    [House Hearing, 117 Congress]
    [From the U.S. Government Publishing Office]

    STRATEGIC IMPORTANCE OF DIGITAL ECONOMIC ENGAGEMENT IN THE INDO-PACIFIC

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

                                    HEARING

                                   BEFORE THE

     SUBCOMMITTEE ON ASIA, THE PACIFIC, CENTRAL ASIA, AND NONPROLIFERATION

                                     OF THE

                          COMMITTEE ON FOREIGN AFFAIRS
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                JANUARY 19, 2022

                                   __________

                               Serial No. 117-98

                                   __________

            Printed for the use of the Committee on Foreign Affairs

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

                             _____

                 U.S. GOVERNMENT PUBLISHING OFFICE
    46-522PDF           WASHINGTON : 2022

                          COMMITTEE ON FOREIGN AFFAIRS

                      GREGORY W. MEEKS, New York, Chairman

    BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
    ALBIO SIRES, New Jersey                  Member
    GERALD E. CONNOLLY, Virginia         CHRISTOPHER H. SMITH, New Jersey
    THEODORE E. DEUTCH, Florida          STEVE CHABOT, Ohio
    KAREN BASS, California               SCOTT PERRY, Pennsylvania
    WILLIAM KEATING, Massachusetts       DARRELL ISSA, California
    DAVID CICILLINE, Rhode Island        ADAM KINZINGER, Illinois
    AMI BERA, California                 LEE ZELDIN, New York
    JOAQUIN CASTRO, Texas                ANN WAGNER, Missouri
    DINA TITUS, Nevada                   BRIAN MAST, Florida
    TED LIEU, California                 BRIAN FITZPATRICK, Pennsylvania
    SUSAN WILD, Pennsylvania             KEN BUCK, Colorado
    DEAN PHILLIPS, Minnesota             TIM BURCHETT, Tennessee
    ILHAN OMAR, Minnesota                MARK GREEN, Tennessee
    COLIN ALLRED, Texas                  ANDY BARR, Kentucky
    ANDY LEVIN, Michigan                 GREG STEUBE, Florida
    ABIGAIL SPANBERGER, Virginia         DAN MEUSER, Pennsylvania
    CHRISSY HOULAHAN, Pennsylvania       AUGUST PFLUGER, Texas
    TOM MALINOWSKI, New Jersey           PETER MEIJER, Michigan
    ANDY KIM, New Jersey                 NICOLE MALLIOTAKIS, New York
    SARA JACOBS, California              RONNY JACKSON, Texas
    KATHY MANNING, North Carolina        YOUNG KIM, California
    JIM COSTA, California                MARIA ELVIRA SALAZAR, Florida
    JUAN VARGAS, California              JOE WILSON, South Carolina
    VICENTE GONZALEZ, Texas
    BRAD SCHNEIDER, Illinois

                        Sophia Lafargue, Staff Director

                   Brendan Shields, Republican Staff Director
                                     ------

     Subcommittee on Asia, the Pacific, Central Asia, and Nonproliferation

                        AMI BERA, California, Chairman,

    BRAD SHERMAN, California             STEVE CHABOT, Ohio, Ranking Member
    DINA TITUS, Nevada                   SCOTT PERRY, Pennsylvania
    ANDY LEVIN. Michigan                 ANN WAGNER, Missouri
    CHRISSY HOULAHAN, Pennsylvania       KEN BUCK, Colorado
    ANDY KIM, New Jersey                 TIM BURCHETT, Tennessee
    GERALD CONNOLLY, Virginia            MARK GREEN, Tennessee
    TED LIEU, California                 ANDY BARR, Kentucky
    ABIGAIL SPANBERGER, Virginia         YOUNG KIM, California
    KATHY MANNING, North Carolina

                          Jamie Morgan, Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

                                   WITNESSES

    Cutler, Ms. Wendy S., Vice President, Asia Society Policy
      Institute......................................................     7
    Bliss, Ms. Christine, President, Coalition of Services Industry..    15
    Feith, Mr. David, Adjunct Senior Fellow, Indo-Pacific Security
      Program, Center for a New American Security....................    26

                                    APPENDIX

    Hearing Notice...................................................    57
    Hearing Minutes..................................................    58
    Hearing Attendance...............................................    59

                STATEMENT FOR THE RECORD REPRESENTATIVE CONNOLLY

    Statement for the record submitted by Representative Connolly....    60

                RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

    Responses to questions submitted for the record..................    62

                ADDITIONAL INFORMATION SUBMITTED FOR THE RECORD

    Additional information submitted for the record..................    66

                        STRATEGIC IMPORTANCE OF DIGITAL

                    ECONOMIC ENGAGEMENT IN THE INDO-PACIFIC

                          Wednesday, January 19, 2022

                              House of Representatives,
                     Subcommittee on Asia, the Pacific,
                     Central Asia, and Nonproliferation
                          Committee on Foreign Affairs,
                                                        Washington, DC.

        The subcommittee met, pursuant to notice, at 10:08 a.m.,
    via Webex, Hon. Ami Bera (chairman of the subcommittee)
    presiding.
        Mr. Bera. Virtual gaveled in, and the Subcommittee on Asia,
    the Pacific, and Nonproliferation will come to order.
        Without objection, the chair is authorized to declare a
    recess of the committee at any point. And all members will have
    5 days to submit statements, extraneous materials, and
    questions for the record, subject to the length limitations in
    the rules. To insert something into the record, please have
    your staff email the previously mentioned address or contact
    full committee staff.
        Please keep your video function on at all times, even when
    you are not recognized by the chair. Members are responsible
    for muting and unmuting themselves, and please remember to mute
    yourself after you finish speaking. Consistent with remote
    committee proceedings of H. Res. 8, staff will only mute
    members and witnesses as appropriate when they are not under
    recognition to eliminate background noise.
        I see that we have a quorum and will now recognize myself
    for opening remarks.
        First, I want to thank our witnesses and the members of the
    public for joining today's hearing on the importance of
    strengthening U.S. digital economic engagement with the Indo-
    Pacific region. The Indo-Pacific is home to many of our closest
    allies and significant trading partners, with more than 662
    million people, and a combined of $3.2 trillion.
        I have long supported deepening economic relations with our
    Indo-Pacific partners, and I believe we can do that in a way
    that protects and benefits American workers and strengthens the
    U.S. economy.
        I also commend the Biden Administration for its continued
    prioritization of the region and its efforts toward developing
    an Indo-Pacific economic framework.
        Today's hearing focuses on what I hope will be one
    important pillar in the broader economic framework: digital
    trading. The Indo-Pacific region contains the majority of the
    world's internet users and the fastest-growing internet market.
    The pandemic has only further accelerated these trends. U.S.
    companies and platforms remain dominant in this expanding but
    increasingly competitive market, and further U.S. leadership is
    necessary to expand economic opportunities that improve the
    livelihoods of our workers and consumers in the United States
    and beyond.
        As chair of the House Foreign Affairs Subcommittee on Asia
    and the Pacific, I do not intend for this hearing to examine
    what should be encompassed in a digital trade agreement, but,
    rather, I hope our witnesses will help talk about the
    geopolitical, economic, and strategic importance for the United
    States to engage our Indo-Pacific allies and partners on the
    development of standards for the digital economy and
    technology.
        Countries in the region have long been negotiating and
    implementing digital trade policies to stimulate economic
    growth and improve the livelihoods of their citizens. Although
    these conversations occur thousands of miles away, they have
    significant implications for data protection and privacy, trade
    facilitation, and other issues that affect the American people
    and our economy.
        But despite the wide-reaching impact of these agreements in
    today's interconnected economy, the United States is not at the
    table to ensure that the standards and norms being established
    align with our shared democratic principles. Our absence risks
    allowing countries that do not share our pro-worker, pro-
    consumer, pro small-business, and pro-environmental values to
    advance digital governance standards empathetical to democratic
    practices.
        We need to engage our allies and partners to advance a
    prosperous Indo-Pacific region that supports a rules-based
    international trading system and high standards that prioritize
    openness and the free flow of data.
        The United States has experienced negotiating digital trade
    chapters, which we did in the U.S.-Mexico-Canada agreement, and
    in the standalone U.S.-Japan digital trade agreement. These
    agreements provide for nondiscrimination, consumer protection
    and privacy and prohibit customs, duties, and technology
    transfer requirements among other obligations.
        Working to lower barriers to digitally enable trade and
    establishing rules that allow for nondiscriminatory competition
    with Indo-Pacific countries will help U.S. companies compete
    more effectively.
        I also want to be clear that this will need to be an
    inclusive process with the consultation of relevant
    stakeholders and groups. But the NAFTA renegotiation process
    demonstrated what is possible when all parties are at the
    table, and there is open dialog and compromises that ultimately
    strengthen the outcome that resulted in USMCA.
        I have had the opportunity to hear from experts with
    differing opinions prior to today's hearing, and I look forward
    to continuing to work and have this conversation with labor and
    environmental groups to ensure that the U.S. digital economic
    engagement with the Indo-Pacific continues to be pro-worker,
    pro-environment, and pro-small business.
        Our competitors are not waiting for us as they continue to
    shape the rules of the digital road in the Indo-Pacific. The
    United States has a unique window of opportunity to
    economically reengage the region on this pivotal issue, and
    work with allies and partners to advance a free, open, and
    prosperous Indo-Pacific underpinned by our shared commitment to
    democratic norms and principles.
        And I look forward to hearing from our witnesses today, as
    well as voices from other stakeholders and relevant industries,
    to ensure that we demonstrate sustained global leadership on
    these important issues.
        Again, thank you to the witnesses and the members for
    participating today.
        I will now yield 5 minutes to my good friend from Ohio, our
    ranking member, Representative Steve Chabot, for any opening
    comments he may have.
        Mr. Chabot. Thank you, Mr. Chairman. And I want to thank in
    advance the witnesses for sharing their insights with us here
    this morning.
        It is hard to overestimate, as you have indicated, the
    strategic importance of the Indo-Pacific. The region accounts
    for about a third of global economic activity, has huge growth
    potential. With over half of the world's population and a
    youthful population at that, the region is poised to become an
    engine of global economic growth over the coming decades.
        Moreover, the countries throughout the Indo-Pacific are
    hungry for trade, with the U.S., with each other, and with the
    rest of the world, and the world is hungry for trade with them.
    A free and open Indo-Pacific is critical to the U.S.'s economic
    future, as many of our largest trading partners are in the
    region, and there is enormous potential to grow those ties.
        While the U.S. has strengthened our trade pacts with South
    Korea and Japan and developed bold standard rules on digital
    trade through the USMCA, we cannot rest on our laurels, but
    that is exactly what we are doing as Beijing continues to
    pressure Indo-Pacific countries to trade their sovereignty for
    the Chinese Communist Party's so-called common destiny, while
    we fail to provide a clear option for these countries to turn
    to.
        Let me be blunt, Mr. Chairman, this Administration has no
    meaningful agenda for economic statecraft in Asia right now,
    and I say that with great remorse because we ought to be
    working together on this. And I know you and I are.
        This brings me to the topic of today's hearing, the digital
    economy, which is comprised of the emerging tech, like AI,
    advanced semiconductors, and 5G. It is critical to superpower
    status in geopolitical competition. And this 21st century
    economic engine runs on data, a resource with infinite supply.
    Sustained and enhanced U.S. leadership in digital trade and
    innovation benefits not only our economy and work force, but
    our national security and economic well-being. That is why
    writing the rules around data and digital trade are so
    consequential. And, fortunately, we have templates in the U.S.-
    Japan trade agreement and in USMCA that would provide an ideal
    starting point for a high-quality deal.
        That is why I was pleased to join you, Mr. Chairman, in
    leading a letter to USTR to ask that they move toward such a
    deal. From Zoom meetings to online shopping, to the increasing
    use of big data and AI in manufacturing sectors, the digital
    economy will only grow in importance to U.S. economic success.
        All of these factors make the timing so appealing for a
    digital trade agreement in the Indo-Pacific. The consequences
    of inaction on digital trade with the region could be dire, as
    data and the digital economy are a matter of the utmost
    importance to Xi Jinping. The CCP, the Chinese Communist Party,
    grasps the value of data and is using it to coerce and control
    its trade partners. Over many years, the CCP has passed laws,
    regulations, and standards that give it control over the data
    of its companies and citizens, while at the same time, scouring
    the globe to funnel data back to China.
        While we think a lot about ports and national resources,
    unfortunately, we have been too much asleep at the wheel as the
    world's most valuable resource, data, pours into the PRC every
    single day. That needs to change.
        Mr. Chairman, it is time for us to get our heads in the
    game. And I agree with you that the best way to do this is to
    negotiate and conclude a digital trade agreement.
        While I do have to admit that a digital sector agreement is
    a poor substitute for being part of the more comprehensive
    regional agreement, it is an excellent place to start building
    U.S. economic ties with our partners throughout the region.
        Let me close with this: Across the Indo-Pacific, countries
    are hungry for more trade with the U.S., and we can achieve
    major foreign policy wins by meeting that demand. For example,
    Taiwan wants a trade deal so much that they finally allowed
    U.S. pork imports after years of delay. But whether it is
    digital trade or Taiwan, the Administration, unfortunately, has
    ignored the demand for real trade deals. Instead, they are
    poised to offer regional economic framework, which simply
    cannot meet the needs of the moment.
        Let's hope the President decides to negotiate something
    more substantial, or I am afraid Americans will end up having
    to play by rules that were written in Beijing.
        And I yield back.
        Mr. Bera. Thank you, Ranking Member Chabot.
        Let me now introduce our witnesses.
        First we have Ms. Wendy Cutler, Vice President at the Asia
    Society Policy Institute. Ms. Cutler served for nearly three
    decades as a diplomat and negotiator in the Office of the U.S.
    Trade Representatives, where she also served as Acting Deputy
    U.S. Trade Representative.
        Next, we have Ms. Christine Bliss, President of the
    Coalition of Services Industry. Prior to CSI, Ms. Bliss was
    Assistant U.S. Trade Representative for services, investment,
    telecommunications, and e-commerce.
        Last but not least, is Mr. David Feith, adjunct senior
    fellow of the Indo-Pacific Security Program at the Center for a
    New American Security. He served as U.S. Deputy Assistant
    Secretary of State for East Asian and Pacific Affairs from 2020
    to 2021.
        I thank you all for participating in today's hearing.
        I will now recognize each witness for 5 minutes. Without
    objection, your prepared written statements will be made part
    of the record. I will first invite Ms. Cutler for her
    testimony.

    STATEMENT OF MS. WENDY S. CUTLER, VICE PRESIDENT, ASIA SOCIETY
                            POLICY INSTITUTE

        Ms. Cutler. Well, thank you, Chairman Bera and Ranking
    Member Chabot, and distinguished members of the subcommittee. I
    am honored to have the opportunity to appear before you today,
    even if virtually.
        As this subcommittee fully appreciates, the United States
    must strengthen its economic engagement in the Indo-Pacific.
    Given the trajectory of regional economic growth and
    innovation, U.S. prosperity is closely tied to the Indo-Pacific
    for the years to come. Without a robust regional economic
    agenda, the United States risks foregoing economic
    opportunities, and also becoming increasingly marginalized as
    the region forges a new future without us.
        Furthermore, economic engagement will help strengthen U.S.
    credibility and influence in this pivotal region. Security
    partnerships alone will not achieve that. It is, therefore,
    encouraging that the Administration is now developing an Indo-
    Pacific Economic Framework.
        Since the United States exited the TPP, our regional
    partners have not slowed down. In fact, the recent two regional
    comprehensive trade deals, CPTPP and RCEP, should serve as a
    wake-up call for Washington. And China's recent application to
    join the CPTPP is a potential game-changer and must be taken
    seriously. If the United States does not step up its economic
    game, CPTPP accession negotiations for China will become the
    most consequential negotiation in the region with the United
    States again sitting on the sidelines.
        And our Indo-Pacific partners are also actively pursuing
    negotiations in the digital space. In addition to a series of
    bilateral trade agreements, Singapore, New Zealand, and Chile
    have concluded a partnership agreement which could become a
    platform for a broader regional deal, with Korea and China
    expressing interest in joining.
        And now to turn to China, which is building a very
    different digital future. Indeed, Xi Jinping has described tech
    innovation as the main battleground of the global playing
    field. Just last week, China's State Council released an
    ambitious and detailed 5-year plan on digital aimed at
    bolstering the role of these technologies in its economy with
    goals related to broadband access, digital infrastructure, and
    emerging tech research. And, moreover, the plan lays out
    Beijing's international intentions, including partnering with
    ASEAN and the EU, as well as becoming more active on digital
    matters in international organizations.
        China's goal is to leverage its gravitational pull of its
    economic heft to create a favorable international environment
    for its own digital vision, including policies related to cross
    border data flows, data privacy, and to the promotion of China-
    driven technical standards. And let's keep in mind that China's
    digital future includes worrying efforts to manage access to
    information, constrain dissent, and carry out monitoring and
    repression of certain populations.
        The United States must work with like-minded countries to
    shape an affirmative alternative to the Chinese approach that
    advances democratic norms, including transparency, openness,
    inter-operability, and fairness. And, in my view, there is no
    better way to do this than by shaping a robust and forward-
    leaning digital pillar as the centerpiece of the Indo-Pacific
    economic framework.
        Now, there are various approaches for doing this, but I
    believe the United States would be best served by proposing a
    new paradigm, and this would involve lifting the most
    meaningful, inclusive, and impactful elements from existing
    trade agreements, including the USMCA, while adding new
    features to promote digital inclusiveness, strengthen consumer
    confidence and trust, and protect personal information.
        The goal should be to ensure that the outcomes serve the
    interests of our workers, consumers, and businesses of all
    sizes, particularly SMEs. And, moreover, a digital economy
    pillar should be sufficiently flexible to take on the
    challenges presented by new trends and technologies, including
    AI and worker force skill development.
        In pursuing such an approach, extensive consultations with
    Congress and all stakeholders are critical in order to get this
    right. And to be impactful as possible, an agreement should
    include flexibilities to cast a wide net for potential
    membership, particularly in Southeast Asia where tech is
    booming and Chinese tech companies have been aggressively
    expanding their presence in recent years.
        In conclusion, Mr. Chairman, a bold, meaningful, and
    impactful, and inclusive Indo-Pacific economic framework with a
    strong digital pillar could go a long way in reasserting U.S.
    leadership and influence in the region; but time is of the
    essence. We need to move now to help shape the economic future
    of the region, or risk becoming observers as others do.
        Thank you.
        [The prepared statement of Ms. Cutler follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

           Mr. Bera. Thank you, Ms. Cutler.
        I will now recognize Ms. Bliss for her testimony.
        I do not know if your camera is on, Ms. Bliss. There it is.
    Great.

    STATEMENT OF CHRISTINE BLISS, PRESIDENT, COALITION OF SERVICES
                                INDUSTRY

        Ms. Bliss. Chairman Bera, Chairman Meeks and Ranking Member
    McCaul, as well as subcommittee Ranking Member Chabot, and
    distinguished members of the subcommittee, I appreciate the
    opportunity to participate in today's hearing to discuss the
    strategic importance of digital economic engagement in the
    Indo-Pacific.
        My name is Christine Bliss. I am president of the Coalition
    of Services Industry, and we represent services and digital
    firms on services and digital trade issues. Our members include
    firms that provide information technology services, financial
    services, logistics, media and entertainment, distribution, and
    professional services.
        I want to note at the outset that CSI supports the Biden
    Administration intention to develop an Indo-Pacific framework
    to renew U.S. leadership in the world's fastest growing region,
    as you noted, Mr. Chairman, in your opening remarks. We believe
    that all potential aspects of the IPEF, including digital
    trade, sustainability, supply chain, resilience, and labor are
    all important. However, in line with the topic of today's
    hearing, my testimony focuses on the significance of the
    digital economic engagement pillar.
        An Indo-Pacific trade agreement has received bipartisan
    congressional support, thanks to the leadership of this
    committee and you, Mr. Chairman, and other Members of Congress
    that recognize the strategic imperative of taking swift action
    to reassert U.S. leadership in the region.
        I would also note, as you did, Mr. Chairman, in your
    opening remarks, that I believe that USMCA provides a positive
    process and precedent for the IPEF in light of its broad,
    bipartisan support, and robust stakeholder engagement,
    including with the labor community and others.
        As Ms. Cutler noted in her testimony, and you did in your
    opening remarks and Ranking Member Chabot's opening remarks,
    digital engagement in the Indo-Pacific region is an urgent
    exercise.
        First, expansion of services in digital trade with the
    region is critical to supporting existing and future jobs and
    services in digital sectors in the United States, as well as in
    supporting manufacturing and other key sectors of the U.S.
    economy.
        And this is not just about moving the interests of large
    U.S. services and digital firms and professional workers. It is
    also about creating new opportunities for the 52 million U.S.
    workers in services occupations earning middle class wages,
    which can benefit from the creation of new jobs in digital and
    digitally enabled services, and to their participation in
    supply chains.
        It is also vitally important to micro-, small and medium-
    sized businesses which increasingly depend on access to
    broadband, internet platforms, and the latest digital
    applications in the cloud to expand their domestic and
    international reach.
        Second, digital engagement in the region is essential to
    combat rising protectionism, even among our closest allies in
    the region. Data localization and data residency requirements
    are proliferating, and they do not only pose major trade
    barriers, but they also enable increased authoritarian
    influence, censorship, and surveillance, and leave networks
    vulnerable to cybersecurity risks.
        U.S. engagement in the region's digital economy is also
    important to counteracting China's protectionist and
    authoritarian whole-of-government approach to shaping the rules
    of the road on digital trade.
        Ms. Cutler alluded to the recently announced 5-year plan by
    China to even tighten its grips on data sovereignty and to
    expand its reach on digital policies internationally.
        China also recently concluded the RCEP and had a great
    influence on the standards on digital trade in that regard,
    which were incredibly weak. And this is important because RCEP
    is the world's largest trading block, accounting for 30 percent
    of global GDP.
        China's application to accede to regional agreements like
    CPTPP and the digital economy partnership are also of great
    concern.
        Additionally, as has been noted, U.S. allies, like Japan,
    the U.K., Australia, Singapore, New Zealand, Korea, and other
    nations are expanding their digital networks while the U.S. is
    not, and is at serious risk of being left behind. In the words
    of Singapore's Deputy Prime Minister, Heng See Keat, the U.S.
    cannot afford to be absent from the regions involving the
    economic architecture, if not through CPTPP, then it must have
    an equally substantial alternative.
        Finally, the digital aspects of IPEF and any associated
    digital agreement should include world class digital provisions
    applying to all services sectors. It should promote worker
    skill training, particularly for women, small businesses, and
    historically marginalized communities. The IPEF should be
    accompanied by a regional digital agreement with like-minded
    allies, including Japan, Singapore, Australia, New Zealand, and
    Korea and should be binding and enforceable.
        My written testimony also includes an annex recommending
    specific provisions to be included in such an agreement.
        In conclusion, Mr. Chairman, I thank you for the
    opportunity to testify today and appreciate the subcommittee's
    attention to these critical issues.
        [The prepared statement of Ms. Bliss follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Bera. Thank you, Ms. Bliss.
        I now invite Mr. Feith for his testimony.

     STATEMENT OF DAVID FEITH, ADJUNCT SENIOR FELLOW, INDO-PACIFIC
          SECURITY PROGRAM, CENTER FOR A NEW AMERICAN SECURITY

        Mr. Feith. Thanks very much, Chairman Bera, Ranking Member
    Chabot, and all the distinguished subcommittee members. I
    appreciate very much the opportunity to speak with you about
    digital trade with the Indo-Pacific, and, more broadly, the
    strategic importance of data rules.
        I wish to stress three main points today:
        First, a U.S. digital trade agreement in the Indo-Pacific
    would indeed serve American interests economically and
    strategically.
        Second, such an agreement is, by no means, all that is
    needed. Our country should improve our overall approach to
    digital trade, starting by curbing the massive and currently
    unregulated frozen sensitive data from the United States to
    China.
        Third, U.S. diplomacy should seek to cooperate with allies
    on both of these tracks, to expand digital trade among friends
    and to limit it with China.
        The case for expanding U.S. digital trade in the Indo-
    Pacific is strong, as we have heard, because digital trade is
    important, and the Indo-Pacific is important. There are various
    ways that we can craft better digital trade rules in the Indo-
    Pacific and, as we have discussed, the general contours of a
    desirable deal are visible from previous U.S. agreements.
    Parties would agree not to impose tariffs on each other's
    digital content; parties would agree not to force technology
    transfers as a condition of market access; parties would agree
    in general to open cross border data flows, meaning they would
    limit data localization. The more that our Indo-Pacific allies
    partners honor rules like these, the better for regional
    economic development and for U.S. interests.
        There are notable risks in our current approach, however.
    It is not nearly enough to expand digital trade with our
    partners. We also need to limit our digital trade with China.
    Our most urgent digital trade challenge, in fact, may not be in
    the Indo-Pacific, but at home. It is how to begin placing
    overdue national security controls on data flows to and from
    China.
        China's approach to digital trade has long been far more
    strategic, mercantilist, and nonreciprocal than U.S. policy has
    recognized. The Chinese Communist Party has developed
    comprehensive strategy to control, accumulate, and exploit
    data, data such as personal health records, personal genetic
    sequences, and personal online browsing habits; data such as
    corporate trade secrets, corporate supply chain records, and
    corporate financial accounts; data such as the photos, voice
    recordings, and mapping imagery pulsed through phones, drones,
    and smart cars all throughout the world.
        Beijing recognizes that the competition for global
    influence in the 21st century will require protecting and
    harnessing this data to achieve commercial, technological,
    military, and intelligence advantages. And that is what it is
    doing.
        As we have heard, Beijing has built a latticework of laws
    and regulations to make the Chinese Communist Party effectively
    the world's most powerful data broker. This has a huge impact
    on foreign firms operating in China. Not only must their
    Chinese data stay in China and be accessible by the Chinese
    State, but Beijing now demands control over whether they can
    send it to their own headquarters, or to a corporate lab in,
    say, California, or to a foreign government that has made a
    lawful, regulatory, or law enforcement request.
        Beijing's approach is nakedly nonreciprocal. It relies on
    access to data from foreign countries while denying foreigners
    access to data from China. In China, Beijing controls the data
    of foreign companies. Outside of China, Chinese companies
    operate comfortably, creating and accessing valuable new data
    sets prime for easy transfer back to China in all manner of
    data-intensive fields, biotech, pharma, medical devices,
    drones, autonomous cars and trucks, social media, digital
    payments, e-commerce, and more. These data flows to China
    contain massive quantities of American information.
        All of this is the stuff of digital trade, yet there are
    effectively no rules governing any of it. In this environment
    for upwards of a generation, Beijing has been coldly effective
    in designing a strategy of global data mercantilism: data
    hoarding for me, data relinquishing for thee.
        The Biden Administration has spoken about the importance of
    data in our competition with China, but no visible strategy has
    yet emerged. The U.S. Government traditionally has no mechanism
    for limiting cross-border data flows, even on national security
    grounds.
        When an American teenager wants to download a Chinese
    social media app onto her phone, or a U.S. university wants to
    exchange biotech research with a Chinese university, or U.S.
    State Government wants to use Chinese drones for power grid
    surveillance, the U.S. Government has no way to regulate this
    activity to protect American important interests.
        Washington is beginning to address this gap only recently
    due to creation, at least on paper, of the new ICTS regulatory
    regime for reviewing cross-border data flows. But the ICTS
    process has not yet been put to use. Apart from ICTS, the
    Congress could, of course, consider legislative approaches, and
    various bills have been proposed to limit the ability of
    Chinese social media apps to operate and collect data in the
    U.S., but without success.
        Another idea is to create a new export control regime that
    would restrict bulk personal data from going to foreign
    adversaries, but that, too, has not garnered much apparent
    support.
        I will close by noting quickly how, as we struggle to
    develop new standards for our own digital trade with China, it
    will be difficult to harmonize our approach with partners
    overseas. But overcoming this challenge is essential if we are
    to create a favorable global digital order.
        We have discussed China's interest in joining the CPTPP.
    China wants to do so chiefly to influence its currently high
    standards and to protect, thereby, China's more mercantilist
    and authoritarian interests. CPTPP members have a veto over
    this and should use it.
        Important as it is, however, to keep Beijing from entering
    CPTPP against the rules will hardly be sufficient for shaping
    the future of trade in Asia. As we have said, fashioning a high
    standard Indo-Pacific digital trade agreement would be a good
    step, and so would begin to impose reasonable national security
    restrictions on U.S.-China data flows.
        The concept that combines these two elements, digital trade
    expansion with friends and digital trade limitation with
    rivals, is what former Japanese Prime Minister Shinzo Abe
    called Data Free Flow with Trust. We should maximize data trade
    with those we can trust, and limit data trade with those we
    cannot. This will not be easy, given China's size, strength,
    and deep integration into our digital economy and that of our
    allies, but it is necessary.
        Our responsibility now, now that we recognize increasingly
    that data is a strategic resource, is to design a global
    digital trade order that reflects democratic values and not
    Beijing's.
        Thank you very much, Mr. Chairman.
        [The prepared statement of Mr. Feith follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Bera. Great. Thank you.
        I will now recognize members for 5 minutes each. And
    pursuant to House rules, all time yielded is for the purposes
    of questioning our witnesses.
        Because of the virtual format of this hearing, I will
    recognize members by committee seniority, alternating between
    Democrats and Republicans. If you miss your turn, please let
    our staff know, and we will circle back to you. If you seek
    recognition, you must unmute your microphone and address the
    chair verbally.
        With that, I will start by recognizing myself.
        Again, I appreciate the work that the ranking member, Mr.
    Chabot, and I have been doing on this, as well as the other
    subcommittee members.
        And, Ms. Cutler, your opening testimony--I know both of us
    worked together during the Obama Administration to get TPA
    passed and TPP. And, you know, it was a somewhat contentious
    deal and, ultimately, we did not get it across the finished
    line.
        That said, in the last Administration, you know, there was
    a lot of work on the renegotiation of NAFTA. All parties were
    brought to the table. I have had conversation with some of the
    labor negotiators and others, and everybody did not get what
    they wanted, but it did demonstrate a process and, ultimately,
    led to a strong bipartisan vote where I think in the House,
    there were more House Democrats that actually voted for that
    bill than House Republicans.
        So it does show an open process with all stakeholders at
    the table, labor, environmental groups, you know, the business
    community, and others, that we can actually get a trade deal
    across the finish line. So it is, again, something that we are
    very supportive of the Biden Administration pursuing.
        Maybe the first question would go to Ms. Cutler. You
    outlined a few of the existing policies. There is a digital
    trade capture in the USMCA. There is the bilateral that we have
    between the United States and Japan. You also touched on the
    Singapore, New Zealand, Chile deal, which, you know, seems to
    be a more modular deal. If you can expand on these different,
    you know, options and potentially where a good starting point
    would be?
        Ms. Cutler. Yes. So as you mentioned, there is so much
    digital activity going on in the region. Singapore has really
    been instrumental in seeking bilateral agreements with other
    countries, and they recently concluded a deal with Korea. At
    the same time, Singapore is part of this regional effort with
    Chile and New Zealand with this so-called Digital Economy
    Partnership Agreement.
        And I think all of--these agreements in the region without
    us, as well as drawing from the USMCA and U.S.-Japan Bilateral
    Digital Agreement, really provides a great starting point for
    the United States. I do not think we should dock on to any of
    the agreements in the region, because I think they all need to
    be updated and improved and reflect more effectively labor and
    consumer concerns that we are hearing in the United States.
        But my sense is that our regional partners and allies are
    very excited about working with us in this area. They are not
    waiting for us, but they are welcoming.
        Mr. Bera. Great. Thank you for that.
        I have to, you know, second that. I cannot have a
    conversation with Australians or our friends in New Zealand or
    Singapore or Indonesia without this topic coming up, and there
    really is a strong desire in the region for the United States
    to engage and help come up with a high-standard agreement that
    really does set the rules of the road.
        Mr. Feith, you talked a little bit about some of the risks,
    you know, what China is doing in terms of data privacy and the
    like. Can you outline, you know, or maybe expand on the risks
    that we face if we do not actually set a high standard, you
    know, trade deal?
        Mr. Feith. Certainly. The risks if we fail to set standards
    in the region include that China's model, which it inherently
    uses to exert influence over not just foreign companies, but
    foreign countries, the approach of foreign countries to not
    just matters of economics and trade, but also, you know,
    matters of political and foreign policy decisionmaking, Beijing
    will have a freer hand to dictate terms. They can do that
    either by getting inside these institutions, as we have
    discussed. If these institutions, like CPTPP, do not hold by
    their own standards, if they were, over the years, to be
    pressured by Beijing to make the decision that, even though it
    would, frankly, make nonsense of the rules and standards that
    CPTPP is supposed to stand for, to bring in China when China's
    data regime is what it is, when China's labor regime is what it
    is, when its approach to State-owned enterprises is what it is.
    But, obviously, these forces are subject to politics. And
    Beijing will indeed be pressing to work its way in both inside
    these institutions, or from the outside, if the institutions
    are not sufficiently strong, Beijing will be able to exert
    itself on other countries and will not have the collective
    market and, sort of, policy power of these countries working
    together in these trade blocks exerting influence on Beijing,
    which over time we would prefer.
        Mr. Bera. I have noticed my time has expired, so thank you
    for that.
        Let me go ahead and recognize the ranking member, Mr.
    Chabot, for 5 minutes.
        Mr. Chabot. Thank you, Mr. Chairman.
        Mr. Feith, I will begin with you.
        Neither this Administration, nor the previous one, showed
    particular interest in new trade deals in the Indo-Pacific.
    That has essentially left the State Department to champion
    economic engagement, which it has been attempting to do, but
    without the heft of the USTR.
        What opportunities are we missing in the region with the
    White House holding USTR on such a tight leash?
        Mr. Feith. Well, thanks for that, Congressman Chabot.
        The experience that I had in Singapore reflected very much
    what you said, and I will say, to the extent that we are
    speaking broadly about economic engagement with the Indo-
    Pacific, it is worth noting that, you know, in addition to the
    tools that we have, formal trade negotiation tools that
    obviously are led by USTR, in addition to some of the general
    economic and diplomacy tools that are wielded by the State
    Department, there are additional very important tools,
    including some that have been sharpened and strengthened by
    this committee over the years, to include the International
    Development Finance Corporation, and the Eximbank. These are
    both also important for making sure that American trade
    investment in this vital region are as substantial as possible
    and, therefore, American influence is, too.
        But I think, as your question suggests, there is still a
    power in broad trade deals properly negotiated that can be, you
    know, among the strongest tools that we have. And it is
    interesting the ways that in different Administrations and
    sometimes with continuity across Administrations, the dynamics
    between the White House, USTR, and State function.
        One thing we observed in the last Administration with some
    interest was questions about whether the bandwidth constraints
    of USTR, in terms of personnel and the number of hours in the
    day, could be mitigated through personnel transfers where, you
    know, larger parts of the government, like the State Department
    or others, could lend personnel to build out trade missions,
    the ability to visit more countries and have more negotiations.
        Those were, I think, interesting issues which merit
    additional consideration if I could suggest that.
        Mr. Chabot. Thank you.
        Let me ask you this: What consequences do we face if we
    fail to compete with China in the trade arena, relative to our
    economy, to strategic competition more generally? I will just
    leave it there.
        Mr. Feith. Well, you know, China under Xi Jinping has a
    fundamentally different view of the future of the world than we
    do, and that our allies and partners all around the world do.
    They have a, frankly, intensely adversarial and hostile view
    toward our interests and our values.
        So to the extent that we accede competitive ground to them,
    to the extent that we let them continue to advance in their
    economic and technology goals without competing properly,
    without making power cells more resilient against their
    subversion, without making our allies and partners stronger and
    more resilient in that fashion, the consequences could be
    absolutely severe for control in generally in Asia, and
    globally.
        Mr. Chabot. Thank you.
        Ms. Bliss, let me try and get a question, one more in here.
    History shows, I believe, that the wealthiest countries tend to
    be those that have been successful in the trade arena.
        Could you discuss some of the economic benefits of the U.S.
    if we could negotiate a digital trade deal with countries in
    the Indo-Pacific?
        Ms. Bliss. Absolutely. Thank you, Congressman Chabot.
        So it is critically important for services and digital
    trade and the firm--services and digital firms that I
    represent, and, more broadly, in the economy, but also because
    those firms also support other economic sectors, like
    agriculture, like manufacturing.
        And as I think you noted in your opening remarks, there is
    tremendous growth potential in the Asia Pacific, particularly
    in countries like Malaysia and Vietnam, Indonesia. And so, the
    digital aspect of that is very, very important to creating and
    supporting U.S. jobs in digital and digitally enabled services-
    related areas.
        Just to give you an example, U.S. services digital exports
    are $500 billion. Out of that, just in the Asia Pacific, $180
    billion in services exports, $124 billion of that total are
    digital. And that is just the beginning. We believe there is
    tremendous growth potential there in that regard.
        So the benefits of tapping into the region with strong
    digital rules are tremendously important and, as I noted, not
    just to the large firms and services in digital trade, but
    also, to the smaller firms, in particular, that rely on digital
    tools to expand their reach to domestic and to global markets
    and, particularly, women and minorities. 90 percent of minority
    businesses are small businesses. And so the benefits, I think,
    are quite large.
        If I can add a couple of things to, I think, a question
    that you asked and also that the chairman asked, in terms of
    the consequences of not having a strong Indo-Pacific strategy
    in counteracting China, also include the fact of China's
    widening influence in multilateral institutions, whether it is
    the WTO, APEC, or the ITU and in standard settings bodies in
    particular.
        So, an Indo-Pacific digital agreement, MOU, whatever form
    it would take, should include addressing standards for
    digitally enabled services, because that is another area where
    we really face a huge challenge from China.
        And then, finally, I also wanted to emphasize, with respect
    to China, that China heavily influenced the outcome in the RCEP
    negotiations. And as a result, the digital disciplines are,
    unfortunately, full of exemptions, and they are quite weak,
    particularly in areas such as data localization, restrictions
    on cross-border data flows, and provisions that champion
    domestic industries.
        So we do not want that to become the model throughout the
    Asia Pacific region. So I know I went beyond the specific
    outlines of your question, but I just wanted to add a couple of
    points to the question that you and the chairman raised.
        Mr. Chabot. Thank you.
        Mr. Bera. The gentleman's time has expired.
        Let me go ahead and recognize the gentleman from
    California, Mr. Sherman, for 5 minutes of questioning.
        Mr. Sherman. I would ask that you go to the next Democrat
    and have me be the Democrat after that.
        You are muted, Mr. Bera.
        Mr. Bera. Let me recognize the gentleman from Michigan, Mr.
    Levin, for 5 minutes of questioning.
        Mr. Levin. Thanks so much, Mr. Chairman. This is a really
    important hearing.
        I want to focus on some of the privacy concerns associated
    with the digital trade components of the agreements we have
    been discussing here today.
        Today's tech giants have a nearly unfettered ability to
    collect, store, transfer, and use personal data from their
    customers around the world for their own profit. The U.S. has
    thus far failed effectively to regulate the tech sector here at
    home to ensure that consumer privacy rights are protected,
    particularly compared to European data regulations.
        Ms. Bliss, in your testimony, you express support for a,
    quote, ``U.S. led high standard digital trade agreement in the
    Indo-Pacific region,'' end quote.
        Could you expand on what those high standards would look
    like in practice, particularly when it comes to privacy rights,
    please?
        Ms. Bliss. Well, thank you, Congressman.
        I think that you are absolutely right that privacy
    protection is extremely important, and I will say that I think
    action on Federal privacy legislation is very important as part
    of that and as a foundation to address the patchwork of State-
    level privacy laws that exist now.
        So just foundationally, I think that is an important point.
        I think that there are important privacy-related provisions
    that have been included in the USMCA and other agreements----
        Mr. Bera. Ms. Bliss, if you could turn your camera on.
        Ms. Bliss. Sorry about that.
        I do think there are important provisions that have been
    included in previous digital provisions, agreements such as
    USMCA, the U.S.-Japan agreement, for example, ensuring that
    parties have an adequate privacy framework domestically. I
    think----
        Mr. Levin. Could I just ask you, Ms. Bliss, does your
    organization represent the big tech companies, the tech giants
    of the United States? Are they part of your organization?
        Ms. Bliss. There are--I do have a number of tech companies
    that are members. They are not the majority of my membership by
    any means; but, yes, they are included.
        Mr. Levin. Some of, like, Alphabet and whatever Facebook
    calls itself now, or Apple, or, you know, Amazon, any of those?
        Ms. Bliss. Not Apple, but yes, I do have.
        Mr. Levin. Does your coalition support European privacy
    protections?
        Ms. Bliss. No, we have not taken a position on that.
        Mr. Levin. I see.
        Ms. Bliss. However, we have been of the view that it is
    possible to ensure privacy protection in a way that recognizes
    the European right to enforce the GDPR, in terms of working out
    trade rules, digital trade rules with respect to cross-border
    data transfer.
        Mr. Levin. OK. Let me try to get in one more question. That
    is helpful. Thank you.
        So U.S. competition with China obviously looms large in
    this discussion, particularly in terms of setting standards,
    the rules of the road for future digital trade norms and
    practices. And, obviously, China's own initiatives in its
    participation in multilateral agreements are already shaping
    the digital trade sphere as some of you have said.
        Let me ask, Ms. Cutler, how can we ensure that U.S.
    engagement in digital trade and future agreements does not
    perpetuate a race to the bottom in terms of competitive
    business standards? And what policies or norms would you
    suggest that we champion in digital trade agreements that would
    allow us to compete effectively with China but still protect
    consumer rights, the privacy rights I was talking about before?
        Ms. Cutler. Well, thank you, Congressman Levin.
        That is a good question, and I emphasize in my testimony
    that I really think we need an affirmative agenda here. This is
    not about--we should not just focus on countering China, but
    let's set the stage for what is important to us. And protection
    of data is important. Cross-border data flows is also
    important. Digital inclusiveness is important. The norms of
    nondiscrimination and fairness is important.
        So, in my view, that is kind of the approach we should
    take. Of course, in the back of our minds is China, but that
    cannot be the driver. We should, again, assert an affirmative
    positive agenda, and I think that will gain a lot more traction
    in the Indo-Pacific region with our allies and partners and,
    frankly, other countries that are kind of sitting on the fence.
        Mr. Levin. All right.
        Thanks, Mr. Chairman. Looks like my time has expired. I
    yield back.
        Mr. Bera. Thank you.
        Let me now recognize the gentleman from Pennsylvania, Mr.
    Perry, for 5 minutes of questioning.
        Mr. Perry. Thank you, Chairman Bera.
        For any of our panelists who might want to answer, I would
    like to glean a little more information as to the expectations
    for a bilateral trade agreement with Taiwan. I mean, given the
    fact that Taiwan has repeatedly demonstrated its good faith
    interest in negotiating with the United States, what do you
    think is the appetite within the Biden Administration for a
    free trade agreement with Taiwan? And do you think we can
    expect anything like that within the next few years? Any
    panelist that wishes to answer that.
        Ms. Cutler. Perhaps I will take a shot at it, and I cannot
    speak for the Biden Administration, and I do not know exactly
    where they are in these discussions. But what I have gleaned
    from my conversations with Administration officials is that
    there is a real commitment to strengthen, expand, and deepen
    our economic relations with Taiwan. And just in the past year
    we have seen, for example, USTR reinvigorate the TIFA, the
    Trade Investment Framework Agreement, set up working groups. We
    have seen the State Department and Commerce also set up
    bilateral channels dealing with supply chains, technologies,
    green technologies, et cetera.
        So I think there is robust and unprecedented economic
    engagement with Taiwan. And, again, I cannot speak, you know,
    is that sufficient or is the Administration envisioning, you
    know, that at some point maybe, when they are ready to do free
    trade treatments, that they would look to Taiwan to conclude
    such an agreement.
        Mr. Perry. Okay. Thank you.
        Anybody else wish to weigh in?
        Ms. Bliss. I would just--Congressman, I would just say I
    would agree with Wendy's assessment that I think that given the
    current Administration's reluctance to at least at this point
    proceed with trade agreements, probably that may not be
    realistic in the near term to expect. However, as Wendy pointed
    out, there has been a much higher level and interest in
    engagement in various ways with Taiwan, which I think is
    encouraging.
        So that seems to be the likeliest outcome, at least in the
    near term.
        Mr. Perry. All right. I mean, I appreciate the sentiment. I
    just--I feel like we are tiptoeing--and, look, you are just
    here to help inform us, but we are tiptoeing around the
    circumstance with Taiwan and China trying to not offend China;
    at the same time, China has no problem offending us or the rest
    of the world, and we have got a great trading partner right
    next door that has been honest and true with us all along, and
    I just--personally, I do not--I think we ought to be more
    robust and forceful in that.
        But given maybe what I would the consider the
    Administration's dithering establishing trade policies in the
    Indo-Pacific, and to me, that maybe indicates a lack of
    consensus among U.S. officials, but do you guys think that
    individual trade agreements, digital trade agreements with some
    of the friendly partner nations is a plausible way to go as
    opposed to something far more reaching?
        You know, do you think that that is--do you think that the
    individual trade agreements is what we really have to hope for
    with some of these more allied countries to us?
        Ms. Bliss. Congressman, I would just respond by saying that
    it appears that the Administration is pursuing bilaterally with
    some key allies in the region, whether it be Singapore or
    others, that be making a visit to Indonesia and have been in
    Indonesia, and will be going to ASEAN.
        So that seems to be the approach, bilateral approach.
    However, I think from our perspective, we would hope, at least
    with respect to digital trade, that there would be the prospect
    for a regional digital agreement to avoid a patchwork of
    agreements that could have differing standards.
        I think there are obviously negative commercial
    implications of that of having differing standards, but there
    is also, I think, the China angle too, which is, I think, a
    regional digital agreement would have stronger force and the
    ability to counteract some of the negative policies that we
    have been talking about with respect to China.
        So, again, I think it is a preference rather than a
    reflection of where the Administration is. But I think, from
    our perspective, we would hope that there is the possibility of
    doing a regional Asia Pacific digital agreement, at least
    initially, with like-minded countries.
        Mr. Perry. Well, I sure hope so. I agree with you. I think
    that the regional framework is what we are seeking. You just do
    not know if it is possible. And I am just wondering if the
    individual agreements, where you get started with something,
    would set the tone for a regional framework even though you did
    it piece by piece by piece. It is not optimal, but at least we
    can get there.
        So I appreciate your input.
        Mr. Chairman, I yield back the balance.
        Mr. Bera. Great. Thank you.
        Let me now recognize the gentleman from California, Mr.
    Sherman, for 5 minutes of questioning.
        Mr. Sherman. Thank you. And thank you, Mr. Chairman, for
    holding this hearing.
        First, I want to emphasize that while there is a lot of
    support for rejoining TPP here in Washington, TPP is DOA with
    the American people. We saw this in 2016, where every
    Presidential candidate opposed TPP, and the people voted for
    the Presidential candidate who seemed most passionate in his
    opposition. In 2020, no Presidential candidate thought that
    they could sell TPP to the American people.
        So we should be focusing here, and I think we are focusing
    here, on specific agreements dealing with digital because the
    American people probably cannot be convinced that goods made at
    35 cents an hour in Vietnam should have free access to the U.S.
    market over the dead bodies of the labor leaders killed by that
    regime.
        When we focus on China, they have tremendous power in our
    government and in our society because of the economic
    relationship, but it is not reciprocal. There are no lobbyists
    in Beijing working for trading partners of American companies
    or American companies themselves influencing Chinese policy.
    But the power that China has over Congress, because of its
    economic relationships, is enormous.
        For that reason, we rarely even threaten the much higher
    tariffs that would need to be threatened to eliminate what is
    the largest and most pernicious trade deficit in the history of
    the world.
        When we focus on digital, one important aspect of that is
    entertainment, and we have seen the power of the Chinese
    Government. As NBA stars fawn over each other as to who can
    apologize most for how the Uyghurs are treated, or in my own
    city, in Hollywood, where studios know that they will not have
    access to the Chinese markets if they ever make a movie about
    Tibet.
        Scathing reports have been issued by the global Federation
    of Labor, the ITUC, and the global service sector labor
    federation, PSI. And without objection, I would like to enter
    both of these reports into the record.
        They raise the issue of whether, through these
    international treaties, big tech can handcuff Congress before
    we can regulate them, before we can deal with monopolistic
    abuses, and can lock in a regulatory scheme favorable to
    themselves which Congress cannot change without the permission
    of dozens of other countries.
        But I want to focus also on financial services. As you
    know, I chair the Capital Market Subcommittee. There we saw
    Morgan Stanley, in effect, forced to recommend that its
    customers buy more Chinese stock in order to get access to the
    Chinese market. But I want it to focus on one particular aspect
    of this.
        Ms. Bliss, we have got to ensure that financial services
    firms are protected from the threat of forced data
    localization. That is one area where we have bipartisan
    agreement, both in the industry and from U.S. leadership.
        Do you agree that the Biden Administration should build on
    that foundation against this effort by many countries, but
    especially China, to say, Oh, the data has to be kept in that
    country so that then oppressive governments can have access to
    that data to oppress their people?
        How should the Biden Administration prevent these data
    localization initiatives?
        Ms. Bliss. Thank you, Congressman Sherman.
        And you really hit on what is one of our top digital
    priorities. We believe that data localization is pernicious,
    unjustified, and that I think the U.S. itself has worked out
    ways to ensure that regulators can get the information that
    they need, and if they cannot, they can resort to data
    localization, looking at the precedent that we have set on
    financial services in the USMCA financial services chapter.
        So we think that that is a good balance, and a good way to
    combat.
        But I absolutely agree that the elimination of data
    localization continues to be a major priority in the Indo-
    Pacific where it is, unfortunately, a continuing problem. Even
    among allies like Korea, Indonesia, Vietnam, it is a huge
    problem. And so, I think prohibiting data localization has to
    be a continuing priority, no question.
        And let me also say----
        Mr. Sherman. I would just also comment the regime in Ho Chi
    Minh City and Hanoi is not an ally of the United States. And I
    look forward to a more formal regulatory dialog with China, as
    we have with the U.K. and, again, India on these digital
    issues.
        And I yield back.
        Mr. Bera. Great. Thank you.
        Let me now recognize the gentlelady from Missouri for 5
    minutes of questioning, Mrs. Wagner.
        Mrs. Wagner. Yes. I thank you, Mr. Chairman, and I want to
    thank our witnesses certainly for their time and expertise.
        As co-chair of the ASEAN Caucus, I am glad that this
    committee is examining the critical importance of trade and
    economic ties in the Indo-Pacific. China is determined to
    expand its influence throughout the region by subverting,
    replacing, or blocking the global rules and norms that the
    United States has championed for decades. Our partners in
    Southeast Asia are being increasingly targeted by China and are
    just absolutely desperate for the United States to show
    leadership and commitment.
        Sadly, this Administration has neglected to offer, I think,
    a robust and specific plan to deepen U.S. economic engagement
    in the region.
        The United States should be laying out a clear, a concrete,
    and a detailed roadmap for expanding economic and trade ties
    with Southeast Asia. My Southeast Asia Strategy Act, which I am
    proud to say was signed into law December 27th of 2021, will
    require the Administration to do just that.
        China wants to rewrite global economic rules, especially in
    the digital economy and other emergent sectors. The United
    States must be proactive in shoring up existing international
    standards and building out the foundational agreements for the
    economies of the future.
        This is why I was pleased to join Representatives Bera and
    Chabot in calling on the Administration to immediately begin
    negotiating a digital trade agreement for the Indo-Pacific.
    Vague promises to, quote, ``explore an economic framework for
    the Indo-Pacific'' will simply not be enough. China has already
    taken a number of actions to exert control over the development
    of digital trade rules, including by convening the PRC-led
    Regional Comprehensive Economic Partnership, or RCEP.
        RCEP includes extremely concerning digital policy
    provisions that benefit China's authoritarian model of digital
    regulation. I worry that if the United States allows RCEP to
    form the basis for international digital standards, there will
    be serious ramifications, especially for human rights.
        Ms. Bliss, how do RCEP digital provisions advantage
    authoritarian governments and help dictators restrict free
    speech and target vulnerable groups?
        Ms. Bliss. Thank you, Congresswoman. And thank you for the
    work on--as you co-chair the ASEAN Caucus and also for the
    legislation----
        Mr. Bera. Ms. Bliss, I would have you turn your camera on.
        Mrs. Wagner. Your camera is off.
        Ms. Bliss. Sorry. Now it is on. Thank you.
        So thank you for your work in this area. I think it is
    extremely important.
        And I think that it is critically important that the
    Administration, as you say, come out with a concrete plan. And
    I think our view would be that there are significant provisions
    that need to be added, and we need to not only--we need to
    build on USMCA and the agreement we negotiated with Japan on
    digital----
        Mrs. Wagner. Now, let me just say that I am concerned about
    this Regional Comprehensive Economic Partnership that is PRC-
    led.
        Ms. Bliss. Yes. No, I was going to get to that.
        Mrs. Wagner. I have very limited time and more questions,
    please.
        Ms. Bliss. Right. So on RCEP, the way that it is so
    concerning is that there are flexibilities built in so that
    members of RCEP cannot observe various disciplines to the data
    localization provisions----
        Mrs. Wagner. Thank you, Ms. Bliss. Thank you. I am going to
    reclaim my time here.
        Let me ask another question. It is very clear that China
    also hopes to use digital rulemaking to insulate itself from
    sanctions and other economic consequences of their human rights
    abuses and violations of international laws.
        Ms. Bliss, if the United States does not take swift action
    to negotiate digital trade agreements, how might the PRC use
    digital rules to weaken our sanctions regime?
        How do we prevent this?
        Ms. Bliss. Well, again, if we do not get involved, I think,
    fortunately, there are other nations who are building a network
    that we are, unfortunately, outside of and will not benefit
    from. But I think that the PRC is being successful, both in
    terms of trying to extend its influence through--by joining
    CPTPP and also DEPA. And so, I think that is a threat that we
    need to face.
        And, so, to your question, as I understand it, it is how
    can--what kind of a threat does China really pose? And I think
    it is through the potential of joining CPTPP, DEPA, as well as
    its ongoing activities multilaterally.
        Mrs. Wagner. OK. Thank you.
        My time has expired. I appreciate the chairman's
    indulgence. And, Mr. Chairman, I have some other questions I
    will submit for the record, and I thank you very, very much.
        Mr. Bera. Thank you, Mrs. Wagner.
        Let me now recognize the gentleman from California, Mr.
    Lieu, for 5 minutes.
        Mr. Lieu. Thank you, Chairman Bera, for holding this
    important hearing.
        My question goes to Mr. Feith. The problems you identified
    seems to go more toward the fact that you have authoritarian
    countries versus free and open societies like the United
    States. So one reason that Russia was able to successfully
    execute, as our Department of Justice found, a sweeping and
    systematic attack of U.S. elections in 2016, is because in the
    U.S., we do not censor what people post on Twitter or Facebook.
        The fact that China can do all sorts of things to software
    companies and other businesses in China is very different than
    in the U.S., where our own U.S. Supreme Court has made it
    difficult to even patent a number of kinds of software.
        So when we have a free and open society, how is it that if
    we do any of these trade agreements, it will affect any of the
    concerns that you identified in your testimony? I am just
    curious how that would address the harms that you put out.
        Mr. Feith. Yes. Thanks for the question.
        I think, of course, the difference that you point out, you
    know, that is so fundamental between free and open society and
    the authoritarian society is enormous. And I think that there
    are areas where the problems of nonreciprocal trade and
    nonreciprocal digital trade and data exchange, essentially they
    are areas where we wouldn't be able to pursue remedies, and we
    wouldn't want to pursue remedies for the reasons that you say.
    If a reciprocal remedy is to try, you know, set up in America a
    censorship regime that looks like China, that is not appealing.
        But there are many other areas where I think, you know, an
    approach of a pursuit of a degree of reciprocity would be
    entirely consistent still with the free and open society at
    home, would be beneficial for national security interests
    around things like the protection of sensitive personal medical
    or genomic data, access to sensitive types of laboratories,
    corporate or academic, access to other sensitive sectors. And I
    think that some of these could be affected, you know, reformed,
    and approved by U.S. regulation or law in a fashion that is
    entirely consistent with remaining a free and open society
    here.
        Mr. Lieu. So what we are talking about is not any digital
    trade agreement with China? Right? It is with other countries?
    So I am still trying to understand how this would sort of
    address the harms that you say are emanating from countries
    like China?
        Mr. Feith. Oh, absolutely. My point was that there are
    certain benefits to derive from a digital trade agreement in
    the Indo-Pacific, but they are largely separate from the
    additional very important digital trade-related tasks of
    beginning to scrutinize and then selectively restrict some of
    the types of data exchange that we have with China. We wouldn't
    do that through a digital trade agreement with China. We would
    do that through mechanisms like this new ICTS regime, which is
    an interagency regime led by the Commerce Department, or you
    could do it through some of the legislative proposals that have
    emerged on the Hill.
        But, no, the idea is not that that would be done through a
    trade agreement.
        Mr. Lieu. All right. So I am a recovering computer science
    major, and I see how quickly technology moves. I believe it is
    impossible to stop technology. At most, we might go to
    regulated at its edges.
        Just look at TikTok. Try to ban it, like, good luck with
    that; right. We saw what happened.
        With Uber, what we saw happen is largely, my view is Uber
    broke a bunch of laws at the very beginning, but they went
    ahead and just did it. People liked the service, and now people
    use it.
        And so when digital technology moves that quickly, I have
    concerns about any sorts of regulation from Congress or
    treaties where it would be very hard to change if we get it
    wrong.
        Now, having said that, I do know we do have digital-free
    trade agreements with Australia, with Japan, with South Korea,
    with a number of other countries. So my question is, why do not
    we just do that? What if we simply went to Singapore and said,
    Hey, why do not we do a digital-free trade agreement?
    Indonesia, why do not we do that? Or in New Zealand, and so on.
    Why not just do it country by country?
        And that is for any member of the panel.
        Ms. Cutler. Perhaps I can just respond.
        I just think doing these types of agreements bilaterally
    doesn't produce the same kind of impactful result that you will
    get from working with a whole group of countries. And by
    getting a group of countries to agree to common rules, common
    standards, and common norms, it is much more impactful and,
    frankly, develops kind of a collective reaffirmation of the
    types of democratic principles and values that, you know, we
    are advocating.
        So, again, you can do it bilaterally, but I am not sure why
    you would want to.
        Mr. Lieu. Thank you.
        Ms. Bliss. If I could quickly jump in----
        Mr. Bera. The gentleman's time has expired.
        Let me go ahead and recognize the gentleman from Tennessee,
    Mr. Burchett, for 5 minutes of questioning.
        I think you are on mute.
        Mr. Burchett. I was making a play for bipartisanship. I was
    going to say--ask Ted Lieu if he would stay on for a minute and
    let her finish answering. She wanted to answer that question,
    and I was curious about that myself. If you'll go--and I will
    yield my time to do that. Just take a little bit because I am
    going to cut you off.
        Mrs. Kim of California. Mr. Chairman, was I recognized? I
    apologize.
        Mr. Bera. No. Mr. Burchett.
        I think Mr. Burchett is allowing you time to answer that
    question.
        Ms. Bliss. Well, you are very kind, Congressman. Thank you.
        Just very quickly, two points: One is--and I think this
    came out in Congressman Lieu's question, but also in a previous
    question that was posed, and that is that all of U.S. trade
    agreements enshrine the principle of the right to regulate. And
    I think that is a very important point to make in terms of
    concerns about the degree to which a trade agreement can
    constrain what the U.S. Government can do legislatively or
    administratively. So that is point one.
        And then point two, I just wanted to add that I think in
    terms of emerging technologies and how swiftly things are
    changing, an important point to make is one of the innovative
    provisions that the U.K. has included in its FTAs, which I
    think we ought to take a close look at as well, is a regulatory
    sandbox for digital regulation. And I think enshrining that and
    making that part of it is a good way of addressing the rapidly
    changing and evolving digital landscape.
        Thank you.
        Thank you again very much.
        Mr. Burchett. Yes, ma'am.
        I do not agree with Ted Lieu on much, but I wanted to hear
    what--he has been my buddy, so I wanted to make sure he got the
    answer on that.
        What can be done to protect against the Chinese Communist
    Party gaining control over our undersea fiberoptic cables and
    over the data that flows through them? Anybody can answer that,
    please.
        Mr. Feith. I am happy to take that, sir.
        On the undersea cables, I think broadly, somewhat crudely,
    there are perhaps three broad categories.
        One is the question of whether we, as a U.S. Government,
    support undersea cables being built directly from our country
    to China. That is something that the FCC basically put an end
    to over the course of the last several years. They stopped
    issuing new landing licenses for cables of that kind I believe
    in very early 2017. And then in June 2020 or so, they undid a
    previously granted plan that would have connected Los Angeles
    to Hong Kong. That was the Pacific Light Cable Network, and
    they said they are not going to license that to turn on--to
    touch from London--or rather from Los Angeles to Hong Kong. It
    is only going to go from Los Angeles to Taiwan and the
    Philippines.
        So the landing license that the FCC has authority over is
    one big one; but there are two other major areas of this that
    also would seem to relate to American data integrity and ally
    data integrity, which is to what extent Chinese companies, like
    the former Huawei subsidiary, HMM Tech, are welcome to build
    cables that if not touching the U.S. connects to other allies
    and partners of ours.
        So, for example, HMM Tech actually just landed for the
    first time in France. I believe this may have been the first
    time they landed in a NATO country----
        Mr. Burchett. I remember, but prior to that they were
    Huawei, right? They just changed their name to HMM. Is that
    pretty much the case?
        Mr. Feith. Huawei Marine was a subsidiary of the Huawei we
    all know.
        Mr. Burchett. I get it. I get it, yes.
        Mr. Feith. It is a bit of a kind of a--yes, bit of a
    corporate shell game. But, yes, it is the same company. They
    build cables.
        And so, I think there is a question, that is a question for
    us, about allied consultations and diplomacy, which is how much
    do we make it clear to our friends that we consider this a
    major data integrity risk when ally countries with whom we have
    sensitive, you know, communications might be inviting this
    Huawei affiliate into their critical telecommunications
    infrastructure to build new cables. And there is also the
    related matter of the maintenance of existing cables, where----
        Mr. Burchett. OK. I am going to run out of time, but--hang
    on, David. I am going to run out of time. What can we do to
    stop that?
        Mr. Feith. Well, again, I think at home you have domestic
    licensing authorities which the FCC has been using.
    Diplomatically we can encourage friends, to include the French
    and others, to reconsider these sorts of landings. There are
    also--essentially there are authorities, you know, for example,
    like DFC Financing, and Eximbank Export Credit that allow the
    U.S., or even the Japanese and European competitors of these
    Chinese undersea cable firms to give certain bidders more
    competitive pricing because Huawei in classic Chinese fashion
    seeks to underbid and win contracts that way.
        And I think all of those measures are things we should take
    very seriously as you are suggesting.
        Mr. Burchett. All right.
        Thank you, Mr. Chairman. Thank you for your indulgence.
    Appreciate it.
        Mr. Bera. Thank you.
        The chair now recognizes the gentlelady from Virginia, Ms.
    Spanberger, for 5 minutes of questioning.
        Ms. Spanberger. Thank you very much, Mr. Chairman. And
    thanks for our witnesses being here.
        I have long been concerned about China's growing influence
    as a leading supplier of 5G technology. Chinese control of this
    important telecom technology could threaten the privacy, the
    data, the security of American countries and certainly American
    consumers.
        So last Congress, I was very proud to introduce and pass,
    with a vote of 413 to 3, legislation that would require the
    Administration to develop and plan a counter Chinese monopoly
    plan and trajectory for us in the 5G space.
        And most recently, I was proud to cosponsor, vote for, and
    see signed into law the bipartisan Secure Equipment Act of 2021
    to remove potentially harmful equipment from our Nation's
    communication networks.
        So as sort of followup to this landscape of what we have
    done so far, I am curious, how could U.S. engagement with Indo-
    Pacific countries foster a more diverse, resilient, or secure
    telecommunications ecosystem that supports our domestic
    priorities while also expanding our engagement in the region?
        And I will open it up to any of the witnesses who may want
    to speak to that, either in agreement or in disagreement with
    the premise of my question.
        Ms. Cutler. Well, I will start.
        I am in total agreement with the premise of your question.
    The whole idea of working with our partners and allies in the
    Indo-Pacific is to kind of build that ecosystem that reflects,
    again, our values, our norms, our priorities, taking into
    account their concerns and priorities as well. But the more we
    can work with them and develop this ecosystem, it is not going
    to be static. It will continue to expand into other areas,
    particularly as technology develops.
        So I think, you know, you are right on the mark with your
    question, and I think that is one of the important elements,
    and really the urgency now, of working with our countries to
    build that ecosystem.
        Ms. Spanberger. In looking at building that ecosystem, are
    there any suggestions that you all--again, I will open this up
    to any of the witnesses--would make to members of this
    committee in terms of either legislatively or things we should
    be thinking about as we are looking toward our partners and
    potential increased partnerships in the Indo-Pacific?
        Are there any things that you would point us to or things
    that you think we should be focusing on from a congressional
    standpoint?
        Mr. Feith. Congresswoman, I will take that quickly.
        One thing the U.S. Government has learned in recent years,
    sometimes through difficulty and frustration, is that as we try
    to make our own policy and consult with our friends about
    policy on the sorts of telecommunications infrastructure
    matters that you have raised, there is sometimes a problem of
    an inability to address the full relevant technology stack.
        And the previous question about undersea cables reflects
    that, where, you know, we had an explosion in interest over the
    last 5 years, let's say, in 5G where we basically ended up
    focusing our diplomacy aggressively and with some success, but
    quite narrowly, on the matter of terrestrial hardware, you
    know, which bay stations for terrestrial systems will our
    allies and partners install. And that is extremely important.
        But all of the same concerns apply to undersea cables. All
    of the same concerns apply to data centers and the cloud. All
    of the same concerns apply throughout that process, and we, in
    our system and very much with allies and partners, we found in
    our diplomacy that often, unless we made a specific, you know,
    point, but actually the concern that is about terrestrial also
    relates to undersea, it also relates to cloud, our counterparts
    wouldn't naturally make the inference.
        And I think as we do policy and legislating, we might
    fruitfully bear that in mind.
        Ms. Spanberger. And, Mr. Feith, you mentioned multiple
    times the diplomatic engagement and, you know, through our
    diplomatic discussions. And so, I would just note that we do
    need to have a very strong diplomatic presence across Asia, so
    I am personally--and I think many of my colleagues share this
    concern that so many of our Ambassador positions across the
    region, especially in Southeast Asia have gone unfilled, in
    some cases, for years. And so I think that this--it certainly
    has an impact on our ability to cooperate on shared U.S.
    interests, to include putting a check on Chinese expansionism,
    but also bolstering public health in their response to COVID.
        And so I wonder if you, in the closing moments that we have
    left, have any comments on that in terms of the necessity and
    value of having those positions filled?
        Mr. Feith. No. I would agree. It is extremely valuable, and
    the sooner the better.
        Ms. Spanberger. Thank you.
        Mr. Chairman, I yield back. Thank you very much for this
    hearing.
        Mr. Bera. Great. Thank you.
        Let me now recognize the gentleman from Kentucky, Mr. Barr,
    for 5 minutes of questioning.
        Mr. Barr. Thank you, Mr. Chairman. Thank you to our
    witnesses for your testimony.
        Let me especially thank Mr. Feith for what I think is the
    most salient point of this entire hearing, in his prepared
    testimony when he quoted General Secretary Xi Jinping in
    talking about data. And I will quote from Mr. Feith's testimony
    what the Chinese leader said. Quote, ``the vast ocean of data,
    just like oil resources during industrialization, contains
    immense productive power and opportunities. Whoever controls
    big data technologies will control the resources for
    development and have the upper hand.''
        Make no mistake, that is the modus operandi of the Chinese
    Communist Party.
        Beijing, indeed, recognizes that competition for global
    influence in the 21st century will require harnessing this
    data, dominating this data to achieve commercial,
    technological, military, and intelligence advantages.
        That is what it is doing. I want to flag that testimony. I
    want to highlight it. I want to underline it. That is what this
    hearing is all about, and we need to compete and we need to
    counter that threat.
        So, Mr. Feith, in response to that--and also I would invite
    our other witnesses to chime in here--tell us about the extent
    to which the Chinese-led Regional Comprehensive Economic
    Partnership is enabling China to obtain those advantages in
    data, and amplify whatever other threats RCEP poses to the
    rest.
        Mr. Feith. Well, thanks, Congressman. I appreciate your
    comments about the testimony.
        I will also happily defer on a lot of the RCEP details to
    my colleagues, you know, with USGR experience who are deeper on
    this.
        I would just say briefly, I think what RCEP does with
    respect to allowing China to continue to carry out this
    aggressive and mercantilist and predatory data strategy is
    mostly failing to check any of that in the Chinese system,
    which is to say that the rules in RCEP that relate to data,
    cross-border data flows, data localization are soft. They are,
    in some cases, I think non--kind of unenforceable because they
    are not subject to the mechanisms that do exist in that
    agreement.
        What makes it low standard is it basically allows
    governments to do as they please. And in the case of Beijing,
    doing as they please is the construction of this intensely
    controlled posture where, frankly, Beijing is succeeding at
    hoarding all of its own data and seeking to absorb all of the
    rest of the world's data through means either legal or illegal.
    And I think that is the challenge that it poses to us in
    recognition that we have national security concerns with the
    exposure of our data, and we all have intense competitive
    concerns with the control of data over time as an input into
    innovation and technology.
        Mr. Barr. Ms. Bliss, could you also offer your thoughts on
    that and particularly what threats RCEP poses, and what changes
    to the digital trade landscape in the Asia Pacific and the
    Indo-Pacific region going forward?
        Ms. Bliss. Yes. Well, I would largely agree with Mr.
    Feith's comments with respect to the weaknesses and the dangers
    of RCEP.
        And as I have previously said, I think, overall, the
    flexibilities that are built in in the agreement in terms of
    allowing a country, a member like China, to do as it pleases
    and impose its own policies is a real danger and risk to us.
        As Mr. Feith mentioned, the data localization and cross
    border flow provisions are incredibly weak and ineffective, and
    the fact that you have these kinds of standards in the ASEAN
    region with the significant GDP that it represents is extremely
    problematic.
        Mr. Barr. Reclaiming my time in the final time.
        Obviously, the Trump Administration pulled out of TPP. The
    Biden Administration is signaling a lack of interest in CPTPP.
    How do we prevent China from being part of that?
        Ms. Bliss. Well, I do not know if you are addressing it to
    all of us. I can start maybe just by saying I think China will
    have real hurdles, and it is of great concern that they have
    applied to join CPTPP. The good thing, however, is that the
    existing CPTPP partners have to agree on the application and
    on--China would have to agree to the conditions that were put
    on the terms of its accession and the negotiation that it would
    have to go through.
        So working with our allies, I think they would share our
    concerns, and I think there would be real questions as to
    whether China could actually meet the standards necessary to
    join CPTPP. But it is not a given, so it is an ongoing concern.
    But I do think the fact that that mechanism is in place, where
    you do have to get agreement in order to accede and go through
    negotiation, is at least a safeguard that is in place.
        Ms. Cutler. If I can just add, though, I think we need to
    take this--and this is in my testimony--very seriously, and
    just relying on our allies and partners to kind of block even
    the establishment of a working party to start those
    negotiations for China CPTPP accession, we cannot count on
    them. We are not in that agreement. We cannot block it. And
    even our allies and partners, guess who their largest trading
    partner is? It is China, where are their supply chains, you
    know, where they strengthen their supply chains and increasing
    their economic integration.
        And so, while it is important behind the scenes that we
    work with our allies and partners, there is nothing better that
    we can do than by getting back in the region economically,
    sharing our affirmative agenda, and getting others to sign on,
    and really lead the economic future of the Indo-Pacific.
        Mr. Barr. I agree with you, Ms. Cutler.
        My time is expired, and I yield back.
        Mr. Bera. Let me now recognize the gentleman from Virginia,
    Mr. Connolly, for 5 minutes of questioning.
        Mr. Connolly. Thank you so much, Mr. Chairman, and thank
    you for having this hearing.
        Ms. Cutler, was the whole issue of digital services and
    digital governance addressed in the TPP?
        Ms. Cutler. Clearly, parts of it were, but, frankly, that
    chapter is pretty outdated now. I mean, it was negotiated
    probably 10 years ago now, put into force 3 years ago. And so,
    you know, it would be significant updating----
        Mr. Bera. Mr. Barr, you have to mute yourself.
        Mr. Connolly. I would ask that my time be paused, Mr.
    Chairman.
        Ms. Cutler. I think I answered your question, so----
        Mr. Connolly. So I guess I want to get at, when the United
    States walked away from its own treaty that it had written, it
    had negotiated, the TPP, when Donald Trump decided to walk away
    from that, did that create a vacuum in terms of economic
    relationships in the broader Trans Asia Pacific region?
        Ms. Cutler. Well, it absolutely created a vacuum. And, you
    know, our trading partners, they got their act together to go
    forward with the CPTPP without us. Now, lucky for us, they kept
    most of the provisions intact. But as they go forward and China
    becomes, you know, increasingly interested in a lot of these
    arrangements, their ability and their interests in just
    pursuing what we want them to pursue, you know, is something we
    just cannot count on.
        Mr. Connolly. And it also created a vacuum, did it not,
    that China is actively filling?
        Ms. Cutler. Absolutely. I mean, the fact that the irony of
    all ironies is China applying to join the CPTPP.
        Mr. Connolly. Yes.
        Ms. Cutler. Whoever thought that, you know, that wasn't in
    the cards.
        Mr. Connolly. I mean to me, this was one of the most self-
    inflicted wounds any great power could ever administer to
    itself.
        So here we have, you know, something like 40 percent of the
    world's GDP agreeing to enter into, you know, this regime that
    promoted liberal economic trade and investment and intellectual
    property protection, human rights, environmental standards,
    labor standards for the first time under the American
    protective channel. And we walk away from our own treaty, and
    that leaves those countries that were willing to partner with
    the United States sort of at the mercy now of, you know,
    outrageous fortune and the Chinese.
        What is a country like, for example, Vietnam to do absent
    the protective umbrella TPP would have provided?
        And are you seeing, as a consequence of that subsequently,
    countries either in tandem or individually cutting their own
    deals with China as best they can?
        Ms. Cutler. Well, I think RCEP is the testament to that. As
    long as the TPP negotiations were going on, frankly, there was
    a lack of interest in the RCEP negotiations. But the fact that
    15 Asian countries came together, including seven CPTPP
    members, and concluded RCEP that was brought into force earlier
    this month without us is really a testament to not only the
    vacuum we created, but their intent and their confidence to go
    forward without us.
        Mr. Connolly. You know, there were a lot of criticisms,
    especially, frankly, in my coalition, my Democratic coalition,
    about TPP and it did not meet the standards that we wanted.
    Does the Chinese agreement have human rights standards as part
    of the agreement?
        Ms. Cutler. I mean, RCEP is really just--the chapters are a
    subset of CPTPP. It does not include human rights, does not
    include State-owned enterprises, does not include labor, does
    not include environment, and the list goes on.
        Mr. Connolly. Ah. So while there were people who found TPP
    not entirely adequate, or not everything they wanted, what has
    replaced it has zero of that?
        Ms. Cutler. RCEP does, but let's keep in mind there is, you
    know, CPTPP----
        Mr. Connolly. No, no. I am only talking about RCEP now.
        Ms. Cutler. Yes, correct.
        Mr. Connolly. And I just think that is the threat. OK.
    Making perfect through the enemy of the grid has now hugely
    increased China's influence to the very region we were trying
    to counter it, and diminished our own because we walked away
    from our own agreement. And, oh, by the way, ironically, the
    standards you thought were inadequate are nonexistent under the
    Chinese umbrella.
        Ms. Cutler. And RCEP also is not a static agreement. It
    provides committees. It has a work program. And new rules will
    probably be discussed among the 15 countries going forward.
        Mr. Connolly. Thank you so much.
        Thank you, Mr. Chairman.
        Mr. Bera. Thank you.
        Let me now recognize the gentlelady from California, Mrs.
    Kim, for 5 minutes of questioning.
        Mrs. Kim of California. Thank you, Chairman Bera, and thank
    you, Ranking Member Chabot. And I want to thank all of our
    witnesses for joining us today, and, especially, Ms. Wendy
    Cutler. It is really good to see you.
        Leveraging U.S. engagement in the Indo-Pacific on digital
    economic opportunities is crucial toward securing U.S. national
    interest in the region and opening new doors for American
    commerce.
        So in my time in Congress so far, I have strongly urged the
    Biden Administration many times to pursue trade agreements that
    would implement new rules on cross-border data flows,
    restrictions on data localization, and protection of source
    code.
        Ensuring the secure movement of data across borders with
    countries that maintain similarly strong standards is critical
    toward promoting future digital trade that will bolster global
    commerce and boost technological innovation.
        As the world continues to evolve in the digital age, it is
    imperative that our policies and partnerships evolve with it,
    and that the U.S. is at the end of countering the technical
    authoritarianism and democratizing visual technologists.
        For these reasons, I led a letter with our fellow Members
    of Congress to the Biden Administration last November urging
    the President to reengage the Indo-Pacific on digital trade
    through new or updated bilateral, and plurilateral trade
    agreements. However, I have yet to see a response to my letter
    from President Biden, and this committee has yet to see any
    substantive action in the Indo-Pacific on pursuing new digital
    trade opportunities.
        So let me ask my first question to you, Mr. Feith. I would
    like to focus my questioning first on China's Digital Silk
    Road. Can you provide insight into the present challenges this
    poses to U.S. national security and economic interest in the
    Indo-Pacific? And what are potential responses Congress and the
    Administration can take to counter these challenges?
        Mr. Feith. Sure. Thank you for that.
        Well, so, the Digital Silk Road of China is essentially the
    digital component of the broader Belts and Road Initiative, or
    One Belt One Road strategy as the Chinese still say it in
    Chinese.
        And essentially there has been, I think, a lot of
    attention, justified attention on Chinese-built projects like
    ports that have themselves allowed Chinese military access or
    caused debt problems for the countries that received them. But
    actually the Digital Silk Road, which is to say the digital
    telecommunications infrastructure that is largely invisible,
    you know, harder to take a picture of than a port, is probably
    the more pernicious threat, as I think your question suggests.
        And perhaps--in brief, but the threats are two main types.
    One is simply to the data integrity, which is to say that when
    Chinese companies that are instruments of the State and are
    subject to coercion by the Chinese State are building undersea
    cables or, you know, mobile telephone infrastructure,
    infrastructure for, you know, commerce and government business
    in these third countries, all of that is subject to compromise
    by the Chinese State or by the Chinese security services. And
    that is a very big problem for the data integrity. And there is
    the related problem of the political influence that comes with
    it.
        These Chinese overseas infrastructure projects seem very
    often designed to basically insinuate the Chinese Communist
    Party into the local politics of these countries as a way of
    exerting some very effective long arm influence, and sometimes
    that is collecting information and----
        Mrs. Kim of California. Thank you, Mr. Feith. Yes, thank
    you. Thank you for your answer.
        In the interests of time, I would like to ask Ms. Cutler a
    couple of questions. Actually, I will just throw that all in
    there.
        What existing or potential future agreements offer the best
    frameworks for personally digital trade opportunities with the
    Indo-Pacific region? And what strategies do you realistically
    believe this Administration will pursue? And which countries
    will they primarily seek to partner with?
        And then if you can further provide the insight on
    opportunities that remain out there for a partnership with
    ASEAN member nations.
        Ms. Cutler. Well, thank you very much, Congressman Kim, and
    it is great to see you.
        Just in short, the Administration is soon to unveil its
    Indo-Pacific economic framework with details in all of the
    areas that they have listed, including digital standards and
    digital technologies. So I am expecting that we are all going
    to see a lot more very soon, which will include some kind of
    initiative on digital with our partners in the region.
        Now, when we talk about which partners, they are kind of
    the usual suspects, Australia, Japan, New Zealand, Korea,
    Singapore. But from my perspective, for any digital initiative,
    even for the overall framework to be effective, it needs to go
    broader than that, particularly with respect to including
    countries from Southeast Asia. And if that means there needs to
    be certain flexibilities to allow certain countries to sign on
    to certain obligations from the git-go, and then over time to
    phase in others, I think that is, you know, a worthwhile
    approach.
        So I think we will be seeing more digital very soon. I know
    both USTR and Commerce are working very hard to kind of build
    out that agenda, and there is a recognition that this is, you
    know, an important part of the overall framework.
        Mrs. Kim of California. Thank you.
        Thank you for allowing us to go over time, Chairman. I
    yield back.
        Thank you, Ms. Wendy Cutler.
        Mr. Bera. Thank you.
        Let me recognize the gentlelady from North Carolina, Ms.
    Manning, for 5 minutes of questioning.
        Ms. Manning. Thank you. Thank you, Chairman Bera and
    Ranking Member Chabot, for organizing this very important
    hearing. Thank you to our witnesses for sharing your expertise
    with us today.
        I would like to echo Representative Spanberger's concerns
    about the lack of envoys who have been confirmed throughout the
    region and, frankly, throughout the world, and how that is
    hampering our efforts and our ability to achieve trade
    agreements and other important agreements in this region and
    around the world. And many of those envoys and Ambassadors are
    awaiting confirmation in the Senate, and I think it is causing
    real harm to this country.
        I would also like to pick up on the issue that
    Representative Connolly raised, and that is the serious error
    that the Trump Administration made in walking away from the
    TPP, an agreement that we forged to create a significant
    regional alliance that would have been hugely beneficial to the
    U.S. in terms of trade and influence on the standards and
    behaviors in the region.
        And right now, as we are talking about all of these
    agreements that we have seen created between other countries in
    the region, we are basically being left out and we are being
    forced to play catchup.
        So, Ms. Cutler, you mentioned a little bit what you would
    hope to see is the Biden Administration release its Indo-
    Pacific economic framework. I wonder if you could talk a little
    bit more about what you would like to see to reinforce our
    efforts to create a regional block that is more in line with
    our values and priorities.
        Ms. Cutler. Yes. I mean, what I would like to see are just
    details in all of these areas which show that this initiative
    overall is serious, that we are committed to the long term to
    economic ties with the region, and that it goes beyond just
    principles and best practices. It actually has rules, norms,
    and standards that we will be asking others to join us in
    embracing, and have some real tangible outcomes that really
    matter and are impactful.
        So whether it be in digital or in infrastructure or in
    clean technologies or supply chains, there is a lot to be done
    in all of these areas and, frankly, you know, we need to move
    quickly.
        Ms. Manning. Thank you.
        Ms. Bliss, since President Trump withdrew from the TPP in
    2017, and in the absence of any substitute engagement, can you
    talk to us about what the impact has been on U.S. companies in
    the region? In particular, what kinds of discriminatory trade
    barriers have we watched in the digital realm in the past few
    years?
        Ms. Bliss. Thank you, Congresswoman.
        What we have seen in particular is a continued rise in
    digital protectionism, and as I mentioned previously,
    particularly in the area of data localization requirements, and
    on restrictions on cross-border data flows, I can mention
    specifically--I mentioned Korea and Indonesia in particular as
    examples of where data localization measures are still
    significant problems for U.S. companies across the services
    sector. And so that, I believe, in part, is a direct result of
    the U.S. not participating and being able to be part of the
    TPP, and now CPTPP.
        But I will say, as previous witnesses have said, I would
    totally agree that, you know, we have gone beyond CPTPP and
    what we included in digital trade in USMCA, the U.S.-Japan
    agreement but, more importantly, I think what some of our
    trading partners are doing, Australia, Singapore, and the U.K.
    in particular, and there is some really strong innovative
    conditions that I think can be helpful in combating the rise of
    digital protectionism.
        So I think we need to look at those.
        Ms. Manning. Thank you.
        Mr. Feith, we have seen how China exerts pressure against
    American companies, like Apple, forcing them to store consumer
    data on Chinese servers, orcensor applications in return for
    market access.
        What can the U.S. do in our trade engagements to push back
    on these efforts across the region?
        Mr. Feith. It is a--frankly, it is a very difficult one in
    the sense that, you know, there are certainly some companies--
    and Apple is a real example--that have made themselves very
    strongly dependent on what they can get only in China, in
    Apple's case in terms of the manufacturing supply chain and,
    therefore, they are in a position where they comply with even
    the very onerous and predatal or even fundamentally unfair and
    nonreciprocal laws and regulations that China imposes.
        I think that, you know, the ability to fix that, frankly,
    from Washington is limited, which I think is why the problem
    persists to such an unfortunate degree.
        I think in the long term, though, this digital and data
    trade discussion, you know, might need to point, you know,
    frankly, into a kind of a world that we feel like we cannot
    even really imagine at the moment, where essentially we have
    arrangements where countries that want to follow essentially,
    you know, democratic and liberal norms of data trade align
    ourselves into, you know, something of a data trade zone and a
    block, and actually consider over time, not only privileging
    each other, but actually imposing restrictions and tariffs on
    the likes of China and others who will continue to not follow
    these rules of, you know, reciprocal and open trade.
        Ms. Manning. Thank you.
        My time has expired, and I yield back.
        Mr. Bera. Thank you.
        I want to thank our members for their questions and to the
    witnesses for their responses.
        With member questions now concluded, I will move to my
    closing remarks and then recognize the ranking member for any
    closing remarks that he may have.
        I think, you know, for folks that are watching this, as
    well as for our witnesses and members of the Administration,
    you've seen bipartisan support for engagement and, you know, a
    desire from the members of this subcommittee, but I believe in
    a bipartisan-bicameral way, a desire for the United States to
    engage with the region in a way that, you know, doesn't
    disadvantage our workers, addresses environmental concerns, but
    also sets standards and norms for digital trade and, you know,
    beyond in the region.
        I think recent history also suggests, you know, with USMCA
    that with an inclusive process that does take time, does take a
    lot of effort, you can come up with a strong bipartisan
    agreement that it can be supported by labor, environmental
    groups, the business community, and others and has a strong
    standard.
        So I welcome the ability to work with the various groups,
    but also with the Administration as they engage and start to
    lay out their economic framework for engagement with the Indo-
    Pacific. And I look forward to working with the ranking member,
    Mr. Chabot, and other members of this subcommittee as this
    process goes forward.
        And with that, let me go ahead and recognize the ranking
    member, Mr. Chabot, for any closing comments that he may have.
        Mr. Chabot. Thank you, Mr. Chairman. And let me commend you
    for holding a really excellent hearing, I believe, on a very
    important issue.
        As I said in my opening statement, countries throughout the
    Indo-Pacific are hungry for U.S. economic engagement. And I
    agree with you that the digital trade is a good place to start.
    Such an agreement would bring many benefits to the U.S.
    economy. And as the past chairman of the House Small Business
    Committee, I particularly appreciate Ms. Bliss mentioning the
    importance of a digital agreement for small-and medium-sized
    enterprises. The stakes are high if we sit on the sidelines.
        As our witnesses have said, the PRC is seeking to export
    digital standards to the rest of the world that are radically
    different from those that we would create. Unfortunately, this
    Administration's rather nebulous statements about an economic
    framework for the region really do not inspire a great deal of
    confidence that their strategy is up to the task.
        So I appreciate your leadership on this issue and look
    forward to working with you and our colleagues over on the Ways
    and Means Committee to make some progress on this critical
    area.
        And with that, I yield back.
        Mr. Bera. Thank you.
        And I want to once again thank our witnesses and the
    members who participated in this very important virtual
    hearing.
        And with that, the hearing is adjourned. Virtual gavel
    banging.
        [Whereupon, at 12:04 p.m., the subcommittee was adjourned.]

                                    APPENDIX
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                       STATEMENT FOR THE RECORD CONNOLLY

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                RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

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           ADDITIONAL INFORMATION MATERIALS SUBMITTED FOR THE RECORD

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