using the Defense Production Act's Title III authorities to 
        shore up domestic production of strategic resources needed to 
        respond to the pandemic.i A separate Executive Order 
        issued in September directed the Departments of Defense, 
        Treasury, Commerce, Energy, and others to produce reports 
        offering guidance on how to reduce U.S. overdependence on China 
        for critical minerals. The reports, among other things, should 
        include recommendations on potential incentives to promote 
        domestic mining and processing of such minerals.ii 
        Administration officials have also reportedly considered 
        establishing a $25 billion ``reshoring fund'' to subsidize U.S. 
        companies' movement of manufacturing activity out of 
        China.iii
---------------------------------------------------------------------------
    \1\ According to research conducted by the Congressional Research 
Service, China accounted for over 15 percent of U.S. imports of medical 
ventilators and over 70 percent of imports of medical protective 
articles like masks. Karen M. Sutter, Andres B. Schwarzenberg, and 
Michael D. Sutherland, ``COVID-19: China Medical Supply Chains and 
Broader Trade Issues,'' Congressional Research Service R46304, April 6, 
2020, 17-18. https://crsreports.congress.gov/product/pdf/R/R46304.
    \2\ China produces more than 80 percent of rare earth elements 
globally, and broad provisions in Beijing's recently passed Export 
Control Law could see the Chinese government restrict exports of these 
elements as a tool of coercion. Jamie Smyth, ``Industry Needs a Rare 
Earths Supply Chain Outside China,'' Financial Times, July 27, 2020. 
https://www.ft.com/content/fc368da6-1c86-454b-91ed-cb2727507661; Lester 
Ross, Kenneth Zhou, and Tingting Liu, ``China Publishes Draft Export 
Control Law,'' WilmerHale, January 15, 2020. https://www.jdsupra
.com/legalnews/china-publishes-draft-export-control-law-58113/.

    b. How do we incentivize businesses to pursue materials and 
manufacturing elsewhere while the People's Republic of China 
---------------------------------------------------------------------------
artificially keeps costs lower than other competing venues?

   The supply chain realignment process is in its early stages 
        and will be challenging. The United States and other countries 
        are just beginning to formulate and implement supply chain 
        reshoring and diversification initiatives. Unfortunately, with 
        supply chains in China, the outsourcing and offshoring that has 
        occurred is also a result of deeply-embedded and supported 
        industrial policies designed to promote China's interests often 
        at the expense of other countries. While many of the 
        dependencies have existed for some time, the current pandemic 
        has elevated attention on these issues in the United States and 
        in other nations.

   Some governments are providing subsidies and other 
        investment incentives to encourage companies to diversify 
        production away from China. The Japanese government has 
        earmarked $2.2 billion to subsidize Japanese manufacturers' 
        relocation of production out of China to diversify supply chain 
        risks.iv So far, 57 Japanese companies have received 
        a total of $535 million to open new factories in Japan, while 
        another 30 companies have received $220 million to expand 
        production in Vietnam, Myanmar, Thailand, and other Southeast 
        Asian countries.v European leaders are also seeking 
        to reshore supply chains in some critical industries, such as 
        medical supplies.vi For example, in June French 
        President Emmanuel Macron submitted a proposal to European 
        Commission President Ursula von der Leyen asking Brussels to 
        develop investment incentives to encourage the reshoring of 
        active pharmaceutical ingredient production capacity to the 
        EU.vii

   Despite its diminished competitiveness as a low-cost 
        manufacturing base, China's extensive industrial ecosystem 
        makes the complete transfer of supply chains out of the country 
        a difficult prospect. China's ecosystem of suppliers, skilled 
        labor, and efficient transportation infrastructure is difficult 
        to match, cementing dependencies on production networks there. 
        According to research from Bank of America, the cost to U.S. 
        and European companies of moving manufacturing out of China 
        could reach $1 trillion over the next five 
        years,viii a hefty expense as the pandemic strains 
        corporate finances and crimps investment. Preliminary trade 
        data and market research suggests the diversification of 
        discrete portions of production in select industries away from 
        China, rather than a complete uprooting of supply chains out of 
        the country, is more likely.\3\ Any movement of manufacturing 
        production outside of China is made more difficult in the short 
        term as resumption of industrial activity and economic recovery 
        in China outpaces that of other countries still grappling with 
        the pandemic and the fact that China's industrial policies and 
        state-led market intervention creates incentives for Western 
        companies to continue to rely on that country.
---------------------------------------------------------------------------
    \3\ For example, according to the World Trade Organization Economic 
Research and Statistics Division, in the first half of 2019 about $21 
billion in U.S. imports diverted from China to Mexico ($6.9 billion), 
the EU ($6 billion), Taiwan ($4.5 billion), and Vietnam ($2.8 billion). 
Looking forward, consulting firm McKinsey estimates that the production 
of 16 to 26 percent of globally traded goods could move to new 
countries over the next five years as companies and governments pursue 
supply chain resilience. Susan Lund et al., ``Risk, Resilience, and 
Rebalancing in Global Value Chains,'' McKinsey Global Institute, August 
2020, 61; Eddy Bekkers and Sofia Schroeter, ``An Economic Analysis of 
the U.S.-China Trade Conflict,'' World Trade Organization Economics and 
Statistics Division, February 26, 2020, 9. https://www.wto.org/english/
res_e/reser_e/ersd202004_e.pdf.

    c. What more can be done to protect against supply chain 
vulnerabilities created by an overreliance on a single foreign nation 
---------------------------------------------------------------------------
like we have with China?

   The U.S. government must strengthen its ability to analyze 
        U.S.-China economic relations. Our country's economic linkages 
        with China are deepening beyond trade to include portfolio 
        investment which is likely to create enhanced vulnerabilities 
        and dependencies. As China's financial authorities 
        strategically open China's financial sector to utilize foreign 
        capital in shoring up China's economy, it becomes more urgent 
        for the U.S. government to track and monitor U.S. exposure to 
        risks and vulnerabilities in China's financial system and to 
        ensure that U.S. investors, as well as our national interest, 
        are protected. To that end, the Commission recommended in 2020:

     Congress enact legislation establishing a China 
            Economic Data Coordination Center (CEDCC) at the Bureau of 
            Economic Analysis at the U.S. Department of Commerce. The 
            Center would be mandated to collect and synthesize official 
            and unofficial Chinese economic data on developments in 
            China's financial markets and U.S. exposure to risks and 
            vulnerabilities in China's financial system, including:

                  Data on baseline economic statistics (e.g., 
                gross domestic product [GDP]) and other indicators of 
                economic health;

                  Data on national and local government debt;

                  Data on nonperforming loan amounts;

                  Data on the composition of shadow banking 
                assets;

                  Data on the composition of China's foreign 
                exchange reserves; and

                  Data on bank loan interest rates.

    There are also many questions concerning the scope and scale of 
U.S. multinational firms' business in China that are left unanswered by 
data aggregated by the U.S. Department of Commerce. Enhanced collection 
of data on U.S.-China commercial ties will enable U.S. policymakers to 
more readily identify and assess supply chain vulnerabilities with 
respect to China and determine where we should prioritize our efforts 
to defend against related vulnerabilities. The Commission thus 
recommended in 2019:

     Congress enact legislation requiring the collection of 
            data on U.S.-China economic relations. This legislation 
            would:

                    Direct U.S. economic statistics-producing 
                agencies, including the U.S. Census Bureau, the U.S. 
                Department of Commerce's Bureau of Economic Analysis, 
                and the U.S. International Trade Commission, to review 
                methodologies for collecting and publishing not only 
                gross trade flows data, but also detailed supply chain 
                data to better document the country of origin for 
                components of each imported good before it reaches U.S. 
                consumers.

                    Direct the U.S. Census Bureau to restart 
                data releases in its Current Industrial Reports at the 
                ten-digit industry level.

                    Direct the U.S. Department of the Treasury 
                to coordinate with the U.S. Census Bureau to match U.S. 
                firm-level data with their U.S. employees' data.

   Develop new analytic tools to more effectively monitor 
        supply chain vulnerabilities for materials critical to the U.S. 
        manufacturing base. China dominates global supply of numerous 
        critical minerals and metals used in energy storage and other 
        advanced technologies, creating supply risks for materials, 
        components, and end products sourced from China. The Chinese 
        government's approach to establishing dominance in global 
        supply chains has been systematic, requiring coordination 
        between industrial policy, domestic geological exploration, and 
        commercial engagement in resource-rich developing countries, 
        all supported by substantial state funding. As China's control 
        over these materials expands, risks to the United States of 
        impaired or narrowed access to them heightens. To address this 
        challenge, the Commission recommended in 2019:

     Congress direct the U.S. Geological Survey, in 
            coordination with the U.S. Department of Energy, U.S. 
            Department of Commerce, U.S. Department of the Interior, 
            and U.S. International Trade Commission to develop and 
            maintain a risk assessment framework that identifies 
            materials used in manufacturing industries critical to both 
            national security and commercial vitality. Such a framework 
            should provide an early warning mechanism for any threats 
            to the U.S. supply of these critical materials, including 
            an increasing concentration of extraction and processing by 
            another country or entity and acquisition of significant 
            mining and processing facilities; increasing export 
            restrictions by another country; large gaps between 
            domestic prices for these materials in another country 
            versus prices on international markets; sharp increases or 
            volatility in price; and substantial control in supply of 
            minerals used within the same industry or related minerals 
            that serve as substitutes by another country.

   Incentivize U.S. enterprises to invest more in the basic 
        research that underpins U.S. innovation and technological 
        leadership. While the U.S. government funds some basic research 
        and offers incentives like the research and development tax 
        credit to spur innovation, the Chinese government uses 
        prescriptive and interventionist methods to build supply, 
        generate demand, and guarantee a market for nascent industries. 
        The CCP broadly supports licit and illicit technology and 
        talent acquisition strategies and programs. Beijing's statist 
        approach helps new technologies overcome obstacles to 
        commercialization. A U.S. policy environment that expands 
        support to U.S. companies conducting innovative early-stage 
        research in emerging industries will enable the United States 
        to more effectively rise to the challenge of economic and 
        technological competition with China. The Commission thus 
        recommended in 2019:

     Congress amend Internal Revenue Code Section 41 to 
            extend the research and development tax credit to initial 
            stages of deployment for new products, processes, computer 
            software, techniques, formulae, or inventions that increase 
            the production of final and intermediary goods manufactured 
            primarily in the United States. The tax credit should also 
            extend to precompetitive commercial development of basic 
            and applied research performed in the United States, 
            particularly in industrial sectors where the People's 
            Republic of China threatens the technological leadership of 
            the United States.

    Question 2. Beijing has leveraged an array of economic incentives 
to induce U.S. companies to increase production in China, and U.S. 
companies have done so to realize their fiduciary duty to their 
shareholders. The U.S. government is increasingly asking U.S. companies 
to consider how their decisions can serve not just their shareholders' 
interests but also those of U.S. policy as strategic competition with 
China heightens.
    a. How can the U.S. government better engage with U.S. companies to 
enlist industry in shoring up U.S. economic competitiveness with 
respect to China?

   The COVID-19 pandemic is putting business and government on 
        the same page with respect to resolving the risks of 
        overreliance on China-based production networks. Shortages 
        caused by the COVID-19 pandemic are sparking renewed interest 
        on the part of multinational companies in reshoring or 
        nearshoring production closer to home markets. As the 
        international business community re-evaluates China as a 
        production base, U.S. policymakers are presented with 
        opportunities to elevate the attractiveness of the United 
        States as an investment destination for U.S. and other 
        multinational companies. According to a May 2020 survey of 
        global supply chain executives conducted by McKinsey, about 40 
        percent of companies intend to nearshore and increase their 
        supplier base to bolster resilience.ix Analysts 
        anticipate critical supply for strategic industries, such as 
        healthcare products, personal protective equipment, or 
        pharmaceuticals, may begin to reshore as governments and 
        companies prioritize resilience and redundancy over 
        cost.x Congress and the Administration must engage 
        in a broader discussion to advance and accelerate these efforts 
        and broaden them to other sectors.

   Continued formalization of rules and regulations to mitigate 
        selected risks of U.S.-China commercial engagement may guide 
        U.S. companies to make business decisions that more closely 
        align with the national interest. U.S. policy efforts to halt 
        the flow of U.S. advanced technologies to Chinese companies 
        that pose a national security threat or are involved in human 
        rights abuses in Xinjiang province, for example, signal to U.S. 
        companies what kind of business activity runs counter to U.S. 
        policy interests and harms U.S. national security in the long-
        run. As these companies may not consider risks to U.S. national 
        security when conducting business in China, U.S. policy steps 
        to defend against those risks can define the appropriate bounds 
        for U.S. commercial activity in China as strategic competition 
        between the two countries heightens.

   The United States can also work with likeminded partners to 
        bolster supply chain resilience and develop alternatives to 
        China-centric production networks. Supply shortages wrought by 
        the COVID-19 pandemic have led some governments to explore how 
        they can work together to assure supply chain security. For 
        example, the Japanese, Australian, and Indian governments are 
        mulling the establishment of a trilateral supply chain 
        resilience initiative focused on securing supply chains in the 
        Indo-Pacific region,xi while the British government 
        has proposed the formation of a ``D10'' group of ten 
        democracies to jointly develop 5G technology and reduce 
        dependence on Huawei.xii U.S. engagement in these 
        multilateral efforts can both strengthen U.S. supply chain 
        security and bolster U.S. economic competitiveness with respect 
        to China. Taiwan firms' central role in global information and 
        communications technology supply chains makes Taiwan an 
        attractive partner to the United States in this effort. To this 
        end, the Commission recommended in 2020:

     Congress encourage the Administration to include 
            Taiwan in multilateral efforts to coordinate and strengthen 
            supply chain cooperation and security. This could be done 
            through the expansion of Global Cooperation and Training 
            Framework programming or a new multilateral arrangement 
            with likeminded democracies. This multilateral engagement 
            should focus on securing critical inputs and assuring 
            supply chain resilience in strategic industries critical to 
            economic competitiveness and national security, including 
            information and communications technology, integrated 
            circuits, and electronic components.

   Policymakers must make clear to multinational enterprises 
        and companies that rely on China as either a location for 
        production, or a supplier, that there are significant costs to 
        producting in, or obtaining supplies from, that country. Short-
        term profits are not the only determinant for a fiduciary; 
        rather, the long-term health and success of the enterprise are. 
        The COVID-19 pandemic and the focus on supplier relationships 
        with China has made clear that dependency on China creates 
        enormous risks. China's technology acquisition strategies have 
        undermined the value of many of our companies as their 
        competitors have obtained technology, R&D, and manufacturing 
        capabilities from multinational's activities in that country. 
        The subsidies that China provides to many domestic champions 
        also harm long-term competitiveness of U.S. companies. and in 
        addition, the relationships that many U.S. firms have with 
        Chinese companies now on the Entities List or identified by the 
        Department of Defense as promoting the PLA, may expose U.S. 
        companies to risks under U.S. law and undermine U.S. national 
        security.

    Question 3. U.S. laws, regulations, and practices afford Chinese 
companies certain advantages that U.S. companies do not enjoy. For 
example, Chinese firms that raise capital on U.S. stock markets are 
subject to lower disclosure requirements than their U.S. counterparts.
    a. Can you describe other benefits Chinese companies enjoy in the 
United States, especially in cases where U.S. companies do not enjoy 
reciprocal advantages in China?

   U.S. firms compete with unfairly subsidized Chinese 
        companies both in the United States and abroad. Chinese firms' 
        U.S. operations may pose competitive challenges if they receive 
        below-cost financing or subsidies from the Chinese government. 
        For example, state-owned China Railway Rolling Stock 
        Corporation (CRRC), China's largest rail-car manufacturing 
        company, reported that it received $37.1 million in government 
        grants--including loans at below-market rates--in 
        2017.xiii In the United States, CRRC has won four 
        out of five major U.S. contracts for new railcars in the cities 
        of Chicago, Philadelphia, Boston, and Los Angeles since 
        2017.xiv U.S. firms can operate at a disadvantage in 
        global markets as well. For example, Chinese construction firms 
        operating in African countries have benefited from significant 
        government subsidies, allowing them to submit lower bids for 
        many construction projects.xv According to Aubrey 
        Hruby, Senior Fellow at the Atlantic Council's Africa Center, 
        Chinese firms have won 42 percent by value of all World Bank 
        open bid contracts with bids that are often 40 percent less 
        expensive than competitor firms.xvi The early entry 
        of Chinese firms Huawei and ZTE into Africa's 
        telecommunications sector, aided by generous subsidies from the 
        Chinese government, has also helped Chinese companies gain an 
        advantage over competitors in the continent's 
        telecommunications and mobile phone markets. In order to equip 
        the U.S. government with information needed to better address 
        the ways in which Chinese government subsidies unfairly 
        advantage Chinese companies, the Commission recommended in 
        2020:

     Congress expand the authority of the Federal Trade 
            Commission (FTC) to monitor and take foreign government 
            subsidies into account in premerger notification processes.

                  The FTC shall develop a process to determine 
                to what extent proposed transactions are facilitated by 
                the support of foreign government subsidies.

                  The definition of foreign government 
                subsidies shall encompass direct subsidies, grants, 
                loans, below-market loans, loan guarantees, tax 
                concessions, governmental procurement policies, and 
                other forms of government support.

                  Companies operating in the United States that 
                benefit from the financial support of a foreign 
                government must provide the FTC with a detailed 
                accounting of these subsidies when undergoing FTC 
                premerger procedures.

                  If the FTC finds foreign subsidies have 
                facilitated the transaction, the FTC can either propose 
                a modification to remedy the distortion or prohibit the 
                transaction under Section 7 of the Clayton Act, which 
                prohibits mergers and acquisitions where the effect 
                ``may be substantially to lessen competition, or to 
                tend to create a monopoly.''

   U.S. firms have no existing tools to address the 
        anticompetive practices of Chinese state-owned or state-
        supported firms operating in our market. To be actionable, 
        existing U.S. laws against unfair competition require the 
        pricing and market activities of a competitor be based on the 
        theory of recoupment. In short, if a Chinese entity does not 
        plan to recoup lost profits, their competitive strategies may 
        not violate our existing laws. Therefore, a subsidized Chinese 
        SOE, with little to no cost of capital, may be able to invest 
        in plant and equipment at dramatically lower costs than their 
        U.S. counterparts. This is an issue that Congress should 
        examine.

    b. Does the ability of Chinese companies to access U.S. capital 
markets give them an advantage when competing against U.S. firms 
globally?

   Like all foreign issuers, Chinese firms that raise capital 
        on U.S. exchanges have been subject to lower disclosure 
        requirements than their U.S. counterparts, thereby affording 
        them unfair advantages when competing with U.S. firms. This 
        situation is particularly challenging because Chinese companies 
        do not comply with U.S. regulations on disclosure requirements. 
        Chinese firms have benefitted from the United States' deep and 
        highly liquid capital markets without complying with U.S. 
        disclosure standards and despite failing to disclose basic data 
        on ownership, operations, and political ties to U.S. 
        regulators. This noncompliance not only enables these companies 
        to unfairly outcompete U.S. firms, but also erodes the 
        integrity of U.S. capital markets and exposes U.S. investors to 
        fraud, as the recent Luckin Coffee accounting scandal and 
        numerous other past examples have demonstrated. The Commission 
        is therefore heartened by the recent passage in the House of 
        Representatives of the Holding Foreign Compaines Accountable 
        Act, and looks forward to strengthened enforcement of listing 
        standards on U.S. exchanges.
ENDNOTES
    i White House, ``EO on Delegating Authority Under the 
DPA to the CEO of the U.S. International Development Finance 
Corporation to Respond to the COVID-19 Outbreak,'' May 14, 2020. 
https://www.whitehouse.gov/presidential-actions/eo-delegating-
authority-dpa-ceo-u-s-inter
national-development-finance-corporation-respond-covid-19-outbreak/.
    ii Jeffrey G. Weiss et al., ``U.S. and EU Actions to 
Address Supply Chain Threats Caused by Reliance on Critical Mineral 
Inputs,'' Steptoe, October 8, 2020. https://www.steptoe.com/en/news-
publications/us-and-eu-actions-to-address-supply-chain-threats-caused-
by-reliance-on-critical-mineral-imports.html; White House, ``Executive 
Order on Addressing the Threat to the Domestic Supply Chain from 
Reliance on Critical Minerals from Foreign Adversaries,'' September 30, 
2020. https://www.whitehouse.gov/presidential-actions/executive-order-
addressing-threat-domestic-supply-chain-reliance-critical-minerals-
foreign-adversaries/.
    iii Andrea Shalal, Alexandra Alper, and Patricia 
Zengerle, ``U.S. Mulls Paying Companies, Tax Breaks to Pull Chains from 
China,'' Reuters, May 18, 2020. https://www.reuters.com/article/us-usa-
china-supply-chains/u-s-mulls-paying-companies-tax-breaks-to-pull-
supply-chains-from-china-idUSKBN22U0FH.
    iv Isabel Reynolds and Emi Urabe, ``Japan to Fund Firms 
to Shift Production out of China,'' Bloomberg, April 8, 2020. https://
www.bloomberg.com/news/articles/2020-04-08/japan-to-fund-firms-to-
shift-production-out-of-china?sref=FlHD1WjR.
    v Hiroyuki Akiyama, ``Japan Companies Line Up for `China 
Exit' Subsidies to Come Home,'' Nikkei Asian Review, September 9, 2020. 
https://asia.nikkei.com/Economy/Japan-companies-line-up-for-China-exit-
subsidies-to-come-home; Simon Denyer, ``Japan Helps 87 Companies to 
Break from China after Pandemic Exposed Overreliance,'' Washington 
Post, July 21, 2020. https://www.washingtonpost.com/world/asia_pacific/
japan-helps-87-companies-to-exit-china-after-pandemic-
exposedoverreliance/2020/07/21/4889abd2-cb2f-11ea-99b0-
8426e26d203b_story.html.
    vi European Commission, ``Introductory Statement by 
Commissioner Phil Hogan at Informal Meeting of EU Trade Ministers,'' 
April 16, 2020. https://ec.europa.eu/commission/commissioners/2019-
2024/hogan/announcements/introductory-statement-commissioner-philhogan-
informal-meeting-eu-trade-ministers_en; Philip Blenkinsop, ``EU Trade 
Chief Urges for More Diverse Supply Chains after Crisis,'' Reuters, 
April 16, 2020. https://www.reuters.com/article/us-health-coronavirus-
eu-trade/eu-trade-chief-urges-for-more-diversesupply-chains-after-
crisis-idUSKCN21Y27P.
    vii Leila Abboud and Michael Peel, ``Covid-19 Hastens 
French Push to Bring Home Medicines Manufacture,'' Financial Times, 
July 29, 2020. https://www.ft.com/content/80a4836b-ca25-48e0-996d-
458186e968dc.
    viii Candace Browning Platt et al., ``The USD1 Trillion 
Cost of Remaking Supply Chains: Significant but Not Prohibitive,'' BofA 
Securities, July 22, 2020.
    ix Knut Alicke, Richa Gupta, and Vera Trautwein, 
``Resetting Supply Chains for the Next Normal,'' McKinsey Global 
Institute, July 2020, 3. https://www.mckinsey.com//media/McKinsey/
Business%20Functions/Operations/Our%20Insights/
Resetting%20supply%20chains%20for%20the%20next%20normal/Resetting-
supply-chains-for-the-next-normal.pdf?shouldIndex=false.
    x Shefali Kapadia, ``The 5 Ws of Reshoring Supply 
Chains,'' Supply Chain Dive, July 13, 2020. https://
www.supplychaindive.com/news/5-ws-reshoring-supply-chains-diversify-
localization/579943/.
    xi Rajeswari Pillai Rajagopalan, ``Australia-Japan-India 
Trilateral Sets Sights on Supply Chain Resilience,'' Diplomat, October 
2, 2020. https://thediplomat.com/2020/10/australia-japan-india-
trilateral-sets-sights-on-supply-chain-resilience/.
    xii South China Morning Post, ``Britain Wants U.S. to 
Form a 10-Nation 5G Alliance to Cut Reliance on China's Huawei,'' May 
29, 2020. https://www.scmp.com/news/world/europe/article/3086774/uk-
wants-us-form-10-nation-5g-alliance-cut-reliance-chinas-huawei.
    xiii CRRC Corporation Limited, ``CRRC Corporation 
Limited Annual Report 2018,'' March 2019, 121. https://www.crrcgc.cc/
Portals/73/Uploads/Files/2019/4-26/636918870297486290.pdf.
    xiv Alexandra Alper and Allison Lampert, ``China to Bid 
on D.C. Metro Rail Deal as National Security Hawks Circle,'' Reuters, 
May 9, 2019. https://www.reuters.com/article/us-usa-china-trains-crrc-
focus/china-to-bid-on-d-c-metro-rail-deal-as-national-security-hawks-
circle-idUSKCN1SF0Y5; Faiz Siddiqui, ``China's State-Owned Rail-Car 
Builder Looks Close to Bidding on Metro Contract; Also Eying New York 
Subway Work,'' Washington Post, February 11, 2019. https://
www.washingtonpost.com/local/trafficandcommuting/chinas-state-owned-
rail-car-builder-looks-close-to-bidding-on-metro-contract-also-eyeing-
ny-subway-work/2019/02/11/77c6da4c-2a53-11e9-984d-
9b8fba003e81_story.html.
    xv DW, ``Building Africa: Can Europe's Construction 
Firms Compete with China's?'' February 21, 2020. https://www.dw.com/en/
building-africa-can-europes-construction-firms-compete-with-chinas/a-
52435595.
    xvi Aubrey Hruby, ``Deconstructing the Dragon: China's 
Commercial Expansion in Africa,'' Atlantic Council, July 2019, 10. 
https://www.atlanticcouncil.org/wp-content/uploads/2019/09/
Deconstructing_the_Dragon-Chinas_Commercial_Expansion_in_Africa.pdf.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Jacky Rosen to 
                             Michael Wessel
    Question 1. During these challenging times, Nevada's manufacturers 
and their workers have been resilient in ensuring that our communities 
have the protective equipment they need to keep our first responders, 
frontline workers, and families safe. However, despite these efforts to 
ramp up PPE production, as COVID-19 cases continue to climb, challenges 
remain--particularly our overdependence on global supply chains. I am 
curious, however, if American companies--through innovation--can help 
pave the way to creating new, domestic supply chains.
    a.) Are there COVID response-related sectors where small and 
medium-sized businesses can still step up and fill domestic supply 
chain needs? Where are the biggest gaps where American manufacturers 
can jump in to not only contribute, but even create jobs because unmet 
demand is so high? What would failure to fill these gaps mean for the 
American economy as a whole?
    Although American small and medium enterprises (SMEs) stepped up to 
address PPE shortfalls at the start of the coronavirus crisis, ongoing 
PPE shortages mean their role remains critical in meeting domestic 
demand and protecting jobs. According to a December 9, 2020 report by 
the Wall Street Journal, despite an increase in PPE production since 
January (up to 150 million N95 masks a month from 20 million a month 
prior to the pandemic) there are still widespread shortages of N95 
masks and other personal protective equipment.\1\ Supplies of medical 
products that require certification, including testing kits, N95 masks, 
needles, and reagents, continue to be limited.\2\ According to a survey 
conducted by the Government Accountability Office (GAO) in September 
2020, one-third to one-half of the states reported shortages of testing 
supplies and one-third of states reported being very concerned about 
having sufficient supplies to administer COVID-19 vaccines.\3\ Even 
following the pandemic, concerns about reliance on China for medical 
equipment and supplies prompted by the experiences of COVID-19 may 
create a longer-term demand for U.S. sourcing that may create an 
opportunity for U.S. manufacturers. We must ensure that domestic 
capacity exists to meet our Nation's needs.
---------------------------------------------------------------------------
    \1\ Stephanie Armour, Betsey McKay, and Susan Pulliam, ``U.S. 
Supplies of Covid-19 PPE Fall Short of Targets,'' Wall Street Journal, 
December 9, 2020. https://www.wsj.com/articles/u-s-supplies-of-covid-
19-ppe-fall-short-of-targets-11607509800.
    \2\ Cheyenne Haslett, ``Nonpartisan Report Warns of COVID-19 
Testing Shortages in Over Half U.S. States, Territories,'' ABCNews, 
November 30, 2020. https://abcnews.go.com/Politics/nonpartisan-report-
warns-covid-19-testing-shortages-half/story?id=74469015.
    \3\ Government Accountability Office, ``COVID-19: Urgent Actions 
Needed to Better Ensure an Effective Federal Response,'' GAO-21-191, 
November 30, 2020. https://www.gao.gov/reports/GAO-21-191/.
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    Another area where SMEs could contribute is in production of 
medicines and active pharmaceutical ingredients (APIs). The COVID-19 
outbreak highlighted the United States' reliance on China for APIs, 
some of which are critical for the production of therapeutics used to 
treat COVID-19, which may prompt demand for APIs processed in the 
United States. Willy Shih, a professor at Harvard Business School who 
focuses on manufacturing, notes that innovations in the production of 
APIs, including biomanufacturing, could allow existing businesses to 
pivot to the production of APIs at a competitive price point.\4\ 
Generally, SMEs represent a growing share of the pharmaceutical 
development pipeline, increasing from 52 percent of late-stage product 
pipelines in 2003 to 73 percent in 2018. These companies' smaller size 
may allow them to pivot quickly to meet emerging health needs, 
indicating the capability of SMEs to play a critical role in addressing 
API shortages and diversifying the United States' pharmaceutical supply 
chains.\5\ These SMEs should have quick access to capital to shift 
production in the future, should their capabilities and production 
capacity be needed.
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    \4\ Willy Shih, ``Companies That Want to Make Pharmaceutical APIs 
will be Producing Commodities. Here's What They Should Consider,'' 
Forbes, July 29, 2020. https://www.forbes.com/sites/willyshih/2020/07/
29/companies-who-want-to-make-pharmaceutical-apis-will-be-producing-
commodities-heres-what-they-should-consider/?sh=2d0677d9af0f.
    \5\ IQVIA Institute for Human Data Science, ``Emerging Biopharma's 
Contribution to Innovation: Assessing the Impact,'' 2019. https://
www.iqvia.com/insights/the-iqvia-institute/reports/emerging-biopharmas-
contribution-to-innovation; Danielle Navarro, ``Research Synthesis: 
Role of Small and Medium-Sized Enterprises,'' Graduate Institute of 
Geneva Global Health Center, October 28, 2019. https://
www.knowledgeportalia.org/small-and-medium-enterprises.
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    In 2019, the United States imported 80 percent of its APIs, many of 
which were sourced from China or from third party countries that 
ultimately source from China.\6\ Generic drugs are particularly 
vulnerable to disruption: 40 percent of generic drugs sold in the 
United States only had one manufacturer.\7\ As highlighted in the 
Commission's 2019 annual report, the Food and Drug Administration (FDA) 
has faced difficulties inspecting China-based API production 
facilities, which may expose U.S. consumers to the risk of using APIs 
that have not been produced to acceptable standards.\8\ Efforts to 
diversify the United States' pharmaceutical supply chains and ensure 
sourcing from facilities inspected by the FDA in response to problems 
highlighted by the pandemic may create new market opportunities for 
U.S. manufacturers.
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    \6\ U.S. Food and Drug Administration, FDA at a Glance: FDA-
Regulated Products and Facilities, April 2017.
    \7\ Economist, ``A Dire Scarcity of Drugs Is Worsening, in Part, 
because They Are So Cheap,'' September 14, 2019. https://
www.economist.com/international/2019/09/14/a-dire-scarcity-of-drugs-is-
worsening-in-part-because-they-are-so-cheap.
    \8\ U.S.-China Economic and Security Review Commission, 2019 Annual 
Report to Congress, November 2019, 259.
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    Failure to diversify supply chains for pharmaceutical products and 
medical protective equipment would make the United States vulnerable to 
future supply chain disruptions and risk potential exposure to products 
manufactured in facilities that do not meet U.S. health and safety 
standards.

    b.) What actions can Congress take to strengthen our Nation's 
domestic supply chains?
    The Commission has generated several recommendations to strengthen 
domestic supply chains by preventing the abuse of the United States' 
open market system by Chinese actors backed by Chinese government 
subsidies, supporting U.S.-based innovation, and reducing reliance on 
China-based suppliers that may pose a risk to U.S. consumers and 
industry.
    Strengthen regulatory oversight: A key recommendation from the 
Commission's 2020 Annual report is that Congress expand the authority 
of the Federal Trade Commission (FTC) to monitor and take foreign 
subsidies into account in premerger notification processes.\9\ This 
recommendation would limit the ability of companies aided by foreign 
government subsidies to engage in acquisitions that would reduce 
competition. This follows a 2018 recommendation that Congress direct 
the Office of the U.S. Trade Representative to identify the trade-
distorting practices of Chinese state-owned enterprises and develop 
policies to counteract their anticompetitive impact.\10\
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    \9\ U.S.-China Economic and Security Review Commission, 2020 Annual 
Report to Congress, December 2020, 536.
    \10\ U.S.-China Economic and Security Review Commission, 2018 
Annual Report to Congress, November 2018, 483.
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    Shore up supplies of critical materials: In 2020 the Chinese 
government revised its export control law to include provisions 
allowing for blocking foreign access to strategic resources like rare 
earths, furthering highlighting the risk that the Chinese government 
may use its dominance in the production of rare earth materials as a 
tool for coercion.\11\ China produces more than 80 percent of rare 
earth elements globally.\12\ In contrast, U.S. export controls are 
limited to dual-use technologies and do not include raw materials. A 
2019 Commission recommendation would help the United States identify 
and respond to risks associated with the Chinese government's control 
of the supply of rare earth materials. The Commission recommended that 
the U.S. Geological Survey develop and maintain a risk assessment 
framework that identifies materials used in manufacturing industries 
critical to both national security and commercial vitality. This 
framework would provide an early warning mechanism for any threats to 
the U.S. supply of these critical materials.\13\ This could provide an 
initial step toward diversifying production of rare earth materials 
when necessary, insulating U.S. manufacturing industries from coercion 
and unexpected disruptions to the supply of rare earth minerals.
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    \11\ Lester Ross, Kenneth Zhou, and Tingting Liu, ``China Publishes 
Draft Export Control Law,'' WilmerHale, January 15, 2020. https://
www.jdsupra.com/legalnews/china-publishes-draft-export-control-law-
58113/.
    \12\ Jamie Smyth, ``Industry Needs a Rare Earths Supply Chain 
Outside China,'' Financial Times, July 27, 2020. https://www.ft.com/
content/fc368da6-1c86-454b-91ed-cb2727507661.
    \13\ U.S.-China Economic and Security Review Commission, 2019 
Annual Report to Congress, November 2019, 207.
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    Boost U.S. innovation: Several Commission recommendations would 
support U.S. innovation and initial development in emerging tech 
sectors, creating an environment that is conducive to U.S.-based 
innovative industries. In the 2019 annual report, the Commission 
recommended that Congress amend IRS Section 41 to extend the research 
and development tax credit to initial stages of development.\14\
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    \14\ U.S.-China Economic and Security Review Commission, 2019 
Annual Report to Congress, November 2019, 207.
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    Secure the pharmaceutical supply chain: The Commission has also 
highlighted several steps that Congress could take to ensure that the 
United States has access to safe and secure supplies of critical 
lifesaving and life-sustaining drugs and medical equipment. This 
includes a recommendation from the 2019 Annual Report that Congress 
require Medicare, Medicaid, the U.S. Department of Veterans Affairs, 
the U.S. Department of Defense, and other Federal funded health systems 
to purchase their pharmaceuticals only from U.S. production facilities 
or from facilities that have been certified by the FDA to be in 
compliance with U.S. health and safety standards and that actively 
monitor, test, and assure the quality of the APIs and other components 
used in their drugs, unless the FDA finds the specific drug is 
unavailable in sufficient quantities from other sources.\15\ These 
actions would ensure that domestic health supply chains are sourced 
from facilities whose health and safety can be verified by the FDA.
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    \15\ U.S.-China Economic and Security Review Commission, 2019 
Annual Report to Congress, November 2019, 249.
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