[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
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
STATEMENT FOR THE RECORD CONNOLLY
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
ADDITIONAL INFORMATION MATERIALS SUBMITTED FOR THE RECORD
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]