[Senate Hearing 117-351]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 117-351
 
                    U.S.-CHINA RELATIONS: IMPROVING 
                    U.S. COMPETITIVENESS THROUGH TRADE

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 22, 2021

                               __________
                               
                               
                               
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
 
 

            

            Printed for the use of the Committee on Finance
           
            
                                ______                       

            
                   U.S. GOVERNMENT PUBLISHING OFFICE 
48-401-PDF                    WASHINGTON : 2022 
	     
	                                         
                                     


                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         RICHARD BURR, North Carolina
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania   TIM SCOTT, South Carolina
MARK R. WARNER, Virginia             BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island     JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire         STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada       TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts      BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                    Joshua Sheinkman, Staff Director

                Gregg Richard, Republican Staff Director

                                  (ii)
                                  
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee 
  on Finance.....................................................     1
Crapo, Hon. Mike, a U.S. Senator from Idaho......................     2

                               WITNESSES

Wessel, Michael R., Commissioner, U.S.-China Economic and 
  Security Review Commission, Washington, DC.....................     5
Kokas, Aynne, Ph.D., senior faculty fellow, Miller Center for 
  Public Affairs; and associate professor of media studies, 
  University of Virginia, Charlottesville, VA....................     6
Willems, Clete R., partner, Akin, Gump, Strauss, Hauer, and Feld 
  LLP, Washington, DC............................................     8
Baer, David, chief operating officer and general counsel, Element 
  Electronics, Winnsboro, SC.....................................    10

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baer, David:
    Testimony....................................................    10
    Prepared statement...........................................    49
    Responses to questions from committee members................    50
Brown, Hon. Sherrod:
    Submissions for the record...................................    52
Crapo, Hon. Mike:
    Opening statement............................................     2
    Prepared statement...........................................    54
Kokas, Aynne, Ph.D.:
    Testimony....................................................     6
    Prepared statement...........................................    56
    Responses to questions from committee members................    63
Portman, Hon. Rob:
    Submissions for the record...................................    52
Wessel, Michael R.:
    Testimony....................................................     5
    Prepared statement...........................................    64
    Responses to questions from committee members................    68
Willems, Clete R.:
    Testimony....................................................     8
    Prepared statement...........................................    76
    Responses to questions from committee members................    80
Wyden, Hon. Ron:
    Opening statement............................................     1
    Prepared statement...........................................    86

                             Communications

American Farm Bureau Federation..................................    89
Bradford/Hammacher Group of Companies............................    92
Center for Fiscal Equity.........................................    94
Guardian Technologies............................................    98
Lasko Products, LLC..............................................    99
Rail Security Alliance...........................................   100


                    U.S.-CHINA RELATIONS: IMPROVING 
                   U.S. COMPETITIVENESS THROUGH TRADE

                              ----------                              


                        THURSDAY, APRIL 22, 2021

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10 a.m., 
via Webex, in the Dirksen Senate Office Building, Hon. Ron 
Wyden (chairman of the committee) presiding.
    Present: Senators Cantwell, Menendez, Carper, Cardin, 
Brown, Casey, Crapo, Grassley, Cornyn, Thune, Portman, Toomey, 
Lankford, and Daines.
    Also present: Democratic staff: Sally Laing, Senior 
International Trade Counsel; and Joshua Sheinkman, Staff 
Director. Republican staff: Mayur Patel, Chief International 
Trade Counsel; and Gregg Richard, Staff Director.

   OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM 
             OREGON, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. I thank all of my colleagues. This is a very 
hectic morning, and the Finance Committee is meeting to discuss 
one of the most significant challenges facing the U.S. economy. 
And that is the decades-long effort by the Chinese Government 
to manipulate global competition in their favor by any means 
necessary.
    The Finance Committee is coming together to respond to this 
challenge with Democrats and Republicans on the committee 
working on new legislation that will take concrete steps to 
boost America's competitiveness and level the playing field for 
American workers and American businesses.
    This is a bipartisan effort. Senator Crapo and I have been 
talking in considerable detail about the core issues of how our 
country can out-compete China, cracking down on the use of 
forced labor, fighting censorship, protecting U.S. jobs by 
rooting out the counterfeiters, shoring up supply chains 
including semiconductors and medical products, and stepping up 
trade enforcement and oversight.
    This is going to be a significant bipartisan push on issues 
that are front and center for the Senate Finance Committee.
    I do want to thank Ranking Member Crapo and the many 
members of the committee on both sides of the aisle who are 
contributing and have key ideas on these issues. The 
committee's proposal will be combined with bills from other 
committees to form a larger package on building up U.S. 
competitiveness.
    This is a prospect I think both sides of the aisle can get 
behind. The trade rip-offs and underhanded tactics of the 
Chinese Government and enterprises have grown at our expense, 
and they are well known: massive unfair subsidies that destroy 
any level playing field, theft of innovative intellectual 
property, shakedowns of 
cutting-edge technology, policies that meddle in supply chains 
and hurt our consumers and products, and use of forced labor--
absolutely reprehensible on its own, regardless of where it 
fits into international trade.
    With the Great Firewall and other sophisticated trade 
barriers, the Chinese Government blocks 10,000 websites and a 
host of American digital service providers. For the few allowed 
to enter the Chinese market, the price of admission is 
censorship.
    The overall result is untold losses for American companies 
and their workers. Homegrown tech giants rip off American 
innovations and thrive in the absence of American competition.
    Several of those homegrown firms have outgrown the Chinese 
market, accessed U.S. financial systems, and invested in 
American companies. The catch is, this is not just about 
economic losses for America; these Chinese firms compete 
unfairly and also export the government's intolerance of free 
speech.
    From solar panels to soybeans to software and everything in 
between, America's workers, farmers, and our economy writ large 
have been exposed to China trade cheating for too long. The 
consequences are visible in Oregon and across the country.
    Factories have shuttered. Towns have lost their beating 
economic hearts. Fewer and fewer workers believe that it will 
be easier for their families to get ahead in the future. In 
short, America has spent 2 decades falling further and further 
behind in a cold trade war. That did not change when it turned 
hot several years ago.
    The previous administration was right to throw out business 
as usual on trade with China, but their strategy relied more on 
what some might call Internet muscle and tough talk than 
serious economic strength. The former President's mean tweets 
and angry statements did not get results. The agreements the 
Chinese Government signed mostly rehashed commitments it had 
already made and broken in the past. Their core trade rip-offs 
are ongoing.
    So today this is about the Finance Committee building a 
bipartisan coalition to take a different tack. We are pleased 
to have an opportunity to address these important issues. We 
have excellent witnesses. I will introduce them shortly. But 
first let us hear from our friend, Senator Crapo.
    [The prepared statement of Chairman Wyden appears in the 
appendix.]

             OPENING STATEMENT OF HON. MIKE CRAPO, 
                   A U.S. SENATOR FROM IDAHO

    Senator Crapo. Thank you very much, Mr. Chairman. I 
appreciate those remarks and your spearheading this effort to 
make America as competitive as it can possibly be, particularly 
with regard to China. I am glad to be working with you on 
legislation to strengthen America's trade policies and 
practices. That is a potent challenge to the United States on 
several levels: economic, strategic, and moral.
    Republicans and Democrats can and should work together to 
formulate a China policy that can effectively confront these 
challenges. There is no need for a Republican or a Democrat 
policy on China, just an American policy. An American policy is 
precisely that: it reflects the best of America. It reflects 
our competitive spirit, our leadership in innovation, and 
critically our values.
    So how do we put such a policy into practice? It is simple: 
stay true to what made the American experiment a success. In 
terms of competitiveness, we should not close off our market or 
engage in protectionism. China closes off its market and 
provides distorted subsidies to create national champions. We 
do not fear competition, we embrace it, because American 
workers, farmers, and businesses have always confronted 
challenges head-on, and that spirit will never dampen.
    American companies become global champions, because the way 
forward in a free market is to excel, and America excels like 
no other in a fair fight. And to fight at its best, America 
must focus on strengthening its competitiveness, which means we 
need to be smart in our use of tariffs. We need to cut tariffs 
on imports that support American manufacturing, or on goods 
consumed by American consumers, especially the middle- and low-
income families.
    We can achieve that through programs like the miscellaneous 
tariff bill, and through thoughtful application of the section 
301 tariffs on China. Our open market strengthens America 
strategically.
    President Eisenhower told Congress in 1958 that world trade 
strengthens our friends and increases their desire to be 
friends. World trade helps to lay the groundwork for peace by 
making all free nations of the world stronger and more self-
reliant.
    He was right. That is why it is important that we 
reauthorize the Generalized System of Preferences program. 
Developing countries that want to play by the rules should know 
that the United States will be a reliable trading partner and a 
fierce friend.
    For example, there is no question that if most countries 
are offered a choice between debt-trap diplomacy like China's 
Belt and Road Initiative, or the opportunity to have access to 
the U.S. market which is governed by the rule of law, they are 
going to pick America. History is instructive in that regard.
    In terms of innovation, we should pursue policies that 
promote and reward creativity, such as strong intellectual 
property protections. Many of us are rightly repulsed by 
practices like China's technology theft and its Great Firewall. 
But the answer is not to construct our own restrictions on data 
and information, or to create some social credit score for U.S. 
companies. The answer, like President Reagan said 3 decades 
ago, is to tear down the wall.
    We must directly target those actions that take aim at U.S. 
companies. We must also negotiate and enforce strong rules 
through new trade agreements, including at the World Trade 
Organization.
    Last, though perhaps most important, are our values. 
China's human rights abuses are appalling. The communist regime 
set its tone on human rights at its inception and it has not 
improved since. Internationally, we must be sharper in our 
engagement on human rights by rallying our allies to confront 
these abuses, including forced labor and the suppression of 
free speech.
    What will bring down those abuses is not U.S. 
disengagement, but facilitating the opportunity for the Chinese 
people to engage themselves. Domestically, we have to stay true 
to our processes. That means our approach is shaped by a course 
that reflects our American tradition of building consensus 
through dialogue and debate.
    Whatever anyone may claim China has achieved through its 
system, ask them if they would rather live in a world that 
reflects its approach to its citizens or ours. Unlike any 
government official in China, every member present today is 
here because their constituents chose them through free and 
fair elections. And each of our members has the right and 
responsibility to bring their insights into the discussion.
    This hearing is a part of that discussion, but it is not 
the end of it. Moreover, it bears emphasis that Congress is 
democracy at its best. Concentrating unfettered power in the 
executive is China's approach, not ours.
    Having Congress in the driver's seat on critical trade 
policy decisions is not a weakness, it is a strength. Chairman 
Wyden and I still have a lot of work ahead of us to right this 
ship of state in the world's marketplaces, and I appreciate our 
partnership in this effort. And we are working together--and 
with members of our committee--to achieve that in a legislative 
package that will strengthen America's competitiveness and 
benefit its farmers, businesses, and innovators.
    Thank you for organizing this hearing, Mr. Chairman. I look 
forward to the testimony from our witnesses.
    [The prepared statement of Senator Crapo appears in the 
appendix.]
    The Chairman. I thank my colleague. And I think, if there 
is one issue that is central to this country's future, it is 
being in a position to out-compete China. And I very much 
appreciate the path that my colleague wants to take. We are 
going to do this in a bipartisan way. The stakes are enormous, 
and I thank him for his effort to build the bipartisan 
coalition.
    Let's go now to our witnesses. Mike Wessel is here. He is a 
Commissioner of the U.S.-China Economic and Security Review 
Commission. He has extensive experience. We met first decades 
ago when he was working on Capitol Hill focusing on 
international trade. He now heads a public affairs consulting 
firm.
    Then we will hear from Aynne Kokas, associate professor of 
media studies at the University of Virginia and senior faculty 
fellow at the Miller Center for Public Affairs. She has written 
extensively about digital trade issues with China, including 
China's censorship and digital policies and their impact on our 
country.
    Next up will be Clete Willems, a partner at Akin Gump, 
where he advises multinational companies, investors, and trade 
associations on international economic issues. And he is a 
former Deputy Assistant to the President for International 
Economics, and at the White House he was a trade negotiator.
    Finally, we will hear from David Baer, chief operating 
officer and general counsel for O'Shaughnessy Holding Company, 
which owns Element Electronics. Element is an American consumer 
electronics firm that assembles televisions in South Carolina 
from primarily imported parts. They announced that they were 
closing and laying off 126 workers in 2018 as a result of the 
section 301 tariff imposed by the Trump administration.
    We have an excellent group of panelists. Let's go first to 
Mr. Wessel.

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

    Mr. Wessel. Chairman Wyden, Ranking Member Crapo, members 
of the committee, it is an honor to appear before you today. My 
name is Michael Wessel, and I am a Commissioner on the U.S.-
China Economic and Security Review Commission. My testimony 
today reflects only my personal views.
    The Commission is a somewhat unique bipartisan body. We 
report to and support Congress. In 7 of the last 10 years, we 
have issued unanimous reports. Where it was not unanimous, 
there was only one dissenting vote. Our bipartisanship is a 
reflection of the broader political support for addressing the 
challenges posed by the Chinese Communist Party.
    China is not interested in abiding by international norms. 
We should stop hoping for change and waiting for it to occur. 
We need to accept reality and adopt the policies that are in 
our best interest.
    We need to make clear that in debating and addressing the 
challenges posed by the policies of the CCP, we are not 
disparaging the people of China. Rising anger and aggression 
targeted at people of Asian descent here in the U.S. or around 
the globe is unacceptable.
    The Biden administration is engaged in a top-to-bottom 
review of past actions, identifying its preferred path forward 
and, importantly, what cooperation and coordination with our 
allies is possible.
    A multilateral approach is important, but it is not the 
only approach. For years we sought multilateral cooperation but 
got little help. To paraphrase an old saying, our allies were 
willing to hold our coat while we bloodied our nose.
    Our producers and our workers cannot wait for allies to 
fully appreciate the impact of China's policies and develop the 
will to act. The outsourcing and offshoring of jobs and 
productive capacity to China has created unacceptable 
vulnerabilities. Americans saw that clearly when we were unable 
to obtain critical PPE supplies as COVID ravaged our country. 
China has shown its willingness to politicize and indeed 
weaponize its supplies of vital products.
    At the end of 2020, U.S. corporations were sitting on more 
than $5.5 trillion in cash and liquid assets. We need to send 
stronger signals that we want them to invest those funds here 
to expand production and create jobs. China's new 14th 5-year 
plan increases support for indigenous innovation and continues 
an expansive export strategy. Massive over-capacity will 
continue. Huge subsidies, protectionist and predatory 
practices, and legal and illegal actions will support their 
efforts.
    The CCP is seeking to advance research and development 
indigenously. The pace of R&D expenditures by U.S. affiliates 
in China has grown at a faster pace than domestic investments 
by their U.S. parents. We need to alter that trend.
    China's leaders are also desperate for foreign capital and 
investment. Changes in international investment indices may 
result in $400 billion or more of Western capital flowing into 
Chinese equities. Bond index changes may spur another $200 
billion going into China.
    Some of our citizens' capital could be invested in 
companies on the U.S. Entities List and DoD's list of companies 
supporting China's military. There also appear to be 
investments by U.S. persons in these companies after they were 
put on these lists. That must stop.
    We need to treat supply chains as integral components of 
our national and economic security, as well as vital to our 
critical infrastructure. In the 1980s, America faced 
competitive challenges from Japan, although they pale in 
comparison to those posed by China. In 1987, Congress and the 
Reagan administration worked together to create SEMATEC to 
reclaim America's momentum in the semiconductor sector.
    In 1988, Congress passed the Omnibus Foreign Trade and 
Competitiveness Act to advance America's ability to compete. 
Now is the time to consider what steps America should take to 
protect our interests and prepare for the future. Too much of 
the focus of our China discussions has been about containing, 
confronting, or decoupling. Many of the actions and policies of 
the CCP directly challenge U.S. interests. We need to send a 
strong signal to the CCP, to our companies, to our people, and 
the world that we will stand up for our interests. We will 
compete. We will invest. And we will win.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Wessel appears in the 
appendix.]
    The Chairman. I thank you, Mr. Wessel. And I like the fact 
that you closed on the bottom line, which is out-competing 
China.
    Dr. Kokas, welcome.

STATEMENT OF AYNNE KOKAS, Ph.D., SENIOR FACULTY FELLOW, MILLER 
  CENTER FOR PUBLIC AFFAIRS; AND ASSOCIATE PROFESSOR OF MEDIA 
      STUDIES, UNIVERSITY OF VIRGINIA, CHARLOTTESVILLE, VA

    Dr. Kokas. Chairman Wyden, Ranking Member Crapo, and 
distinguished members of the Senate Finance Committee, it is an 
honor to be here. My name is Aynne Kokas, and I am an associate 
professor of media studies at the University of Virginia and a 
senior faculty fellow at the Miller Center for Public Affairs. 
My testimony reflects my personal views.
    My remarks today will focus on three key points.
    First, Chinese laws imperil U.S. tech investment in China 
and around the world.
    Second, Chinese firms with close government ties are 
rapidly acquiring a wide range of U.S.-based digital media and 
tech-sector entities.
    Third, U.S. firms face pressure to self-censor as a result 
of U.S. domestic financial pressure paired with Chinese 
regulations.
    With the growth of the Chinese market, U.S. national 
interests and U.S. commercial interests have diverged. The 
global tech sector is estimated to reach $5 trillion in 2021. 
The U.S. is poised to make up 33 percent of that. The Chinese 
market makes up 14 percent of the global tech economy, but it 
also offers a tantalizing market growth opportunity for U.S. 
firms, despite current market entry restrictions.
    Further, disaggregating the tech economy from other sectors 
like automotive, agriculture, and health care, becomes 
increasingly difficult because of the role that digital 
management platforms and data integration play in cross-
sectoral innovation. However, data security regulation in the 
United States has historically followed sector-by-sector 
oversight.
    Chinese laws imperil U.S. tech sector investment. Unlike 
the United States, China centralizes tech oversight across 
sectors to provide a range of tools for the Chinese Government 
to access corporate data and IT, including forced data 
localization and corporate national security audits.
    The July 2020 Hong Kong National Security Law permits the 
Chinese Government to hold people and platforms liable for 
crimes committed extraterritorially. This puts particular 
pressure on firms that commit perceived transgressions such as 
speaking out about Xinjiang and human rights, and by those who 
offer education online at U.S.-based universities.
    Chinese firms have acquired a wide range of U.S. tech and 
media firms, enhancing both military and economic 
competitiveness. These include social media platform TikTok, 
gaming platform Fortnite, and many more.
    Beyond games of entertainment, Chinese firms have acquired 
companies with U.S. operations in the agriculture, health, and 
manufactured goods sectors and beyond.
    Further, Chinese firms can also acquire data from U.S. 
firms through data broker agreements. Such acquisitions limit 
U.S. economic competitiveness in data-driven industries where 
the skills, talent, and data developed in the U.S. advance PRC 
goals to grow the tech sector, particularly in data-driven AI.
    U.S. firms face financial pressures to self-censor. 
Hollywood studios are shifting content as a result of such 
Chinese market access pressures, but they are the canary in the 
coal mine. Other U.S.-based corporations have shut down the 
speech of fans and employees to preserve access to the Chinese 
market, as we have seen in the NBA and on the Hearthstone 
gaming platform.
    Delta and Marriott faced economic penalties do to listing 
Taiwan as an independent entity. H&M stores were delisted from 
Chinese map platforms for corporate speech about Xinjiang. The 
list goes on.
    National security concerns compete with the fiduciary 
responsibilities of U.S. companies to grow. The U.S. Government 
needs to restructure these incentives. My recommendations are 
as follows.
    First, improve U.S. tech sector competitiveness. Increase 
U.S. Government investment in STEM through agencies like DARPA 
and the Defense Innovation Unit, and through the adoption of 
the Endless Frontier Act.
    Continuing on Mr. Wessel's statement, it is important to 
work actively against anti-Asian hate in the United States in 
order to advance our mission for equality, but also to welcome 
researchers and technologists to continue their current path to 
grow their careers here, so they do not get trained here and 
then return to China to build their careers.
    Second, enhance U.S. global data oversight to prevent data 
exfiltration to non-allies. Build out a national data privacy 
framework across sectors to prevent consumer data exfiltration 
to non-allied countries, and join agreements like the CPTPP, 
formerly TPP, that already have data governance agreements. 
Require enhanced reporting on how and when firms share data 
with third-party providers. Limit the sale of U.S. consumer 
data through efforts such as the Protecting Americans' Data 
From Foreign Surveillance Act.
    Finally, fund Chinese area studies. The lack of secondary 
and tertiary social science education opportunities to learn 
about China means that most business people entering the U.S. 
workforce do not have a working understanding of China's 
political system, to the detriment of U.S. national security.
    Thank you for your time and attention. I welcome your 
questions.
    [The prepared statement of Dr. Kokas appears in the 
appendix.]
    The Chairman. Dr. Kokas, thank you very much for 
exceptionally important testimony. We very much appreciate your 
being here.
    Our next witness will be Clete Willems. Where is Mr. 
Willems?
    Mr. Willems. I am here.
    The Chairman. Please proceed, Mr. Willems.

 STATEMENT OF CLETE R. WILLEMS, PARTNER, AKIN, GUMP, STRAUSS, 
              HAUER, AND FELD LLP, WASHINGTON, DC

    Mr. Willems. Thank you, Senator.
    Members of the committee, thank you for the opportunity to 
testify today.
    U.S.-China competition will define the trajectory of the 
global economy and our collective security for generations to 
come. Congress will play a critical role in determining the 
outcome of this competition, and today I offer six suggestions 
to best position the United States for success.
    First, the United States must run faster, with policies to 
encourage domestic innovation in strategic areas targeted by 
China, such as artificial intelligence, semiconductors, 
synthetic biology, 5G, and 6G, among others. I understand the 
concerns raised by overall government spending levels, but 
misdirected spending in certain areas should not deter us from 
well-directed spending in areas critical to U.S. innovation 
leadership, especially if this spending seeks to enhance the 
strengths of the private sector instead of replacing it. More 
R&D spending, public-private partnerships, and narrowly 
tailored grant programs are a good idea.
    Consistent with this, Congress should pass the Endless 
Frontiers Act, fully fund the USA Telecommunications Act, and 
CHIPS for America. Such policies will help us run faster, but 
we are unlikely to run fast enough if we only focus at home. 
Much of the revenue our companies use to fund innovation comes 
from sales overseas, and the United States needs a proactive 
trade agenda to open up markets and set standards in emerging 
technologies.
    We cannot sit on the sidelines while China implements the 
RCEP and flirts with the CPTPP. Congress should renew Trade 
Promotion Authority, encourage the administration to finalize 
negotiations with the U.K. trade agreement, and plot a path 
forward in the Indo-Pacific. If TPP is not viable, we should 
consider sectoral agreements with TPP countries in areas like 
digital trade.
    Second, we must better coordinate with allies, including 
with the WTO. The WTO's current rules do not adequately 
constrain China's worst practices. Congress should encourage 
the Biden administration to make ambitious WTO reform 
proposals, starting with the trilateral initiative with the EU 
and Japan. The U.S. must also better coordinate on defensive 
measures like export control that maximize the impact and avoid 
putting U.S. industry at a disadvantage to foreign competitors 
not subject to such controls. Additionally, it should 
prioritize the resolution of transatlantic disputes so we can 
focus our energy on China.
    Importantly, however, we should not give our allies a free 
pass. They should be expected to stand up to China alongside 
the United States and refrain from unilateral discriminatory 
policies of digital services taxes, or the EU's Digital 
Marketing Act.
    Third, the United States should engage directly with China 
for additional market access. Sales to China support American 
farmers, workers, and businesses, full stop.
    The Phase One deal was a good first step toward a level 
playing field, with largely successful structural provisions on 
IP, agriculture, and financial services. The United States 
should now consider how to move on to Phase Two and obtain 
structural commitments in other areas.
    The administration should also reinstate a tariff exclusion 
process to provide relief for products that cannot be sourced 
elsewhere and are not core to China's Made in China 2025.
    Fourth, the United States must not become China to beat 
China. We should avoid policies that replicate the very same 
practices we are condemning, which are inefficient and 
undermine our credibility to rally an international coalition 
to our side. More specifically, we should focus our policy on 
flexibility, resiliency, and partnerships with trusted allies 
instead of trying to make everything at home.
    Similarly, access to our procurement markets should not be 
restricted for all foreign actors, but instead traded for 
reciprocal access to foreign markets. We should resist China's 
approach of invoking national security unless truly justified, 
and tread carefully when considering novel policies for 
investment streams.
    Fifth, the U.S. Government should closely align the private 
sector on policy implementation, including efforts to eliminate 
forced labor from supply chains. The U.S. Government must also 
be willing to back U.S. companies in particularly difficult 
policies like Chinese Government censorship, which is so 
embedded in the current Chinese Government philosophy that no 
company could be expected to navigate it on its own.
    Finally, we must be clear-eyed about the China challenge 
and the risk that certain policy choices entail. We should not 
over-
legislate to appear tough, but adopt nuanced policy responses 
calibrated to the threat posed, with clear, achievable 
objectives.
    If we decouple from China and blindly demagogue all China's 
people, including many who share our concerns about their own 
government, we could find ourselves on a dangerous path.
    I hope that the policies I have outlined today will provide 
a better alternative, and I look forward to your questions.
    [The prepared statement of Mr. Willems appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Willems. We will 
have questions in a moment.
    Our next witness will be Mr. Baer. Welcome.

 STATEMENT OF DAVID BAER, CHIEF OPERATING OFFICER AND GENERAL 
          COUNSEL, ELEMENT ELECTRONICS, WINNSBORO, SC

    Mr. Baer. Good morning, Chairman Wyden, Ranking Member 
Crapo, and members of the committee. My name is David Baer, and 
I am the chief operating officer and general counsel of Element 
Electronics. Thank you for giving me the opportunity to share 
Element's story with the committee.
    Element is the sole remaining mass producer of televisions 
in America. Our factory is located in Winnsboro, SC. As 
Chairman Wyden noted, Element's U.S. factory was on the brink 
of closure until Congress's enactment of the MTB and approval 
of an exclusion from the 301 tariffs completely reversed the 
situation and leveled the playing field.
    As a result, our U.S. factory rapidly grew. At the end of 
2020, we were operating all of our eight production lines and 
had over 520 team members working in our factory. Importantly, 
our story is about community and people. At Element, we offer 
living wages and benefits to our employees, over 90 percent of 
whom are African American. Included in our written submission 
is information about some of our employees and how they have 
benefited from the ability of Element to offer good-paying jobs 
in our community.
    However, our success depends on two issues that are 
completely beyond our control: the restoration of an exclusion 
from the China 301 tariff, and restoration of the Miscellaneous 
Tariff Bill.
    The most expensive input in an LCD TV is the glass LCD 
panel. These panels are not available in the U.S. Thus, we must 
import them. However, we face a severe tariff inversion 
situation when importing these panels.
    The normal tariff on LCD panels is 4.5 percent, while the 
tariff on the finished TV is 3.9 percent. Thus, the normal 
tariff structure incentivizes the importation of finished TVs 
over producing them in the U.S.
    To make matters worse, imports of the same finished TVs 
from Mexico are duty-free. TV producers in Mexico use the same 
panels that Element imports and the same factory equipment that 
Element uses, but Mexican producers import those LCD panels 
duty-free and then export the finished TVs into the U.S. duty-
free.
    The MTB provided temporary tariff relief to solve this 
obviously unintentional tariff conflict. So, with the lapse of 
the MTB, we are once again at a severe competitive disadvantage 
relative to imports, particularly from Mexico.
    In addition, we face an incremental 7.5-percent tariff on 
LCD panels imported from China as a result of the section 301 
tariffs. We agree that the U.S. must aggressively confront the 
unfair actions of the Chinese Government. However, the U.S. 
must do so in a way that does not inflict unintended harm on 
American producers and workers who have no choice but to rely 
on certain imports from China.
    Recognizing the lack of U.S. production of LCD panels and 
the dominance of China in the LCD panel market, Element 
received an exclusion from the section 301 tariffs. Like the 
MTB, that exclusion expired last December. Even with the 
exclusion in place, Element worked to find non-Chinese 
suppliers for LCD panels and, for a time, was successful in 
sourcing LCD panels from sources outside of China. 
Unfortunately, over the course of 2020, each of these non-
Chinese suppliers exited the LCD panel market for TVs as a 
result of relentless unfair competitive pressure from China. As 
a result, our factory is again primarily relying on imports 
from China.
    Because of the lapse in both the MTB and the 301 tariff 
exclusion, we face a combined tariff disadvantage of 12 
percent. Nobody can be expected to pay a premium of 12 percent 
for a TV assembled here. This 12-percent tariff disadvantage 
makes our factory in the U.S. uncompetitive, and we are 
currently operating only four production lines, and employment 
has dropped to 370.
    Without a restoration of both the MTB and the 301 
exclusion, Element will be forced to move production out of the 
U.S. This will devastate our workers and our community. 
Leveling the playing field through retroactively restoring both 
MTB and the 301 exclusion will allow Element to successfully 
compete against anyone.
    Therefore, on behalf of Element Electronics, our team 
members, and all their family members, I urge the Congress to 
enact legislation that would retroactively restore the MTB. And 
if the administration does not retroactively restore the 
exclusions from the 301 tariffs, then Congress should enact 
legislation that requires the retroactive restoration of these 
exclusions.
    Thank you very much for your time, and I am happy to take 
any questions.
    [The prepared statement of Mr. Baer appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Baer. This has been 
an exceptional panel of witnesses. It is hard to know where to 
start.
    I think, Dr. Kokas, it is a question for you to start, and 
then we will go to Mr. Wessel, but we want to hear from all of 
you in these questions.
    Doctor, it seems to me what you have done is spelled out 
how China is using its economic might to export repression. 
That is essentially what their agenda is all about--incredible 
economic might--and they are using it to be able to export 
repression around the world.
    So start us off by saying what would be, say, the first two 
steps, the first two bold steps you would urge the Finance 
Committee to take to fight China's repressive digital 
protectionism.
    Dr. Kokas. There are many steps, but two key steps that I 
would recommend would be to, first, change how U.S. exchanges 
fund Chinese entities when they try to enter the U.S., when 
they try to raise capital in the U.S.
    So I've written about, for example, the case of ITE, which 
grew from Baidu, after Baidu had raised capital on the U.S. 
exchanges then became a domestic competitor with Netflix. This 
is a classic example of how the U.S. actually funds the growth 
of Chinese firms so they can become competitive with U.S. 
firms.
    Another thing I think is important along those same lines 
is to increase the reporting requirements for how U.S. firms 
share their data with China and with Chinese partners, as well 
as how U.S. firms are investing within the Chinese market. So I 
think additional reporting requirements there are really 
important.
    The other thing is to enhance the use of the Foreign 
Corrupt Practices Act to make more robust the range of 
different types of items of value that firms could receive from 
the Chinese Government, looking specifically at market access.
    The Chairman. That point is well taken. I am particularly 
attracted to this idea of cutting off access to capital, 
because I think that is just a no-brainier. We have to do that. 
Thank you.
    Mr. Wessel, I think Dr. Kokas has really kind of led us 
into an area where you are really one of the authorities, and I 
think it would be helpful if you would give the committee some 
sense of the size and scope of the problem.
    What is being lost in terms of value, in terms of lost 
market access, stolen intellectual property rights and 
displaced American jobs? What is lost when the Chinese cheat?
    Mr. Wessel. Mr. Chairman, thank you for your question. That 
really goes to the heart of why your committee and others are 
looking at this issue. It is certainly our interest in the 
rights, the repression, the other issues, the freedoms, that go 
to the heart of our values, but our workers have been kicked in 
the teeth because of the China trade relationship.
    Just a couple of quick comments. The Economic Policy 
Institute indicated that since the accession of China to the 
WTO in 2018, 3.7 million jobs were lost. The majority of those 
jobs were in the manufacturing sector.
    In 2019, we ran a $134-billion advanced technology products 
trade deficit. Those are products that, you know, we should be 
excelling in, we do excel in. They are at the core of what you 
and your colleagues are seeking to advance, but China, through 
predatory and protectionist policies, has skewed the balance.
    Finally, the Commission on the Theft of American 
Intellectual Property, a bipartisan commission, has done great 
work over the years. Their estimates--using their methodology, 
I computed that in the last 5 years, there has been $2.4 
trillion in U.S. IP that has been stolen. That IP supports 
American jobs, American innovation, and our future.
    If we continue to lose at that pace, we will see the 
decimation of our tech sector, the continued hollowing out of 
our manufacturing sector, and the loss of our standard of 
living.
    The Chairman. One last question--and we are going to have 
to be prompt today, because we have so many members asking 
questions. How should the committee strike the balance, Mr. 
Wessel, between breaking down barriers that keep the Chinese 
market closed to our goods and services, and building up our 
R&D and domestic capabilities? How would you strike that 
balance?
    Mr. Wessel. Well, I would say it should be in equal 
balance, but we have to get progress on both. Certainly, as has 
already been talked about, our goal is to be able to sell 
American competitive products in China based on their 
competitiveness, not based on what China says they are willing 
to accept that week, or that day.
    But second of all, because China has been unwilling--and it 
is evidenced in all their economic programs--we need to invest 
in ourselves. We need to out-compete China. Americans can do 
that. As you know, back in the 1980s, President Reagan, along 
with the Democratic Congress, created SEMATEC. It was engaged 
in the MOSS talks. We can walk and chew gum at the same time. 
We cannot lose sight of doing both at the same time.
    The Chairman. Very good. Thank you very much.
    Next is Senator Crapo. And because it is going to be such a 
hectic morning, followed by Senator Stabenow, Senator Grassley, 
and Senator Cantwell.
    Senator Crapo?
    Senator Crapo. Thank you very much, Mr. Chairman.
    I will go to you first, Mr. Baer. And I would like to ask 
you to be brief in your responses because, as the chairman 
indicated, we have a lot of ground to cover here quickly.
    But I wanted to just highlight the section 301 tariff 
exclusion issues that you so clearly pointed out are so 
critical to your company, and the MTB reauthorization--two key 
pieces of what we need to do in this committee right now.
    You very clearly showed how our failure to reauthorize the 
301 tariff exclusions for your company was very damaging, and 
is very damaging. I just wanted to make a point here. Your 
company is just one example in America. There are hundreds of 
301 tariff exclusions that need to be reinstituted across this 
country in industries of all different types. Is that not 
correct?
    Mr. Baer. Absolutely.
    Senator Crapo. And the failure to be targeted in our 
imposition of 301 tariffs is critical across our economy. And 
just the same point, really, with regard to MTB 
reauthorization. An overwhelming majority of the tariff lines 
in the MTB are already subject to China section 301 tariffs. 
And the MTB provides relief on the key inputs that you 
described for your company with regard to manufacturing.
    It is critical, again, not just for your company but across 
our economy, in businesses large and small that need to be able 
to stay strong and competitive. Is that not correct?
    Mr. Baer. Yes, absolutely. I mean just for us, the 
combination of the lapsed MTB and the 301 tariffs has cost over 
150 jobs over the last few months.
    Senator Crapo. Well, thank you. And that is just repeated 
across our economy. It is one of the things that we critically 
need to do in order to be as competitive and as strong as we 
can be.
    Mr. Willems, I would like to go to you for a couple of 
questions. America's innovative industries, including its 
digital technology companies, are the envy of the world. And I 
am concerned that China is taking out its envy of U.S. 
successes by creating new restrictive tools to target these 
digital companies, and other 
technology-related companies, and that other countries are 
going to follow in this direction if we do not take some action 
to stop that.
    Do you agree? And what can we do about that?
    Mr. Willems. Senator, I absolutely do agree. And I think 
that the first thing we need to do is stand behind our 
companies. Digital companies, technology companies in the 
United States, they are our national champions. And if we are 
going to really compete against China, we need to backstop 
these companies against China's competitors.
    I talked in my opening about a bunch of different ways to 
do it. I think some of the incentives you all are looking at 
are a great start. But we also need to engage directly with 
China and push back on them.
    I think that one thing that has not really come into the 
discussion yet that is important, especially as we are looking 
at third markets, and when we are looking at China exporting 
its policies abroad, is creating international rule sets that 
we can all collectively enforce against China. To me, that is 
the way to push back on that. And I will finally just add, 
again it is not just China. You are also right to be concerned 
about places like Iran that are looking at various policies 
that are quite troubling, and we need to stand up there as 
well.
    Senator Crapo. All right; thank you. And I appreciate your 
help and input in helping us to identify these actions.
    Again for your, Mr. Willems; I am interested in a point 
that you made in your written statement. You wrote that we have 
to remember that the export of non-sensitive items to China 
allows its capital, essentially, to subsidize U.S. innovation 
leadership.
    I agree with that. Restrictions on non-sensitive items are 
counterproductive because other countries will simply backfill 
our orders to take our place in China's market.
    What are some steps that we can do to make sure that our 
approach is targeted? And how can we ensure that other 
countries coordinate with us better on trade policy with China 
to mitigate this backfill issue?
    Mr. Willems. I think the area where this really has come up 
is in the area of export controls, where the U.S. has taken 
certain interim measures, none of which are justifiable, 
against Chinese companies, but has not coordinated them. So you 
have this situation where companies can export into China from 
other markets the very same products that we can't. And so what 
you really need to do is to coordinate better on a multilateral 
basis. And if you do that, you are going to be more effective, 
and you are not going to hurt the U.S. in the process. So I 
would look there.
    In terms of working with other countries, I think at the 
end of the day we need to help them understand that it is in 
their self-interest, and that the same challenges we are facing 
with China are also affecting their markets. And I think we can 
get on the same page and push back proactively, and that will 
be a much more effective approach.
    Senator Crapo. All right; thank you very much.
    The Chairman. I thank my colleague.
    Next is Senator Stabenow.
    [No response.]
    The Chairman. She has a very hectic morning.
    Next, then, would be Senator Grassley.
    [No response.]
    The Chairman. Next, then, would be Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman; I appreciate it.
    I also appreciate this panel and witness list. I think they 
have covered a lot of ground. And as you know, we are working 
in the Commerce Committee on the major portions of the R&D in 
the Endless Frontiers Act. So I am glad to hear that everybody 
thinks that is a key component of what we should do moving 
forward.
    And I am so glad to join my Team Northwest colleagues, the 
chairman of the committee and the ranking member. I say that 
because I think the Northwest does have a very, already 
integrated view of the economies of the Pacific Northwest and 
Asia.
    So we already see the complexity of this challenge. That is 
to say, the 301 tariff exemption expiring causes a great deal 
of difficulty for a variety of sectors in our economy, a 
variety of companies. And I think that belies the larger 
question, which is, we already have such an integrated economy, 
how do we move forward when we absolutely know we want better 
behavior out of China as it relates to very important broad 
public policies, whether that is IT theft, privacy issues, the 
whole myriad of things?
    So I think, Mr. Willems, your comments I totally agree 
with: flexibility, redundancy, and partnerships. I definitely 
see those as the opportunity for us to work together. But 
besides the 301 exemption that my colleague, Senator Crapo, 
mentioned, what other tools do we need to affect policy moving 
forward? And my one concern is that somehow, we will go too far 
and ourselves try to pick winners and losers. And by that, I 
mean the Federal Government or some enabled aspect of the R&D 
investment that we are talking about.
    So supply chains are already complex. They are already 
integrated. I like the idea of working with our partners, but 
how do we--what are the cornerstones of those flexibility, 
redundancy, resiliency, and partnership issues that we should 
take forward?
    Mr. Willems. Thank you, Senator. It is a great question, 
and I am glad that we are like-minded on many things. You know, 
I think the point I was really trying to make is that, when you 
are looking at supply chains, you want to be thinking about the 
positive incentives that you can create to make sure that you 
can rely upon them in any sort of crisis situation.
    And some of the things we are looking at in terms of 
providing the different kinds of funding are R&D and tax 
credits, to make sure that we have supply chains that are in 
the United States. I am very comfortable with that. What I have 
found that is less effective are the discriminatory aspects of 
it.
    Now in terms of your specific question on how we better 
link them with some of these other countries, I think that you 
need to be looking at creating standards that we would all 
meet. And so, if we are talking about the pharmaceutical 
sector, or we are talking about the technology sector, what are 
standards that countries like the U.S., Japan, the EU, and 
Korea all adhere to and that maybe differentiate ourselves from 
China because they have more of an open model? And those are 
the kinds of things where we can ensure that there are 
linkages.
    I think we can also look at--allies should all agree 
together that, in crisis situations, we won't put export 
restraints on each other. And we will have lower tariffs 
between ourselves, so that we can better integrate those supply 
chains.
    I do think that part of the conversation has to be an 
honest look at the fact that once COVID hit and we were in the 
crisis situation, there were a lot of export restraints imposed 
around the world. And so, if we have allies that we really 
trust, and we have common standards between each other, I would 
think that we could try to agree to some of that.
    Senator Cantwell. Well, I think that is exactly where we 
should go. In trade in general, I have been very involved in 
increasing capacity building, increasing enforcement 
capabilities at USTR, and I actually think here we just need to 
bolster our trade strategy as it relates to these policies.
    On Huawei, I think that is exactly what we should have been 
doing, running around the globe getting like-minded countries 
to say we are not going to allow technology exports from 
countries that basically do not adhere to the rule of law of 
keeping a government back door out of technology solutions.
    Why would we let any government have a back door to 
technology solutions, let alone one as big as the Chinese 
market? So I just think we did not rally enough of our 
international allies soon enough on that.
    So what do we have to build here in the United States to 
give us capacity? If that is 20 more people at the State 
Department, count me in. Because 95 percent of consumers live 
outside of the United States.
    So we have to be building the capacity to have these 
conversations on an international basis so that we can go to 
China with a full panoply of markets, not just the U.S. market, 
but a panoply of other markets, saying ``This is what it is 
going to take to do business.'' And the sooner we get at those 
longstanding U.S. principles that we know that a lot of our 
allies agree on, I think the sooner we will really have the 
kind of market power that we want to have with China in 
implementing these policies.
    I agree; I am not being naive. But at the same time, the 
Northwest does look at them as a market. So we are not going to 
just X them out either. So I think that this is the better 
strategy.
    Thank you, Mr. Chairman.
    The Chairman. I thank my colleague who is so knowledgeable 
about these issues, and we definitely look forward to 
partnering closely with her, and I thank her.
    Next will be Senator Cornyn--oh, Senator Grassley is here. 
Senator Grassley, please proceed. We called you earlier. Go 
ahead.
    Senator Grassley. Thank you very much. This is a very 
important and needed hearing that you are sponsoring. Thank 
you.
    I want to talk about counterfeit goods from China and Hong 
Kong, which have increased considerably in recent years. And so 
my question, leading up to asking Mr. Wessel--as Americans 
turned to e-commerce, criminals took advantage of innocent 
consumers more than they did before e-commerce. I introduced 
legislation last week to give the U.S. Customs and Border 
Protection more authority to share information with rights-
holders on suspected counterfeit products. This bill would 
allow the CBP to share information with its private-sector 
partners, creating a much stronger network for counterfeit 
detection. So now to my question.
    In addition to information sharing between public and 
private entities, how can Congress prevent the trade in 
counterfeit products through trade policy? And how can the 
information sharing across the public and private sector 
benefit and secure U.S. trade?
    Mr. Wessel. Thank you for your question, Mr. Grassley. And 
thank you for your leadership on so many of these issues--the 
Foreign Sovereign Immunities Act, and many others.
    Your question is spot-on, because it is not just the 
economic losses that come from counterfeit products, but it is 
the real potential harm to American health and safety from many 
of those products. Your legislation is an important anchor for 
that approach. It needs to be supplemented by providing CBP the 
resources to be able to support that policy. Because, as you 
know, they often focus on the interdiction of other products 
and concerns.
    And finally, we just need an all-of-the-above strategy to 
make our various e-commerce platforms, Attorneys General, and 
others, aware of the problem and coordinated in their response.
    Senator Grassley. Thank you.
    According to USDA data, total exports of agriculture 
products covered under the China Phase One agreement were 
approximately $27 billion in 2020. That means the export target 
of $33 billion was missed by $6 billion. Despite the missed 
target, 2020 was the record for exports of agriculture products 
covered by the agreement.
    Mr. Willems, as one of the negotiators on the Phase One 
deal with China, I appreciate hearing your perspective on the 
deal. Recognizing the challenges of the global pandemic, do you 
think China is living up to its commitment in Phase One? And 
what steps in improving structural reform should the Biden 
administration make sure China takes before they move to Phase 
Two?
    Mr. Willems. Thank you, Senator. It is a great question, 
and I agree with the point that you made, which is that we have 
seen record numbers of agriculture exports to China. And I 
believe that the reason for that is the Phase One deal. And I 
would emphasize--I know that there is a lot of attention often 
paid to the purchasing chapter, and the targets that that set, 
but I think it is much less important than the structural 
commitments themselves.
    And if you look at agriculture, the reason that we are 
seeing record numbers is because there were 57 underlying 
structural commitments that China made to actually change its 
laws and regulations to allow in chicken, beef, and pork for 
the first time in years, by changing their actual underlying 
laws and regulations.
    And that is juxtaposed against energy services and 
manufacturing, where we did not have the underlying chapter and 
therefore we were not anywhere close to our purchasing 
commitments, and I think what that shows you is the importance 
of the structural chapter.
    And I would say, in agriculture China is doing a good job. 
On IT, you can look at the national trade estimates that USTR 
just put out. I think it is probably a B. You know, they did a 
lot of what they said. There are a couple of things now in 
progress that are incomplete.
    There are additional financial services, so that has been 
good. So I think, more or less they have done what they said 
they were going to do. Obviously there are areas where they 
have not fully followed through, and we need to put pressure in 
there.
    Moving on, what I would do is, I would look for additional 
structural commitments. I would not focus as much on purchases. 
And where I would start is with some of the text that got 
scuttled in May 2019. As you all may remember, we were very 
close to what was going to be a somewhat more comprehensive 
deal with China.
    Talks broke down for a variety of reasons, and we only got 
about half of what we were negotiating. And there was stuff 
left on the table on services and non-tariff barriers, and 
additional things on forced technology transfer. I think I 
would pivot there next, and then work with the allies on some 
of the more structural things like SOEs and industrial 
supplies.
    Senator Grassley. Thank you. My time is up.
    The Chairman. I thank my colleague.
    Senator Cornyn is next.
    Senator Cornyn. Thank you, Mr. Chairman. I want to thank 
you and Senator Crapo for working together on a bipartisan 
negotiation on the Confront and Compete Against China 
legislation, including items that are particularly important to 
me: censorship by foreign governments especially in digital 
trade, which follows up on my work last year as chairman of the 
Trade Subcommittee, working with Senator Casey; reasserting 
congressional authority over trade negotiations through 
additional oversight; the possible creation of a temporary 
restraining order or a national security exclusion order on the 
importation of goods obtained through trade secret theft by 
foreign governments and state-owned enterprises; identification 
of unacceptable risks to our supply chains and outgoing 
investment to unreliable foreign adversaries in the event of an 
emergency or national security; and finally, reauthorization of 
the Generalized System of Preferences and Miscellaneous Tariff 
Bill, and other tariff relief.
    And finally, I would like to note that, while the United 
States may not need an industrial policy per se, it is clear 
that the entirety of the Chinese Government, from its military 
to its blog posts, they have one that they are using against 
us.
    So, Mr. Willems, let me ask you a question, if I may, 
please. You testified last year before the Trade Subcommittee. 
Senator Casey and I led that effort on how foreign governments 
like China and Russia use censorship to block market access and 
cost companies billions of dollars, especially in the digital 
trade space.
    I am grateful that the current package currently being 
negotiated by the chairman and ranking member includes 
addressing foreign censorship as a key objective, at my 
request. I simply do not think we can tolerate American 
citizens being censored by foreign governments on our own soil.
    So let me ask you, if I may, please, can you tell me your 
thoughts on how we can better address this problem, addressing 
censorship in the trade space?
    Mr. Willems. Certainly, Senator. And thank you for your 
leadership on several of these issues. I agree with all the 
priorities that you highlighted.
    On censorship in particular, this is a very significant 
issue. And it is something that is appalling, but it is very 
difficult for our companies on their own to push back on these 
policies that are so embedded in this Chinese Government's 
philosophy. And some of the ideas I believe that you are 
considering that would have a government role, where the 
government steps in and shields U.S. companies--I think that is 
the right approach.
    I know there was some talk of putting in place section 301, 
or a mechanism like that, at USTR to focus on this, where the 
U.S. Government would come in. They would investigate it and 
come in and potentially try to push back against it. I think 
those are the right ways to go.
    I think it is challenging, again, for an individual company 
to push back on this because of just the massive power of the 
Chinese Government.
    Senator Cornyn. Dr. Kokas, can you discuss how the Chinese 
Government's censorship policies factor into the planning and 
investments of American businesses?
    Dr. Kokas. I have a few responses to this. One thing that 
is really important is to enhance financial reporting of the 
types of investments that we see by Chinese firms within the 
U.S. So looking specifically at firms like Alibaba Pictures, or 
Tencent Pictures, which produce films within the U.S. market 
and are heavily funded by Chinese investments. So I think 
enhancing financial reporting, particularly in content-
producing industries, is very important.
    One of the other challenges that we face is that this is a 
huge challenge for privately held corporations. So it is very 
difficult to understand how much Chinese investment, and how 
much Chinese influence, is occurring within privately held 
media and tech companies.
    So I think that one thing that could be interesting would 
be to look at special reporting for privately held companies 
about their level of Chinese investment, and their level of 
data transfers.
    Finally, something that is important to protect U.S. 
companies is data privacy regulations at the national level. 
And this is important because it will help protect the data of 
U.S. companies from being transferred to China. Thank you.
    Senator Cornyn. Thank you. I have been exploring the 
creation of an authority that would place, in essence, a 
temporary restraining order or national security exclusion 
order under section 337 of the Tariff Act of 1930 that would 
help block the importation of goods created through trade 
secret theft by foreign governments or state-owned enterprises.
    Mr. Wessel, could you discuss briefly the Commission's 
work, the International Trade Commission's work, on confronting 
intellectual property theft, and whether you think this concept 
might be useful?
    Mr. Wessel. Thank you for your question, Senator Cornyn. I 
think it is vital. We have seen that the utility of section 337 
is somewhat limited in terms of the ability to respond quickly: 
the burden of bringing a suit, the discovery, and all the other 
issues that go along with it. So some kind of blanket approach 
that allows companies to earn their way out of it by proving 
that they did not engage, rather than having to prove, which is 
difficult, there are violations, I think has value and is 
something that the ITC and Congress should seriously consider.
    Senator Cornyn. Right now it seems like China steals 
intellectual property with near impunity, and I would like to 
see another tool available to the U.S. Government.
    Mr. Willems, finally, can you share your experiences with 
IP theft by China, and how you would view this new tool?
    The Chairman. Mr. Willems, briefly. I think Senator Cornyn 
is making some very important points. We just have 20-some 
Senators to go. So please respond to Senator Cornyn's question 
and then we can move on.
    Senator Cornyn. I beg your pardon, Mr. Chairman. I did not 
have a clock in front of me, so this is my last question.
    The Chairman. I understand. These are important points you 
are raising.
    Mr. Willems. I think it is a good idea to explore other 
ideas, and we can follow up on that later.
    The Chairman. Very good. I look forward to working with my 
colleague on that.
    Senator Menendez?
    Senator Menendez. Thank you. Thank you, Mr. Chairman.
    Yesterday, the Senate Foreign Relations Committee, which I 
chair, voted out, in a bipartisan fashion, the Strategic 
Competition Act, 21 to 1--which is rare around here these days.
    It is the first major proposal to bring Democrats and 
Republicans together in laying out a strategic approach towards 
Beijing. The bill ensures the U.S.'s position to compete with 
China across all dimensions of national and international power 
for decades to come. And I think we have to be clear-eyed and 
sober about Beijing's intentions and calibrate our policies and 
strategy accordingly.
    So I look forward to the bill now coming to the floor. And, 
Mr. Wessel, in your capacity--I do not know if you had a chance 
to get a sense of the legislation, as a Commissioner on the 
U.S. China Economic and Security Review Commission, but what do 
you think about what we did in the bill? What would you like to 
see that we did not do? How can we make it better? Those are 
some of the questions I have for you.
    Mr. Wessel. Thank you, Mr. Chairman, and I appreciate the 
question. I appreciate your leadership and work on this issue 
for so long. I will be honest. I was unable to track all the 
amendments, but the underlying issues that the committee 
reported, the discussion of it, I think indicates a very strong 
base that deserves support.
    One of the critical areas I think you addressed is 
influence operations. And going to the previous question, that 
really underlies a lot of the impact on our companies, our 
workers, our researchers.
    We have found academic researchers stifling their own, or 
censoring their own discussions; journalists being forced to 
censor their own discussions. And the impact of these influence 
operations through the United Front Work Department, Confucius 
Institutes, and other operations, I think has had a pernicious 
effect.
    Your requirement that universities report contributions 
over a million dollars to determine what impact they may have 
on free speech, research, et cetera, I think is a critical 
component, along with many of the other provisions that the 
committee adopted yesterday.
    Senator Menendez. Well, thank you. We look forward to you 
having a chance to review the totality, and any insights you 
have, we welcome.
    Would you say that--trade is obviously one of our 
challenges with China, but isn't it much bigger than trade?
    Mr. Wessel. It is much bigger than trade. Again, it goes to 
the entire operation of markets: free speech, the overall 
competitive equation in terms of what is happening to our own 
workers here, for example. Just the threat of offshoring or 
outsourcing has limited wage gains and has resulted in 
companies deciding on certain investment postures. And so it 
has had an overall negative effect.
    And as you well know, in Africa and many other places, what 
has been happening with the Belt and Road Initiative, through 
debt diplomacy and other Chinese CCP actions, has corroded 
international norms.
    Senator Menendez. So it is fair to say that making 
investments here at home, as China has made in their country, 
is critically important in order that we not only confront 
China but compete with China?
    Mr. Wessel. I think it is vital. You know, I go back to 
President Reagan, who was known as being a free-market 
advocate, who supported SEMATEC and other investments in the 
U.S. It is not choosing winners and losers in the overall 
sense. It is choosing to make America the winner in this 
process.
    Senator Menendez. Let me just ask finally, when the U.S. 
entered into the Phase One agreement with the Chinese 
Government on trade and investment issues, China agreed to 
purchase $100 billion in U.S. manufacturing, agriculture, 
services, energy exports per year for 2 years following the 
agreement.
    We are now a year into this agreement, and Congress and the 
general public have no idea whether China is meeting the terms 
of the Phase One agreement. One hundred billion dollars for 
U.S. manufacturing and agriculture is not exactly chump change 
that we can afford to ignore.
    Is there currently any way for Congress to know whether 
China is following the terms of Phase One? Should we be putting 
our trust that China is complying with Phase One? Because I do 
not know that I will personally do that.
    Mr. Wessel. I certainly would not. Again, I am a Democrat, 
but I use the Reagan line, ``trust but verify.'' I think USTR, 
Department of Commerce, and others have the ability to track on 
a very granular basis what we are selling. But I also think it 
is important to recognize that we should allow competitiveness 
to choose what China buys, not simply what they choose.
    So for example, Senator Grassley asked about Phase One. I 
would like to see China open its market to crushed soybeans, 
not just the underlying product. I want to see value-added 
products, the best we have to offer getting in there, not just 
the products that they want to buy at a commodity level that 
often become industrial tourists--products that they transform 
into products that come right back into our markets.
    Senator Menendez. Well, I will close, Mr. Chairman, by just 
saying I would like to know: have they complied? And this is 
one of the reasons I think that our efforts to have an IG at 
USTR are so important, and we would have greater insights at 
the end of the day. Thank you very much.
    The Chairman. Thank you, Senator Menendez. And I want to 
know that information as well. So we will be working closely 
with you.
    Our next two panel members will be Senator Thune and then 
Senator Carper. Yes, both of them are here.
    Senator Thune?
    Senator Thune. Thank you, Mr. Chairman. Thanks for holding 
this important hearing. Let me just say to begin with, that the 
China that joined the World Trade Organization in 2001 was a 
very different country than it is today. China is now the 
world's second largest economy and a strategic competitor of 
ours across multiple fields, particularly in key areas, if you 
look at, for example, 5G, advanced technologies, artificial 
intelligence, quantum computing. China is a military power in 
the Asia-Pacific and has undertaken arguably the world's 
largest infrastructure program, the Belt and Road Initiative, 
across all corners of the globe.
    Yet at the World Trade Organization, China continues to 
self-designate as a ``developing country,'' just as they did in 
2001, in order to justify lower levels of trade commitments. 
Self-designating as a developing country not only provides 
China with trade advantages vis-a-vis the U.S. and other 
countries, but it undermines the institution of the WTO.
    Mr. Willems, is it economically justifiable for China to 
continue to self-designate as a developing country at the WTO? 
And what steps should the United States take to accelerate WTO 
reforms? And what would some of those reforms look like?
    Mr. Willems. Thank you, Senator. I agree very strongly that 
it does not make any sense for China to be classified as a 
developing country. What a developing country does in the WTO 
system is, it generally allows you to get away with lower 
levels of commitment in negotiations. And it does not make 
sense for the second largest economy in the world to say they 
are not going to take on commensurate commitments to the United 
States.
    What the United States tried to do under the Trump 
administration that I think was a good idea was to put in place 
objective criteria which would graduate, if you met that 
criteria. That includes things like being a member of the OECD, 
having a significant proportion of global trade, being a member 
of the G20. And when you apply those criteria to China, they 
would graduate.
    I think what you need to do here is you need to encourage 
other countries to self-graduate. Korea is one that showed some 
leadership here and said, ``You know what, we're not going to 
call ourselves a developing country anymore.''
    I think we need to push other countries to do that, and 
then also push for more objective criteria over time. You know, 
in terms of a broader WTO reform proposal, this is an area 
where proposals need to be more forward-leaning. We need to get 
proposals in there that deal with China's worst practices. The 
trilateral with the EU and Japan is a great idea, but it needs 
to get to an outcome that we can just put into the WTO. So we 
really do need to prioritize that.
    And I do think the U.S. should engage in dispute settlement 
forums, which is an area that they did not engage in quite as 
much as when I was part of the Trump administration. It does 
not mean we give up the changes we need to see, but let's go 
out there with some proactive proposals and see what we can do. 
And I think there are a lot of ways that we can do that that I 
would encourage this administration to pursue.
    Senator Thune. Fifteen countries, including China, signed a 
major trade deal last November. The deal calls it a Regional 
Comprehensive Economic Partnership, or RCEP, to form the 
world's largest trading block, and covers about a third of the 
global GDP.
    With RCEP now a reality, and America not a party to the 
Trans-Pacific Partnership, what should be the top trading 
priority for the United States to compete and lead in the Asia-
Pacific?
    Mr. Willems, you can start with that, and then anybody else 
who wants to comment on that.
    Mr. Willems. Yes, I enthusiastically will jump in here and 
say we need to get in the game in the Asia-Pacific. I 
understand that Senators and others, including the former 
President, may have had problems with TPP, but the answer to me 
was not to walk away. The answer was to renegotiate those 
aspects of it that we did not think were sufficient.
    That is exactly what we did with USMCA in a strong 
bipartisan consensus, and I think that was great. So let's do 
that with TPP. But again, if that is not viable for some 
reason, let's at least look at building block agreements with 
countries in that region. I mean, digital trade is an area 
where we can start; there is a lot of like-mindedness. Start 
with building blocks in key sectors and then try to build it 
over time.
    So again, ideal for me would be the comprehensive TPP we 
negotiated. But if that's not feasible, if we cannot do that 
for some reason, let's at least start with building blocks with 
TPP countries.
    Senator Thune. Do we need to renew TPA?
    Mr. Willems. Senator, I think it would be a good idea to 
have that authority, because it gives us credibility at the 
negotiating table, and it also makes sure that Congress has a 
direct say in what the administration is doing.
    Senator Thune. Thank you.
    Mr. Chairman, my time has expired. Thank you.
    The Chairman. Thank you, Senator Thune. We will be working 
closely with you.
    Senator Carper and Senator Portman are next.
    Senator Carper?
    Senator Carper. Thanks, Mr. Chairman. Welcome to all of our 
witnesses.
    I want to follow up on Senator Thune's line of questioning 
and focus on TPP. I think one of the best ways we could have 
moved forward in terms of trade in the last decade was the TPP. 
And the idea that we pulled out of it, pulled out of a trading 
block that included us and 12 other nations, 40 percent of the 
world's trading, and we walked away from it? China was on the 
outside, kept on the outside because of its bad behavior 
issues, and we walked away. When I think of some of the dumbest 
things that we have done in recent years in terms of trade, 
that is high on the list.
    I just wondered if each of you could, if you have not 
already spoken--Mr. Willems has already spoken--but could each 
of you take just a few minutes to share your thoughts on the 
benefits of taking a multilateral approach to trade to remain 
competitive with China?
    And my second follow-up question to that would be, in your 
view is there a possibility that negotiations can somehow 
resume and put Humpty Dumpty back together again with respect 
to TPP?
    Mr. Wessel. Thank you, Senator Carper. Let me start 
quickly. First of all, as I said in my testimony, multilateral 
approaches are key. That is what we should be seeking. But at 
the same time, we cannot wait for our multilateral partners to 
wake up to the real challenge that China's economic and other 
activities pose to them and their people. We have to act on our 
own.
    As to the TPP, let me--as my testimony also indicated, I 
chair the staff chair of the Labor Advisory Committee. When 
President Obama looked at the TPP early on, I was one of those 
brought into the situation room to have a deep discussion about 
what the architecture was going to be. And I think many of us 
thought that engaging in that way could be helpful.
    The ultimate agreement, though, which would have allowed 37 
percent of a vehicle to qualify under the rules of origin, that 
would have allowed Vietnam for example to comply with labor law 
requirements by having a 5-cent minimum wage, and that would 
suffice----
    Senator Carper. Mr. Wessel, I am sorry. I am going to ask 
you to hold it right there. Let's go to our other witnesses. 
Thanks so much.
    Same question.
    Dr. Kokas. Thank you so much, Senator Carper. This is a 
really important question, and I think, as I said in my 
remarks, I think it is important to rejoin the CPTPP, as it is 
now.
    One thing that I would like to highlight is, the challenge 
of multilateral agreements does not move us forward as quickly 
as we could. In my research, one of the things that I have 
identified is that there are multi-stakeholder tech standard 
organizations, like the IETF or the ACSM, that have the 
capacity to build out tech standards and do not require the 
same level of overall coordination as a multilateral 
organization.
    Now the U.S. Government has held back from funding 
participation in these organizations. However, that is not the 
case with the Chinese Government. And I realize we do not want 
to out-China China; however, it is important to have a voice at 
the table for these crucial standard-making bodies. Thank you.
    Senator Carper. Mr. Willems, you have already spoken a 
little bit on this, so I am going to ask you to respond more 
fully and directly to my question, if you would.
    Mr. Willems. Sure. I thought what Mr. Wessel said was right 
on. I think rules of origin for automobiles in the TPP 
agreement might have been a tad too permissive. That is an area 
that I might look at if I were to negotiate it. And there are 
also areas that you could also look at.
    The reality is that TPP now unfortunately--I think the 
negotiations were more or less concluded in 2012 or 2013. So it 
is a little bit outdated, and we have improved things through 
the USMCA. So I think you would want to do more or less a side-
by-side in certain areas and figure out where we can benefit 
from your collective bipartisan wisdom in the updates that you 
helped the past administration make on USMCA and apply those to 
TPP. Now we may not want to do everything. It is a different 
set of countries, but I do think the rules of origin updates 
are somewhere to look. And maybe you do not go quite as far as 
in the North American market, but probably beyond where you 
were before. And if you could pin that down, then I think you 
could try to update some of the other areas and get an 
agreement that the U.S. can return to.
    Senator Carper. Thanks so much, Mr. Chairman. I suspect I 
am out of time. Could I flag a question for the record with 
respect to the section 301 tariff exclusion process?
    The Chairman. Sure.
    Senator Carper. I would ask the witnesses, for the record, 
what should Congress do to reform its process in order to 
provide greater certainty and predictability for American 
companies?
    Thanks, very much.
    The Chairman. Senator Portman?
    Senator Portman. Thank you, Mr. Chairman. And thanks to you 
and Senator Crapo for holding this hearing, one, because it is 
important to talk about our challenge with China, but most 
importantly, because you are developing a package to look at 
how we, in fact, do what you said at the outset, which is, and 
I am quoting, ``Take concrete steps to level the playing field 
for American workers.''
    I could not agree with you more, and I think we have an 
opportunity here with this broader legislation that is moving 
to have the Finance Committee be involved in that.
    So, as you know, Senator Brown and I introduced one 
proposal recently to update our anti-dumping and countervailing 
duty laws. And it is really an attempt to help with regard to 
the real world out there as to how China is evading the 
existing laws, which were strengthened in what's called the 
Level the Playing Field law. This is our Level the Playing 
Field Act 2.0, and it looks at these issues that I think every 
single one of us has had to address.
    Certainly we know about steel, where 15 years ago China had 
about 15, 18 percent of the steel production in the world. Now 
they have about half of it. And they are dumping it in various 
places, and sometimes through third parties and third countries 
that send it to the United States, and therefore avoid our 
anti-dumping or countervailing duty laws.
    Sectors like chemicals, ship building, cement, paper, 
glass, aluminum, all face the same over-capacity issue. And 
whether it is polyester textured yarn from North Carolina, or 
lawn mowers from Nebraska, or metal file folders from Delaware, 
or woven ribbons from Maryland, or xanthum gum from Oklahoma, 
or woven sacks from Louisiana, every member of this committee 
has been facing this one way or the other.
    So our legislation would make it easier for manufacturers 
to win cases when China moves its factories to new countries in 
order to escape the application of U.S. trade remedies, and it 
would give the Commerce Department new tools to go after 
China's Belt and Road Initiative by accounting for trade-
distorting subsidies given by China to producers in other 
countries.
    So, Mr. Wessel and Mr. Willems, I hope you are familiar 
with our legislation. We sent it to you for your analysis, and 
we got some input from you. Do you both agree that this 
committee should consider this Level the Playing Field 2.0 
legislation to update our existing trade remedy laws and better 
address the reality which is the global nature of China's non-
market behavior?
    Mr. Wessel. Thank you, Senator Portman. Thank you for Level 
the Playing Field Act 1.0, and 2.0. I think your legislation, 
along with Senator Brown, is critical, especially as we face 
the recovery out of the pandemic.
    One of the critical provisions in the bill is to look at 
profitability in a different way. We have companies that were 
shut down during the pandemic. Now that they are restarting, if 
they start earning a small profit, that could be used against 
them as they try to fight massive subsidized and dumped 
products by the Chinese who, as you know, have over-capacity in 
solar, and aluminum, and steel, and countless other industries.
    The provisions in your and Senator Brown's bill are the 
tool chest that America needs to compete.
    Senator Portman. Thank you.
    Mr. Willems?
    Mr. Willems. Yes, Senator, I appreciate your leadership on 
this issue. Conceptually, I definitely agree with what you are 
trying to do. And I do think that we need to find a way so we 
are not constantly playing Whack-A-Mole as China uses subsidies 
and over-production to avoid our duties.
    If you look at third-country subsidization, and third-
country dumping, those are areas the European Union has also 
been focused on. So I think it is a great opportunity for a 
joint proposal there.
    I will have to come back to you. I have not had a chance to 
look at every specific of your new legislation, so I will get 
back to you on that. But I love the idea overall. I would also 
say, as I alluded to in earlier remarks, we have to do a better 
job on this stuff with the WTO, and I would look to try to do 
rules there. And then I would look to try to figure out a way 
to reverse some past decisions that have undermined our ability 
to counteract Chinese subsidies, such as the Public Body's 
Decision as we call it, which hurt our ability to use 
countervailing duties against state-owned enterprises.
    It was wrongly decided, and I think we need to figure out a 
way to fix that.
    Senator Portman. Thank you. And thanks, Mr. Chairman.
    The Chairman. I thank my colleague.
    Next is Senator Cardin.
    Senator Cardin. Mr. Chairman, thank you very much. Let me 
thank all of our panelists. The U.S.-China trade issue is one 
of the most important issues that we have to get right.
    It is very challenging, when we look at the fact that we 
are promoting market economies and China wants to dominate 
through a government-controlled economy; when we want to 
protect intellectual property and China wants to take 
intellectual property and use it for their own advantage; that 
we want to promote trade with other countries so that all 
economies can do better; and where China is using their trade 
leverage in an effort to promote their rules in regard to a 
government-controlled economy.
    So we have challenges. In 2015, I was responsible for 
including in the Trade Promotion Authority, as a principal 
negotiating objective, good governance and anticorruption. Now 
obviously, we are not in a position to enter into a trade 
agreement with China that would be, I think, strong on the 
governance issue, but my question--and I will start with Mr. 
Wessel--my question is, do we have adequate trade remedies and 
tools today to deal with the corruption and the anticompetitive 
nature of our relationship with China? Or do we need stronger 
tools in order to put us on a level playing field as it relates 
to governance issues and anticorruption issues?
    Mr. Wessel. Thank you for your question, Senator, and for 
your leadership in 2015 and beyond. I think that the short 
answer is, we need new authorities. We need new tools, and we 
need new enforcement measures.
    There are some on the books that could be better enforced, 
but when it comes to good governance, corruption--which goes to 
the heart of many of the degrading policies around the globe--I 
think a lot more can be done and should be done by Congress.
    Senator Cardin. Well, I hope you will be--and all the 
panelists will be--free in giving us suggestions as to what we 
should be considering as we take up our relationship with 
China.
    I know we have our traditional trade remedies, but it seems 
to me they were not created to deal with the circumstances of 
good governance and corruption. So it would be helpful if you 
could help us fine-tune our tools, or suggest new tools, in 
order to deal with the challenges we have with China.
    Look, I am for competition. But it has got to be on a level 
playing field. And today it is not on a level playing field.
    Mr. Wessel, I want to raise one additional issue as it 
relates to China--as to how we use trade. China's activity in 
the China Sea is anything but in our national security 
interests, as they try to dominate the South China Sea. That 
obviously affects the free flow of commerce and presents 
national security threats. But it also affects trade directly.
    So what should we be considering in our trade relations 
with our allies and partners, and with China, to deal with 
influencing China's nefarious activities in the China Sea?
    Mr. Wessel. Well, Senator, thank you. I do not know that 
there are any easy answers to that question. We have been 
trying, as you know, for quite some time. China's decision to 
ignore the UNCLOS decision on the nine-dash line and other 
activities, their reef and rock rebuilding activities, as well 
as the use of fishing boats as sort of a civilian militia 
around many of these islands, and what they did with Vietnam in 
terms of their oil rig--I think it is pernicious. It is 
corrosive. And it is continuous.
    And I think we need to engage in a much deeper relationship 
with our partners there, and have a coordinated strategy to 
address the trade and other impacts that we see.
    Senator Cardin. Well, I will invite again all the panelists 
to give us suggestions in this regard, because I want you to 
know, as Senator Menendez mentioned, we passed, by an 
overwhelming majority on the Senate Foreign Relations 
Committee, a major bill as it relates to China.
    One of the amendments that we could not consider, but would 
have passed overwhelmingly, was Senator Rubio's amendment that 
I was a co-sponsor of, that would have dealt with taking action 
against China because of their activities on the China Sea 
through the use of sanction-type activity.
    We will use that. Sometimes that is a blunt instrument, and 
it would be better if we had a more fine-tuned way of dealing 
with China's activities in the China Sea. So I welcome your 
thoughts. Otherwise, I think Congress will look for a more 
direct way to respond to China's activities.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Cardin.
    Next is Senator Toomey.
    Senator Toomey. Thank you very much, Mr. Chairman. My first 
question is for Mr. Willems.
    The United States currently has 25-percent tariffs on steel 
imports and 10-percent tariffs on aluminum imports from most 
countries, including many close allies of the United States. As 
you know, they were authorized by the Trump administration 
under section 232 of the Trade Expansion Act of 1962.
    In my view, this has alienated to some degree our allies, 
who correctly view these tariffs as an unwarranted move to 
protect the domestic industry, not a national security issue. 
So my question for you is, do you agree with the view that the 
imposition of these steel and aluminum tariffs under section 
232 has undermined our country's ability to work with our 
allies in confronting China's many objectionable practices?
    Mr. Willems. Thank you, Senator. I have not been a strong 
proponent of the 232 action that President Trump took. I was 
very involved in the interagency process when we considered how 
to move forward. I agreed with the President that there was a 
very serious concern with Chinese excess capacity disturbing 
global markets. But my view was that it was hurting Europe, it 
was hurting Japan, it was hurting our allies around the world 
just like it was hurting us.
    And so I would have preferred a concerted solution where we 
all worked together to isolate the bad practices coming out of 
China. I think that would have been a better approach.
    Senator Toomey. Thank you.
    So, Mr. Chairman, I mean, I do not think there is any 
question that the 232 tariffs weakened our ability to work with 
allies to confront China. I would also argue that 232 steel and 
aluminum tariffs have been harmful to the U.S. economy, by an 
objective measure. They have cost us a lot of manufacturing 
jobs--maybe as many as 75,000. They have increased steel and 
aluminum prices and made U.S. exports less competitive. I would 
argue it was a misuse of executive authority. Remember, the 
Department of Defense determined that the steel and aluminum 
tariffs were not necessary to meet defense requirements.
    Nevertheless, the Commerce Department decided to recommend 
the use of section 232 to target imports that do not threaten 
national security. These tariffs have not accomplished any of 
the stated goals. They have done nothing to decrease steel 
over-capacity. They have had an absolutely minimum impact on 
steel imports from China.
    And worst of all, Mr. Chairman--and this is why I am 
bringing this up--there is nothing we in Congress can do about 
it. Now the Biden administration is in the process of reviewing 
this, and I am hoping that they will recognize the domestic 
economic damage and the global implications, and they will make 
the right decision and lift these tariffs.
    But the fact is, Congress has no choice but to sit on our 
hands and passively wait on the administration to make a 
decision in an area--that is to say, collecting taxes and 
duties--that the Constitution delegates explicitly to us. And 
that is why I think we need to reform the underlying statute to 
reassert the responsibility that we have in this area.
    If removing these tariffs is an important part of working 
with our allies, and working with our allies is important in 
combating China, then it should be the prerogative of this 
committee to reform what I think is the excessive delegation of 
authority. And we should do it in any legislation this 
committee considers when dealing with China.
    So as you know, Mr. Chairman, I introduced a bill last year 
with Senator Warner. We had over 60 groups across a wide range 
of diverse industries; we had a number of Democrats and 
Republicans who co-sponsored the legislation on the committee 
and off the committee. And the premise is simple. It just 
restores responsibility over tariffs, which is to say taxes, to 
Congress--where the Constitution actually puts it.
    It does not take away the ability of the President to use 
section 232 for legitimate national security purposes, it just 
requires that Congress authorize that.
    Colleagues, Congress is, after all, the first branch of 
government, and we have explicit constitutional 
responsibilities, and they include trade. I think we should act 
that way. So I introduced this legislation when there was a 
Republican in the White House. I continue to support it when 
there is a Democrat in the White House, because for me this is 
not about party politics. Irrespective of who the President is, 
I think Congress should accept this responsibility.
    We can take an important step in that direction, Mr. 
Chairman, by including section 232 reform in the upcoming China 
bill, and I hope we will do exactly that. Thank you.
    The Chairman. I thank my colleague. As he and I have talked 
about before, there is no question in my mind that Donald Trump 
misused the tariff concept. What we are waiting to see is how 
President Biden is going to look at it. And I am very hopeful 
that we will see a fresh approach.
    Next is Senator Brown.
    [No response.]
    The Chairman. And I do not see the Senator.
    Next would be Senator Cassidy.
    Senator Cassidy. Hello, everybody.
    Commissioner, I am very interested in trade-based money 
laundering; if you will, the partnering, if you will, or 
coupling of the money laundering of illicit dollars with licit 
trade and the way tens of billions of dollars have been moved 
out of the United States annually.
    Any sense of the magnitude by which this may be occurring 
with trade with China?
    Mr. Wessel. I apologize, Senator; I do not know. I can tell 
you, though, briefly that last week the China Commission held a 
hearing where we looked at China's aggressive expansion on 
digital currency. And that has serious repercussions for money 
laundering, lowering the ability or reducing the ability of our 
sanctions regimes to work.
    But as to money laundering directly, I will have to get 
back to you after talking to our committee staff.
    Senator Cassidy. Sounds great.
    Mr. Willems, I really liked your testimony, because on the 
one hand--you know, I have been bouncing between committee 
hearings. I apologize to everybody. But I think you mentioned 
the need to strike a balance.
    You cannot be antagonistic, nor can you be a folding chair. 
There has to be some sort of push-back. At the same time, there 
has to be continued engagement, and you gave some particulars 
there. So let me just kind of specifically mention that.
    Again, I have this interest in international money 
laundering. And it does occur to me, though, that that requires 
the cooperation of both countries. You have to have 
transparency into banking transactions. The Commissioner just 
mentioned the potential for this cryptocurrency to facilitate 
transactions for which inherently--they are crypto.
    Do you have any kind of practical suggestions on how we 
could engage the Chinese Government to cooperate with us on 
money laundering--which, by the way, may be part of their 
capital flight, and I gather capital flight is a major issue. 
So I do think there is a vested interest.
    So, any thoughts on that?
    Mr. Willems. Well, I would certainly agree with your 
overall concept, as reflected by my statement that engagement 
needs to be part of our answer. I have not spent a ton of time 
on money laundering issues, so I do not have a sophisticated 
answer for you, but I do think that finding a way to work 
together, through some of the international institutions and 
other initiatives like the G20 that we are tangentially 
involved with, those kind of things make sense to me.
    We have to find ways to partner. Because even as we are 
pushing back on the problems, trying to solve them together is 
in our interest.
    Senator Cassidy. I am not sure who this question is 
directed towards. It has occurred to me that the labor 
standards and the environmental standards in China are either 
nonexistent or not enforced. Indeed, you could call it a 
negative enforcement if you include slave labor.
    And on the other hand, we have treaties with Mexico and the 
CAFTA-DR that require labor and environmental standards. Now in 
a sense, this turns out to be a subsidy to China, allowing them 
to undercut the cost of production within one of these other 
countries, because they do not have to comply. And the cost of 
compliance inherently adds cost.
    One, do you agree with that observation? And I open that up 
to anyone who feels qualified to speak. And secondly, what do 
we do about that? Because otherwise there will be a giant 
sucking sound of business from Central America to China. And 
when that occurs, people lose jobs, and they tend to migrate to 
the United States.
    Mr. Willems. Senator, I can jump in quickly and just say, 
it is something I have written about a little bit in the past, 
and I put forward a WTO reform proposal. And one of the ideas 
there was to try to impart those kinds of standards into the 
international rule set so that they do apply to China, just as 
they apply to countries with which we have an FTA.
    I agree with you, China should not have a leg up on us, 
both allies and partners, through FTAs.
    Mr. Wessel. Senator, yes, I agree with your comment a 
thousand percent. The AFL-CIO, I believe in 2004, had filed a 
301 petition regarding China's labor rights violation. The 
petition was not accepted.
    I think that needs to be updated, because I think, since 
that time, we have all seen what effect China's failure to 
promote labor rights, freedom, et cetera, has had on our own 
workers. So I would suggest that we update that petition and 
bring it forward, as we also look at doing what Clete is saying 
about bringing this into the WTO. But until the WTO acts, we 
cannot afford to allow the continued impact on our own people.
    Senator Cassidy. Mr. Chairman, I yield back. Thank you.
    The Chairman. Thank you, Senator Cassidy.
    Next is Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    Mr. Wessel, it is good to see you again. Would you agree, 
Mr. Wessel, that China has never engaged in a good-faith effort 
to reduce over-capacity?
    Mr. Wessel. I would agree 100 percent; yes, sir.
    Senator Brown. So, Senator Portman and I have recently 
introduced legislation, I think you know, to strengthen our 
anti-
dumping and countervailing duty, building on the Level the 
Playing Field Act of 5 years ago, to challenge unfair trade 
practices and reduce the impact of over-capacity and support 
workers in Ohio and Oregon, and Senator Casey's Pennsylvania, 
and all.
    Do you agree this legislation will help support Ohio 
steelworkers and protect U.S. jobs?
    Mr. Wessel. Senator, I think it is not only Ohio 
steelworkers, but workers all across the country. Because, as 
you know, it is steel, it is aluminum, it is chemicals, it is 
solar up in Senator Wyden's area. It is about 15 to 17 sectors 
that are in over-capacity, and that decimates U.S. production 
and employment.
    So I think the tools you are talking about are vital, and 
they reflect the changing nature of China's competition.
    Senator Brown. So, walk through for the committee why the 
Brown-Portman bill will help to create more of a level playing 
field across those 17 industries?
    Mr. Wessel. Well, as you know--and I think Clete just used 
the comment Whack-A-Mole--China's over-capacity is like a 
Whack-A-Mole problem. Not only do they change the nature of the 
product, which then creates a new competitive pressure here, 
but they are flooding other countries' markets with their core 
products.
    You will remember several years ago, oil country tubular 
goods, we had a trade case against China. We successfully won 
that. They then sent hot-rolled coil into Korea that was 
transformed in a minor way. Korea uses no OCTG, but they 
started shipping it to the U.S., and again we lost production 
and employment here in the U.S.
    That is just one example across hundreds, if not thousands, 
of products. Each trade case takes about a year and a half for 
the first results, and as much as five for a final, and costs 
generally between $1.5 million and $3 million. But that does 
not even talk about the injury that has occurred to the company 
and the workers.
    Many companies never come back, as you know, and you have 
seen that in your State. So the tools you have provided in your 
and Senator Portman's legislation would make it easier to 
address serial dumping. It would make it easier in a situation 
like today, where companies are just coming back to 
profitability. But that can be used against them at the ITC.
    So I would say, all of the tools you are providing are ones 
that U.S. companies and workers need.
    Senator Brown. Thanks, Mr. Wessel. I remember learning that 
new acronym and having it burned into my brain, OCTG, as we 
made those pipes in Ohio. We made them all over the country. 
And we saw, as Mr. Willems said, the Whack-A-Mole show.
    I remember when they went to Korea. And Korea had no 
industry of that type, was at zero before that happened. So 
thank you.
    Chair Wyden and Ranking Member Crapo, thanks so much for 
the hearing, first of all, for doing this, and for your ongoing 
work to address China's anticompetitive trade policies, 
combined with Brown-Wyden and all the things we have done 
together and will continue to do together that are really 
important.
    As this committee moves forward with this bipartisan 
legislation so American workers and manufacturers can compete, 
I would like to ask you, Senator Crapo and Senator Wyden, to 
work with me and Senator Portman to include our Eliminating 
Global Market Distortions To Protect American Jobs as part of 
this effort. We can together strengthen our trade remedy laws. 
And I will give back time, but I ask unanimous consent to 
include a few letters of support for this legislation in 
today's record.
    The Chairman. Without objection, so ordered.
    [The letters appear in the appendix beginning on p. 52.]
    Senator Brown. Thank you, and I yield back the rest of my 
time, Mr. Chairman.
    The Chairman. Thank you, Senator Brown, and we look forward 
to working closely with you.
    Next is Senator Lankford.
    Senator Lankford. Mr. Chairman, thank you. And to our 
witnesses, thank you as well for your work on this 
exceptionally important issue.
    I have to tell you, in this day and age I am amazed at the 
number of American companies that are still looking to China to 
do manufacturing, after all the intellectual property that they 
have stolen, after their immense human rights abuses and what 
they have done. And I am particularly astounded with the number 
of American companies that will boycott States in the United 
States, that will make public statements about different 
things, but have no problem doing business in China, which has 
one of the worst human rights records in the world; which 
limits a free press and takes away any right to vote for any 
individual in a meaningful way in China; which does 
surveillance laws on their people; which violated their word on 
Hong Kong, and said basically Hong Kong will have some sort of 
autonomy until 2047. And then, when it was not convenient, they 
just broke their word on that and consumed Hong Kong with their 
surveillance network. They do forced abortions on individuals 
and limit the number of children that families can have. They 
limit free access to faith, free access to a free press, free 
access to assembly.
    All of those things are common in China, not to mention the 
prison camps of the Uyghurs and the multitude of other issues 
that they have done, as we have talked about, economically, 
today. So there are serious issues with any companies doing 
business in China. They need to be clear-eyed on the real risk 
of having a communist government be your partner for your 
business.
    And it needs to be very clear for American companies that 
are going to speak ill of America but seem to have no problems 
with engaging in China and the things the Chinese Government 
does there. So I would encourage companies to be awake as they 
deal with their interactions with China.
    Saying all that, there are a billion people there. There 
are a lot of companies that want to do business with a billion 
people and are engaged in that process. So I want to be able to 
talk to some of the things that China is doing that we need to 
pay attention to, and I would like to start with rare earth 
minerals and critical minerals.
    China has been very strategic in trying to isolate the 
critical minerals market and rare earth minerals. We have, 
quite frankly, allowed them by limiting production of critical 
minerals here in the United States, and have just exported that 
work to China to manage.
    Now we are behind the eight ball in many ways on trying to 
be able to catch up on those critical minerals that are needed 
for solar panels, for batteries, for steel production, for so 
many items in our cellphones--everything else.
    So let me ask, Mr. Willems, do you have ideas on the 
critical mineral side of things that we can continue to do to 
be able to catch up and to be able to level the playing field 
that we have abdicated to China?
    Mr. Willems. Thank you, Senator, and I appreciate all of 
your remarks. I will say, on critical minerals, I mean there 
has been a lot of discussion in this administration. They have 
a supply chain executive order. They are looking at this. I 
think we are looking forward to their recommendation.
    One thing I will say, though, if we are serious about this, 
I really do think that permitting and being able to produce 
these minerals in the United States has got to be a core part 
of that. And I understand that some have environmental concerns 
about that, but we need to find a way that we can do it in an 
environmentally friendly way in the United States. Because 
otherwise, I think we are tying our hands behind our back.
    We cannot just subsidize our way out of this. I also would 
really look at partnerships with other countries. Australia is 
a country that has done a lot of work in this area. And I think 
we should look at leveraging institutions like the Development 
Finance Corporation to have joint partnerships and projects 
with Australia.
    So those are two ideas that I would put into the mix, and I 
very much look forward to the results of the Biden 
administration's review.
    Mr. Wessel. Senator?
    Senator Lankford. Go ahead.
    Mr. Wessel. Senator, if I could just add quickly, the NDAA 
that Congress just passed, I guess with a veto override earlier 
this year, included a new provision that would expand rare 
earth mineral utilization by DoD from mines to magnets. Prior 
to that, the DoD was required to procure products, the final 
products, from an allied country, essentially, but it allowed 
Chinese rare earth minerals to be the underlying basis.
    The new provisions should help get those four U.S.-based 
mines back online. It is going to take a bit of time, but we 
need to do that, with investments as well as broader 
provisions.
    Senator Lankford. I completely agree.
    Mr. Willems, I want to follow up on a WTO question with you 
as well. China talks about how they are co-equal to the United 
States, and they are another world superpower, until it comes 
to WTO. And then suddenly they shrink back and say, ``We are a 
developing poor country, and we need extra subsidies, and we do 
not need to pay our fair share in.''
    What reforms need to be done to WTO? Because China has an 
outsized influence in that, and a veto in the dialogue.
    Mr. Willems. There are a lot of reforms that need to be 
done by the WTO. I have a paper that I wrote on this, and I 
would love to share that with you and talk further. I know we 
are almost out of time, but I will say, to your point, the 
developing country status is right at the top of the list.
    If China claims that it is a co-equal partner in the global 
community with the United States, it needs to treat itself like 
one at the WTO. And we need to have objective criteria that 
say, given their significant size and the power of their 
economy, they have got to take on every single commitment that 
the United States does.
    Senator Lankford. Thank you. Thank you, Mr. Chairman. I 
yield back.
    The Chairman. I thank my colleague.
    At this point, it is Senator Casey, and we are just going 
to keep going. It has been a challenge, but Senator Crapo and I 
are determined to make sure that everybody has a chance to get 
heard on this crucially important topic.
    Senator Casey?
    Senator Casey. Mr. Chairman, thank you very much. I know we 
are well into the vote, so I will try to be brief and try to be 
under time.
    Mr. Wessel, I will direct my question to you, maybe two 
questions at the most. We have all seen too clearly the cost of 
relying on China, which is a non-market economy, for our 
Nation's critical capabilities, especially with respect to 
personal protective equipment. We also have very little 
visibility on what other vulnerabilities might exist with 
respect to production dependencies in other sectors of our 
economy.
    Last month, the U.S.-China Commission held a hearing to 
examine how U.S. capital investment in China props up the 
Chinese Government's military-civil fusion and ultimately 
compromises the U.S. national security. Some witnesses noted 
that the U.S. does not have a mechanism to assess how 
outsourcing by U.S. companies to countries of concern may 
compromise our national security and the security of supply 
chains that Americans depend upon.
    Senators Cornyn, Stabenow, and I have a proposal to 
increase visibility on vulnerable supply chains, to review 
outbound--outbound--investment of critical capabilities to 
foreign adversaries and non-market economies like China, to 
assess and address dependencies and vulnerabilities of our 
critical supply chains.
    Mr. Wessel, do you agree the U.S. should establish outbound 
investment review?
    Mr. Wessel. I do. And I think the structure that you have 
been advancing--I have talked to your staff--allows for the 
flexibility in terms of viewing this, but will gain the 
necessary information as well as control where critical 
products are at risk.
    Senator Casey. Well, thanks very much. I will propound 
additional questions to you in writing. And I will conclude 
with this, Mr. Chairman, in the interests of time.
    I know that Ranking Member Crapo and his staff have raised 
concerns with respect to elements of this proposal. I think it 
is important the U.S. has visibility on vulnerable supply 
chains, and also critical that we know when national critical 
capabilities are being offshored for foreign adversaries.
    I hope we can work together to reach a resolution on your 
concerns. I think this is a critically important issue. And I 
will yield back 2 minutes and 30 seconds because I know the 
vote is on. Thanks very much.
    Senator Crapo [presiding]. This is Senator Crapo. I believe 
Senator Wyden has stepped out to go to the vote, so I am going 
to go next to Senator Daines.
    Senator Daines. Yes, thanks, Senator Crapo.
    I spent over half a decade in China in the private sector. 
We were launching, marketing, and selling American brands to 
compete, back in the 1990s, against the state-owned enterprise 
brands. And we beat them handily, by the way. It was nice to 
see the American brands winning.
    I have led a lot of codels to China, getting more U.S. 
Senators engaged to understand what is going on on the ground 
there, to see the innovation ecosystem that they are building 
in China, and what that means for the United States and the 
world.
    I have seen first-hand the challenge and the repression 
implemented by the Chinese Communist Party, as well as the need 
to hold China accountable for its unfair trading practices and 
existing commitments.
    It is also essential, I believe, that the U.S. make needed 
investments in research and development. How we run faster here 
in America, in terms of global competitiveness and beating 
China into these next-generation technologies, is we are truly 
going to have to race to be more competitive and be more 
innovative.
    And that is why I strongly support Senator Young's Endless 
Frontier Act. I appreciate his leadership on this issue, which 
I think will help ensure the U.S. maintains its competitive 
edge in scientific and technology innovation, supporting high-
tech jobs around our country, and right there in Montana.
    I want to start with a question for Mr. Willems. In your 
testimony, you highlight the importance of ensuring the U.S. 
runs faster. I agree with that. As it relates to competing 
against China, you reference the Endless Frontier Act as a good 
start, which I agree with.
    As Congress considers a proposal to ensure the U.S. remains 
a global leader in innovation and technology, how should we 
target investment to ensure that we expand upon the competitive 
advantages a free market economy provides and do not displace 
them?
    Mr. Willems. It is a great question, Senator, and I do 
think that that is an important point that I tried to make in 
my opening, that the reason the U.S. has been the world's 
leader for years in innovation is because of our free markets 
and our market economy, which is different from China.
    China has been successful in very targeted areas where it 
has had a ton of money and therefore been able to develop 
innovative technology. So I think what we do not want to do is 
to just throw a bunch of money out the door and hope that we 
beat them. I think we need to interface with the private sector 
directly and say, ``Where in particular are you going? And how 
can we help you get there?''
    I think some of the things in the Endless Frontier Act that 
talk about working with universities are critical. I think tax 
credits for innovation for our companies are important, in 
addition to the things that are in that bill.
    Again, I think we need to, as we are moving forward--we 
need to not abandon our principles, because they are the source 
of our strength. And especially I think, if we are looking at 
supply chains, we need to not become a closed-off society where 
we aren't competing, working with others around the world. We 
need to leverage each other, the things we bring to the table.
    And 5G and 6G are good examples where we have not been able 
to do everything at home in the United States. We have some 
companies that are involved there, but we are going to need to 
work with Japan and others.
    So it is all about the positive incentives, and to realize 
we cannot do everything ourselves, and we need to maximize our 
abilities to have our companies work with others, work with----
    Senator Daines. Mr. Willems, thank you. I am going to jump 
in on the specific issue of polysilicon. It is a critical 
component to nearly everything: semiconductors, next-generation 
batteries, other technology essential for long-term 
competitiveness and growing our economy.
    For years, the U.S. polysilicon industry has been targeted 
by China, and retaliatory tariffs are actually threatening a 
lot of our high-wage manufacturing jobs in places like REC 
Silicon in Butte, MT. What can be done to strengthen the U.S. 
semiconductor and battery supply chain and reduce our 
dependence on China for these critically important materials?
    Mr. Willems. I do think that we need to fully fund the 
CHIPS for America Act, which was included as part of the NDAA 
last year. We authorized the program; let's fund that program.
    I would also look at the tax incentives that were included 
there that I think were left on the cutting room floor. That 
would help for additional fabrication in the United States. We 
also need to keep helping additional design in the United 
States.
    And the other thing on semiconductors, is we need--if we 
are going to take export control measures against China, we 
need to coordinate those with others. And we need to allow our 
semiconductor companies to sell nonsensitive materials to 
China. Because ultimately what that does is, that helps make 
China subsidize our companies.
    So look, on the most sensitive stuff, you may have to shut 
the door. But on stuff that is not sensitive, let's let our 
companies sell overseas so we put China in the position of 
helping us----
    Senator Daines. I am sorry to interrupt you, but could you 
give a quick comment on--I am concerned about critical minerals 
in China's control there. What risk does the U.S. face should 
China restrict access to these critical minerals? And how can 
we mitigate the threat? I know I am out of time, so you will 
have to make it a quick answer.
    Mr. Willems. Sure. They have done it before, and we sued 
them at the WTO and won when they tried to do that. I think we 
need to keep disciplines there internationally, but we also 
need to partner with others to diversify our supply chains and 
our source of supply. And I mentioned in an earlier question 
that Australia would be a good partner on some of those things. 
I would also look at Canada and others who have some resources, 
as well as our own.
    Senator Daines. Thank you.
    Mr. Wessel. Just very quickly, on polysilicon, we should 
act against the forced labor that is producing the polysilicon 
in the Xinjiang region. It is something that has been raised, 
and that could have a big impact as well.
    Senator Daines. Thanks, Mr. Wessel. Thanks, Senator Crapo.
    Senator Crapo. Thank you very much, Senator Daines. And I 
am not sure if we have any Senators back from the votes yet, so 
I am going to go through a few names here. And if none of the 
Senators is back yet, I have a couple of questions of my own 
that I did not get to ask before.
    Is Senator Warner available?
    [No response.]
    Senator Crapo. Senator Young?
    [No response.]
    Senator Crapo. Senator Whitehouse?
    [No response.]
    Senator Crapo. Senator Sasse?
    [No response.]
    Senator Crapo. Senator Hassan?
    [No response.]
    Senator Crapo. Senator Barrasso?
    [No response.]
    Senator Crapo. Senator Cortez Masto?
    I believe she is--I have been told she is close to----
    Senator Cortez Masto. I am here; thank you.
    Senator Crapo. Oh, good. Go ahead.
    Senator Cortez Masto. Thank you, Mr. Chairman and Ranking 
Member.
    So this is a great conversation, and I so appreciate the 
written testimony.
    Let me start with the panel on technology competition. You 
know, it is clear that competing with China in this technology 
sector will entail a whole-of-government response. And that is 
why I have been working on legislation to conduct a review 
every 4 years that will collect, coordinate, and outline the 
national posture on key technology issues.
    I think by clearly identifying our goals, and appropriately 
investing, we can ensure the United States is globally 
competitive for decades to come. But my question is, what role 
do you see technology development and innovation playing in the 
broader global competition landscape? And would you agree that 
it would be helpful to have a strategic posture across many 
Federal agencies to be competitive on various technologies such 
as 5G, AI, and green energy?
    Let me open that up and maybe start with Mr. Willems.
    Mr. Willems. Thank you, Senator. I think it is a good idea 
for us to be more strategic and to coordinate better across the 
agencies. I think that is an area that we have struggled with a 
little bit in recent years, and I think making sure we have an 
overall strategic plan is important.
    I also like the idea that you are constantly updating 
priorities, and you are constantly reviewing them. And I do 
think this is where--the point I was making earlier--where 
having the private sector come in and help us understand where 
they are going and where they need help, is the way to do it.
    You do not want to have a completely top-down approach 
where the U.S. Government is deciding we are going to do X, and 
then throw subsidies out the door. But we need to have this 
constant feedback loop with our industries, so we know exactly 
what they need. So that should be in there as well.
    Senator Cortez Masto. Thank you.
    Anyone else? Any other comments on this question?
    Mr. Wessel. I would just say that I think it is spot-on. If 
we look at what is happening now with the auto sector being 
starved for semiconductors, that has resulted in production and 
employment loss. Technology is now embedded in virtually all 
our products--production processes and the products themselves. 
So it is no longer some esoteric issue. It goes to the core of 
America's competitiveness.
    Senator Cortez Masto. Thank you.
    And, Dr. Kokas, I see you had your hand up.
    Dr. Kokas. Yes, I did. Thank you, Senator Cortez Masto. So 
a national posture on tech issues is essential. In my 
conversations with partners and allies in Japan, the European 
Union, and Australia, one of their major critiques is that it 
is very difficult to collaborate with the United States because 
there is not a clear, affirmative vision of what U.S. tax 
policy actually is.
    The second issue that I would point out is the importance 
of having aligned tech policy across different agencies for 
cybersecurity purposes. So agencies like the Social Security 
Administration have not historically had a large cybersecurity 
mandate. However, they have, increasingly, data that could be 
very useful in targeted hacks.
    And finally, I think that it is particularly important to 
look at a national policy in order to be able to deal with 
Chinese acquisitions of global firms that gather data within 
the United States.
    So currently, the CFIUS process does not address that. I am 
thinking specifically of Syngenta as the largest Chinese 
acquisition outside of the U.S. They gather huge amounts of 
U.S. agricultural data, but it was an acquisition of a Swiss 
firm.
    So by having strong U.S. tech policies, we can actually 
identify which types of data, and which particular sectors, are 
most important to address nationally and manage issues like 
that that are not currently addressed in that process. Thank 
you.
    Senator Cortez Masto. Thank you. I so appreciate that.
    Another area I want to focus on with all of you, while we 
are here, is the technology standards. One key area we address 
as we look at global competitiveness in technology is the 
standard setting process, right? Standard specifications define 
performance requirements for materials, products, and services 
related to technologies around the world.
    I believe it is critical that we absolutely look at this 
for emerging technologies. The Chinese Government has already 
established goals to set global standards for emerging 
technologies like 5G and 6G, the Internet of Things, artificial 
intelligence. And again, I am working on legislation to 
establish this interagency task force that will develop really 
a strategy for emerging technology standard setting to help us 
affirm our leadership on this issue.
    So I wonder if you would be willing to discuss the 
importance of the U.S. involvement in standard setting, and how 
critical it is at this point in time.
    Dr. Kokas. Thank you, Senator Cortez Masto. Very briefly, 
one thing that I think has received a lack of attention is the 
participation of Chinese Government entities in multi-
stakeholder organizations.
    We have discussed a lot about multilateral considerations, 
and I think that is crucially important. However, these are 
things that could immediately change on a dime. And when 
bringing this up to colleagues in the Department of Commerce, 
one of the things that they have highlighted is that this is a 
U.S. policy decision.
    I think that we are really leaving things on the table by 
allowing Chinese regulators to participate actively in multi-
stakeholder organizations and professional organizations that 
are really setting the standards based upon how the U.S. has 
structured the global regulatory environment by putting 
corporate interests first.
    However, U.S. corporations currently have multiple 
different masters, shall we say, and our interest is both in 
their relationship with the Chinese Government and the U.S. 
Government. By not sending U.S. Government entities to these 
professional organizations, we are enabling the Chinese 
Government to take leadership in crucial areas. I am thinking 
particularly in facial recognition technology.
    Senator Cortez Masto. Thank you. Thank you so much. I know 
my time is up. Thank you for this great discussion today.
    Senator Crapo. Thank you, Senator Cortez Masto.
    I am going to check again. I understand several Senators 
are on their way back. Are there any Senators who have not had 
a chance to ask questions who are----
    Senator Warner. Senator Warner.
    Senator Crapo. Senator Warner, you are up.
    Senator Warner. All right; thank you, Mr. Ranking Member, 
Mister Almost Chairman.
    Let me add--I am not going to ask a question on this, but I 
want to echo what Senator Cortez Masto just asked and Dr. 
Kokas's comments. This is an area where, candidly, I think 
America went to sleep. We went for 50 years assuming for almost 
every technological innovation, even if we did not invent it in 
America, that we would set the standards, the protocol, the 
procedures.
    And you know, I see this in 5G--I was a telcom guy. We did 
not flood the zone with our engineers and our technical people. 
China is flooding the zone and, consequently, setting 
standards. You mentioned facial recognition. I am fearful that 
that is going to grow into AI across the board.
    We have already seen China set standards on 5G. And the 
standards are so important because it is not just about what 
radio spectrum we use or what technical specs; it really does 
creep into things like transparency and respect for human 
rights.
    I think it is so important. And if you look, China has even 
got a document, China 2035, where they have laid out by issue 
area where they hope to set the standards.
    So, Dr. Kokas, I want to say, a corollary of that is where 
U.S. companies are actually almost enabling--under the guise 
that nobody can miss the Chinese market, they are willing to 
sacrifice their values that they would never sacrifice in our 
country or, for that matter, in virtually any other western 
country, to kind of get access to this market.
    I actually think sometimes helping China with censorship 
surveillance, social control--a couple of years ago, I wrote 
the Google CEO with Chairman Wyden about the company's efforts 
to literally work with the Chinese Government to build a 
surveillance-enabled search engine in China, totally counter to 
anything Google has said about their values.
    How do we address this entity where actual American 
companies are willing and obliging Chinese efforts to advance, 
not only their economic dominance, but the goals of the CCP. 
And when I mention China, it is important to mention my 
interest is with the CCP and Xi Jinping, and it is not with the 
Chinese people or the Chinese diaspora, particularly Chinese 
Americans. But shouldn't we--how do we hold U.S. companies 
accountable to the kind of values they espouse here when they 
then quietly are willing to work to advance the goals of the 
CCP in terms of their surveillance state?
    Dr. Kokas. So thank you so much, Senator Warner, and it is 
a pleasure to answer the question, as a proud professor at the 
University, and a proud Virginian.
    So I think that this is a multi-pronged question, and there 
is not one specific answer. One area where I think the U.S. can 
make a huge difference is by passing a comprehensive data 
privacy framework which prevents U.S. companies from exporting, 
exfiltrating data to China, or Chinese companies that are 
operating within the U.S. from exfiltrating data back to China.
    I think this is essential, because it also strengthens 
consumer privacy within the U.S. It also is truly important, 
because we have a situation in the U.S. where companies are--we 
have used the words Whack-A-Mole multiple times, but companies 
are changing their privacy policies by the day.
    As I write about these things, I have to have alerts for 
when TikTok is changing their transparency policy. The 
legislative calendar does not work at that pace. So there needs 
to be legislation, and there needs to be reporting in place for 
how companies are sharing their data abroad.
    That's something we can do within the U.S. This is also 
important because we do not know precisely the ownership 
stakes, or the ownership relationships, of privately held 
companies that have relationships with China. I am thinking in 
particular of Epic Games and Fortnite that have huge amounts of 
data, and we have no idea how they are sharing it. All that we 
have reliance on is what the company says, and they say that 
they do not share their data with their Chinese partners, but 
there is really no way that I have to identify and actually 
test that. But that is an important first step.
    Senator Warner. I appreciate that, and I do appreciate the 
work you have done and am proud that you are doing it at the 
University of Virginia.
    I just, in my last 25 seconds, want to make the case not 
only to the panel--and Mr. Wessel has actually helped on some 
of this. I believe the Chinese model, which I call kind of 
authoritarian capitalism, is where they allow dramatic domestic 
competition in emerging technologies, always then getting a 
Chinese champion that emerges, dominates in the Chinese market, 
and then that Chinese champion is advanced abroad.
    We have seen that in the case of Huawei--the $100-billion 
backstop. We see it in the case of semiconductors--$150-billion 
investment. Many of us on this committee are working in a 
bipartisan way to make a substantial investment in the 
semiconductor industry--$50 billion in emerging appropriations 
under the so-called CHIPS Act with my good friend John Risch 
and many on the committee.
    We need to make that law very shortly. We also need in an 
area, I would argue where we are not only behind because we 
don't even have an American player but could potentially lose 
the game in 5G, to go beyond 5G to ORAN--Open Radio Access 
Networks.
    We have a similar type of emergency appropriation that is 
broadly endorsed by American and other companies, about moving 
to this more software-based system in ORAN. And I have gone too 
long, so the pitch is to my colleagues. I would love to talk to 
you more individually. I think this legislation will be the 
second week of May, and I think sending a broad bipartisan 
signal that America is willing to get back in the game in terms 
of these cutting-edge technologies, standard setting, and also 
the key research, is critically important.
    And with that, I will yield, Mr. Chairman, or Senator 
Crapo; but thanks for giving me the extra minute.
    Senator Crapo. You bet. Thank you. And I appreciate your 
focus and what you are saying.
    Next is Senator Young.
    Senator Warner. Senator Young has been a leader on this. 
Let me just, as he comes on, give him a shout-out as well. He 
has been the key leader on the underlying legislation.
    Senator Crapo. Yes, he has been very strong on this.
    [No response.]
    Senator Crapo. I am going to go through a few more names. 
Senator Whitehouse?
    [No response.]
    Senator Crapo. Senator Sasse?
    [No response.]
    Senator Crapo. Senator Barrasso?
    [No response.]
    Senator Crapo. Senator Warren?
    [No response.]
    Senator Crapo. Senator Scott?
    [No response.]
    Senator Crapo. We do expect a couple of those back right 
away, and so while we are waiting for them, I have a question 
for you, Mr. Willems, on the TRIPS Agreement.
    When you were in the Trump administration, you were part of 
the team that worked to stop forced technology transfers to 
China. Some have argued that the TRIPS intellectual property 
waiver would amount to exactly that, a forced transfer of MRNA 
vaccine technology to China, and other vaccines, and would be 
delivering a competitive advantage to countries that are 
increasingly viewed as our adversaries, at taxpayer expense.
    Do you agree? And how do you evaluate that?
    Mr. Willems. Thank you, Senator. Unfortunately, I do agree, 
and I am very concerned about the Biden administration's 
consideration of a waiver of intellectual property protections 
at the WTO, which ostensibly would help distribute more 
vaccines for COVID around the world.
    Look, I will be the first to say the more we can distribute 
the vaccines around the world and help other people is great. 
But the problem is, this is actually not the right way to do 
it. IP has not been an impediment to vaccine distribution, and 
we have actually had our companies do licensing agreements with 
companies in India.
    So the notion that IP is somehow causing a problem here is 
wrong, and it really, I think, is just this longstanding effort 
by India and others to undermine U.S. IP at the WTO.
    And then to the specific point you made, let's keep in mind 
that the technology that we are talking about, the MRNA 
technology, this was something that was funded by DARPA, by our 
Department of Defense, as a national priority that helped 
facilitate the production of these vaccines. And the notion 
that we would go to the WTO and basically say, technology 
transfer of DARPA-funded research to China, which has 
specifically identified this in its Made in China 2025 plan--
the fact that we would aid and abet Made in China 2025 is crazy 
to me.
    And so I really hope the administration realizes that is 
not the right way forward. I think there are other things we 
can look at. I think, you know, funding--funding distribution 
is fine. If you are facilitating licensing agreements that are 
done on voluntary terms, that is fine. But I think if we are 
having an honest conversation about this, we also need to look 
at our export policies and say, how do we export more of this 
stuff from the United States?
    I know a lot of Senators are familiar and are interested in 
building a stronger domestic pharmaceutical sector, but let's 
use this as an example. Let's help them send the vaccines 
around the world and sanction our supply chain in America.
    Senator Crapo. Thank you. Do any of the other witnesses 
have an opinion on this issue that they would like to share?
    Mr. Wessel. Senator, thank you for the question. I have 
worked hard at this. I disagree with Clete's comments on a very 
limited waiver for this product. I think we are facing such a 
large problem globally that we have to bring this into line. 
But we also need to do better about preventive measures, the 
ability to make sure our early-warning systems are better, et 
cetera. But I would do this as a one-off, but restrict it to 
this product.
    Dr. Kokas. Senator Crapo?
    Senator Crapo. Yes?
    Dr. Kokas. Just two quick points on this.
    So first of all, I would like to agree with Mr. Wessel that 
if we are not able to actually bring the COVID-19 pandemic 
under control, there will not actually be a global economy, or 
efficient global trade for us to discuss.
    So I think that there is a reason for the limited exception 
here. But the other thing that I think is really important to 
underscore that seems to be the focus of the committee hearing, 
is that the MRNA vaccine technology emerged from the funding of 
basic research in the United States. And advancing the funding 
of basic research, not specifically applied research but basic 
research, is essential in order to ensure American 
competitiveness.
    We do not know how long--it is a very long time horizon, so 
there tends to be a focus on strictly applied technologies, but 
this underscores the importance of not just funding things that 
we can use within the next year or 2 years, but things that 
build out our innovation ecosystem for the next 20, 30, 40 
years. Thank you.
    Senator Crapo. Thank you.
    Mr. Willems. And if you would indulge me for just 20 
seconds, I agree with Mr. Wessel on so many things, but I would 
note that the proposal that India and others are making at the 
WTO is not limited. They are basically asking to waive broad 
portions of this intellectual property agreement, ostensibly 
because of its vaccine issue, but really it is a much broader 
proposal. And I think there are just better ways to do it. We 
do not need to give our technology up to China and others who 
facilitate exports to the United States.
    Mr. Wessel. Again, I would do it as a one-off. I understand 
the concerns and share those, because IP really goes to the 
heart of America's competitiveness.
    Senator Crapo. All right, thank you. Thank you both very 
much.
    Have we had--well, for example, I am told Senator Young is 
coming back. Senator Young, are you back yet?
    [No response.]
    Senator Crapo. Any other Senators who have made it back 
yet?
    [No response.]
    Senator Crapo. All right; I am going to go on with another 
question then. This one is to you, Mr. Baer. One of the issues 
with the section 301 exclusion process that I have seen, in 
terms of companies coming to me and asking for help in trying 
to get a 301 exclusion, is timeliness. It takes a significant 
amount of time to get the 301 exclusions through the process 
and put into place.
    And now to have them expire and have to go through that 
process again, I would think is a little disconcerting. Would 
it be helpful to businesses like yours--and as we talked 
earlier, issues across our country in this context--if there 
were some kind of a timeline, or a time frame required for 
responsiveness to these kinds of issues?
    Mr. Baer. Yes, most certainly. You know, I certainly 
understand the program, and it operates differently than 
business. And you know, probably for very good reason. But 
certainly, the length of time that some of these things have 
taken has been a challenge for us, where we are almost to May 
now and we are still trying to fight to get our exclusions 
back.
    So certainly some sense of timeliness, or at least 
expectation of time frames, would be helpful.
    Senator Crapo. All right; thank you.
    Mr. Baer. Thank you.
    Senator Crapo. Anybody else want to weigh in on the section 
301 exclusion process or issues?
    Mr. Willems. Sure, Senator. I would just say, I think the 
administration should update the process as soon as possible. 
We want to help our companies like Mr. Baer's. And I think 
there are some changes we might want to make to it as well, to 
make sure it is more transparent and actually works for 
companies, and that they have some sense of certainty.
    So I would strongly support what he just said.
    Senator Crapo. All right; thank you very much. I still do 
not see any Senators having made it back yet. Are there any?
    [No response.]
    Senator Crapo. Okay; I am going to go on to another 
question then. And this is one I would like to throw out 
generally. It is with regard to semiconductors.
    Senator Wyden and I--and many of the others on this 
committee and other Senators in the Senate--are very committed 
to strengthening and improving America's competitiveness in the 
semiconductor industry in response to Chinese anticompetitive 
conduct and subsidization, as well as activities across the 
globe in other countries.
    One of the big things that has already been discussed about 
that is the CHIPS Act, somewhere between $30 billion and $50 
billion of direct grant support for the American semiconductor 
industry. That is primarily a spending issue. It would really 
be resolved, most likely, in one of the spending bills moving 
on the Senate floor, or in the appropriations process.
    But we have been looking very carefully at, within the 
jurisdiction of the Finance Committee, what types of activities 
or solutions would be helpful; for example, a development tax 
credit or an R&D tax credit or some other type of ability to 
incentivize the growth and the strengthening of our 
semiconductor industry.
    I would just like some of you who may have thoughts on this 
to kind of free wheel with me here for a second and discuss 
what we could do to go beyond the CHIPS Act to do what is 
necessary to strengthen our semiconductor industry.
    Mr. Wessel. Senator, I will take a crack at that, if I can, 
and thank you for the great question. And certainly, the CHIPS 
Act being fully funded is the first step. But this committee 
has significant jurisdiction.
    First of all, for example, in trade agreements the ability 
to include these kind of technology products as part of content 
requirements often is done more generally, and there are things 
that could be done, as was done in part in USMCA, to look at 
new technologies and how we can use procurement as a pull-
through. That is number one.
    Number two, there is often what is called ``the valley of 
death'' between research and deployment. And I think the 
committee could look more at how we expand the deployment of 
these technologies without running afoul of WTO's subsidy 
protocols and disciplines.
    The ability to test the development and deployment of 
technologies, these chip fabs, as you know, as well as the 
equipment used to produce semiconductors, are extremely 
expensive. So taking something from the lab bench to the shop 
floor to the clean room floor is a difficult process. I think 
that is something where there are a lot of tax rules and other 
provisions under the jurisdiction of Finance that could come 
into play.
    Mr. Willems. I would just add--I mean I do think, as you 
alluded to, some of these tax credits that are within your 
jurisdiction are the way to go. And in particular, if you look 
at the semiconductor supply chain, there are some things we are 
doing well, and there are some things we have not done as well, 
and we really need to look at the foundries and fabrication of 
semiconductors and find ways to actually manufacture in the 
United States.
    But I also will make a broader point here, which is that, 
in addition to the specific targeted things for the industry, 
we also need to look at the general condition of this business 
in the United States, and that is the overall tax policy that 
gets to how easy it is to make new facilities, site these 
facilities in the United States, and it also looks at how well 
you can export from America.
    And as I alluded to before, when we are looking at export 
control measures, we need to be careful that they do not make 
it too difficult for us to send our products abroad. And we 
need trade agreements so we have new markets for ourselves as 
well.
    So I think all those things are important.
    Senator Crapo. Thank you. Anybody else?
    [No response.]
    Senator Crapo. All right, I am going to go--I am going to 
ask again if any of our Senators have made it back.
    [No response.]
    Senator Crapo. For our witnesses, we have four votes going 
on right now. And I am guessing that a lot of our Senators are 
just feeling like they are caught up on the floor until they 
get through this--oh, here is Senator Wyden. We can ask him how 
to proceed.
    Senator, can you hear me?
    The Chairman. I can. I can.
    Senator Crapo. We do not have any other Senators back, and 
have not had anybody back for probably 5 or 10 minutes. And I 
have run out of my questions. And so I do not know whether you 
want to wrap up the hearing, or whether you expect other 
Senators to come back, but the ball is returned to you.
    The Chairman. Senator Crapo, let's make sure we have asked 
staff about it. My understanding is, on both sides, our side 
and your side, we gave a last call for Senators who would like 
to participate.
    So your side does not have any additional----
    Senator Crapo. My understanding is, we are not aware of 
anybody on our side who is asking to participate at this point.
    The Chairman. Let me just check with our side. Nobody is 
waiting.
    Well, what I will do is--and I welcome you to as well, 
Senator Crapo, if you would like to--I am just going to give a 
short closing statement. And that also will give us a chance to 
see if members come back.
    I want to thank our witnesses. Terrific panel, because----
    Senator Crapo. Senator Wyden, I have to--they are calling 
me because I have to get back to this next vote, so I am going 
to slip out now. You can wrap it up.
    The Chairman. Perfect. Thank you, Senator Crapo.
    I want to thank our witnesses, because you gave us exactly 
the kind of information we need to get to the bottom line, 
which is to out-compete China.
    And my colleagues today have raised a variety of critical 
issues with respect to our trading, our relationships, digital 
trade, censorship, agriculture, theft of intellectual property, 
monetary policy, the list goes on.
    And to me, the diversity of topics shows that this is a 
substantial, difficult, multi-pronged issue that China 
presents. I appreciated Mr. Wessel describing the size of the 
problem: $2.4 trillion in lost intellectual property, $134-
billion trade deficit in advanced technology, an estimated 3.7 
million lost jobs since 2001.
    Dr. Kokas described China's efforts to export repression. 
That is how I would characterize it. And we always think about 
exports--what they are doing is exporting repression through 
their digital and censorship policies.
    Mr. Willems and Mr. Baer captured the impact of these 
anticompetitive practices in the United States.
    So we look forward to working with all of you on a clear-
eyed and effective legislative response to these 
anticompetitive practices. My view is, this legislation--and 
the bipartisan approach we are pursuing--is an example of trade 
done right. Because it says, at the center, we are going to 
make sure that American workers have a chance to compete 
fairly.
    Now I believe Senator Stabenow of Michigan, for whom these 
China issues are very important, is on her way to the hearing. 
So I think at this point, with your leave, we will take a 5-
minute recess and we will wait for Senator Stabenow, because 
these are important issues to her, and we will be back out of 
here at the conclusion of her questions and will wrap up. So my 
thanks to all of you.
    [Brief recess.]
    The Chairman. All right, I thank our guests for their 
patience. Our colleagues are so interested in participating in 
this. I believe Senator Bennet is ready to ask questions. Is 
that true?
    [No response.]
    The Chairman. Senator Bennet?
    [No response.]
    The Chairman. I had been told at one point that Senator 
Bennet was here, and Senator Warren was interested. Do we have 
any Senators? This is almost like making a public appeal.
    [No response.]
    The Chairman. All right. What we will do is, we will recess 
for an additional 5 minutes. And I think you can tell the end 
is in sight, and we thank all of you very much for your 
patience.
    [Brief recess.]
    The Chairman. To our witnesses, thank you all for your 
exceptional patience. It has been a terrific hearing, and we 
are going to adjourn, recognizing that, with the bedlam of 
today, it is not possible to be everywhere at once. Our thanks, 
and we are adjourning today. But as far as our involvement with 
all of you, it is to be continued.
    Thank you, very much.
    Mr. Wessel. Thank you.
    Mr. Willems. Thank you very much.
    Dr. Kokas. Thank you.
    Mr. Baer. Thank you.
    [Whereupon, at 12:48 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


       Prepared Statement of David Baer, Chief Operating Officer 
                and General Counsel, Element Electronics
    Good morning, Chairman Wyden, Ranking Member Crapo, and members of 
the committee. My name is David Baer, and I am the chief operating 
officer and general counsel of Element Electronics. Thank you for 
giving me the opportunity to share Element's story with the committee.

    Element is the sole remaining mass producer of televisions in 
America. Our facility is located in Winnsboro, SC and at the end of 
2020 was operating at essentially full capacity. That means all eight 
production lines were running and we had over 520 team members working 
at the facility. This success shows that with a level playing field our 
workers can out compete anyone. Importantly, our story is about 
community and people--at Element we offer living wages and benefits to 
our employees, over 90 percent of whom are African American. For many 
of our employees, Element is literally a family business with multiple 
generations working together at our facility. I have included in our 
written submission information about some of our employees and how they 
have benefited from the ability of Element to offer good-paying jobs in 
our community.

    However, the success of our employees and our community depends on 
two issues that are completely beyond their control: the continuation 
of tariff relief under the China 301 tariff exclusions and the 
Miscellaneous Tariff Bill, otherwise known as the ``MTB.''

    With respect to the MTB, it is important to understand that the 
most expensive input into the LCD TVs produced by our team in South 
Carolina is the glass LCD panel. These panels are not available in the 
U.S. Thus, Element must import these panels. Element faces a severe 
tariff inversion situation when importing these panels. The normal 
tariff on LCD panels is 4.5 percent while the tariff on finished LCD 
TVs is 3.9 percent. Putting a higher tariff on an essential part as 
compared to the imported finished TV obviously incentivizes the 
importation of finished TVs over U.S. production. To make matters 
worse, imports of finished LCD TVs from Mexico are duty-free under 
USMCA. TV producers in Mexico use the same panels that Element imports 
and the same factory equipment that Element uses--but Mexican producers 
import those LCD panels duty-free and then export the finished TVs into 
the USA duty-free.

    The 2018 MTB provided temporary relief for the tariffs on imported 
LCD panels. Unfortunately, the MTB lapsed at the end of last year, and, 
as a result Element is once again at a severe competitive disadvantage 
relative to imports, particularly duty-free imports from Mexico.

    In addition to the lapse in the MTB, Element is also now paying an 
additional 7.5-percent tariff on any LCD panels imported from China as 
a result of the section 301 tariffs. Element deals with the unfair 
competitive pressures from imports from China every day. We have seen 
firsthand how the Chinese Government subsidizes and controls Chinese 
companies and the Chinese economy. The United States must aggressively 
confront the actions and policies of the Chinese Government. However, 
the United States must also be careful not to inflict unintended harm 
on American producers and workers who have no choice but to rely on 
certain imports from China.

    Recognizing the lack of U.S. production of LCD panels and the 
dominance of China in the LCD panel market, Element received an 
exclusion from the section 301 tariffs. Like the MTB, that exclusion 
expired last December. Even with the exclusion in place, Element worked 
to find non-Chinese suppliers for LCD panels and for a time was 
successful in sourcing LCD panels from sources outside of China. 
Unfortunately, over the course of 2020 each of these non-Chinese 
suppliers exited the LCD panel market for TVs as a result of relentless 
unfair competitive pressure from China. Now, Element is once again 
forced to rely on imports from China as we search for alternative 
sources of supply, which do not currently exist.

    As a result of the lapse in the MTB and the 301 tariff exclusion, 
Element has gone from operating at full capacity and over 520 team 
members at the end of the year to operating just 4 lines, and 
employment has dropped to 370 team members. Although Element continues 
to produce to meet its ever-increasing demand from its customers, it is 
impossible to remain competitive in the face of an overnight 12-
percent tariff disadvantage to our competition, most of whom are using 
Chinese materials assembled in Mexico. Without a restoration of the MTB 
and the 301 exclusions, Element will be forced to move production out 
of the USA. This will devastate our workers and our community.

    Demand for Element TVs is strong. Just a few weeks ago, Element was 
named Walmart's 2020 Supplier of the Year in the entertainment, toys 
and seasonal category. However, no one can be expected to pay a premium 
of 12 percent for a TV produced in the US. Leveling the playing field 
through retroactively restoring the MTB and Element's exclusion from 
the 301 tariffs will allow Element's employees to once again 
successfully compete against anyone. Moreover, passing this bipartisan 
legislation will allow Element and many other companies to get back to 
doing what we do best--employing hundreds of hard-working Americans in 
good paying jobs in a community that relies on Element as one of its 
primary sources of economic growth. Therefore, on behalf of Element 
Electronics, our team members and their families, I urge Congress to 
enact legislation that would retroactively restore the MTB, and if the 
administration will not use the authority it has to retroactively 
restore the exclusions from the 301 tariffs, then Congress should enact 
legislation that requires the retroactive restoration of these 
exclusions.

    Thank you for your time, and I am happy to answer any questions you 
may have.

                                 ______
                                 
            Questions Submitted for the Record to David Baer
                 Questions Submitted by Hon. Mike Crapo
    Question. Under section 301 of the Trade Act of 1974, the previous 
administration imposed four rounds of additional tariffs on 
approximately two-thirds of Chinese imports to the United States. 
However, to avoid undue harm to American consumers and manufacturers, 
the USTR initiated a tariff exclusion process for certain Chinese 
products subject to these additional tariffs.

    Is it fair to say that without the exclusion from section 301 
tariffs, Element Electronics would have had to cut back on employment--
in particular, on well-paying manufacturing jobs? If so, can you tell 
me why?

    Answer. Yes, that is very accurate. The most expensive and 
significant component in the production of an LCD TV is the LCD panel. 
China is the primary source of LCD panels as a result of Chinese 
producers driving non-Chinese suppliers out of the market. As a result, 
Element and all of our competitors in China and Mexico rely on LCD 
panels produced in China. Element received an exclusion from the 
section 301 tariffs for LCD panels and in combination with the benefits 
of the MTB, Element increased production and employment. At the end of 
2020 we employed over 520 team members and paid a living wage and 
benefits. With the lapse of the section 301 exclusion and the MTB at 
the start of 2021 and the resulting overnight imposition of an 
additional 12 percent duty, Element's South Carolina plant became 
uncompetitive, particularly against tariff free imports from Mexico. As 
a result, we have had to reduce employment and production--we are now 
down to only 370 team members. We will likely need to continue to 
downsize our U.S. production in favor of foreign production without 
retroactive reinstatement of our 301 exclusion and the MTB. The lapse 
of the section 301 exclusion and the MTB has already caused the loss of 
good paying jobs and the rapid retroactive restoration of the exclusion 
and MTB is needed to prevent further job losses.

    Question. An overwhelming majority of the tariff lines in the MTB 
are already subject to China section 301 tariffs. Moreover, the MTB 
provides relief on inputs key to U.S. manufacturing. Without MTB 
renewal, U.S. manufacturers will spend additional money they could have 
used on jobs and competitiveness.

    Do you agree that failing to renew MTB legislation has already 
adversely impacted manufacturers, and that every day Congress fails to 
renew it is another day that hurts industry's ability to create U.S. 
jobs?

    Answer. I absolutely agree. Under the normal U.S. tariff structure, 
Element faces a severe tariff inversion problem. The tariff on LCD 
panels, the key component, is 4.5 percent while the tariff on finished 
TVs is 3.9 percent. Thus, the normal tariff structure provides an 
incentive to import finished TVs rather than produce them in America. 
The situation is even more dire with regard to imports from Mexico, 
Element's most significant competition. Imports from Mexico are duty-
free. The MTB levels the playing field for Element and puts our team 
members on an equal footing with imports from Mexico and other 
countries. If Congress were to prohibit imports from China from 
benefiting from the MTB than Element would have no means to level the 
playing field against imports from Mexico or other countries. Congress 
would effectively be telling Element to move its production to Mexico. 
The lapse of the MTB has already made our South Carolina facility 
uncompetitive and we have had to lay off over 150 team members. Rapid 
and retroactive restoration of the MTB and the exclusion from the 
section 301 tariffs is needed to prevent further job losses.

                                 ______
                                 
              Question Submitted by Hon. Thomas R. Carper
    Question. Over the past several years, tariffs on China and 
subsequent retaliatory tariffs have caused significant economic 
disruptions for U.S. businesses and farmers. I have heard from many 
constituent companies who have invested significant time, money, and 
resources navigating the process for securing an exclusion from these 
tariffs. However, unfortunately, these exclusions expired at the end of 
last year, and no new exclusion process has opened. Recently, I joined 
Senator Portman, and several of my Senate colleagues on both sides of 
the aisle, to encourage USTR to re-start an exclusion process.

    However, the last exclusion process was far from perfect, and left 
many questions about speed, transparency, and fairness.

    Moving forward, in your view, what should Congress do to reform 
this process in order to provide greater certainty and predictability 
to American companies?

    Answer. Element was able to obtain an exclusion from the section 
301 tariffs and as a result was able to rapidly grow and increase 
employment. However, Element faced significant uncertainty with regard 
to the status of its exclusion request once filed as we had no idea 
when a decision would be made. In order to mitigate this uncertainty, 
Element would request that if an exclusion process is restarted any 
application for the restoration of a previously granted exclusion be 
automatically approved at the outset of that process and new 
applications are subject to clear timelines.

                                 ______
                                 
              Question Submitted by Hon. Patrick J. Toomey
    Question. Last December, the Trump administration declined to renew 
the exclusion process for section 301 tariffs, further hurting American 
businesses and consumers in the midst of a pandemic. Many businesses 
already facing supply chain challenges related to COVID-19 have been 
unable to quickly shift production to other countries or facilities 
without compromising their procurement process or product quality.

    Since January 2021, when the section 301 exclusion process lapsed, 
CBP has assessed just under $9,000,000,000 in additional taxes on 
American companies and consumers--yet the Biden administration has thus 
far given no indication of a plan to reinstate the 301 exclusion 
process.

    How would small and mid-size businesses be helped by the 
reinstatement of the section 301 product exclusions, especially during 
this period of economic recovery?

    Answer. Element is the quintessential American small business 
success story. We moved LCD TV production back to the U.S. from China, 
located our facility in Winnsboro, SC, a small town that suffered from 
high unemployment, particularly among the African American community, 
and grew from less than 100 team members to over 520 team members by 
the end of 2020. Over 90 percent of our team members are African 
American and we are able to pay a living wage and benefits. However, 
the lapse of the exclusion from the section 301 tariffs has made our 
facility and team members uncompetitive against imports, particularly 
imports from Mexico. As a result, we have already had to lay off over 
150 team members. The rapid and retroactive restoration of the 
exclusion from the section 301 tariffs and the MTB is needed to prevent 
further job losses.

                                 ______
                                 
    Submitted by Hon. Sherrod Brown, a U.S. Senator From Ohio, and 
               Hon. Rob Portman, a U.S. Senator From Ohio
                American Iron and Steel Institute et al.
April 19, 2021

The Honorable Sherrod Brown         The Honorable Rob Portman
United States Senate                United States Senate
503 Hart Senate Office Building     448 Russell Senate Office Building
Washington, DC 20510                Washington, DC 20510

Dear Senators Brown and Portman,

As the trade associations representing America's steel producers, 
fabricators and workers, we write to express our full support for the 
Eliminating Global Market Distortions to Protect American Jobs Act of 
2021 (S. 1187), introduced on April 15, 2021. We thank you for your 
continued leadership and commitment on the critical trade issues 
included in this legislation.

The steel sector is a core part of the U.S. manufacturing base and is 
essential to our national and economic security. The U.S. companies and 
their workers who produce and fabricate an array of steel products rely 
on the availability and effectiveness of the U.S. antidumping (AD) and 
countervailing duty (CVD) laws to counter the harmful impact of 
unfairly traded imports into the U.S. market. These laws are our first 
line of defense to offset unfair advantages enjoyed by our foreign 
competitors who leverage their governments' financial largesse and 
protected home markets to penetrate the U.S. marketplace at the expense 
of our jobs and livelihoods. Your bill will vastly improve the ability 
of these laws and the U.S. agencies charged with enforcing them to 
address foreign efforts to circumvent the remedies Congress intended--
remedies that allow the industry to grow jobs, develop infrastructure 
and serve an economy recovering from the ravages of the COVID-19 
pandemic.

As Congress considers the steps needed to restore and sustain our 
country's competitiveness in the years ahead, America must ensure that 
there are fair and effective rules of commercial engagement--an 
imperative that would be achieved by the enactment of this legislation. 
Specifically, your legislation elaborates improvements to the structure 
and application of the AD and CVD laws which will permit the 
enforcement agencies to more certainly and swiftly address a range of 
practices which undermine the relief from unfair trade practices that 
U.S. industry has worked to secure. Passage of your bill is essential 
if our country is to overcome the difficult challenges of global 
economic competition which lie ahead.

Our industry's survival is imperiled by an immense global over-capacity 
in steel production, capacity which is sustained through foreign 
government subsidies, supports and other intervention and the 
facilitation of aggressive export practices intended to dump that 
excess production in others' markets. Until these kinds of market 
distortions are no longer a factor in the global marketplace, the 
United States will need the most effective trade laws and enforcement 
regime possible to ensure that there is a level playing field where 
U.S. steel and other manufacturing industries can compete and thrive. 
Your bill will be instrumental in securing that goal.

The steel industry and its workers thank you for your leadership and 
stand prepared to work with you to advance this legislation in the 
117th Congress.

Sincerely,

Kevin M. Dempsey                    Philip K. Bell
President and CEO                   President
American Iron and                   Steel Manufacturers
Steel Institute                     Association

Roger B. Schagrin                   Laurence Lasoff
Executive Director and              Counsel
General Counsel                     Specialty Steel Industry
Committee on Pipe and               of North America
Tube Imports

Charles J. Carter, S.E., P.E., 
Ph.D.
President
American Institute of
Steel Construction

                                 ______
                                 
                                Cambria
``Cambria sincerely thanks Senator Portman and Senator Brown for their 
meaningful and bipartisan efforts to strengthen and modernize America's 
trade remedy laws,'' said Marty Davis, President and CEO of Cambria. 
``As the largest domestic manufacturer of quartz slab surfaces, Cambria 
has experienced firsthand the damages to our workers as a result of 
unfair international trade practices by China. Cambria has long worked 
with the U.S. Government to ensure a level playing field for our 
industry, yet certain repeat offenders have routinely avoided 
antidumping and countervailing duties by employing sophisticated 
transshipping schemes. Passage of the Eliminating Global Market 
Distortions to Protect American Jobs Act will equip authorities with 
the necessary tools to protect American jobs and will ensure family-
owned companies such as ours remain competitive in the global 
marketplace.''

                                 ______
                                 
               Committee on Pipe and Tube Imports (CPTI)

                   900 Seventh Street, NW, Suite 500

                          Washington, DC 20001

                           P: (202) 223-1700

                  E: [email protected]

                           F: (202) 429-2522

April 21, 2021

The Honorable Sherrod Brown         The Honorable Rob Portman
U.S. Senate                         U.S. Senate
Washington, DC 20515                Washington, DC 20515

Re: Eliminating Global Market Distortions to Protect American Jobs Act 
of 2021

Dear Senators Brown and Portman,

We write on behalf of the U.S. steel pipe, tube and fittings producers 
who are members of the Committee on Pipe and Tube Imports (CPTI) in 31 
States with over 35,000 employees to express our support for the 
Eliminating Global Market Distortions to Protect American Jobs Act of 
2021, S. 1187. We thank you for your continued leadership and 
commitment to ensure that U.S. trade laws remain strong and accessible 
for the industry and its workers who rely on a level playing field.

The steel pipe, tube and fittings industry have successfully used the 
trade laws to challenge unfair trade practices--which include over 100 
antidumping (AD) and countervailing duty (CVD) cases over the past 3 
decades. The remedies provided through the imposition of duties have 
enabled these companies and their workers to recover and compete.

Our association has been a leading supporter of the trade laws and has 
worked with Congress to ensure that these laws remain in place. We know 
these laws are effective and we recognize that Congress should revisit 
them to ensure they are consistent with the ever-changing patterns of 
global trade.

As Congress considers the steps needed to restore and sustain our 
country's competitiveness the CPTJ and its members plans to be part of 
the Nation's economic recovery--from supplying the auto, construction 
and energy sectors to being part of an innovative infrastructure 
network. We agree that the provisions as outlined in S. 1187 provide a 
critical framework to ensure these laws remain in place.

We encourage members in the Senate to join you in support of this 
legislation as it moves through the legislative process.

Sincerely,

Roger B. Schagrin                   Tamara L. Browne
Executive Director and General 
Counsel                             Director, Government Affairs

                                 ______
                                 
               Kitchen Cabinet Manufacturers Association

                  1768 Business Center Dr., Suite 390

                            Reston, VA 20190

                             (703) 264-1690

                         https://www.kcma.org/

April 21, 2021

The Honorable Sherrod Brown         The Honorable Rob Portman
U.S. Senate                         U.S. Senate
Washington, DC 20515                Washington, DC 20515

Dear Senators Brown and Portman,

As the country's leading trade association representing U.S. kitchen 
cabinet manufacturers and their employees in hundreds of communities 
across the country, we write to express our support for the Eliminating 
Global Market Distortions to Protect American Jobs Act of 2021, S. 1187 
which was introduced on April 15, 2021. We thank you for your continued 
leadership and commitment to ensure that U.S. trade laws remain strong 
and accessible for manufacturers impacted by unfair trade.

In recent years, the domestic kitchen cabinet manufacturers were hard 
hit by unfairly traded imports from China. These imports resulted in 
financial losses, production cuts and reduced employment for the 
industry. The industry took action and filed AD/CVD petitions on 
imports from China which concluded in March 2020 with the imposition of 
AD and CVD duties. Our industry welcomed this decision and since that 
time has worked hard to regain its footing in the market.

These petitions marked the industry's first experience using the trade 
laws and we were very pleased with the results. We know these laws are 
the first line of defense to counter unfair trade practices and we 
remain committed to work with Congress to ensure they remain in place.

As Congress considers the steps needed to restore and sustain our 
country's competitiveness the kitchen cabinet industry wants to be part 
of that recovery. S 1187 includes important provisions which will 
ensure access to these laws.

We encourage members in the Senate to join you in support of this 
legislation as it moves through the legislative process.

Sincerely,

Betsy Natz, CEO

                                 ______
                                 
                Prepared Statement of Hon. Mike Crapo, 
                       a U.S. Senator From Idaho
    Thank you for those remarks, Mr. Chairman, and for spearheading 
this effort to out-compete China, in particular. I am glad to be 
working with you on legislation to strengthen America's trade policies 
and practices.

    China is a potent challenge to the United States on several 
levels--economic, strategic and moral. Republicans and Democrats can--
and should--work together to formulate a China policy that can 
effectively confront these challenges. Put plainly, there is no need 
for a Republican or Democrat policy on China, just an American policy.

    An American policy is precisely that: it reflects the best of 
America. It reflects our competitive spirit, our leadership in 
innovation, and critically, our values. So how do we put such a policy 
into practice? Simple--stay true to what made the American experiment a 
success.

    In terms of competitiveness, we should not close off our market or 
engage in protectionism. China closes off its market and provides 
distortive subsidies to create national champions. We do not fear 
competition; we embrace it, because America's workers, farmers, and 
businesses have always confronted challenges head-on, and that spirit 
will never dampen.

    American companies become global champions because the way forward 
in a free market is to excel, and America excels like no other in a 
fair fight. And to fight at its best, America must focus on 
strengthening its competitiveness, which means we need to be smart in 
our use of tariffs. We need to cut tariffs on inputs that support 
American manufacturing, or on goods consumed by the American consumer, 
especially middle- and low-income families.

    We can achieve that through programs like the Miscellaneous Tariff 
Bill, and through thoughtful application of the section 301 tariffs on 
China. Our open market strengthens America strategically. President 
Eisenhower told Congress in 1958 that world trade:

        . . . strengthens our friends and increases their desire to be 
        friends. World trade helps to lay the groundwork for peace by 
        making all free nations of the world stronger and more self-
        reliant.

    He was right. That is why it is important we reauthorize the 
Generalized System of Preferences program. Developing countries that 
want to play by the rules should know that the United States will be a 
reliable trading partner and a fierce friend.

    For example, there is no question that if most countries are 
offered a choice between debt-trap diplomacy like China's Belt and Road 
initiative, or the opportunity to have access to the U.S. market, which 
is governed by the rule of law, they are going to pick America. History 
is instructive in that regard. In terms of innovation, we should pursue 
policies that promote and reward creativity, such as strong 
intellectual property protections.

    Many of us are rightly repulsed by practices like China's 
technology theft and its Great Firewall. But the answer is not to 
construct our own restrictions on data and information, or create some 
social credit score for U.S. companies. The answer, like President 
Reagan said 3 decades ago, is to tear down the wall. We must directly 
target those actions that take aim at U.S. companies. We must also 
negotiate and enforce strong rules through new trade agreements, 
including at the World Trade Organization.

    Last, but perhaps most important, are our values. China's human 
rights abuses are appalling. The Communist regime set its tone on human 
rights at its inception, and it has not improved since.

    Internationally, we must be sharper in our engagement on human 
rights by rallying our allies to confront these abuses, including 
forced labor and the suppression of free speech. What will bring down 
those abuses is not U.S. disengagement, but facilitating the 
opportunity for the Chinese people to engage themselves.

    Domestically, we have to stay true to our processes. That means our 
approach is shaped by a course that reflects our American tradition of 
building consensus through dialogue and debate. Whatever anyone may 
claim China has achieved through its system, ask them if they would 
rather live in a world that reflects its approach to its citizens--or 
ours?

    Unlike any government official in China, every member present today 
is here because their constituents chose them through free and fair 
elections. And each of our members has the right and responsibility to 
bring their insights into the discussion. This hearing is part of that 
discussion, but it is not the end of it.

    Moreover, it bears emphasis that Congress is democracy at its best. 
Concentrating unfettered power in the executive is China's approach, 
not ours. Having Congress in the driver's seat on critical trade policy 
decisions is not a weakness, it is a strength.

    Chairman Wyden and I still have a lot of work ahead of us to right 
this ship of state in the world's marketplaces, and I appreciate his 
partnership in this effort. And we are working together, and with 
members on the committee, to achieve that in a legislative package that 
will strengthen America's competitiveness and benefit its farmers, 
businesses, and innovators.

    Thank you for organizing this hearing, Mr. Chairman. I look forward 
to the testimony from our witnesses.

                                 ______
                                 
Prepared Statement of Aynne Kokas, Ph.D., Senior Faculty Fellow, Miller 
 Center for Public Affairs; and Associate Professor of Media Studies, 
                         University of Virginia
    Chairman Wyden, and distinguished members of the U.S. Senate 
Finance Committee, it is an honor to be here. Funding from title VI, 
the Fulbright U.S. student program, the East-West Center, the Woodrow 
Wilson Center, the National Endowment for the Humanities, and the Kluge 
Center at the Library of Congress, has been central to my ability to 
research and teach about China at the University of Virginia and as a 
student in public universities in California and Michigan. To maintain 
American competitiveness, there is a crucial national security need to 
fully fund the study of China by American students and scholars.

    My remarks today will focus on five key findings:

      1.  U.S. corporate profit in key media sectors depends on access 
to the Chinese market and adherence to Chinese regulations. This shapes 
the U.S. digital landscape.
      2.  Chinese laws imperil U.S. tech investment in China.
      3.  Chinese firms with close Chinese Government ties are rapidly 
acquiring a wide range of U.S.-based digital media and tech sector 
entities.
      4.  Chinese financial interest in U.S. media firms is already 
leading to censorship and disinformation.
      5.  The U.S. market's economic dependence on China is changing 
how companies talk about censorship.
                      a note about self-censorship
    For the past year, when receiving calls from journalists to discuss 
this topic when I have been speaking with journalists about U.S.-China 
media relations, some assumed that I would not want to go on the record 
about my thinking due to the sensitive nature of this topic. The PRC 
Government has increased reprisals against scholars, including 
sanctions of Newcastle University professor Jo Finley Smith and German 
academic Adrian Zenz. The environment for research about China has 
deteriorated rapidly, as have extraterritorial threats to speech. I am 
here speaking frankly and want to acknowledge the intensifying 
pressures against doing so.

    U.S. corporate profit in key sectors depends on access to the 
Chinese market and adherence to Chinese regulations. This shapes the 
U.S. digital landscape.

    The global tech sector is estimated to reach USD 5 trillion in 2021 
(Business of Technology 2021). The U.S. is poised to make up 33 percent 
or USD 1.6 trillion of that (Business of Technology 2021). The Chinese 
market makes up 14 percent of the global tech economy but it also 
offers a tantalizing market growth opportunity for U.S. firms (Business 
of Technology 2021). With the growth of the Chinese market, U.S. 
national interest and U.S. commercial interests have diverged.

    For example, the U.S. entertainment market size in key industries 
is roughly the same size or smaller than China's market size. The 
evolution of the commercial media industries makes this crystal clear. 
The size of the Chinese gaming market is USD 41 billion versus USD 60.4 
billion in the United States (Thomala 2021). In China there are 704.8 
million social media users. The U.S. market, by contrast, is slightly 
more than a third the size at 223.02 million (Tanovska 2021). China 
overtook the U.S. theatrical distribution market in 2020 for the first 
time ever (Davis 2021). This shapes the content production landscape 
for media conglomerates creating multi-platform IP such as the Marvel 
Cinematic Universe range of films, games, theme park rides, 
merchandise, etc. (Kokas 2017). It is in the clear financial interest 
of U.S. firms to serve the Chinese market.

    Further complicating regulation, disaggregating the ``tech'' 
economy from other sectors like retail, entertainment, transportation, 
health care, and others, becomes increasingly difficult because of the 
role that digital management platforms and data integration play in 
cross-sectoral innovation (Nambisan et al. 2017). However, data 
security regulation in the United States has historically followed 
sector-by-
sector oversight, with the Health Insurance Portability and 
Accountability Act (HIPAA) as a prime example. Unlike the United 
States, China has increasingly centralized its tech oversight to 
include all sectors, and to provide a range of tools for the Chinese 
government to access corporate data.
       chinese laws imperil u.s. tech sector investment in china
    U.S. tech firms are in an increasingly challenging political 
landscape vis-a-vis China. In June 2017, China implemented the 
Cybersecurity Law of the People's Republic of China (zhonghua renmin 
gongheguo wangluo anquan fa), which now acts as the baseline for 
present day guidelines (Standing Committee of the National People's 
Congress 2016, Creemers, Triolo, and Webster 2018). The law requires 
that data is stored within China and that organizations and network 
operators submit to government-conducted security checks. What this 
means in practice is that any firm that stores data in the PRC makes 
that data accessible to the Chinese Government regulators, including 
Apple, which moved the iCloud data for Chinese iCloud accounts to 
Chinese Government-run servers in 2017. Such policies are contagious. 
For example, in 2018, Vietnam's National Assembly passed a law 
requiring both foreign and domestic firms to store data generated in 
Vietnam to be stored there (Jacob 2020).

    The December 2019 ``Provisions on the Governance of the Online 
Information Content Ecosystem'' (wangluo xinxi neirong shengtai zhili 
guiding) asserts potential criminal or civil liability for consuming, 
producing or sharing ``negative'' information (guojia hulianwang xinxi 
2019, China Law Translate 2019). With U.S. universities now conducting 
classes online in China, what this means in practice is that students, 
teachers and universities can be surveilled, or held criminally or 
civilly liable in China for information they access or share. It also 
holds platforms civilly or criminally liable.

    On July 3, 2020, the Standing Committee of China's National 
People's Congress released a draft Data Security Law (shuju anquan fa) 
(Rafaelof et al. 2020). The law makes industry, telecommunications, 
natural resources, public health, education, defense, and finance 
regulators accountable for monitoring data created in their respective 
domains. The law also provides a basis for the establishment of a data 
security review system that can review any activities that influence or 
might influence national security data.

    The July 2020 ``Law of the People's Republic of China on 
Safeguarding the National Security in the Hong Kong Special 
Administrative Region, colloquially known as the Hong Kong National 
Security Law, permits the Chinese Government to hold people and 
platforms liable for crimes committed extraterritorially, which puts 
particular pressure on firms with large Chinese operations (The 
National People's Congress 2020). What this means in practice is that 
any individual or firm that is perceived by the Chinese Government to 
violate China's national security could be held liable for those 
crimes. This means that the Chinese Government has provided itself 
legal cover to penalize U.S. firms for perceived transgressions 
(ranging from listing Taiwan as a country to speaking out about 
Xinjiang human rights abuses and beyond) not just in China, but outside 
of China (BBC News 2018, Paton 2021). This same principle applies to 
firms that offer education online to students in the United States, but 
also maintain operations in China.

    Chinese firms have acquired a wide range of U.S. tech and media 
firms.

    Chinese firms are rapidly acquiring U.S. media distribution 
platforms in film, gaming, and social media. Entertainment platforms 
operating in the United States such as social media entertainment 
platform TikTok, and connected gaming platforms Fortnite, Call of Duty, 
and League of Legends, among others are wholly or partially owned by 
Chinese firms (see Figure 1 below). In these cases, beyond censorship 
of content at the production stage, we are also seeing either actual or 
potential censorship of public debate.

    Chinese-owned social media platform TikTok was the most downloaded 
app worldwide in Q1 2021 (Perez 2021). The platform has over 100 
million U.S.-based users (TikTok 2020). It is now a backbone of the 
U.S. tech economy, despite being owned by a Beijing-based firm.

    Major gaming companies including Epic Games, Riot Games, and 
Blizzard are partially or wholly owned by Chinese tech firm Tencent. 
Blockbuster titles like Fortnite, League of Legends, and World of 
Warcraft are now made by firms with at least partial Chinese ownership. 
Together, these games account for nearly USD 4 billion in the U.S. 
economy (Spangler 2020).

 Figure 1: Timeline of Chinese Investment in Major U.S.-based Media and 
                    Entertainment Firms
                    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                    
                    
                    

    .epsSuch acquisitions make an impact on U.S. economic statecraft, 
where the skills and talent developed in the U.S. advance PRC goals to 
grow the tech sector, and in particular, data-driven AI.

    Even with the forced divestment of Grindr in June 2020 to San 
Vicente Acquisition LLC as a result of CFIUS oversight (Wang, Alper, 
and Oguh 2020), the data that the firm gathered during its ownership by 
Beijing-based Bytedance remains vulnerable to Chinese oversight. Paired 
with Chinese Government hacks of the Office of Personnel Management and 
others, the strategic risk of extensive data integration, and the use 
of U.S. consumer data to advance Chinese commercial and military AI 
efforts, is already omnipresent.

    Here I highlight key corporate acquisitions in the field of media 
and entertainment. However, Chinese acquisitions of firms that generate 
sensitive data in the U.S. occurs in the agricultural sector, the 
health sector, the manufactured goods sector, and beyond as I detail in 
my forthcoming book from Oxford University Press. In addition to 
corporate acquisitions, Chinese firms can also acquire data from U.S. 
firms through data broker agreements (Chen 2019).

    Chinese financial interest in U.S. media firms is already leading 
to censorship and disinformation.

    These shifts in market power are changing our digital landscape 
three ways.
Firms Change the Content They Produce
    On the Disney+ platform, there is no content related to Hong Kong, 
and controversial Disney property Kundun (1997) is not available on the 
platform. In film, despite having a contract with the United States 
Navy for logistical support, Sony censored Tom Cruise's iconic leather 
pilot's jacket because it had a patch from Taiwan in the 1986 version 
of the film. In 2019 the animated film Abominable, originally produced 
in conjunction with DreamWorks Animation, but ultimately released by 
China's Pearl Studios, included a contested nine-dash line naval 
sovereignty claim in the South China Sea.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    .epsWe are seeing shifts in the types of narratives and productions 
that emerge from Hollywood as a result of interest in building a market 
in China. Disney's Mulan was filmed in part in Xinjiang, with the 
collaboration of government agencies there that have been involved in 
carrying out human rights abuses against the Uyghur people. The film's 
narrative of suppressing minorities from China's Western regions also 
reflected Chinese government narratives that undergird Uyghur human 
rights abuses (Kokas 2020).

    Film production decisions support entire multi-platform media and 
tech economic ecosystems. They feed into what we see on digital 
platforms, as well as the types of related products that studios 
produce including video games, theme park rides, toys, and even 
educational materials. The development process is highly subjective; as 
such it is very difficult to know when a project is modified or passed 
on because of potential issues with the Chinese market. Emails released 
through the Sony hack revealed multiple instances, most notably in the 
cases of Pixels (2015), Robocop (2014), and Captain Philips (2013), 
where studio executives discussed and/or implemented content changes 
due to concerns about access to the Chinese market (Baldwin and Cooke 
2015). Due to the Sony hack, we know that studio executives do take 
this into account. However, the key challenge is that it goes against 
the financial best interests of any studio executive to ever admit to 
it. Moreover, it is easy to frame censorship as a business decision to 
maximize market access, much like adapting any other product to local 
preferences.
Firms Defend Censorship Due to Economic Interests
    While such censorship or narrative decisions that favor the Chinese 
market were concerning when the U.S. was the largest market in the 
world, they become even more central with China as the world's largest 
film market. This trend is likely to continue at least through 2021 due 
to the sluggish return of the in-person U.S. entertainment sector due 
to COVID.

    We are already seeing a dramatic shift in terms of how leaders in 
the U.S. media industries discuss censorship as a result of Chinese 
market interests (Kokas 2018). In the Q&A session following promotional 
meeting at the Consumer Electronics Show on January 6, 2016, Netflix 
Chairman Reed Hastings referred to changes in content that the firm 
might need to make in order to distribute their content in China as 
``airplane cuts,'' diminishing the significance of a U.S. firm 
censoring their content as a business decision for distribution to a 
market of 1.3 billion people (Roettgers, 2016). In 2017, he followed up 
by reinforcing that the U.S. and Chinese film industries have a 
``shared future,'' underscoring the enmeshment of Hollywood's growth 
imperative with the government-supported rise of the mainstream Chinese 
film industry (MPAA's Charles Rivkin's Opening Address at the 2017 
U.S.-China Film Summit, 2017).

    Disney refrained from commenting on boycotts due to statements by 
star Liu Yifei regarding Hong Kong or specifically addressing 
criticisms that the film was shot in Xinjiang. Only a week after the 
film's digital release, after Chinese authorities banned coverage of 
the film in China, did Disney comment. The firm's Chief Financial 
Officer, Christine McCarthy state, at a Bank of America conference, the 
film caused ``a lot of issues,'' a statement which could also be 
interpreted to mean financial issues for the company, particularly 
given the context (Toh 2020).

    Hollywood studios were, in many respects, a canary in the coal mine 
with regard to the influence U.S. media and technology corporations are 
facing with respect to content censorship. Other U.S.-based 
entertainment corporations have shut down the speech of fans and 
employees in an effort to curry favor with Chinese government officials 
and preserve access to the Chinese market.

        Blizzard, which is partially owned by Chinese tech firm 
Tencent, shut down pro-Hong Kong speech by Ng Wai Chung (known as 
Blitzchung) in its Hearthstone Esports champion's league for voicing 
support of the 2019 Hong Kong protests. Blizzard then banned two 
broadcasters who moderated the platform when he spoke out. When 
pressed, the CEO responded with:

             ``Blizzard had the opportunity to bring the world together 
        in a tough Hearthstone esports moment about a month ago, and we 
        did not. We moved too quickly in our decision making, and then, 
        to make matters worse, we were too slow to talk with all of 
        you. When I think about what I'm most unhappy about, it's 
        really two things: The first is we didn't live up to the high 
        standards that we really set for ourselves, and the second is 
        we failed in our purpose, and for that, I am sorry, and I 
        accept accountability,'' failing to mention the company's 
        censorship in its apology (Blizzard President Addresses Hong 
        Kong Controversy--Blizzcon 2019, 2019).

        When Houston Rockets general manager Daryl Morey tweeted out 
support for the Hong Kong protests, the Chinese Government temporarily 
stopped broadcast of key NBA games. The NBA shut down fan protests due 
to the suppression of Morey's views.

        Users have expressed concerns about TikTok shutting down 
content related to like Uyghur detentions in China and democracy 
protests in Hong Kong (BBC News 2019, Kuo 2019). Independent computer 
security researchers at the Citizen Lab conducted research that was 
inconclusive as to whether TikTok censors social media posts (Lin 
2021). The report does note the possibility that the app could face 
pressure due to parent company Bytedance's legal responsibilities as a 
PRC-based firm (Lin 2021).
Firms Face Financial Pressure to Prioritize Chinese Market Growth
    Commercial media and tech platforms in the United States shape 
public discourse. China is an increasingly important market for 
investors in endowments and pension funds that hold these firms that 
also keenly watch for the growth of American blue-chip stocks. Those 
with equities with China exposure are under pressure to maximize their 
quarterly and annual performance, not just to enrich investment banks 
or individual shareholders, but to back up overall stock market 
performance. There is a fundamental tension between the national 
security concerns of Chinese corporate influence over the U.S. digital 
landscape and the commercial pressures U.S. companies face in an 
increasingly competitive marketplace.

    And yet, in these circumstances where media conglomerates have 
increased pressure to grow, where media market growth is largely 
occurring in China, the United States has also reduced public funding 
for media. Thus, the prevailing voices in the media landscape are 
heavily dependent on the Chinese market, and by extension, Chinese 
regulators.
                            recommendations
    My book Hollywood Made in China (University of California Press, 
2017) and my forthcoming book on Chinese consumer data gathering in the 
United States from Oxford University Press formed the basis for many of 
the recommendations that I will share with you today. The books 
represent the culmination years of fieldwork in China, including one 
year funded by a U.S. student Fulbright grant. Below are three 
recommendations to improve U.S. tech competitiveness through trade:

        Improve U.S. tech sector competitiveness
            Increase U.S. Government investment in the tech 
sector both through research agencies like DARPA and the Defense 
Innovation Unit and through the adoption of the Endless Frontier Act.
            Enhance funding for STEM education at the 
secondary and tertiary levels to increase the competitiveness of U.S.-
trained researchers.
            Continue to support a robust framework for 
skills-based immigration in the STEM fields, paired with transparent 
pathways for immigration to support researchers who seek to remain in 
the United States.
            Work actively against anti-Asian hate in the 
United States to create a hospitable environment for researchers and 
technologists who immigrate to the United States.

        Enhance U.S. and Global Data Oversight to Prevent Data 
Exfiltration to Non-Allies
            Enhance tech sector collaboration across 
developed democracies as outlined in the Democracy Partnership Act.
            Build out a national data privacy framework to 
prevent consumer data exfiltration to non-allied countries following 
the data adequacy standards established by the European Union and 
Japan.
            Companies treat data as an asset that they can 
leverage for financing or sell. As such, it is reasonable to require 
enhanced reporting on how and when firms share data with third-party 
providers. This includes support for congressional efforts to increase 
the rigor and transparency of financial reporting standards for U.S.-
based firms, through mechanisms like H.R. 1815, currently under 
consideration in the Senate Committee on Banking, Housing, and Urban 
Affairs.
            Limit the sale of U.S. consumer data through 
efforts such as the Protecting Americans' Data From Foreign 
Surveillance Act.

        Fund Chinese area studies so that executives can better 
understand the implications of their business decisions related to 
China. The lack of secondary and tertiary social science education 
opportunities to learn about China means that most people entering the 
U.S. workforce do not have a working understanding of China's political 
system. This is in stark contrast to knowledge of college-educated 
Chinese nationals about the United States.
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            cnn.com/2020/09/11/media/disney-mulan-xinjiang-intl-hnk/
            index.html.

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            for Grindr has ties to Chinese owner.'' https://
            www.nasdaq.com/articles/exclusive-winning-bidder-for-
            grindrhas-ties-to-chinese-owner-2020-06-02.

                                 ______
                                 
        Questions Submitted for the Record to Aynne Kokas, Ph.D.
                 Questions Submitted by Hon. Ron Wyden
    Question. While the Chinese Government's hacks of millions of 
Americans' personal information have gotten plenty of attention, the 
Chinese Government can also acquire Americans' data legally, including 
by buying it from unregulated data brokers. This information can then 
be used to supercharge espionage campaigns, including against U.S. 
government officials.

    Do you agree that the data-related threats posed by China extend 
beyond data acquired through hacking, and would you support efforts by 
Congress to restrict the export of Americans' personal data to 
countries like China that are likely to exploit it to the detriment of 
our national security?

    Answer. There are a wide range of data-related risks posed by China 
extending beyond data acquired through hacking. The key risks that I 
see include the following:

        Personal data acquired legally by Chinese firms operating in 
the United States.
        Personal data acquired legally by Chinese firms working in 
business partnerships with U.S. firms.
        Personal data acquired legally by firms of any national origin 
operating in the United States and then sold to Chinese firms as part 
of data broker agreements.
        Personal data acquired legally by non-Chinese and non-American 
firms that partner with or sell data to Chinese firms.

    I think efforts to restrict the flow of data present significant 
potential challenges in several key ways. First, it is expensive and 
unwieldy to track where consumer data goes if the only intervention is 
on preventing its movement. Second, because this is a digital 
ecosystem, restricting data flows requires agreements with third 
nations. Most countries have trade relationships with both the United 
States and China, so it is difficult to assess which countries would 
require data restrictions.

    Question. Are there other measures that you believe would help 
protect Americans' personal data from getting into the hands of hostile 
foreign governments?

    Answer. Developing a more robust data privacy system in the United 
States is of the utmost importance. This includes limitations on the 
type of data that all companies can gather, improvements in systems of 
notification for consumers when companies gather their data, and 
efforts to learn from fellow developed democracies like the European 
Union and Japan about the strengths and weaknesses of their data 
privacy regulations. An additional benefit of working with allies and 
partners is establishing free data trade zones where policymakers can 
be reasonably confident that data is not traveling (at least not 
legally) to hostile third-party actors.

    I strongly support the broad aims of the Protecting Americans' Data 
From Foreign Surveillance Act, in that the export of data, and in 
particular, the sale of data via data brokers, presents a significant 
risk to American national security. The challenge remains how to limit 
the sale to ``hostile'' countries. Digital ``swing states'' like 
Brazil, Indonesia, South Africa, and others present a significant 
challenge in that data sold to these countries don't have robust 
digital oversight and also have trade relationships with the U.S. and 
China. It is heartening to see a focus on solving these important 
problems in the Senate.

    Question. As you mentioned in your testimony, China's closed-off 
Internet and censorship practices have impacts far beyond China's 
territorial borders. The Great Firewall and content regulation affect 
content creators and would-be exporters in the United States and around 
the world. The Chinese government has also sought to build its global 
influence through engagement and leadership at multilateral 
institutions, such as the World Intellectual Property Organization 
(WIPO) and international standards-setting organizations.

    In your view, where are there opportunities for the United States 
to increase engagement with our allies and at multilateral 
institutions? How can the United States use this engagement to counter 
the Chinese government's vision of the Internet and promote the values 
of an open Internet, freedom of speech, and freedom of the press?

    Answer. Yes. There are clear opportunities for the United States to 
engage more actively not just in multilateral organizations, but in 
international standards-
setting organizations and professional organizations where much of the 
micro-level 
policy-making for new standards occurs. It is important to address 
these issues at multilateral institutions like the World Intellectual 
Property Organization and the United Nations International 
Telecommunications Union. However, perhaps even more challenging is 
addressing standards-setting in professional and industry associations. 
The U.S. Government does not, for the most part, participate in 
standards-making efforts led by the private sector as a matter of 
policy and principle. However, many organizations remain open to 
government participation from other countries. There is also the 
challenge of participation in industry associations by Chinese firms 
with robust Chinese Communist Party committees and internal policy 
influence, as well as more general pressure to comply with Chinese 
Government audits and guidance as a condition of operating successfully 
in the market.

                                 ______
                                 
                Question Submitted by Hon. Maggie Hassan
    Question. In addition to forcing U.S. businesses to transfer 
technology, the Chinese Government also engages in intellectual 
property theft. This is an issue for U.S. businesses with a presence in 
China and for domestic U.S. companies that the Chinese Government 
targets with cyberattacks.

    For U.S. businesses with a presence in China, how do data 
localization requirements--which require U.S. companies to store data 
in China--affect their vulnerability to intellectual property theft?

    Answer. Data localization requirements dramatically increase the 
vulnerability of U.S. firms to intellectual property theft. Imagine the 
equivalent, that a Chinese firm operating in the United States would be 
forced to store their data on a U.S. Government server. We can use the 
example of TikTok because of its recent prominence in these debates. 
When the Trump administration sought to force a sale of TikTok, the 
Chinese Government put algorithms developed through user data on its 
export control list for national security reasons. The U.S. Government 
and think tanks around the world have been trying to figure out 
precisely what type of national security risk TikTok may or may not 
pose. Now, imagine that all of their data was stored on a server that 
the U.S. Government could directly access. Not only would it be 
possible to determine with much greater precision the type of potential 
security risk presented by the platform, it would also be possible to 
leverage that export-
controlled algorithm to enhance corporate growth in the United States. 
That is what is happening in China with data localization regulations.

    Here I used an example in the tech sector. However, what is most 
concerning about the data localization policies is that they apply 
across sectors. Tech firms like Apple have sophisticated data security 
operations in place and have still faced challenges. However, firms 
across the value chain operate in China, many of which do not have 
Silicon Valley-level data security budgets--from metalworking companies 
to firms that license industrial processes and beyond.

                                 ______
                                 
        Prepared Statement of Michael R. Wessel, Commissioner, 
           U.S.-China Economic and Security Review Commission
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
it is an honor to appear before you today to address this important 
topic.

    My name is Michael Wessel, and I am a Commissioner on the U.S.-
China Economic and Security Review Commission. I also serve as the 
staff chair of the Labor Advisory Committee to the USTR and Secretary 
of Labor. While my testimony is informed by these positions, my service 
in Congress for more than 2 decades as a congressional staffer and 
other work, my testimony reflects my personal views and are not on 
behalf of any other entities.

    The Commission was created by Congress in 2001 in conjunction with 
the debate about the grant of Permanent Normal Trade Relations (PNTR) 
to China, paving the way for its accession to the World Trade 
Organization. The Commission was tasked with monitoring, investigating 
and submitting to Congress an annual report on the national security 
implications of the bilateral trade and economic relationship between 
the United States and the People's Republic of China, and to provide 
recommendations, where appropriate, to Congress for legislative and 
administrative action.

    The grant of PNTR ended the annual debate about whether to extend 
most-
favored nation status to China. But as it passed PNTR, Congress created 
the Commission because it did not want to forego the annual review of 
our relationship with China. Since the creation of the Commission, 
Congress has extended and altered our mandate as the U.S.-China 
relationship evolved.

    The Commission is a somewhat unique body: we report to and support 
Congress. Each of the four congressional leaders appoint three members 
to the Commission for 2-year terms. In 7 of the last 10 years, we have 
issued unanimous reports. In the 3 years where it was not unanimous, 
there was only one dissenting vote. In many ways, the evolving 
challenges and opportunities posed by the relationship with China have 
united us in our analysis. Our bipartisanship is a reflection of the 
broader political support in this country for addressing the challenges 
posed by the Chinese Communist Party's (CCP's) approach.

    This hearing occurs at a critical time. Tensions with China have 
risen as a result of its continued predatory trade policies, its 
rampant human rights abuses in Xinjiang, Tibet and other parts of the 
country, its illegitimate territorial claims and militarization in the 
South and East China seas, its corroding of democratic rights and 
freedoms in Hong Kong, its increased pressures on Taiwan, its Belt and 
Road Initiative, its use of economic leverage and outright coercion 
against U.S. allies like Australia, its efforts to direct and dominate 
standards setting bodies, and its expansive political, economic, 
security and diplomatic actions across the globe.

    China is pursuing its own interests. It is not interested in 
abiding by international norms. In fact China seeks to minimize these 
norms and the universal values that underpin them by attempting to 
recast them as ``Western.'' We should stop hoping and waiting for 
change in the CCP's outlook or policies. Rather, we need to accept the 
reality of China's approach and adopt the policies and responses that 
are in our long-term best interest.

    Let me start by making clear that in debating and addressing the 
challenges posed by the policies of the CCP, we are not disparaging the 
people of China. Rising anger and aggression targeted at people of 
Asian descent here in the U.S. or around the globe is unacceptable. We 
must be careful in our debates. But we must not allow the CCP efforts 
to coopt these important discussions to advance its influence.

    The Trump administration challenged China on many fronts. Now the 
question is how to respond to China's plans and policies and what will 
be the architecture underlying our approach for the future. The Biden 
administration is engaged in a top-to-bottom review assessing past 
actions, identifying its preferred path forward, and, importantly, what 
cooperation and coordination with our allies is possible.

    A multilateral approach is important. But it is not the only 
approach. For years we sought multilateral cooperation on issues 
ranging from China's over-capacity in steel, aluminum and other sectors 
to China's efforts to dominate the global roll-out of 5G with Huawei 
and ZTE equipment at its core, and in many other areas. To paraphrase 
an old saying, our allies were willing to hold our coat while we 
bloodied our nose.

    Our allies now appreciate, to a greater extent, the challenge posed 
by China's predatory and protectionist policies though they may still 
hesitate to act or may have a different sense of urgency when it comes 
to addressing these challenges. Our producers and our workers cannot 
wait for our allies to fully appreciate the impact of China's policies 
and develop the will to act--for their own interests and for their own 
people.

    The outsourcing and offshoring of U.S. jobs and productive capacity 
to China has created some unacceptable vulnerabilities. Americans 
experienced head-on the impact of this outsourcing last year with too 
many unable to obtain critical personal protective equipment (PPE) to 
protect themselves and those around them as COVID-19 ravaged our 
country.

    In 2019, before the pandemic, the U.S.-China Commission held a 
hearing on the challenges posed by our growing reliance on China's 
biotech and pharmaceutical products. Our reliance was built up over 
many years as China's industrial policies created incentives, market 
barriers and market access requirements that expanded their 
capabilities often with the support of our own companies. We are, in my 
view, unacceptably reliant on China for our active pharmaceutical 
ingredients (APIs), which are some of the building blocks for the life-
saving and life-sustaining drugs our people take. The United States 
sources 80 percent of its APIs from overseas, and a substantial portion 
of U.S. generic drug imports come either directly from China or from 
third countries like India that use APIs sourced from China.\1\
---------------------------------------------------------------------------
    \1\ U.S. Food and Drug Administration, FDA at a Glance: FDA-
Regulated Products and Facilities, April 2017; U.S.-China Economic and 
Security Review Commission, Hearing on Exploring the Growing U.S. 
Reliance on China's Biotech and Pharmaceutical Products, written 
testimony of Katherine Eban, July 31, 2019, 1.

    We no longer make penicillin in this country, as we abandoned the 
fermentation capacity for this drug years ago. We are dependent on 
---------------------------------------------------------------------------
China for many other critical drugs.

    China's government has shown its willingness to politicize and 
indeed, weaponize, its supplies of critical products. It threatened to 
withhold rare earth products from Japan many years ago and did so 
against the U.S. recently. As the world was grappling with devastating 
effects of the global pandemic, China's government engaged in the so-
called ``mask diplomacy,''\2\ offering scarce PPE products to countries 
in return for recognition and support of its policy objectives. It is 
doing this again with regard to its supplies of COVID-19 vaccines.\3\
---------------------------------------------------------------------------
    \2\ Mercator Institute for China Studies, ``The PLA's Mask 
Diplomacy,'' in China Global Security Tracker No. 7, August 3, 2020, 
https://bit.ly/2QlH2bc.
    \3\ Yanzhong Huang, ``Vaccine Diplomacy Is Paying Off for China: 
Beijing Hasn't Won the Soft-Power Stakes, but It Has an Early Lead,'' 
Foreign Affairs, March 11, 2021, https://fam.ag/3gqr36A.

    We need to treat supply chains as integral components of our 
national and economic security as well as vital to our critical 
infrastructure. The past years have seen multiple warning shots across 
the bow of our country ranging from inadequate supplies of PPE to rare 
earth minerals and magnets to products like grain oriented electrical 
steel vital to power transmission. Globalization has shown its limits 
---------------------------------------------------------------------------
and its risks and it's time to act.

    We must confront the policies of the CCP. But we must not naively 
expect them to change. We must compete. We must reduce our dependence 
on China for vital supplies and technologies.

    This is a critical time because many of our multinational firms, 
which were essentially sidelined during the COVID-19 pandemic, are 
beginning to plan for the future. Data from the Financial Accounts of 
the U.S. (formerly the Flow of Funds report) indicate that at the end 
of 2020, U.S. corporations were sitting on more than $5.5 trillion in 
cash and liquid assets.\4\ Many of these companies are now making plans 
for how to deploy those funds.
---------------------------------------------------------------------------
    \4\ https://www.federalreserve.gov/apps/fof/
DisplayTable.aspx?t=l.102, lines 2-11.

    My view is that they should be investing in production and job 
creation here in the U.S. The allure of accessing China's market has 
waned in significant ways, but companies are looking for a signal from 
Congress and the administration as to the direction of future policy. 
Congress has acted on a number of fronts in past years, including in 
passing FIRRMA and the CHIPS Act, to make clear that we will respond to 
predatory practices, we will preserve our key technologies and we will 
---------------------------------------------------------------------------
promote American competitiveness. That must be the path forward.

    We need to send stronger signals that we want them to invest those 
funds here to expand production and create jobs.

    China recently adopted its 14th Five-Year Plan.\5\ Along with 
supporting policies from the past, the CCP wants to for the future by 
capturing leadership in technologies that will be foundational for the 
next wave of innovation and growth. It wants to increase support for 
indigenous innovation to meet the China's domestic needs while 
continuing to have an expansive export strategy. General Secretary Xi 
has termed this China's ``dual circulation'' strategy.
---------------------------------------------------------------------------
    \5\ Karen M. Sutter, Michael D. Sutherland, ``China's 14th Five-
Year Plan: A First Look,'' Congressional Research Service, January 5, 
2021, https://bit.ly/3dvpItg.

    For the U.S. this means that China will continue to advance the 
development of key sectors such as new materials, quantum computing, 
biomedicine, artificial intelligence, electric vehicles and others. It 
will support these sectors and technologies with massive subsidies, 
protectionist and predatory practices and through legal and illegal 
means. It will use an ``all of the above'' strategy to achieve its 
---------------------------------------------------------------------------
goals.

    U.S. goods trade with China continues to show a significant 
imbalance. While the size of the U.S. goods trade deficit with China is 
deeply troubling to me, more important has been the composition of that 
trade deficit. The year 2020, of course, was an aberration. In 2019 the 
U.S. ran a trade deficit in advanced technology products (ATP) with 
China of $134.4 billion. That should be an issue of considerable 
concern.

    China continues to build up massive productive capacity that has 
resulted in significant over-capacity in a growing number of sectors 
beyond the steel and aluminum sectors that have, appropriately, 
garnered attention. Chemicals, fiber optics, and other sectors are also 
in over-capacity as a result of CCP policies. This over-capacity has 
undermined the efforts of market-based companies in other countries to 
compete and survive. In some sectors, such as steel, the CCP has made 
repeated promises to reign in over-capacity, to dismantle operations 
and to limit production. Each of those promises has been broken.

    There have been international dialogues to try to address the 
problem in steel fostered primarily at the Organisation for Economic 
Co-operation and Development (OECD). China, however, never really 
engaged in a good faith effort to reduce over-capacity; rather, it used 
the forum to delay action. This is similar to how it approached many of 
the talks within the Strategic and Economic Dialogue where engagement 
was used by the CCP as an alternative to action.

    The CCP is seeking to advance research and development (R&D) 
indigenously, with the support of foreign firms and through a variety 
of programs including the so-called ``Thousand Talents'' program. Many 
foreign firms have dramatically expanded their R&D investments and 
activities in China to respond to CCP policies and incentives, to 
improve potential market access in China and to support their China-
based operations. The connection between R&D and production is well 
known with operations often being located in proximity to each other.

    The pace of R&D expenditures by U.S. affiliates in China has grown 
at a faster pace than domestic investments by their U.S. parents. 
According to a report issued by the U.S.-China Commission, expenditures 
by U.S. multinational enterprises is China grew an average of 13.6 
percent year-on-year since 2003, compared with 7.1 percent for all U.S. 
multinational foreign affiliates and just 5 percent for multinational 
parents in the U.S. in the same period.\6\ This acceleration of the 
pace of investment in China, as opposed to in the U.S. by American- 
headquartered companies must be addressed.
---------------------------------------------------------------------------
    \6\ Kaj Malden, Ann Listerud, ``Trends in U.S. Multinational 
Enterprise Activity in China, 2000-2017,'' U.S.-China Economic and 
Security Review Commission, July 1, 2020, https://bit.ly/2QAQCHg.

    Efforts by the CCP to promote ``cooperation'' should be viewed with 
skepticism. The CCP is more interested in winning than in the 
---------------------------------------------------------------------------
proverbial ``win-win''

    At the same time, China's leaders are desperate for capital and for 
foreign investment. China's debt-to-GDP ratio has increased at one of 
the fastest paces of any major country, now estimated at 288 percent at 
the end of Q3 2020.\7\ Although shadow banking has been somewhat 
reigned in since 2016, massive debt is still out of control.
---------------------------------------------------------------------------
    \7\ World Bank, From Recovery to Rebalancing: China's Economy in 
2021, December 2020, 28. http://documents1.worldbank.org/curated/en/
297421610599411896/pdf/From-Recovery-to-Rebalancing-China-s-Economy-in-
2021.pdf.

    China has pressured international benchmark index developers like 
Morgan Stanley Capital International (MSCI) to include Chinese equities 
in its emerging market index and increase the weighting of Chinese 
issues. MSCI succumbed to the pressure. Unless the trendline changes, 
the inclusion of Chinese securities by major international index 
providers like MSCI, FTSE Russell, and others could lead an estimated 
$400 billion or more of foreign capital to flow into Chinese 
equities.\8\ Changes in bond indices may result in another $200 billion 
of foreign capital flowing into China to purchase bond issues.
---------------------------------------------------------------------------
    \8\ Bobby Lien and David Sunner, ``Liberalization of China's 
Portfolio Flows and the Renminbi,'' Reserve Bank of Australia Bulletin, 
September 19, 2019; Salley Chen, Dimitris Drakopoulos, and Rohit Goel, 
``China Deepens Global Finance Links as It Joins Benchmark Indexes,'' 
International Monetary Fund Blog, June 19, 2019; MSCI, ``Assets in 
Global Equity ETFs Linked to MSCI Indexes Reach All-Time High of $707 
Billion,'' November 10, 2017; Joyce Chang, ``J.P. Morgan Perspectives: 
China's Index Inclusion: A Milestone for EM as an Asset Class,'' 
JPMorgan.

    The South China Morning Post earlier this week reported that 
Citigroup is planning to apply for permission to ``open a new wholly-
domestic securities business in China. . . . The American bank plans to 
apply by the second half of this year for licenses that would allow it 
to underwrite domestic securities, engage in advisory services on local 
deals and conduct trading for clients, as well as engage in stock 
futures.''\9\
---------------------------------------------------------------------------
    \9\ Chad Bray, ``Citigroup to seek licenses for new wholly-owned 
securities business in China,'' South China Morning Post, April 19, 
2021, https://bit.ly/3twGiOR.

    Yet the CCP still refuses to allow the Public Company Accounting 
Oversight Board (PCAOB) access to the work papers of major U.S. 
accounting firms to ensure that the books and records accurately 
reflect the facts. While any investment in a major Chinese company 
bears additional risks due to the power of the CCP the fact that there 
is no transparency should severely limit the scope of foreign 
---------------------------------------------------------------------------
investment.

    It is not just the issue of ``buyer beware,'' although some 
observers argue that investors assume responsibility for their 
investment and must bear that losses that may result. It is also the 
potential risks to the U.S. taxpayer posed by these investments and 
possible federal exposure. For example, capital losses can offset 
capital gains under our tax laws--meaning that tax revenues would 
essentially support losses on these equities and bonds. The Pension 
Benefit Guaranty Corporation (PBGC) could potentially have to play a 
role if investments in these kinds of issues degraded the economic 
viability of a pension plan covered by the agency.

    The Federal Thrift Savings Plan (TSP) had considered utilizing the 
MSCI index that would open up investments in Chinese securities to 
Federal employees and our men and women in uniform. These investments 
may directly challenge our national and economic security interests. 
Over the last several years, increasing numbers of Chinese companies 
have been placed on the Entities List \10\ as well as on the Department 
of Defense's list of companies supporting the People's Liberation 
Army.\11\ Many of these companies are still included in some 
international indexes and U.S. funds are still flowing to these 
companies. Indeed, U.S. investors reportedly continued to invest in 
these entity list and DOD-identified companies after they were publicly 
identified as being on these lists.
---------------------------------------------------------------------------
    \10\ Department of Commerce, Bureau of Industry and Security, 
https://bit.ly/2QispFJ.
    \11\ Department of Defense, section 1237 of FY99 NDAA Communist 
Chinese military companies list, https://bit.ly/2QispFJ.
---------------------------------------------------------------------------
                               conclusion
    In the 1980s, America faced competitive challenges from Japan. 
While those challenges, in retrospect, pale in comparison to those 
posed by China, there are lessons to be learned. Japan was dominating 
the automotive sector. Japan was dramatically expanding its leadership 
in semiconductors. Japan had closed its market to U.S. products in key 
sectors, including telecommunications, electronics, pharmaceutical and 
medical equipment, and forest products. The Reagan administration 
initiated the Market-Oriented Sector Selective (MOSS) talks to address 
Japan's anticompetitive practices. Voluntary restraint agreements were 
adopted.

    In 1987 Congress and the administration worked together to create 
SEMATECH to reclaim America's momentum in the semiconductor sector. 
SEMATECH was a non-profit consortium of 14 U.S.-based semiconductor 
firms that pooled resources and revitalized U.S. R&D in advanced chip 
manufacturing.

    Following these and other initiatives, Congress considered and 
passed the Omnibus Foreign Trade and Competitiveness Act of 1988 (Pub. 
L. 100-418) that included a broad array of provisions to advance 
America's ability to compete. It was an act that updated existing 
authorities, and created new ones, to give America the tools needed to 
compete in new sectors and to address new challenges.

    Now is the time to consider what steps America should take to 
protect our interests and prepare for the future. Too much of the focus 
of our China discussions has been about containing, confronting, or 
decoupling. Many of the actions and policies of the CCP directly 
challenge U.S. interests. We need to send a strong signal to the CCP, 
to our companies, to our people, and the world that we will stand up 
for our interests, we will compete, we will invest, and we will win.

                                 ______
                                 
        Questions Submitted for the Record to Michael R. Wessel
                  Question Submitted by Hon. Ron Wyden
    Question. China's investments in infrastructure--both its own and 
other countries'--are well known. The Chinese Government has 
prioritized building roads, bridges, rail, ports, and digital systems 
that support the economy, trade, and the movement of people. Through 
its Belt and Road Initiative, the government has also used 
infrastructure as a literal inroad to access developing countries' 
markets and engage in soft-power diplomacy.

    In the United States, our infrastructure investments have lagged 
behind. As a result of chronic underfunding of infrastructure, State 
and local governments have struggled to perform routine maintenance, 
let alone invest in new projects that would create jobs, foster 
economic opportunity, and help us develop a more modern, sustainable, 
and resilient infrastructure system. I am hopeful that in the 117th 
Congress, we can finally pass a robust, comprehensive infrastructure 
package that will set a new standard for investing not only in 
traditional projects like rail, roads, bridges, and ports, but also 
broadband and human services infrastructure like child care and elder 
care.

    In your view, how would increased Federal investment in 
infrastructure of all kinds support trade and improve American 
competitiveness with China?

    Answer. Investments in physical and human infrastructure can 
dramatically enhance America's competitiveness overall and support our 
efforts to compete directly with China. The investment deficit in U.S. 
infrastructure has not only hobbled our ability to support exports via 
our ports and airports but has driven up the cost of doing business as 
companies have had to deal with transportation impediments such as 
crumbling roads and bridges. Our inadequate broadband impedes the 
education of our people and access to resources and information. Our 
failure to provide infrastructure supporting child care and elder care 
diminishes our educational attainment for our kids, reduces the 
productivity of our families and saps the resources of our Nation. 
Investments in infrastructure, broadly defined, would have a 
significant positive impact on our Nation's international 
competitiveness.

                                 ______
                                 
                 Questions Submitted by Hon. Mike Crapo
    Question. With regard to your discussion of diversifying supply 
chains away from China, many argue that such a dialogue must include 
addressing the expiration of the Generalized System of Preferences 
(GSP) program. The effect of its expiration raises material costs for 
American manufacturers and is significant for U.S. companies. GSP's 
expiration also imposes a general detrimental impact on exports from 
developing countries.

    Would you agree then that the GSP's expiration tends to make China 
more competitive?

    If so, in your opinion, is today's combination of GSP expiration 
and section 301 tariffs contributing to the problematic supply chain 
shifts seen in recent years?

    Answer. The expiration of GSP is expected to be a short-term issue 
as Congress reviews the underlying authority and what changes are 
appropriate. I do not believe that China is advantaged during this 
period.

    Question. New research recently released jointly by the World Bank 
and World Trade Organization concludes that liberalized trade policies: 
(1) increase women's wages, (2) increase economic equality between 
genders, and (3) create better jobs for women.

    Given this, if the goal is to promote women's equality as part of 
the United States trade agenda, should Congress consider expanding the 
products eligible for beneficial tariff treatment in programs like the 
GSP?

    Answer. The products eligible for beneficial tariff treatment under 
programs like the GSP should be reviewed and updated but, in my view, 
that should be with an eye towards reducing the scope of products 
covered to identify those that truly achieve the goals of GSP and to 
eliminate product coverage for items that undermine U.S. production and 
jobs. In terms of trade equity for women, I believe that legislation 
such as that authored by Senator Casey, the Women's Economic Employer 
in Trade Act (S. 4008) should be part of the committee's efforts.

                                 ______
                                 
              Questions Submitted by Hon. Thomas R. Carper
    Question. Over the past several years, tariffs on China and 
subsequent retaliatory tariffs have caused significant economic 
disruptions for U.S. businesses and farmers. I have heard from many 
constituent companies who have invested significant time, money, and 
resources navigating the process for securing an exclusion from these 
tariffs. However, unfortunately, these exclusions expired at the end of 
last year, and no new exclusion process has opened. Recently, I joined 
Senator Portman, and several of my Senate colleagues on both sides of 
the aisle, to encourage USTR to re-start an exclusion process.

    However, the last exclusion process was far from perfect, and left 
many questions about speed, transparency, and fairness.

    Moving forward, in your view, what should Congress do to reform 
this process in order to provide greater certainty and predictability 
to American companies?

    Answer. Since the imposition of tariffs under section 301 and 
section 232, I believe that there has been renewed attention on the 
need to secure our domestic supply chains. Reversing more than 30 years 
of outsourcing and offshoring will take time and there will be some 
market problems in the process. But the COVID-19 pandemic and the 
inability of America to provide the necessary products for our people, 
the current problems in the auto sector from semiconductor production 
outsourcing and other supply chain problems all are the result of 
flawed trade policies. Exclusions should not be the normal course of 
business and should be time-limited, where they are provided, to spur 
the development of domestic capacity. Clearly, America is not going to 
meet all of its domestic needs and we must continue to engage the 
world. At the same time, we must ensure we can meet the critical needs 
of our people. The Biden administration's work on supply chains should 
help provide the necessary framework for Congress to consider.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
                                ip theft
    Question. In March 2018, USTR finalized an investigation into 
Chinese forced technology transfer and IP theft and issued a report 
that found that ``the act, policies, and practices of the Government of 
China related to technology transfer, IP, and innovation covered in the 
investigation are unreasonable or discriminatory and burden or restrict 
U.S. commerce.''

    We must do more to protect against foreign adversaries that target 
the IP of U.S. manufacturers and firms, deter those Chinese firms that 
may consider engaging in IP theft, and send a clear signal that there 
will be serious repercussions going forward for Chinese actors that 
engage in this misconduct.

    In addition to the various other trade and legal tools available to 
American firms to combat IP theft by China, do you think it would be 
helpful for Congress to provide the President and future 
administrations with additional tools, including sanctions against 
those determined to have been involved in IP theft, to help deter and 
address IP theft by Chinese actors?

    Answer. Existing actions to deter IP theft by China have had only 
limited impact. Hundreds of billions of dollars of U.S. intellectual 
property is lost each year, injuring our Nation's companies and their 
workforce. We should strengthen our resolve in terms of using all 
available tools as well as provide additional tools including sanctions 
against individuals and companies participating in, supporting or 
directing the theft of our IP.
                   active pharmaceutical ingredients
    Question. In your testimony you argue that the U.S. is unacceptably 
reliant on China for our active pharmaceutical ingredients and for many 
critical drugs.

    Senator Cassidy and I are working on bipartisan legislation to 
create an active pharmaceutical reserve here in the U.S. to provide 
some resiliency to our supply chain and help protect against any 
potential threats in the figure--whether they be public health threats 
like the COVID-19 pandemic, natural disasters, or even politicized 
threats.

    In addition to the President's recent executive order on America's 
supply chains steps, are there steps Congress should take to ensure 
supply chain resiliency and reduce our dependence on China for critical 
goods like essential medicines?

    Answer. The COVID-19 pandemic exposed our Nation's unacceptable 
vulnerabilities in terms of pharmaceutical and medical supplies. The 
dependence of the U.S. on China has reached a critical point where it 
is not only a health security threat, but a national security threat as 
well. Expanding our Nation's ability to respond to crises is 
imperative. Creating a an API reserve could be an important component 
of a strategy. We must also assess what our reliance is for a broad 
range of life-saving and life-sustaining drugs and enhance our ability 
to secure supplies of all the necessary ingredients via domestic 
sources or trusted and secure allies. We must also ensure that the 
development of biosynthetic medicine in this country has the support 
that is needed.

                                 ______
                                 
               Questions Submitted by Hon. Maggie Hassan
    Question. The Chinese Government uses anti-competitive pricing and 
trade policies to gain an edge in manufacturing products that are 
critical for our economic and national security. As you testified to 
the Senate Committee on Commerce, Science, and Transportation last 
year, these unfair policies affect multiple supply chains across 
critical industries--including medical supplies, steel, aluminum, solar 
cells, and rare earth minerals.

    Among the Chinese Government's various predatory pricing 
strategies, which would you highlight as broadly affecting the security 
of multiple critical U.S. supply chains?

    Answer. The security of critical U.S. supply chains in a number of 
products has been adversely impacted by an array of policies promoted 
by the Chinese Communist Party. Most important has been the financial 
support provided to favored industries and sectors in China that have 
fueled dumping and subsidies that have injured market-based suppliers. 
In addition to the financial support, China has utilized performance 
requirements, market access impediments and many other tools to advance 
its goals.

    Question. I am working on a bipartisan basis to promote R&D 
investment in the United States, including through bipartisan tax 
legislation with Senators Young, Cortez Masto, Portman, and Sasse. The 
U.S.-China Economic and Security Review Commission's 2020 report 
highlights trade restrictions used by the Chinese Government to require 
U.S. companies to localize manufacturing--which ultimately leads to 
greater R&D investment in China.

    Can you explain how these unfair trade restrictions have affected 
the levels of R&D investment in the U.S. and China? What are the 
implications of these manufacturing restrictions for U.S. economic and 
national security?

    Answer. The policies of the CCP have, in too many instances, 
essentially required U.S. companies to set up manufacturing operations 
in China as a condition of gaining market access. In addition, the 
subsidies, performance requirements and predatory and protectionist 
policies initiated by the CCP have created other incentives for U.S. 
companies to locate there. There is also a clear and direct 
relationship between manufacturing and the associated R&D that goes on. 
A 2020 report prepared by the staff of the U.S.-China Economic and 
Security Review Commission, based on publicly available data, indicated 
that U.S. companies increased the rate of R&D investments in China at a 
significantly higher pace than the R&D investments made in their 
domestic operations here in the U.S. We have already seen the 
devastating consequences of the offshoring of manufacturing production 
to China. The long-term implications for our economic and national 
security from the migration of R&D are also significant and requires 
not only further scrutiny, but action.

    Question. Many U.S. companies operating in China have been subject 
to technology licensing requirements that the Chinese Government 
effectively uses to obtain the products of R&D by U.S. businesses.

    How has forced technology transfer affected the competitiveness of 
U.S. companies and the ability of the U.S. to maintain a leading edge 
in innovative industries?

    Answer. The CCP's technology acquisition strategies have had a 
devastating impact on U.S. competitiveness. It is a tribute to the 
ingenuity, creativity and spirit of our companies and their workforce 
that America continues to be a leader in so many sectors. But that 
leadership has been corroded by the CCP's policies. In the last 5 years 
alone, the U.S. saw almost $2.4 trillion in IP stolen. The bipartisan 
Commission on the Theft of American Intellectual Property in its 2021 
update indicated that IP industries support more than 45 million U.S. 
jobs. The CCP's policies and programs are putting U.S. leadership in 
innovative industries in serious jeopardy.

                                 ______
                                 
              Questions Submitted by Hon. Elizabeth Warren
    Question. COVID-19 may have highlighted the problem--but it didn't 
create it. Even before the pandemic, experts were sounding the alarm on 
a critical supply chain weakness: our Nation's overreliance on foreign 
countries for drugs, and the active pharmaceutical ingredients--or 
``APIs''--needed to make them. Today, the United States imports nearly 
80 percent of APIs from foreign countries-- including China. As a 
result, the drugs that millions of Americans rely on to treat 
conditions like high blood pressure and kidney disease aren't 
manufactured in the U.S.--and even when those drugs are manufactured 
here, they rely on key materials sourced from one of our geopolitical 
adversaries.

    The U.S. has some restrictions in place that should theoretically 
prevent our overreliance on China for pharmaceutical products. For 
example, the Department of Defense is only supposed to buy drugs from 
countries that comply with the Trade Agreements Act--which doesn't 
include China. But despite this requirement, about 25 percent of 
pharmaceutical ingredients used in military hospitals originate from 
China. How is China able to subvert these rules?

    Answer. The Trade Agreements Act of 1979, to which China is not a 
signatory, requires that pharmaceutical products used in military 
hospitals be purchased from signatory countries. Unfortunately, the 
CCP's industrial policies have resulted in China often being the sole 
source of supply of API's that are used in products produced in China 
or in other countries. India, for example, is heavily reliant on China 
for its APIs. If non-TAA-compliant products are not available, DOD is 
authorized to waive the requirements of the Act and procure those 
goods.

    Question. What are the consequences of our inability to 
domestically produce critical drugs for U.S. national security and 
competitiveness?

    Answer. To some degree, we have already seen the potential impact 
of being unable to produce critical drugs and medical products for 
national security and competitiveness. For example, the sidelining of 
the Aircraft Carrier USS Theodore Roosevelt due to a COVID outbreak is 
a real-world example of how a pandemic can impact our national 
security. While there were other factors contributing to the sidelining 
of the carrier, proper equipment, vaccine and therapeutics might have 
diminished the threat. The CCP has shown its willingness to 
``weaponize'' supplies and also use them for diplomatic advantage. Our 
dependence on China, rather than having domestic capabilities to 
produce a wide- range of products is a serious national security and 
competitiveness threat.

    Question. We can't expect to compete with China when we're so 
dependent upon it for lifesaving drugs-- and meanwhile, our 
overreliance on China poses serious national security risks, sells out 
American workers, and makes American patients less safe. That's why 
President Biden has committed to onshore API manufacturers, and why 
I've worked closely with Senator Smith and Senator Rubio to rebuild our 
domestic drug supply chain. Senator Rubio and I have a bill requiring a 
review of foreign investment in the U.S. drug supply chain and its 
impacts on domestic manufacturing. And Senator Smith and I have a bill 
that makes a $5 billion investment to manufacture critical drugs and 
APIs here in the U.S.--and supports the market for these drugs by 
requiring our government agencies to buy them.

    Would a review of our supply chain and a $5-billion investment in 
domestic drugs (plus the Federal Government's commitment to purchase 
them), help strengthen the U.S.'s economic competitiveness with respect 
to China?

    Answer. There is no doubt that investments in our domestic ability 
to produce drugs and their components, coupled with ensuring that the 
demand for domestically produced products will exist resulting from 
Federal purchases, would have a dramatic positive impact on reshoring 
medical supply chains.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. In your testimony, you shared perspective on the 
dangerous level of reliance on Chinese manufacturing for many 
necessities in our lives. Penicillin, semiconductors, minerals--these 
are just a few items on a lengthy list.

    The pandemic has exposed the risk associated with a supply chain 
fully dependent on China--and we've seen the Chinese use this to their 
own advantage.

    I know the administration has started a top-down review of the 
supply chain, but I think we need something more permanent, more 
comprehensive, and more accessible.

    This can be achieved through aggregated demand mapping for 
industries critical to our economic health, national security, and 
public safety. I have raised this before the committee and am actively 
working on legislation to require construction of a database to achieve 
this.

    With that in mind, what value do you see in creating a 
comprehensive understanding of our supply chain vulnerabilities? Should 
the United States also be concerned with supply chain diversions to 
nearby countries that are actually still intertwined with China?

    What strategies can we use to help businesses actively seeking to 
divert their supply chains from China and back to the United States 
where possible?

    Answer. A comprehensive understanding of our supply chain 
vulnerabilities across a broad range of products critical to our 
economic health, national security and public safety is a common-sense 
approach. The COVID pandemic should be a wake-up call to expedite the 
development of such an assessment and it should be updated on a 
continuous basis.

    The CCP has shown its desire to influence the policies and 
approaches of countries intertwined with China, such as those 
participating in the Belt and Road Initiative and those questioning the 
CCP's approach to Taiwan, Hong Kong, and on other matters. We should 
evaluate supply chains that are at risk of China's influencing the 
policies of those countries and take appropriate actions to protect 
U.S. interests.

    There are a broad array of strategies that the U.S. can adopt to 
help business actively diver their supply chains back to the U.S., 
where possible. In part, the CCP's actions have been a wake-up call to 
our business leaders about the risks to their businesses operating in 
China and, indeed the safety and security of their personnel working in 
country. The U.S. must do more to invest here in ensuring that our 
people have the skills needed, that our research and development 
resources are robust, that our infrastructure supports our economy and 
that we use the power of Federal procurement to ensure that American 
tax dollars are used to promote American production and jobs. These are 
just a few of the policies that are needed.

    Question. It is estimated that roughly 55 percent of Americans own 
stocks--with most investing through professionally managed funds.

    In today's marketplace, it is unsurprising that a mix of 
investments would be allocated to international markets; however, 
Chinese companies have been growing considerably, and it is difficult 
to discern the complete picture of their influence in financial 
markets.

    It is very possible that American investments are contributing to 
the health of the Chinese financial system, but the true extent is 
unknown. The U.S. should seek strategies to both identify potential 
risks to our financial viability and ensure American investors enjoy a 
stable environment.

    Should we be concerned about this, and how can we help business 
community combat integration from malign Chinese actors whose proceeds 
and profits funnel back to the Chinese military?

    Answer. The CCP has actively engaged in increased efforts over the 
past several years to access sources of foreign capital. As an example, 
reportedly pressure was put on MSCI to allow Chinese ``A'' shares to be 
included in its emerging market index and to increase the ``weighting'' 
of those shares. Testimony before the U.S.-China Economic and Security 
Review Commission indicates that this and other actions may result in 
more than $400 billion in international capital going into Chinese 
equities and another $200 billion into Chinese bonds.

    The administration has the legal authority to identify companies 
that pose a threat to U.S. national security interests and place them 
on an Entity List and has recently identified Chinese companies 
assisting the People's Liberation Army. Evidence indicates that U.S. 
persons have invested in these entities after their being listed by the 
U.S. Government as the only existing limitation is on doing trade with 
these companies. Investments post identification should be prohibited 
and existing investments should be unwound. Other policies should be 
evaluated to ensure that U.S. companies are not aiding and abetting 
companies advancing the capabilities of the Chinese military, that 
support human rights abuses, and engage in other acts that are counter 
to U.S. interests.

    Question. From my lens on the Foreign Relations Committee and on 
this committee, I see China's actions and intentions from different 
angles.

    The rate of Chinese investment in other countries is growing 
exponentially, and we see nations making concessions like supporting 
China politically or allowing unfettered access to their resources.

    While it is no secret that Chinese influence extends to nearby 
countries in the region--like Vietnam, Thailand, Indonesia--this 
influence is hitting closer to home, particularly in the Northern 
Triangle of Central America.

    Given the increasing unrest in Central America that has been 
driving scores of people to overwhelm our borders, the last thing these 
countries need is unrepayable debt from China.

    Should China escalate levels of foreign direct investment in 
Central America, as we know they plan to do, what is at stake for the 
national and economic security of the United States?

    Answer. The CCP has expanded its economic, diplomatic and military 
relations across the globe. We must carefully assess their foreign 
direct investment in Central America, as well as the Caribbean and the 
rest of this hemisphere to determine what their intentions are, what 
the implications of their investments are and how we should respond, if 
at all. In many of its investments in other areas of the world, we have 
seen their investments foster ``debt-trap'' diplomacy, as well as 
fueling corrupt activities. These and other concerns demand greater 
attention wherever they arise, but certainly are even deeper when they 
occur in our own back yard.

                                 ______
                                 
               Questions Submitted by Hon. John Barrasso
    Question. You noted in your testimony the importance of a 
multilateral approach to addressing the challenges we face with respect 
to China. Referring to previous American efforts in this area, you 
noted: ``. . . our allies were willing to hold our coat while we 
bloodied our nose.''

    I think that's an accurate assessment.

    Can you elaborate on how we can work with our allies to put maximum 
pressure on China to achieve lasting and meaningful change in how they 
conduct business in the international markets?

    Answer. During the Trump administration, and as evidenced by the 
early approach of the Biden administration, I believe the U.S. has 
shown the CCP and the world that the predatory actions of the CCP will 
not be tolerated. The willingness to confront the CCP's actions and act 
on behalf of U.S. interests must be the clear approach going forward 
and the consistency of that approach should hopefully incent other 
nations to join in the effort to curtail the CCP's unacceptable 
approaches. The CCP is looking to take advantage of opportunities and 
we must deny them those opportunities when the challenge and threaten 
U.S. interests.

    Question. And how does the EU-China investment agreement impact our 
ability to work with our allies in Europe to counter China's 
manipulative market practices and human rights abuses?

    Answer. The EU-China investment agreement raises a number of 
questions about how we may be able to work with our allies in Europe, 
although the path forward is still in question. We must engage our 
allies in Europe to challenge China's manipulative market practices and 
human rights abuses where we can. At the same time, if our allies are 
unwilling to find cooperative strategies, we must advance U.S. 
interests.

    Question. The WTO was formed to establish a trading system based on 
``open, market-oriented policies'' per the 1994 Marrakesh Agreement 
which established the organization. Despite modest improvements, 
China's markets are not ``open.'' Their policies are not ``market-
oriented.'' China is no longer a ``developing nation'' despite its WTO 
status.

    Market-distorting subsidies, intellectual property theft, forced 
technology transfer, forced labor, and industrial over-capacity in 
China aren't anomalies. They are the cornerstones of China's economic 
policy.

    Is there any reason to believe the WTO currently has the necessary 
tools or the will to address the challenges the world is facing with 
respect to China?

    Answer. The World Trade Organization could certainly do more with 
its current tools to address the predatory and protectionist policies 
of China, but those efforts will presumably fall short for a number of 
reasons. First, the Appellate Body is in serious need of reform and has 
exceeded its authority on a number of significant matters. Second is 
that the Appellate Body has, at the same time, constrained its ability 
to address China's practices by imposing unnecessary burdens which 
impede the ability to promote market-based practices. Finally, as the 
WTO is a consensus-based organization, it is difficult to believe that 
China will ever agree to meaningful disciplines and enforcement 
measures regarding its activities.

    Question. What WTO reforms are needed to make it a more effective 
``cop on the beat'' with respect to China?

    Answer. See above; however, it is difficult to see that the WTO 
would be an effective ``cop on the beat.'' Market-based actors must 
develop a set of rules which they can abide by and effectively enforce, 
which also limit China's ability to game the system.

    Question. Chinese over-capacity of steel, aluminum, cement, 
chemicals, and numerous other industrial inputs is part of a broader 
strategy to drive down prices and put international competitors out of 
business. Chinese state-owned enterprises (SOEs) and export subsidies 
hurt American businesses and workers. In Wyoming, our soda ash 
producers and steel pipe and tubing producers know firsthand how 
difficult it is to compete with China in the marketplace.

    Where should the U.S. focus our efforts to counter China's export 
subsidies and over-capacity?

    Answer. In past years the effort to address China's export 
subsidies and over-capacity has focused on multilateral dialogue. China 
initially refused to participate in the talks but when pressure rose, 
they finally agreed to come to the table. As expected, however, they 
delayed action and sought to create a debate as to whether they really 
was a problem, as they continued to amass further capacity and injure 
industries and workers in the U.S. and around the globe. Multilateral 
engagement is vital that lead to effective disciplines with automatic 
enforcement measures.

    Question. What can Congress do to make U.S. companies competitive 
when they are forced to compete directly with China's SOEs?

    Answer. The CCP has proffered enormous benefits on its SOEs ranging 
from subsidies to domestic market preferences to outright theft of 
intellectual property from their competitors, in addition to many other 
practices. It's a tribute to the strength, ingenuity, and creativity of 
our companies and their workforce that we have been able to withstand 
many of the attacks on their markets and their operations. Our 
companies should not have to compete directly against China's SOEs 
without the support of our government. We can adopt automatic self-
initiation enforcement measures to more effectively respond to dumping 
and subsidies. We can provide greater resources to fight cyber and 
human espionage. We can expand ``war chest'' funding at some of our 
agencies to support our companies, where appropriate. We must also 
develop stronger multilateral measures to respond to the unfair acts of 
the CCP's SOEs on a coordinated basis.

    Question. The Chinese Communist Party continues to commit terrible 
human rights abuses. The Uyghurs, a religious and ethnic minority in 
China, have experienced brutal repression at the hands of the Chinese 
Government. They continue to be subjected to torture, imprisonment, and 
forced labor.

    At least 1 million Uyghurs have been put in internment camps by the 
Chinese Communist Party. Around 100,000 Uyghurs and ethnic minority ex-
detainees have reportedly been used as forced labor in textile and 
other industries in China.

    How effective have U.S. actions been at addressing the human rights 
abuses and the use of forced labor?

    Answer. Unfortunately, it has only be of late that the existing 
tools to address human rights abuses and the use of forced labor 
against the Uyghurs have been utilized. They need to be expanded to 
include other products and consideration of a region-wide WRO must be 
initiated. In addition, it is important to recognize that the Uyghurs 
are not the only population in China that is under attack nor are these 
abuses limited to being perpetrated by the CCP. Enforcement of 
internationally recognized human rights, including workers' rights, 
must be a higher priority.

    Question. What more should the United States do on transparency and 
enforcement?

    Answer. The CCP has denied any abuse of human rights and the use of 
forced labor. Yet they have blocked access to any form of inspection to 
verify the allegations that have been made. This lack of transparency 
should shift the enforcement burden to create a rebuttable presumption 
that the alleged abuses are, in fact, taking place. Multiple 
parliaments and experts have identified the actions against the Uyghurs 
as genocide, and the world must act.

                                 ______
                                 
                Prepared Statement of Clete R. Willems, 
             Partner, Akin, Gump, Strauss, Hauer, and Feld
    Chairman Wyden, Ranking Member Crapo, distinguished members of the 
committee, thank you for the opportunity to appear before you today to 
discuss how to improve U.S. competitiveness vis-a-vis China. The U.S.-
China competition will define the trajectory of the global economy for 
generations to come. The Government of China's efforts to dominate 
today's industries and those of the future with unfair trade practices 
pose a serious threat to long-term U.S. competitiveness and leadership. 
Likewise, the Government of China's efforts to export its non-
democratic model of censorship, propaganda, and surveillance around the 
world pose a serious threat to our values and way of life. Democrats 
and Republicans must work together to counter this threat and ensure 
the United States remains more economically competitive and globally 
influential than China for years to come.

    During today's hearing, I will offer suggestions on how to best 
achieve this objective based on my experience negotiating with China on 
the Phase One deal and in persuading U.S. allies to adopt robust policy 
responses on China in multilateral fora, including the World Trade 
Organization (WTO) and Group of Seven (G7). Some of my ideas are 
derived from the China strategy that I helped develop as part of the 
National Security Council (NSC) and National Economic Council (NEC). I 
will also draw on my experience helping companies navigate China's 
market and adjust to recent U.S. policy on China, although the comments 
I provide are solely my own.

    Ultimately, Congress--along with the administration, the private 
sector, and key U.S. allies and trading partners--will all play a 
critical role in determining the outcome of the U.S.--China 
competition. I hope my suggestions today help provide elements of a 
roadmap that leads to success.
``run faster'' with domestic innovation incentives and trade agreements
    First, winning this competition undoubtedly requires the United 
States to ``run faster.'' In particular, the United States should adopt 
policies to encourage domestic innovation, especially in critical areas 
that China is targeting due to their strategic importance, such as 
artificial intelligence, semiconductors, synthetic biology, 5G and 6G, 
among others.\1\ I share the concerns of some policymakers about 
overall government spending levels, but misdirected spending in certain 
areas should not deter us from well-directed spending in other areas 
critical to continued U.S. innovation leadership.
---------------------------------------------------------------------------
    \1\ The Endless Frontiers Act and Executive Order on America's 
Supply Chains (EO14017) target many of the appropriate sectors.

    Appropriately directed government spending should enhance the 
strengths of the U.S. market-led economic system and strengthen the 
U.S. private sector instead of attempting to replace it. The Endless 
Frontiers Act and other legislation that focuses on research and 
development, public-private partnerships, collaboration with 
universities, and narrowly tailored grant programs are a good start. 
Congress should also fully fund the USA Telecommunications Act and 
CHIPS for America Act as well as consider tax incentives to spur 
innovation for critical industries.\2\
---------------------------------------------------------------------------
    \2\ This includes the tax components of the CHIPS for America Act 
(S. 3933 in the 116th Congress). The tax components of this package 
could also be broadened to include design.

    Such policies will help us ``run faster,'' but we are unlikely to 
run ``fast enough'' if we only focus at home. Much of the revenue our 
companies use to fund innovation is derived from sales overseas, and 
the United States should negotiate trade agreements that break down 
barriers to American goods and services. The United States cannot 
afford to sit on the sidelines while China implements the Regional 
Comprehensive Economic Partnership (RCEP) and considers the 
Comprehensive and Progressive Agreement for Trans-Pacific Partnership 
(CPTPP). Our inaction puts U.S. companies at a disadvantage, depriving 
them of revenue that could be used to fund greater innovation. We also 
miss the chance to set standards in key areas like technology transfer, 
subsidies, state-owned enterprises (SOEs), and digital trade that 
---------------------------------------------------------------------------
promote our economic model over China's.

    Congress should renew Trade Promotion Authority, encourage the 
administration to finalize the U.S.-U.K. trade agreement, and plot a 
path to new agreements in the Indo-Pacific region. If a comprehensive 
agreement with our former TPP partners is not viable, we should 
consider targeted sectoral agreements with TPP countries in areas like 
digital trade and build on that approach over time.\3\ Concurrently, we 
should robustly implement the U.S.-Mexico-Canada agreement, which was 
enacted by Congress with historic bipartisan support.
---------------------------------------------------------------------------
    \3\ See, e.g., Wendy Cutler and Joshua P. Meltzer, ``Digital trade 
deal ripe for the Indo-Pacific,'' available at: https://
www.brookings.edu/opinions/digital-trade-deal-ripe-for-the-indo-
pacific/.
---------------------------------------------------------------------------
                     better coordinate with allies
    Second, any effective China policy requires better coordination 
with U.S. allies. In addition to negotiating and implementing bilateral 
and regional trade agreements, we should coordinate on WTO reform and 
other efforts to set global rules and standards for emerging 
technologies and critical industries.

    The United States has used the WTO to address harmful Chinese 
policies, including export restraints on rare earth metals \4\ and 
licensing of intellectual property on non-market terms, among 
others.\5\ But despite successes like these, the WTO has not 
effectively constrained many of China's practices and is falling short 
of its mandate to widely promote market-oriented free and fair trade. 
The WTO does not include agreements governing forced technology 
transfer or SOEs, it allows China to claim ``developing country 
status'' and gain a negotiating advantage despite its global stature, 
and dispute settlement proceedings take too long and have undermined 
our ability to use trade remedies to counter China's massive industrial 
subsidies.
---------------------------------------------------------------------------
    \4\ China--Measures Related to the Exportation of Rare Earths, 
Tungsten, and Molybdenum (United States), WT/DS431.
    \5\ China--Certain Measures Concerning the Protection of 
Intellectual Property Rights (United States), WT/DS542.

    Congress should encourage the Biden administration to make 
ambitious proposals to fix the WTO's problems as soon as possible, 
including through its trilateral initiative with the EU and Japan,\6\ 
plurilateral agreements on e-commerce and other issues, and robust 
dispute settlement reform proposals that would restore the system's 
functionality in exchange for meaningful changes. My paper 
``Revitalizing the WTO'' lays out potential reform proposals in 
detail.\7\
---------------------------------------------------------------------------
    \6\ Joint Statement of the Trilateral Meeting of the Trade 
Ministers of Japan, the United States, and the European Union, January 
14, 2020, available at: https://ustr.gov/about-us/policy-offices/press-
office/press-releases/2020/january/joint-statement-trilateral-meeting-
trade-ministers-japan-united-states-and-european-union.
    \7\ See, e.g., Clete Willems, ``Revitalizing the WTO,'' available 
at: https://www.atlanticcouncil.
org/wp-content/uploads/2020/11/Revitalizing-the-WTO-Report_Version-
11.6.pdf.

    The United States must also better coordinate with allies on 
defensive measures taken in relation to China. Many recent export 
control actions are justified, but due to a lack of multilateral 
coordination there are reports of production shifting to other 
countries without similar measures in place.\8\ In the future, such 
controls should be coordinated to maximize impact and avoid putting 
U.S. industry at a disadvantage to foreign competitors. Such measures 
should also be narrowly tailored to allow exports for non-sensitive 
items to ensure American goods and services can compete globally and 
support jobs at home. To the extent that Chinese companies continue to 
purchase such non-sensitive items from U.S. technology companies, this 
puts China in the position of subsidizing U.S. innovation leadership.
---------------------------------------------------------------------------
    \8\ See, e.g., Stu Woo, ``The U.S. vs. China: The High Cost of the 
Technology Cold War,'' Wall Street Journal, October 22, 2020, available 
at: https://www.wsj.com/articles/the-u-s-vs-china-the-high-cost-of-the-
technology-cold-war-11603397438.

    The United States should also prioritize resolving disputes with 
allies, such as the longstanding WTO disputes related to Large Civil 
Aircraft,\9\ section 232 tariffs on steel and aluminum, and digital 
services taxes. Resolving these disputes will require flexibility on 
both sides, but such flexibility is worthwhile if it allows us to avoid 
wasting time and energy fighting each other that is better spent on 
building trust and coordinating on China.
---------------------------------------------------------------------------
    \9\ European Communities and Certain Member States--Measures 
Affecting Trade in Large Civil Aircraft (United States), WT/DS316; 
United States--Measures Affecting Trade in Large Civil Aircraft--Second 
Complaint (European Union), WT/DS353.

    Importantly, this does not mean the United States should not 
leverage existing measures or give countries a free pass on policies 
that harm U.S. interests. For example, in exchange for lifting its 
section 232 tariffs on steel and aluminum, the United States should ask 
partners to commit to actions to reduce the impact of Chinese excess 
capacity on global markets, track transshipment, and limit import 
surges into the United States. Likewise, on digital services taxes, the 
United States should continue to move forward with its section 301 
investigations until others agree to drop unilateral measures that 
unfairly target U.S. companies for revenue while exempting domestic 
competitors. The United States should also not tolerate policies like 
the EU's proposed Digital Marketing Act, which is both discriminatory 
and includes elements would force U.S. companies to turn over their 
technology.\10\ Mechanisms like the proposed U.S.-EU Trade and 
Technology Council could be used to resolve differences on digital-
related issues and set standards for future technologies.
---------------------------------------------------------------------------
    \10\ Proposal for a Regulation of the European Parliament and of 
the Council on contestable and fair markets in the digital sector 
(Digital Markets Act), available at: https://eur-lex.europa.eu/legal-
content/en/TXT/?qid=1608116887159&uri=COM%3A2020%3A842%3AFIN.
---------------------------------------------------------------------------
                 further engage with china bilaterally
    Third, the United States should engage directly with China to press 
for additional market access openings and modifications to China's 
policies. Sales to China support American farmers, businesses, and 
workers. Just as China harnessed U.S. consumption and growth to grow 
its economy, so too the United States should benefit from increased 
consumption and a level playing field in the second largest economy in 
the world.

    The Phase One deal did not fix all of our problems with China, but 
it helped achieve important structural reforms to China's intellectual 
property laws, substantially reduced barriers to U.S. agricultural 
exports, begun to pry open the financial services sector, and condemned 
the policy of forced technology transfer. According to the Trump and 
Biden administrations, China has met the majority of its structural 
commitments \11\ and U.S. agricultural exports to China are at record 
levels.\12\ The Phase One deal is also one of the only bilateral 
dialogues currently in place and thus one of few existing mechanisms to 
discuss and potentially solve problems. For these reasons, it is in the 
strong U.S. interest to maintain the deal.
---------------------------------------------------------------------------
    \11\ Interim Report on the Economic and Trade Agreement Between the 
United States of America and the People's Republic of China: 
Agricultural Trade, U.S. Department of Agriculture, October 2020, 
available at: https://ustr.gov/sites/default/files/assets/files/
interim-report-on-agricultural-trade-between-the-united-states-and-
china-final.pdf; see also 2021 National Trade Estimate Report on 
Foreign Trade Barriers, March 31, 2021 (discussing China's 
implementation of the Phase One Deal at length), available at: https://
ustr.gov/sites/default/files/files/reports/2021/2021NTE.pdf.
    \12\  See, e.g., USDA China data: https://www.fas.usda.gov/regions/
china.

    In addition to continuing with Phase One, the United States should 
consider whether there is a viable path to Phase Two. China is 
admittedly unlikely to fully address issues like industrial subsidies 
or state-owned enterprises (SOEs) in a bilateral context, but we can 
make additional progress that benefits U.S. industry and workers. As a 
starting point, I recommend harvesting the text on services, non-tariff 
barriers, and forced technology transfer \13\ on which the U.S. and 
China were making progress before negotiations on a more comprehensive 
deal broke down in May 2019.
---------------------------------------------------------------------------
    \13\ The Forced Technology Transfer chapter of the Phase One deal 
does not include all of the components that the United States and China 
were originally negotiating.

    Any Phase Two deal should also focus on structural issues instead 
of purchases. Although the Phase One agricultural purchasing 
commitments helped spawn record sales to China, this is because the 
purchasing commitments are coupled with a robust underlying structural 
chapter that requires China to actually change its laws. The purchasing 
commitments on manufacturing, services, and energy have not fared as 
well because of the lack of a corresponding structural chapter. As this 
illustrates, it is the structural commitments that matter, not the 
---------------------------------------------------------------------------
purchasing ones.

    Another benefit to a Phase Two deal is that it could lead to a 
tariff reduction on certain Chinese imports and U.S. exports. To be 
clear, I supported the initial imposition of the 301 tariffs on China 
to create leverage to persuade China to drop its unfair trade 
practices. But there is no question that existing U.S. tariffs--and 
China's corresponding retaliation--are having an adverse impact on U.S. 
businesses, farmers, and workers. This is especially true with respect 
to those that obtain production inputs from China that cannot be 
sourced elsewhere or who have lost market share in China to 
international competitors. Therefore, it is in our interest to seek 
additional changes in China's policy (and Chinese tariff relief) in 
exchange for U.S. tariff relief. In this regard, it is important to 
recall that section 301 statute indicates that tariffs imposed pursuant 
to it are not intended to be permanent, but to temporarily provide the 
United States leverage to achieve negotiated outcomes.\14\
---------------------------------------------------------------------------
    \14\ 19 U.S.C. Sec. 2411(b) specifies that action under the statute 
is taken ``to obtain the elimination of [the] act, policy, or 
practice'' that ``is unreasonable or discriminatory and burdens or 
restricts United States commerce.''

    At the same time, the Biden administration should also consider 
reinstating a tariff exclusion process to provide relief for products 
that cannot be sourced elsewhere and are not core to China's Made in 
China 2025 ambitions. This will make a policy that maintains leverage 
over China more economically sustainable over the long term.
                    don't become china to beat china
    Fourth, the United States must avoid the impulse to ``become China 
to beat China.'' More specifically, we must not adopt policies that 
replicate the same Chinese practices we are condemning. Such policies 
will be inefficient at best, and at worst will harm our economy and 
credibility to rally an international coalition in our favor. The 
strength of the U.S. economy and the core of our innovation leadership 
comes from our market-based system and rules-based trade that rewards 
entrepreneurialism, fair competition, and the rule of law. This should 
not be sacrificed.

    For example, in an attempt to respond to supply chain challenges, 
we should not seek to source all products domestically. We should also 
not double down on procurement policies that discriminate against 
foreign products and services. These evoke core elements of the Made in 
China 2025 plan. Supply chain efforts should instead focus on positive 
incentives like increased spending and tax credits combined with 
efforts to improve supply diversity, flexibility, redundancy, and 
partnership with trusted partners and allies. Similarly, access to our 
procurement markets should not be restricted for all foreign actors, 
but instead traded for reciprocal access to foreign markets. This can 
help promote the same levels of economic growth as Buy American while 
saving taxpayer dollars in the process.

    The United States should also resist invoking ``national security'' 
to support broad trade barriers unless it is truly justified. Indeed, 
China's expansive view of national security as it applies to its 
economy underpins many of the policies the United States finds most 
problematic and was a common excuse as to why China could not meet U.S. 
demands during negotiations on the Phase One deal. Invoking national 
security in questionable circumstances and against key allies gives 
China carte blanche to justify a whole range of policies with 
questionable national security claims while at the same time 
undermining the WTO legal architecture.

    Congress should also tread carefully when considering novel 
policies like outbound investment screening regimes that would 
significantly expand the role of government in company investment 
decisions.\15\ Broad interventions into how U.S. companies operate and 
invest abroad risk mirroring the distortive role the Government of 
China often plays in the allocation of resources by its companies. Such 
a regime could also impair the ability of U.S. businesses and workers 
to compete globally from the United States and advantage their 
competitors in foreign countries not subject to similar restrictions 
and reviews.
---------------------------------------------------------------------------
    \15\ America LEADS Act, S. 4629, 116th Congress, as introduced, 
section 411.
---------------------------------------------------------------------------
  consult closely and continuously with the private sector on policy 
                                choices
    Fifth, the U.S. Government and private sector should closely align 
on efforts to address the challenges posed by China. It is entirely 
reasonable for the U.S. Government to set standards about U.S. company 
behavior in China, including that U.S. companies not utilize forced 
labor in their supply chains or directly support companies affiliated 
with China's military. However, U.S. policymakers should consult 
closely with industry on such action to receive input on how to best 
design any measures and provide businesses with time to adjust to 
changes in U.S. policy. The Biden administration's efforts to reach out 
to numerous U.S. companies during its 100-day supply chain review is a 
welcome development, and hopefully the policies derived from that 
effort fully reflect industry input.

    The U.S. Government should also be willing to back U.S. companies 
facing particularly difficult Chinese government policies, such as 
Chinese government censorship, an issue I had the opportunity to 
testify on before this committee last year.\16\ Some of the ideas that 
I shared at that time remain relevant, but I would also endorse other 
ideas, such as a Special 301 on censorship activities.\17\ This is a 
good example of the U.S. Government adopting a core role in pushing 
back on a policy that is so embedded in the current Chinese 
Government's philosophy that no company could navigate it sufficiently 
on its own.
---------------------------------------------------------------------------
    \16\ Clete R. Willems, Testimony before the Senate Committee on 
Finance, Subcommittee on International Trade, Customs, and Global 
Competitiveness, hearing on ``Censorship as a Non-Tariff Barrier to 
Trade,'' June 30, 2020, available at: https://www.finance.senate.gov/
imo/media/doc/30JUN2020WILLEMSSTMNT1.pdf.
    \17\ America LEADS Act, S. 4629, 116th Congress, as introduced, 
section 415.
---------------------------------------------------------------------------
          be clear-eyed about the china threat and the risks 
                      from certain policy choices
    Finally, we must be clear-eyed about the extent of the threat posed 
by China and the risk that certain policy choices entail. If we over-
legislate on this issue in a way that undermines our long successful 
market economy principles and view every single Chinese action and 
Chinese company as a threat, we could unintentionally undermine our 
greatest strengths and even bring ourselves to the brink of conflict.

    Yes, China's Made in China 2025 plan and subsequent 5 year plans 
threaten U.S. innovation leadership in critical industries of the 
future, but the health of China's economy as a whole appears more 
tenuous. As numerous analysts have pointed out, China's economic growth 
data is unreliable and China remains heavily reliant on inefficient 
SOEs.\18\
---------------------------------------------------------------------------
    \18\ See, e.g., Shehazd H. Qazi, ``The Great Chinese Rebound? Not 
So Fast,'' Barron's, January 26, 2021, available at: https://
www.barrons.com/articles/the-great-chinese-rebound-not-so-fast-
51611622798.

    Further, while China's plans for Military-Civil Fusion are truly 
concerning,\19\ not every company in China is a Communist Chinese 
Military Company (CCMC). Indeed, some very prominent Chinese companies 
appear to be quite out of alignment with their government at the 
moment.
---------------------------------------------------------------------------
    \19\ See ``Military-Civil Fusion and the People's Republic of 
China,'' U.S. Department of State, available at: https://www.state.gov/
wp-content/uploads/2020/05/What-is-MCF-One-Pager.pdf.

    As a result of factors like these, U.S. policy-makers should adopt 
nuanced policy responses that are calibrated to the threat posed and 
intended to achieve clear objectives instead of overly-broad approaches 
that may do more harm than good. Indeed, if we seek to fully sever ties 
with China and blindly demagogue all Chinese entities and people, 
including the many that share our concerns about their own government's 
---------------------------------------------------------------------------
policies, we could find ourselves on a dangerous path.

    One important lesson that I learned as a negotiator on the Phase 
One deal with China, witnessing Chinese Government officials openly 
arguing with each other in front of our delegation, is that China is 
not a monolithic country. Much like the United States, China is 
composed of individuals with very different perspectives and companies 
with very different relationships with their government. To ensure that 
our policies lead to our desired outcomes, we need to develop clear 
standards to help discern between different groups of individuals and 
companies in China so we can continue to engage with and to build up 
those who share our values and can help promote long-term peace, 
prosperity, and a level playing field between our countries. That is 
better than many of the alternatives.

    I look forward to continuing to work with the committee on all of 
these important objectives.

                                 ______
                                 
         Questions Submitted for the Record to Clete R. Willems
                 Questions Submitted by Hon. Mike Crapo
    Question. America's innovative industries, particularly its digital 
technology companies, are the envy of the world. My concern is that 
China is taking out its envy of U.S. successes by creating new 
restrictive tools to target these innovators--and that other countries 
will follow in this direction.

    Do you agree?

    Answer. Yes. I share your concerns about actions that China and 
other countries around the world are taking to target U.S. digital 
technology companies. Many of China's actions are longstanding and 
extremely broad in scope, such as censorship, forced technology 
transfer, and discrimination in favor of ``national champion'' 
companies, including through market access limitations on foreign 
companies. Together, these polices often have the effect of preventing 
U.S. digital technology companies from being able to offer their 
products or services in China at all.

    Unfortunately, the European Union is also targeting U.S. digital 
technology companies, including through digital services taxes that 
single out American companies for revenue while excluding domestic 
competitors. The current Commission is also advocating a digital 
sovereignty agenda that includes proposals like the Digital Markets 
Act. This proposal is targeted at U.S. companies like digital services 
taxes, but also includes provisions that would require U.S. companies 
to turn over trade secrets, user data, and algorithms to competitors.

    Finally, numerous other countries around the world are including 
digital services taxes outside of the context of the multilateral OECD 
negotiations.

    Question. What can we, in Congress, do about it?

    Answer. First, Congress should be vocal about its concerns about 
these policies. That helps strengthen the administration's hand in 
dealing with our trading partners. Congressional leadership on digital 
services taxes in particular has been very helpful in illustrating to 
the EU that neither political party in the United States will tolerate 
the unfair targeting of U.S. companies for revenue.

    Second, Congress should take legislative action that strengthens 
the administration's hand in dealing with these issues. This includes 
ideas like a Special 301 to address censorship and an investigation 
into the EU's proposed Digital Markets Act.

    Finally, Congress should discuss with the administration how to 
create international rules at the WTO and in FTAs to deal with issues 
like censorship, propaganda, data localization, and the targeting of 
user data, among other key issues, to prevent China from promoting its 
model of governance around the world. An Indo-Pacific digital trade 
strategy is a good place to start.

    Question. I am interested in the point made in your written 
statement about how U.S. exports of non-sensitive items to China put 
China in the position to subsidize U.S. innovation leadership. The 
implication is that overly restricting non-sensitive items may not only 
deny our companies a safe path of needed capital for innovation, today, 
but also deny these same companies market access to China in the 
future, and even for pure off-the-shelf items. As other countries move 
in to backfill non-
sensitive U.S. orders, these new foreign relationships with China may 
eventually take the place of the U.S. in the China market, generally.

    What are some steps the United States can take to make sure our 
approach to restricting non-sensitive items is targeted and safe?

    How can we ensure that other countries coordinate with us better on 
export restrictions and trade policy with China, to mitigate the 
backfilling problem?

    Answer. The United States should lay out clear objectives before 
taking export control actions and ensure that the measures adopted are 
designed to achieve that objective without unintended consequences. For 
example, to the extent that there are concerns that a certain company 
could use a particular technology to threaten U.S. national security, 
the measure adopted should be designed to prohibit the export of that 
item to that company from the United States or a third country. That 
likely will involve coordinating with that third country either 
directly or by restricting the item in one of the many multilateral 
export control fora. At the same time, the measure should not 
necessarily apply to the export of all other items to that company to 
the extent that those other items do not raise similar concerns. When a 
foreign entity continues to purchase non-sensitive items from a U.S. 
company that provides additional revenue for the U.S. company to use 
for research and development and maintain an innovation advantage.

    Question. You served in the Trump administration as part of the 
team that worked to stop forced technology transfers to China. Some 
have argued that the TRIPS intellectual property waiver would amount to 
exactly that--a forced transfer of mRNA vaccine technology to China and 
other countries--and ``would be delivering a competitive advantage to 
countries that are increasingly viewed as our adversaries, at taxpayer 
expense.''

    Do you agree?

    Answer. The Biden administration's goal of ensuring a vaccine 
supply to the rest of the world is laudable, especially at a time when 
much of the world is suffering from COVID-19. However, I am very 
concerned with the Biden administration's recent decision to negotiate 
on a TRIPS waiver for vaccines at the WTO. Even proponents of this 
policy recognize that it will not result in more vaccine production 
during 2021, and it has numerous adverse consequences.

    First, there is no evidence that intellectual property rights have 
been an impediment to vaccine production and distribution. Numerous 
U.S. and EU companies have already voluntary licensed technologies to 
companies capable of production in foreign countries, such as the Serum 
Institute in India. Larger problems at the moment appear to be the 
imposition of export restraints on vaccines and the raw materials 
needed to produce them as well as the lack of idle manufacturing 
capacity capable of producing vaccines using this novel technology. 
Solutions should be addressed toward these issues instead of IP. To 
make matters worse, some in industry have expressed concerns that the 
negotiations on the TRIPS waiver could actually reduce vaccine 
production by increasing the global scramble for raw materials, 
including by entities not yet capable of producing vaccines.

    Second, such a policy will enable countries like China to violate 
U.S. mRNA patents without any repercussion, bringing them closer to 
their Made in China 2025 objective of dominating the global market for 
biotechnology and undermining longstanding bipartisan efforts to push 
back against China for IP theft. It is also important to recognize that 
mRNA technology is not only limited to vaccine production, but could 
have broad application in many other areas.

    Third, this policy also appears to threaten our attempts to build 
an alliance with the EU at the WTO. Indeed, the early response from our 
European allies makes clear that they were not consulted with before 
the Biden administration announced its new policy, undermining recent 
efforts to cultivate the alliance to better push back on China's unfair 
practices.

    Congress should encourage the Biden administration to abandon this 
misguided path and instead seek to export vaccines from the United 
States. This would help address legitimate concerns about needing to 
help the rest of the world respond to the COVID crisis without the same 
adverse consequences. At the same time it would also help achieve the 
bipartisan objective of further strengthening the biopharmaceutical 
sector and supply chain in the United States.

                                 ______
                                 
              Question Submitted by Hon. Thomas R. Carper
    Question. Over the past several years, tariffs on China and 
subsequent retaliatory tariffs have caused significant economic 
disruptions for U.S. businesses and farmers. I have heard from many 
constituent companies who have invested significant time, money, and 
resources navigating the process for securing an exclusion from these 
tariffs. However, unfortunately, these exclusions expired at the end of 
last year, and no new exclusion process has opened. Recently, I joined 
Senator Portman, and several of my Senate colleagues on both sides of 
the aisle, to encourage USTR to re-start an exclusion process.

    However, the last exclusion process was far from perfect, and left 
many questions about speed, transparency, and fairness.

    Moving forward, in your view, what should Congress do to reform 
this process in order to provide greater certainty and predictability 
to American companies?

    Answer. First and foremost, Congress should work with the 
administration to make sure that an exclusion process is reinstated so 
that the many exclusions that were originally granted as a result of a 
lack of domestic availability are quickly reinstated and made 
retroactive.

    Second, in moving forward with the consideration of new exclusions, 
Congress should consider four enhancements: (1) greater transparency 
about the rationale for decisions; (2) additional due process, such as 
having a hearing following written comments; (3) eliminating time 
restrictions on exclusion requests and instead adopting a ``rolling 
process''; and (4) including an appeals process.

                                 ______
                                 
             Questions Submitted by Hon. Patrick J. Toomey
    Question. Key to the U.S.-China relationship is working with 
allies, and one of the most important ways that the United States can 
address the China threat is by pursuing negotiations on new free trade 
agreements (FTAs). China is aggressively pursuing new trade deals, and 
in this past year has joined the Regional Comprehensive Economic 
Partnership (RCEP) and has pursued a comprehensive agreement on 
investment with the European Union (EU). The Biden administration, in 
contrast, has said that the United States will not pursue or sign any 
new trade agreements until the U.S. makes ``major investments in 
American workers and our infrastructure.''

    Pursuing new FTAs would not only have beneficial economic effects--
supporting domestic manufacturing through increasing manufacturers' 
market access--but would also have strategic implications. Reciprocal 
free trade agreements with a country like Taiwan would not only be a 
boon for our domestic manufacturers, but would also be important for 
our national security.

    What do you think are our biggest opportunities for pursuing new 
strategic free trade agreements, and how can such agreements be written 
to combat the threat of Chinese unfair trade practices?

    Answer. As I noted in my testimony, it is critical for the United 
States to adopt an offensive trade agenda that seeks to open new 
markets for U.S. workers and businesses and create rules that promote 
U.S. free and open market-based solutions over Chinese alternatives. 
Such a strategy should include bilateral, plurilateral, and 
multilateral agreements.

    Among the different options, I believe that Congress and the Biden 
administration should prioritize the Indo-Pacific region where China's 
influence is the strongest and where the U.S. commitment to greater 
economic engagement has been called into question by our withdrawal 
from the TPP. Ideally, the United States should attempt to negotiate 
with CPTPP countries on changes to the agreement necessary for the 
United States to rejoin. To the extent that this is not politically 
possible, the United States could instead negotiate building block 
agreements with CPTPP countries in priority areas like digital trade.

    Congress and the administration should also prioritize the 
completion of negotiations with the United Kingdom and Kenya. As I 
understand it, our negotiations with the United Kingdom were quite 
advanced during the Trump administration and this work should not go to 
waste, especially in light of the close relationship between the United 
States and United Kingdom and the potential for a ``gold standard'' 
agreement in numerous areas. I would also continue to prioritize Kenya 
given China's efforts to gain influence in the African continent.

    Finally, the WTO is also critical to any effective China strategy. 
The Biden administration should build on the numerous proposals made by 
the Trump administration to address problems with the negotiating 
function, including the U.S.-EU-Japan trilateral work, and complement 
them with new proposals to improve the dispute settlement function.

    Question. If the United States wants to encourage a free and open 
Indo-Pacific and counter Chinese influence in the region, do you agree 
that accomplishing that task will include working with like-minded 
countries in the region, like Taiwan, to liberalize trade?

    Answer. Yes, I believe that greater economic engagement with Taiwan 
holds great promise and the United States should consider an FTA. 
However, this will require Taiwan to address longstanding concerns 
about U.S. market access for agricultural products such as beef and 
pork to illustrate their commitment to a substantive trade deal. To the 
extent that the administration is not ready to move into full FTA 
negotiations with Taiwan, I would also endorse recent comments by 
Ambassador Tai to try to expand the economic relationship in other 
ways. For example, any efforts at joint standard setting in critical 
technologies or linking U.S. supply chains with key allies and partners 
should include Taiwan.

    Question. President Trump's Phase One deal with China achieved some 
gains in discouraging China's problematic behavior as it related to 
investment, intellectual property protection, and forced technology 
transfer, but it kept in place the vast majority of the section 301 
tariffs. It also lacked any reforms of some of the most significant 
unfair trade practices--China's industrial subsidies and general 
preferential treatment of state-owned enterprises.

    While it is important to ensure that our trading partners live up 
to their international trade commitments, I am concerned about the use 
of tariffs as a primary remedy. Do you believe that tariffs are the 
best mechanism to address Chinese unfair trade practices?

    What policy alternatives can the Biden administration instead 
utilize to better target bad actors?

    Answer. I believe that targeted tariffs can help create leverage to 
address trade concerns as envisioned by both section 301 of the 1974 
Trade Act and WTO rules. At the same time, I agree that there are 
limits to the use of this tool and that at some point additional 
tariffs may become more harmful than good.

    For example, Lists 1 and 2 of the section 301 action against China 
were narrowly targeted toward products that were substitutable or a 
core part of Made in China 2025. In other words, these tariffs were 
designed to be more harmful to China than to the United States, and in 
light of this, they were helpful in getting China to the negotiating 
table and leading to the Phase One deal. On the other hand, subsequent 
tariff lists were not as well targeted and in many cases are 
significantly harming U.S. companies. In light of this, I agree with 
you that the Biden administration (and other U.S. administrations in 
the future) should consider alternatives to tariffs.

    Overall, when considering alternatives to tariffs, the United 
States should consider measures that are more harmful to foreign 
companies than U.S. ones or that are reciprocal to the type action that 
the United States is attempting to address. Certain tax measures, fees 
on services, or other types of limits on investment or market access 
may be worth considering. Ultimately, however, the goal of all of these 
measures should not be to create a lasting trade barrier but to 
persuade the other country to change its unfair practices.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. For years, digital trade and the cross-border flow of 
data has been at the forefront of global trade agreements with e-
commerce growing at an exponential rate.

    Unfortunately, the global digital economy is complex and it can be 
difficult to advance U.S. interests unilaterally. As we work on future 
trade negotiations, the U.S. will need to focus on protecting key 
national interests, but also work cohesively with our international 
allies.

    Can you speak to the importance of implementing a national strategy 
focused on maintaining U.S. global tech leadership by pursuing a 
digital trade agenda that holds China accountable, but also supports 
businesses dependent on e-commerce?

    Answer. To be successful, any strategy that aims to improve U.S. 
competitiveness in digital trade should have an offensive and defensive 
component. Key elements of ``offense'' should include the adoption of 
additional incentives in the United States, such as the Endless 
Frontier Act; lower tax rates and less burdensome regulation to create 
an overall more conducive climate for innovation in the United States; 
joint standard-setting on emerging technologies with key allies through 
the EU-U.S. Trade and Technology Council and other forums; and the 
pursuit of trade agreements with key partners, including through the 
WTO. In this regard, I would prioritize digital trade agreements with 
the Indo-Pacific region and the e-commerce negotiations at the WTO.

    Question. Last year, China and 14 other Asia-Pacific nations signed 
the Regional Comprehensive Economic Partnership, which in some 
instances will bind China to rules for digital commerce.

    With that said, China has been developing its own legal frameworks 
for governing digital rules, and as the world's second-largest economy, 
they still have an advantage when negotiating terms for future trade 
deals with emerging nations.

    Therefore, it remains in our strategic interests for the U.S. to 
assert oversight over China's digital rule-makings and to make sure our 
allies in the Asia-Pacific are not negatively pressured by China's 
presence.

    If the U.S. were to continue developing a plurilateral digital 
trade agreement with Japan that builds off current principles, would 
this effectively add geopolitical pressure for China to adhere to 
international standards?

    Answer. Yes. Although I was a proponent of the bilateral Phase One 
negotiations with China and believe that there is merit in Phase Two, 
we will realistically only effectively pressure China to adhere to 
international standards on key digital issues through a coordinated 
plan with like-minded allies. Consistent with this we should seek a 
plurilateral agreement in the Indo-Pacific region with robust digital 
trade provisions and WTO negotiations on the same issues.

                                 ______
                                 
               Questions Submitted by Hon. John Barrasso
    Question. The WTO was formed to establish a trading system based on 
``open, market-oriented policies'' per the 1994 Marrakesh Agreement 
which established the organization. Despite modest improvements, 
China's markets are not ``open.'' Their policies are not ``market-
oriented.'' China is no longer a ``developing nation'' despite its WTO 
status.

    Market-distorting subsidies, intellectual property theft, forced 
technology transfer, forced labor, and industrial over-capacity in 
China aren't anomalies. They are the cornerstones of China's economic 
policy.

    Is there any reason to believe the WTO currently has the necessary 
tools or the will to address the challenges the world is facing with 
respect to China?

    What WTO reforms are needed to make it a more effective ``cop on 
the beat'' with respect to China?

    Answer. I do not believe that the WTO has all of the necessary 
tools to constrain China's unfair trade practices. Indeed, the WTO 
lacks rules covering many of the issues raised in your question such as 
forced technology transfer, industrial subsidies, state-owned 
enterprises, and forced labor. It is also unacceptable for China to 
claim ``developing country'' status and therefore seek a lower level of 
obligation than the United States in ongoing negotiations. China is the 
second largest economy in the world, the world's leader in certain 
sectors, and aspires to improve its global stature. Consistent with 
this, China should be treated the same as the United States at the WTO.

    The WTO's dispute settlement system is also in need of reform. It 
takes too long for countries to get a resolution, and in certain 
disputes the WTO has adopted reports that undermine the ability of the 
United States and others to use trade remedies to push back against 
China's unfair practices.

    I have written extensively about how to update the WTO to better 
deal with China and am happy to continue to engage with you on these 
ideas: https://www.atlanticcouncil.org/in-depth-research-reports/
report/revitalizing-the-wto/.

    Question. The Phase One agreement negotiated by the Trump 
administration was very important to American exporters. Wyoming's 
farmers, ranchers, and energy producers applauded the deal.

    While agriculture purchases have been positive for U.S. agriculture 
exports to China, American energy exporters, services and manufacturing 
industries are still waiting for China to fulfil their commitments. You 
mentioned the importance of coupling structural commitments with 
purchase commitments in order for Phase One and future agreements with 
China to bear fruit.

    What can we do today in Congress to ensure China meets its Phase 
One purchase obligations with respect to energy, services, and 
manufacturing?

    And is it wise to proceed with a Phase Two agreement prior to China 
meeting its commitments under the Phase One deal?

    Answer. As I noted in my testimony, one of the primary reasons that 
China's purchases of U.S. agricultural goods hit record levels in 2020 
despite the COVID pandemic was the extensive set of structural 
commitments included in the Phase One Deal, with which China appears to 
have largely complied. There are not similar underlying commitments for 
energy or manufacturing and the services commitments are much less 
extensive than for agriculture.

    Moving forward, I believe that the United States should continue to 
press China to meet all of the commitments in the agreement, but to 
press for structural commitments in the energy, services, and 
manufacturing areas. This will help ensure that China's increased 
commitments are predicated primarily on market forces instead of state 
intervention. This should be an overarching goal of the United States 
with respect to China's economy.

    I do not believe that enforcing Phase One and negotiating Phase Two 
should be mutually exclusive. We can hold China accountable for the 
commitments it has made while not standing idle on trying to achieve 
additional successes for U.S. workers and businesses with respect to 
the many market access barriers that still exist. In fact, substantial 
progress was made during the Phase One negotiations with respect to 
additional market access openings in manufacturing and services, among 
other areas. We should build off of that progress in a potential Phase 
Two deal.

    Question. Chinese over-capacity of steel, aluminum, cement, 
chemicals and numerous other industrial inputs is part of a broader 
strategy to drive down prices and put international competitors out of 
business. Chinese state-owned enterprises (SOEs) and export subsidies 
hurt American businesses and workers. In Wyoming, our soda ash 
producers and steel pipe and tubing producers know firsthand how 
difficult it is to compete with China in the marketplace.

    Where should the U.S. focus our efforts to counter China's export 
subsidies and over-capacity?

    What can Congress do to make U.S. companies competitive when they 
are forced to compete directly with China's SOEs?

    Answer. Addressing issues with China's export subsidies and over-
capacity will require a multi-pronged effort that includes:

    (1)  Pressuring China on these issues bilaterally, including 
through a potential Phase Two deal. The United States had been 
negotiating text with China on these issues before talks broke down in 
May 2019.

    (2)  Working with close allies and partners to pressure China 
directly. For example, as a condition for removing U.S. steel and 
aluminum tariffs on the EU, the EU should commit to efforts to address 
Chinese excess capacity.

    (3)  Creating high standard trade agreements that include 
provisions prohibiting export subsidies, over-capacity, and other of 
China's most unfair trade practices.

    (4)  Working through multilateral institutions to address these 
issues. This includes a revamped Global Forum on Steel through the OECD 
and bringing disciplines on these issues into the WTO. The trilateral 
work with the EU and Japan holds promise with respect to the WTO, but 
the three parties need to expedite work on text.

    Question. The Chinese Communist Party continues to commit terrible 
human rights abuses. The Uyghurs, a religious and ethnic minority in 
China, have experienced brutal repression at the hands of the Chinese 
government. They continue to be subjected to torture, imprisonment, and 
forced labor.

    At least 1 million Uyghurs have been put in internment camps by the 
Chinese Communist Party. Around 100,000 Uyghurs and ethnic minority ex-
detainees have reportedly been used as forced labor in textile and 
other industries in China.

    How effective have U.S. actions been at addressing the human rights 
abuses and the use of forced labor?

    What more should the United States do on transparency and 
enforcement?

    Answer. To date, it is unclear whether U.S. actions have resulted 
in a dramatic change in China's appalling practices in the Xinjiang 
region.

    In order to better address this problem, the United States should 
coordinate any subsequent sanctions-related action with allies, 
building off recent efforts to work with the EU, U.K., and Canada. The 
United States should also closely work with the private sector to 
determine how to best root out forced labor from supply chains to 
ensure that measures are effective and not overbroad.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    The Finance Committee meets this morning to discuss one of the most 
significant challenges facing the U.S. economy: the decades-long effort 
by the Chinese Government to manipulate global competition in their 
favor by any means necessary.

    The Finance Committee is coming together to respond to this 
challenge. Democrats and Republicans are working on new legislation 
that will take concrete steps to boost this country's competitiveness 
and level the playing field for American workers and businesses.

    That bipartisan effort will get right at the core issues of how our 
country can out-compete China. Cracking down on the use of forced 
labor. Fighting censorship. Protecting U.S. jobs by rooting out 
counterfeits. Shoring up supply chains, including semiconductors and 
medical products. Stepping up trade enforcement and oversight. This 
will be a significant bipartisan push on issues that are front and 
center for this committee.

    I want to thank Ranking Member Crapo and many members of the 
committee who've contributed. The committee's proposal will be combined 
with bills from other committees to form a larger package on building 
up American competitiveness. That's a prospect I think both sides of 
the Senate ought to be able to get behind.

    The trade rip-offs and underhanded tactics the Chinese Government 
and enterprises have employed to grow at our expense are well known. 
Massive, unfair subsidies that destroy any level playing field. Theft 
of innovative intellectual property. Shakedowns of cutting-edge 
technologies. Policies that meddle in supply chains and hurt American 
consumers and producers. The use of forced labor, which is absolutely 
reprehensible on its own, regardless of where it fits into trade.

    With the Great Firewall and other sophisticated trade barriers, the 
Chinese Government blocks 10,000 websites and a host of American 
digital service providers. For the few allowed to enter the Chinese 
market, the price of admission is extreme censorship.

    The overall result is untold losses for American companies and 
their workers. Homegrown Chinese tech giants rip off American 
innovations and thrive in the absence of American competitors. Several 
of those homegrown firms have outgrown the Chinese market, accessed the 
U.S. financial system, and invested in U.S. companies. The catch is, 
this isn't just a matter of economic losses for America. These Chinese 
firms competing unfairly also export their government's intolerance of 
free speech.

    From solar panels to soybeans to software and almost everything in 
between, America's workers, farmers, and our economy writ large have 
been exposed to China's trade cheating for far too long. The 
consequences are visible in Oregon and all across the country. 
Factories have shuttered. Towns have lost their beating economic 
hearts. Fewer and fewer American workers believe it'll be easier for 
their families to get ahead in the future than it was in the past.

    In short, America has spent 2 decades slowly falling further and 
further behind in a cold trade war. That didn't change when it turned 
hot over the last 4 years.

    The previous administration was right to throw out business as 
usual on trade with China, but their strategy relied more on what some 
people might call ``Internet muscles'' and tough talk than serious 
economic strength. The former President's mean tweets and angry 
statements didn't get results. The agreements the Chinese government 
signed mostly rehashed commitments it had already made and broken in 
the past. Its core trade rip-offs are ongoing.

    It's time to take a different tack. And today's hearing will help 
shape fresh approaches to address China's cheating.

    I'm pleased to have this opportunity to discuss these important 
issues today. The committee is joined by an excellent panel of 
witnesses, and I look forward to Q&A.

                                 ______
                                 

                             Communications

                              ----------                              


                    American Farm Bureau Federation

                  600 Maryland Avenue, SW, Suite 1000W

                          Washington, DC 20024

                            p. 202-406-3600

                            f: 202-406-3605

                          https://www.fb.org/

The agriculture related parts of the U.S.-China Phase One Agreement 
resulted in U.S. agricultural export growth and improved economics for 
U.S. farmers and ranchers in 2020. The expanded sales to China in the 
agreement have had a direct impact on the domestic production, 
processing, and transportation of agricultural goods. The product-
specific obligations and regulatory commitments in the agreement are 
providing new opportunities for growth in many agricultural export 
categories. A full execution of the Agreement is important for the 
future ofU.S. agriculture.

The Agreement was signed on January 15, 2020 and entered into force on 
February 14, 2020. China committed to purchase on average at least $40 
billion annually and $80 billion in total of U.S. food, agricultural 
and seafood products over 2 years. According to the Agreement, these 
purchases by China will be on a commercial basis at market prices and 
purchases may reflect seasonal marketing patterns.

The purchase commitments cover the calendar years 2020 and 2021. Annex 
6.1 of the Agreement identifies the products included in the 
commitment.

Phase One laid out a plan for China to purchase $12.5 billion in 
agricultural products above what they purchased in 2017, which was 
chosen as a baseline because it was the last ``normal'' year of trade 
between China and the United States before the retaliatory tariffs. In 
2017, the U.S. exported $20.8 billion in products covered by the 
agreement to China. This would imply that in 2020, China would have to 
import $33.4 billion in U.S. agricultural products to fully meet the 
terms of the agreement. This is equivalent to a 60% increase over 2017 
exports. The agreement also laid out that over the course of 2020 and 
2021, total exports of U.S. agricultural products to China would 
increase by $73 billion, which is equivalent to $80 billion in Chinese 
imports once shipping and freight are added.

According to USDA data, total exports of agricultural and related 
products covered under the agreement reached approximately $27.2 
billion in 2020, an increase of $6.3 billion over 2017 levels, 
equivalent to a 30% increase. This, of course, means the export target 
of $33.4 billion was missed by over $6 billion. Despite the missed 
target, 2020 was a record year for exports of agricultural products 
covered by the agreement, in nominal dollars.

Though U.S. agricultural exports overall missed the target of a 60% 
increase over 2017 levels, some specific products had increases. For 
example, the following products all set new nominal export levels to 
China in 2020: pork ($2.1 billion), poultry ($761 million), tree nuts 
($705 million), hay ($445 million), beef ($304 million), peanuts ($239 
million) and pulses ($51 million). Meanwhile, exports of some other 
products, though they did not set records, exceeded 2017 levels: corn, 
at $1.2 billion, was 693% above 2017 levels and wheat, at $570 million, 
was 62% above 2017 levels. Soybean exports, the largest agricultural 
commodity exported to China, were $14.2 billion.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


.epsIn 2020 U.S. agricultural exports reached a new record of $27.2 
billion and the U.S. share of total Chinese agricultural imports 
rebounded from the levels seen in 2018 and 2019. However, the U.S. 
still only has 14% of the total Chinese agricultural import market of 
nearly $170 billion. In calendar year 2019, U.S. agricultural exports 
to China (including distilled spirits, fish products and ethanol which 
are included in the agriculture product category in this agreement) 
totaled $14.2 billion, compared to $10.4 billion during the same period 
in 2018.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


.epsIt is useful to compare the actual performance in 2020 to the 
targets included in the Phase One Agreement. According to U.S. Trade 
Representative fact sheets,\1\ ``China has agreed to purchase and 
import on average at least $40 billion annually of U.S. food, 
agricultural, and seafood products, for a total of at least $80 billion 
over the next 2 years.'' Further, in Chapter 6 of the agreement,\2\ 
some guardrails around the $40 billion average are added: ``For the 
category of agricultural goods identified in Annex 6.1, no less than 
$12.5 billion above the corresponding 2017 baseline amount is purchased 
and imported into China from the United States in calendar year 2020, 
and no less than $19.5 billion above the corresponding 2017 baseline 
amount is purchased and imported into China from the United States in 
calendar year 2021.'' Finally, the fact sheet adds, ``on top of that, 
China will strive to import an additional $5 billion per year over the 
next 2 years.''
---------------------------------------------------------------------------
    \1\ https://ustr.gov/countries-regions/china-mongolia-taiwan/
peoples-republic-china/phase-one-trade-agreement/fact-sheets.
    \2\ https://ustr.gov/sites/default/files/files/agreements/
phase%20one%20agreement/
Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pd
f.

There are several key elements in USTR's statement. One is the 
reference to U.S. agricultural imports of ``on average at least $40 
billion.'' This element is important because it does not commit China 
to import $40 billion each year, but rather gives China flexibility for 
different levels of imports in 2020 and 2021; these could be 
significantly different. The key to understanding the Chapter 6 
component is knowing that U.S. agricultural exports to China in 2017 
---------------------------------------------------------------------------
were $20.9 billion.

USTR's fact sheet \3\ sheds some light on how $40 billion could be 
achieved in the Phase One Agreement. The fact sheet states that 
``products will cover the full range of U.S. food, agricultural, and 
seafood products.'' When agriculture-related products, like distilled 
spirits, ethanol, and fish products, are included it is easier to reach 
the export goal, but $27 billion is still short of $40 billion.
---------------------------------------------------------------------------
    \3\ https://ustr.gov/sites/default/files/files/agreements/
phase%20one%20agreement/Phase_
One_Agreement-Ag_Summary_Long_Fact_Sheet.pdf.

A continuing concern is the retaliatory tariffs China may apply on 
nearly 100% of U.S. ag exports. Though the Phase One Agreement does not 
address the tariffs, China currently offers importers exemptions to 
their retaliatory tariffs on nearly 700 types of goods from the United 
---------------------------------------------------------------------------
States, including farm and energy products.

The USTR fact sheet points out that ``China and the United States 
recognize that purchases are to be made at market prices based on 
commercial considerations.'' Between this language and the high-level 
view of China's imports, it seems clear that the U.S. is going to have 
to work to reach $40 billion in agricultural exports. In order to 
achieve this level of agricultural exports, the U.S. will have to win 
market share away from other competitors and the product mix may be 
different from what the U.S. has exported in the past. Market share 
will be won on a product-by-product basis, with different competitors 
for each product.

In the Phase One Agreement, China has also committed to eliminate 
market access barriers, shorten the time for products to get to market, 
increase transparency and encourage the use of international standards. 
In biotechnology, the approval process will be more transparent, 
predictable, efficient and science based. The approval process will 
take no more than 24 months, and China's evaluations will be based on 
international standards.

The Agreement streamlines and establishes time frames for regulatory 
actions by China for meat, poultry, seafood, dairy, infant formula, 
rice, potatoes, nectarines, blueberries, avocadoes, barley, alfalfa 
pellets, hay, feed additives, distillers' dry grains (DDGs) and pet 
food. China and the U.S. have begun to open their markets to bilateral 
trade in poultry products. For beef, China has eliminated cattle age 
requirements, recognized the U.S. beef traceability system, and 
recognized international standards for cattle production. Facility 
registrations are being streamlined so that imports from U.S.-inspected 
and approved facilities with the proper certificates are allowed.

Over 3,500 U.S. processing facilities have been approved for export to 
China. China has also committed to implement food safety measures that 
are science-based and risk-based. For fruits, vegetable and plant-based 
feed products, China will finalize phytosanitary protocols for 
potatoes, nectarines, blueberries, avocadoes, barley, alfalfa hay 
pellets and cubes, almond meal pellets and cubes, and timothy hay.

Following the 2019 U.S. win in a WTO case brought against their 
administration of tariff-rate quotas (TRQs), China is obligated to 
improve corn, wheat, and rice TRQ allocation methodology and will not 
inhibit the filling of TRQs.

Conclusion

During the first year of the Phase One Agreement, U.S. agricultural 
exports to China have significantly increased from $14.7 billion in 
2019 to $27.2 billion in 2020. The missed target for China purchases in 
2020 also has implications for 2021, given that the Phase One Agreement 
for purchases of agricultural products involve a 2-year commitment. To 
achieve the 2-year, $73 billion commitment, U.S. agricultural exports 
to China in 2021 will need to reach about $45.8 billion. Going forward, 
the U.S. will need to use the expanded access provisions in the 
Agreement to compete for market share, and the product mix will be more 
diverse from what the U.S. has exported in the past.

                                 ______
                                 
                 Bradford/Hammacher Group of Companies

                      9333 North Milwaukee Avenue

                       Niles, Illinois 60714-1393

May 6, 2021

U.S. Senate
Committee on Finance

Our companies consist of The Bradford Exchange and Hammacher Schlemmer, 
headquartered in Illinois with offices in Florida, Ohio and New York. 
Hammacher was founded in 1848 and Bradford in 1973. Bradford has about 
600 employees, and Hammacher about 125, all in the United States. 
Bradford also has some employees outside the U.S. We are 100% employee 
owned, and regarding our workforce, over 60% of our employees are 
female.

Bradford is the largest affinity direct marketer of art-based products 
in the U.S. We specialize in creating and direct marketing jewelry, 
collectibles, home decor, giftware, checks, coins, apparel and 
handbags. We offer unique, high quality products not available 
elsewhere. We sell through direct mail, print media, direct response 
mailers, catalogs, and eCommerce. Nearly all of our products are custom 
designed by us, and approximately 76% are manufactured in China. We 
serve the middle class with the average age of our customer being 60 
with an average household income of $64,000.

Giving is one of the Bradford's core values, and for decades our 
employee-owned company has come together to help those less fortunate. 
We traditionally sponsor an annual holiday food drive in December to 
support the hungry in the Chicagoland area, and promote events such as 
toy drives to benefit needy children. Our employee blood drive is also 
another fundamental social impact initiative that we carry out every 
year to support our community. In addition, Bradford routinely donates 
to the following associations, programs and causes:
Associations and Programs
      The Greater Chicago Area Food Depository
      The Niles Food Bank
      Toys for Tots
      POW Association
      Firefighters Association
      Animal Welfare Groups
      Abused Children Association
Medical Research and Support
      Down Syndrome Research
      Breast Cancer Research
      Cerebral Palsy Research
      Leukemia Research
      AIDS Research
      ALS Research
      Nursing Association

We believe that domestic competitiveness translates to social equity 
and community impact. To that end, free trade is vital to us. We buy 
approximately 45 million dollars of products from outside the U.S. 
annually. Due to our complex global supply chain, many of these items 
must be imported from China.

When tariffs were imposed in 2019, we promptly started phasing out our 
Chinese production, moving much to Indonesia, Cambodia, India and 
Mexico. It took some time, but we were making progress, with 
limitations due to the artistic and intricate nature of our products. 
Then COVID-19 hit. Global production was substantially curtailed. 
However, because of its nationwide shut down, China was able to quickly 
control COVID spread and reopen its factories. Indonesia, Cambodia, 
India and Mexico were not. Thus, from January through March of 2021, 
more of our products have come from China. When production resumes in 
Indonesia, Cambodia, India and Mexico, we plan to continue shifting 
production away from China, but, given the massive resurgences 
happening in southeast Asia, that could be some time. Shifting all 
production away from China is unfeasible because of the following 
reasons.

First, most of our products require complex, costly tooling. We do not 
have the tens of thousands of dollars per product and many months to 
have new tooling made and delivered to factories in other countries.

Second, many of our products are handcrafted and hand painted. They 
require sophisticated artisans. We have spent many years helping 
factories in China develop the talent required for our products. We are 
not aware of any countries other than China that have the artists with 
the skills and in the numbers necessary to make many of our products.

Third, many of our products are licensed by major entertainment 
businesses such as Walt Disney or Major League Baseball. Those 
licensors require us to use only certified factories. The certification 
process can take many months to verify that the factories have policies 
that ensure fair labor practices. To our knowledge there are few 
certified factories in other countries that make many of the products 
that we sell.

Fourth, where possible we have moved production of our product to 
countries other than China and relocated final assembly of product to 
the U.S. where practical. Yet, production of the majority of our 
products remains in China, and there are no sources of supply in the 
United States to make the quantity and quality that we need. In fact, 
for many of our products, there are no such sources of supply anywhere 
else in the world other than China.

Lastly, if the tariffs are continued, the price of our products to 
consumers will be substantially higher--essentially a tax on the 
consumer. No revenue would be generated for U.S. companies, and no jobs 
would be created in the U.S.

One additional point. One of our suppliers has told us that our price 
will be going up because a U.S. sourced chemical is used in the 
product, and China is retaliating by increasing tariffs on USA origin 
chemicals. Some of those chemicals are from major U.S. manufacturers 
(such as Dow Chemical). If we reduce our purchases of products from 
China, the U.S. chemical companies will have reduced sales. These 
retaliatory tariff actions are a viscous cycle.

Outside of these critical points as it relates to our import model, 
there are other macro policy considerations to bring to bear given the 
tone of the Biden Administration. On February 24th, President Biden 
signed an executive order to conduct a review of American supply chains 
in order to better understand reliance on foreign manufacturing. 
Notably, the order focuses on high- priority supply chains, including 
semiconductors, high-capacity batteries, rare earth metals, and medical 
supplies.

The executive order includes two distinct phases. The first phase 
includes a 100-day review process of high-priority supply chains, 
including semiconductors, high-capacity batteries, rare earth metals, 
and medical supplies. Following this review, the second phase of the 
order expands the review process to include a wider range of sectors, 
including the production of equipment for defense, public health, 
energy, and transportation. One year after the order is issued, the 
task force will submit recommendations to the administration, such as 
diplomatic agreements or trade-route edits. It is believed the 
executive order is largely focused on providing the Biden 
Administration with a greater understanding of the United States' 
reliance on Chinese exports.

None of our imported products fall within the President's critical 
supply chain framework.

In sum, we urge Congress to advise the United States Trade 
Representative (USTR) to do the following:

    (1)  To renew Section 301 tariff exclusions that were granted,
    (2)  To permit the filing of Section 301 tariff exclusion requests 
for exclusion requests that were not granted, and
    (3)  To refrain from placing Section 301 tariffs on American 
companies that are providing affordable jewelry, dolls, electric 
trains, festive articles, clocks, music boxes and decorative plates to 
average Americans.

Significantly, there should be special treatment for companies that are 
employee owned. We care about our business because we care about our 
employees and community--that's what makes us different. Without your 
support, the survival of potentially hundreds and possibly thousands of 
jobs in the United States could be at risk.

We thank you for this opportunity to submit a Statement for the Record 
and welcome any forum to discuss further how we can be of service to 
the American economic recovery.

Thank you.

Sincerely,

Richard Tinberg
President

                                 ______
                                 
                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                    Statement of Michael G. Bindner

Chairman Wyden and Ranking Member Crapo, thank you for the opportunity 
to submit these comments for the record to the Committee on this topic.

The exit of Donald J. Trump from the White House almost instantly 
improved our trade relationship with China. Since both sides want to 
return to normal, it should happen rather quickly. Let us not do so too 
quickly. There are significant human rights abuses that should be 
addressed before we dot the i's and cross the t's. Let us not waste a 
good crisis to deal with the plight of the Uygurs. If not now, when? 
See our attachment, which contains our prior comments on slave labor 
and supply chains.

While competitiveness is a good thing, justice is a better thing. 
Consumers may have to pay a bit more for goods produced at home and 
abroad, but there are worse things.

The Chinese economy depends on migrant labor, with rural migrants going 
to the coasts to work, but taking their social service systems with 
them. Peasants do not receive the same benefits as workers from urban 
China. They are sitting on a time bomb.

Eventually, these migrants will object to the locality system imposed 
upon them and demand the same level of pay, benefits and consumerism as 
is earned by those designated as urban. When this occurs, the valuation 
of the Yuan will occur, assuming that the Chinese Communist Party 
survives. We do not make this assumption, however.

Chinese workers are not the only ones getting the short end of the 
stick in international trade. The CEO/Donor Class attack on unions for 
the past 30 years trades ``competitiveness'' for worker rights. It has 
taken its toll on the American worker in both immigration and trade.

Cheap goods and food are part of the equation, but not the only part. 
Tax policy is a major driver. That has been facilitated by decreasing 
the top marginal income tax rates so that when savings are made to 
labor costs, the CEOs and stockholders actually benefit. When tax rates 
are high, the government gets the cash so wages are not kept low nor 
unions busted. As Chinese workers are not allowed to unionize, the 
working class in both nations become expendable factor in production 
rather than human beings.

Increasing marginal tax rates will help. I am confident that a second 
reconciliation will make that happen, although the proposed rate 
increases on the richest taxpayers are not large enough to make a major 
difference. Until there is basic change in the economy, anything this 
Committee does will be a mere Band-Aid.

True competitiveness for workers can only come from ownership and 
control of not only the shop floor, but also supply chain decisions. If 
labor rates for overseas subsidiaries provide the same standard of 
living received by American workers in the same jobs (with more equal 
pay scales between them), there will be no thought of competitiveness. 
If common ownership includes common consumption, global price 
competition effects will be muted.

The question is how to get there. Merely encouraging worker investment 
in the market is not enough. It must be targeted toward direct control 
of the workplace.

The USA accounts proposed by President Clinton had the same feature, 
although as a supplement to the Social Security benefit rather than a 
partial replacement, although this feature would be muted by enactment 
of value added taxes. The flaw in using foreign investment to make up 
for lost worker revenue is that eventually foreign workers either 
radicalize or become consumers and demand their own union rights.

The tendency for consumerism to follow industrialization is why 
globalization is a poor substitute for expanding the domestic 
population. Increases to the Child Tax Credit (and adding 
refundability) in the American Recovery Plan Act were a good first 
step, but we stop walking too soon. These changes need to be made 
permanent and sustainable. Government distribution of the benefit is 
fine when attached to unemployment and disability insurance payments.

Workers need the money regularly, as part of pay. In the short term, 
the quickest way to distribute money is to offset pre-payment of these 
credits as part of wages against quarterly income tax payments by 
corporate and individual filers. In the long term, comprehensive tax 
reform is required. Our current proposal is included in a second 
attachment.

An employer-paid subtraction VAT is the best means for distribution of 
the child tax credit in real time. This will decrease resistance to 
larger credits and, along with funding either public or private health 
care (as another credit), will end much of the incentive to resort to 
franchising, the gig economy and 1099 employment to dodge requirements 
for direct employment of full-time workers.

Separating out taxation of capital gains and income into an asset 
value-added tax will end the need for all but the wealthiest workers to 
file income taxes at all. Ending direct filing should be a bipartisan 
goal. For a while, it certainly helped Mike Huckabee when he proposed 
it in 2008. Expanding provisions to avoid taxation of capital gains to 
all shareholders who sell to qualified ESOPs will kick start employee 
ownership.

Another essential step toward employee control is repeal of the Taft-
Hartley Act prohibitions on concentrated pension fund ownership. Once 
we are farther down that road, we can discuss how changing the flow 
social insurance payments might speed up the process. Seen from the 
perspective of employee owners, there will be less resistance.

Over a fairly short period of time, much of American industry, if not 
employee-owned outright (and there are other policies to accelerate 
this, like ESOP conversion) will give workers enough of a share to 
greatly impact wages, management hiring and compensation and dealing 
with overseas subsidiaries and the supply chain--as well as impacting 
certain legal provisions that limit the fiduciary impact of management 
decision to improving short-term profitability (at least that is the 
excuse managers give for not privileging job retention).

As previously stated, employee owners will find it in their own 
interest to give their overseas subsidiaries and their supply chain's 
employees the same deal that they get as far as employee ownership plus 
an equivalent standard of living. The same pay is not necessary, 
currency markets will adjust once worker standards of living rise.

Over time, this will change the economies of the nations we trade with, 
as working in employee-owned companies will become the market 
preference and force other firms to adopt similar policies (in much the 
same way that, even without a tax benefit for purchasing stock, 
employee-owned companies that become more democratic or even more 
socialistic, will force all other employers to adopt similar measures 
to compete for the best workers and professionals).

China could end its peasant labor system in advance of revolution. 
Hopefully quick adoption of our suggestions to expand employee 
ownership is more likely than revolution in China. If not, trade wars 
and rumors of trade wars will always be with us, along with the damage 
they do to both the financial markets and the real economy.

Eventually, trade will no longer be an issue. Internal company dynamics 
will replace the need for trade agreements as capitalists lose the 
ability to pit the interest of one nation's workers against the 
other's. This approach is also the most effective way to deal with the 
advance of robotics. If the workers own the robots, wages are swapped 
for profits with the profits going where they will enhance consumption. 
This is the type of competitiveness we should be fostering.

I have not forgotten about the need to increase marginal rates. 
Separate consumption, employer, asset and high salary taxes will stack 
payments and remove shelters, which is something the current system 
does not do.

Thank you for the opportunity to address the committee. We are, of 
course, available for direct testimony or to answer questions by 
members and staff.

Attachment from Finance: Fighting Forced Labor: March 18, 2021

. . . The other issue with China, as well as south Asia and the global 
south, is defacto slavery. Boycotting the products of slavery worked in 
fighting the Confederacy. The mass migration of slaves had more of an 
impact. A boycott of Xinjiang cotton and tomatoes is problematic during 
a pandemic, but generally it cannot succeed as a stand-alone action. 
Even though it may hurt in the short run, we should still do it.

To make a boycott work, we cannot do it alone. At minimum, Islamic 
nations must join in as well and start linking the cause of the Uygurs 
to the New Silk Road. The ethnic Turkmen range from modern Turkey to 
Xinjiang, so a little solidarity on their part could go a long way. If 
we do go this route, the whole effort to interfere in Iran must end. We 
cannot be with South Asian Muslims on some things and expect solidarity 
with them on others.

On the moral front, I am not sure we have room to talk. We hold 
migrants in stark conditions prior to deportation. If you doubt it, 
visit Lewisburg Federal Prison. Also stop in the Federal Prison 
Industries factory while you are there. Visit any food processing plant 
with large immigrant workforces (send people undercover) and see how 
many workers were trafficked and how local law enforcement reacts when 
they decide they want to leave. Examine the plight of sex workers in 
the United States and see how many of their pimps have arrangements 
with local police.

Our best weapon is our example. As long as slavery exists in the United 
States, our moral voice is compromised. Again, I am not saying to 
ignore this situation. I am saying to go ``All In'' to really fight 
slavery. Also, call it slavery. On the same subject, examine the 
Chinese treatment of peasant workers at their factories. There is a 
two-level society, and American consumers benefit from this. Our 
commitment to abolishing slavery cannot live only in the fringes.

This is not to say that loopholes cannot be closed, although we must 
stop our own unfair trade practices as well. American food should not 
show up in countries just before harvest when doing so depresses the 
price of local agricultural products. Poverty begets slavery. Making 
others poor is an invitation to exploitation.

Poor farmers can either be individual or tenant farmers who are 
essentially peons. The drive for lower food prices for American 
consumers comes at a human cost. This is especially true when only one 
buyer dominates the market, as is sometimes the case for export to 
America (if not often). Poor factory workers never have access to 
collective bargaining. This factor also drives down wages in American 
factories--often those with immigrant labor bearing the brunt of bad 
working conditions, poor wages and lax enforcement. The major 
difference is that being blacklisted in the United States for 
attempting to organize is rarely deadly, as it can sometimes be 
overseas.

Improved enforcement takes money and the willingness to accept higher 
food prices. More inspectors with more authority are needed at home and 
abroad. Government or third party inspection is vital to make sure work 
is safe, fairly compensated and able to organize. We cannot expect 
worker protection in China or Guatemala if we do not insist on it in 
North Carolina and Alabama.

Attachment--Tax Reform, Center for Fiscal Equity, March 5, 2021

Individual payroll taxes. These are optional taxes for Old-Age and 
Survivors Insurance after age 60 for widows or 62 for retirees. We say 
optional because the collection of these taxes occurs if an income 
sensitive retirement income is deemed necessary for program acceptance. 
Higher incomes for most seniors would result if an employer 
contribution funded by the Subtraction VAT described below were 
credited on an equal dollar basis to all workers. If employee taxes are 
retained, the ceiling should be lowered to $85,000 to reduce benefits 
paid to wealthier individuals and a $16,000 floor should be established 
so that Earned Income Tax Credits are no longer needed. Subsidies for 
single workers should be abandoned in favor of radically higher minimum 
wages.

Wage Surtaxes. Individual income taxes on salaries, which exclude 
business taxes, above an individual standard deduction of $85,000 per 
year, will range from 6.5% to 26%. This tax will fund net interest on 
the debt (which will no longer be rolled over into new borrowing), 
redemption of the Social Security Trust Fund, strategic, sea and non-
continental U.S. military deployments, veterans' health benefits as the 
result of battlefield injuries, including mental health and addiction 
and eventual debt reduction. Transferring OASDI employer funding from 
existing payroll taxes would increase the rate but would allow it to 
decline over time. So would peace.

Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes, 
dividend taxes, and the estate tax. It will apply to asset sales, 
dividend distributions, exercised options, rental income, inherited and 
gifted assets and the profits from short sales. Tax payments for option 
exercises and inherited assets will be reset, with prior tax payments 
for that asset eliminated so that the seller gets no benefit from them. 
In this perspective, it is the owner's increase in value that is taxed.

As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. These taxes will 
fund the same spending items as income or S-VAT surtaxes. This tax will 
end Tax Gap issues owed by high-income individuals. A 26% rate is 
between the GOP 24% rate (including ACA-SM and Pease surtaxes) and the 
Democratic 28% rate. It's time to quit playing football with tax rates 
to attract side bets.

Subtraction Value-Added Tax (S-VAT). These are employer paid Net 
Business Receipts Taxes. S-VAT is a vehicle for tax benefits, including

      Health insurance or direct care, including veterans' health care 
for non-
battlefield injuries and long-term care.
      Employer paid educational costs in lieu of taxes are provided as 
either 
employee-directed contributions to the public or private unionized 
school of their choice or direct tuition payments for employee children 
or for workers (including ESL and remedial skills). Wages will be paid 
to students to meet opportunity costs.
      Most importantly, a refundable child tax credit at median income 
levels (with inflation adjustments) distributed with pay.

Subsistence-level benefits force the poor into servile labor. Wages and 
benefits must be high enough to provide justice and human dignity. This 
allows the ending of state administered subsidy programs and 
discourages abortions, and as such enactment must be scored as a must 
pass in voting rankings by pro-life organizations (and feminist 
organizations as well). To assure child subsidies are distributed, S-
VAT will not be border adjustable.

The S-VAT is also used for personal accounts in Social Security, 
provided that these accounts are insured through an insurance fund for 
all such accounts, that accounts go toward employee ownership rather 
than for a subsidy for the investment industry. Both employers and 
employees must consent to a shift to these accounts, which will occur 
if corporate democracy in existing ESOPs is given a thorough test. So 
far it has not. S-VAT funded retirement accounts will be equal-dollar 
credited for every worker. They also have the advantage of drawing on 
both payroll and profit, making it less regressive.

A multi-tier S-VAT could replace income surtaxes in the same range. 
Some will use corporations to avoid these taxes, but that corporation 
would then pay all invoice and subtraction VAT payments (which would 
distribute tax benefits. Distributions from such corporations will be 
considered salary, not dividends.

Invoice Value-Added Tax (I-VAT), Border adjustable taxes will appear on 
purchase invoices. The rate varies according to what is being financed. 
If Medicare for All does not contain offsets for employers who fund 
their own medical personnel or for personal retirement accounts, both 
of which would otherwise be funded by an S-VAT, then they would be 
funded by the I-VAT to take advantage of border adjustability. I-VAT 
also forces everyone, from the working poor to the beneficiaries of 
inherited wealth, to pay taxes and share in the cost of government. 
Enactment of both the A-VAT and I-VAT ends the need for capital gains 
and inheritance taxes (apart from any initial payout). This tax would 
take care of the low-income Tax Gap.

I-VAT will fund domestic discretionary spending, equal dollar employer 
OASI contributions, and non-nuclear, non-deployed military spending, 
possibly on a regional basis. Regional I-VAT would both require a 
constitutional amendment to change the requirement that all excises be 
national and to discourage unnecessary spending, especially when 
allocated for electoral reasons rather than program needs. The latter 
could also be funded by the asset VAT (decreasing the rate by from 
19.5% to 13%).

As part of enactment, gross wages will be reduced to take into account 
the shift to S-VAT and I-VAT, however net income will be increased by 
the same percentage as the I-VAT. Adoption of S-VAT and I-VAT will 
replace pass-through and proprietary business and corporate income 
taxes.

Carbon Value-Added Tax (C-VAT). A Carbon tax with receipt visibility, 
which allows comparison shopping based on carbon content, even if it 
means a more expensive item with lower carbon is purchased. C-VAT would 
also replace fuel taxes. It will fund transportation costs, including 
mass transit, and research into alternative fuels (including fusion). 
This tax would not be border adjustable.

Summary

This plan can be summarized as a list of specific actions:

    1.  Increase the standard deduction to workers making salaried 
income of $425,001 and over, shifting business filing to a separate tax 
on employers and eliminating all credits and deductions--starting at 
6.5%, going up to 26%, in $85,000 brackets.

    2.  Shift special rate taxes on capital income and gains from the 
income tax to an asset VAT. Expand the exclusion for sales to an ESOP 
to cooperatives and include sales of common and preferred stock. Mark 
option exercise and the first sale after inheritance, gift or donation 
to market.

    3.  End personal filing for incomes under $425,000.

    4.  Employers distribute the child tax credit with wages as an 
offset to their quarterly tax filing (ending annual filings).

    5.  Employers collect and pay lower tier income taxes, starting at 
$85,000 at 6.5%, with an increase to 13% for all salary payments over 
$170,000 going up 6.5% for every $85,000--up to $340,000.

    6.  Shift payment of HI, DI, SM (ACA) payroll taxes employee taxes 
to employers, remove caps on employer payroll taxes and credit them to 
workers on an equal dollar basis.

    7.  Employer paid taxes could as easily be called a subtraction 
VAT, abolishing corporate income taxes. These should not be zero rated 
at the border.

    8.  Expand current state/federal intergovernmental subtraction VAT 
to a full GST with limited exclusions (food would be taxed) and add a 
federal portion, which would also be collected by the states. Make 
these taxes zero rated at the border. Rate should be 19.5% and replace 
employer OASI contributions. Credit workers on an equal dollar basis.

    9.  Change employee OASI of 6.5% from $18,000 to $85,000 income.

                                 ______
                                 
                         Guardian Technologies

                         26251 Bluestone Blvd.

                            Euclid, OH 44132

May 6, 2021

U.S. Senate
Committee on Finance

Guardian Technologies (``Guardian'') is a consumer products company 
that develops and sells consumer durables for mass retail to improve 
the home environment. These products include air purifiers, humidifiers 
and dehumidifiers, fans, heaters, diffusers, and therapy lights. 
Guardian was founded in 2005 and is headquartered in Cleveland, Ohio. 
The company employs 25 full-time workers in Cleveland and 30 to 60 
part-time workers on a seasonal basis. To reach American consumers, 
Guardian works with brick-and-mortar and online retail partners, 
including Amazon, Costco, Best Buy, Walmart, Target, Home Depot, and 
Kohl's.

Guardian's GermGuardian brand portfolio includes the company's various 
air purification units. The GermGuardian air purifiers incorporate UV-
C, HEPA filters, and other technologies to reduce harmful microscopic 
particulate in the air. UV-C light helps reduce airborne bacteria, 
viruses, mold spores, and works with Titanium Dioxide to reduce 
volatile organic compounds. Guardian has partnered with The Association 
of Home Appliance Manufacturers (AHAM) and all GermGuardian air 
purifiers are notably AHAM verified.

The COVID-19 pandemic has greatly affected the demand for air purifiers 
for a variety of different indoor environments. Guardian has a 
longstanding history producing these purifier units and is proud to be 
contributing to this critical supply chain. While demand has increased 
for air purifiers, the market has also been flooded with foreign 
products that have made false claims and provided consumers with a 
lower quality product. In 2019, GermGuardian products held the greatest 
unit brand share in the industry. In 2020 Levoit, a Chinese competitor, 
overtook GermGuardian to be the top product in the marketplace. Though 
Guardian currently imports technologies from China, as part of Lasko 
Products, a century old American company, they are proud to support 
American jobs and American manufacturing. Levoit is a pure-play Chinese 
company with a shell company headquartered in California that provides 
little to no economic impact for the country's manufacturing base. 
These foreign purifiers also often fail to meet the AHAM verification 
standards of clean air environments.

Guardian Technologies represents an American company providing American 
solutions to the pandemic response efforts with air purification 
products for government buildings, schools, and small businesses.

The Miscellaneous Tariff Bill (MTB) will provide Guardian Technologies 
much needed duty relief on many products critical for the United 
States' economic recovery following the COVID-19 pandemic. Without the 
MTB, Guardian will find itself at a disadvantage to its Chinese 
competitors and will lose its ability to maintain current U.S. 
employment levels.

American businesses, consumers, and government entities are currently 
being encouraged and incentivized to purchase and utilize air 
purification units for indoor spaces in order to aid in the reopening 
of American schools and businesses. However, these same purification 
units are being unfairly targeted by Section 301 tariffs. It is 
counterintuitive for these products to both be targeted by tariffs upon 
their import and granted consumer relief once distributed in the United 
States. This inefficient structure disproportionately burdens Guardian 
Technologies and similar American air purification businesses.

In sum, we urge Congress to advise the United States Trade 
Representative (USTR) against placing Section 301 tariffs on American 
companies that are providing critical products for reopening the 
American economy and are at an unreasonable competitive disadvantage 
with Chinese finished product imports. In addition, the swift passage 
of the MTB will ensure that our business can get baseline support for 
operations during the pandemic.

We thank you for this opportunity to submit a Statement for the Record 
and welcome any forum to discuss further how we can be of service to 
the American economic recovery.

Sincerely,

Brian Zollar
Director of Business Development

                                 ______
                                 
                          Lasko Products, LLC

                           820 Lincoln Avenue

                         West Chester, PA 19382

U.S. Senate
Committee on Finance

Lasko Products, LLC (``Lasko'') is a 115-year-old U.S. company and one 
of the only remaining U.S. manufacturers of portable fans and other 
similar small appliances. The company is headquartered in West Chester, 
Pennsylvania and employs more than 1,000 U.S. workers, including more 
than 800 production workers at its plants in Texas, Tennessee, and 
Pennsylvania. Lasko sells more than 15,000,000 fans and 5,000 heaters 
in the United States annually. We are the largest manufacturer of fans 
and heaters in the United States, by far.

Our company has a proud tradition of diversity in the workplace and 
community involvement. More than 57% of Lasko's workforce is comprised 
of minority workers and the company is proud to provide competitive pay 
and benefits to its workforce. Lasko has donated twenty acres of soccer 
fields in Franklin, Tennessee to the local YMCA youth soccer program. 
Lasko's presence in West Chester, Pennsylvania is also evidenced by the 
Oscar Lasko YMCA and the Lasko Tower at the Chester County Hospital.

Lasko's U.S. workers manufacture a variety of components, assemble 
internally made and externally sourced components, package finished 
fans and distribute these products to Lasko's customers. Whenever 
practical, Lasko uses U.S.-sourced components and raw materials, such 
as steel and resin.

Lasko's products are built from a variety of components, including 
steel box fan bodies, plastic fan bodies, fan blades, bases, grills, 
and a variety of small parts. The company manufacturers many of these 
components at its U.S. facilities and has invested heavily in a variety 
of American made machinery and tooling at each of its plants. As 
Lasko's sales of domestically manufactured products have grown in 
recent years, the company has invested in increasing manufacturing 
capacity, resulting in increased U.S. employment. We have actively 
hired new employees throughout the past year's COVID-19 pandemic and 
continue to do so today.

Lasko's U.S. made products compete primarily with Chinese-manufactured 
products. Lasko's retailer customers will purchase from Chinese 
manufacturers instead of Lasko when the price differential is as low as 
$0.10 to $0.20 per unit. As a result, Lasko operates on very low 
margins and relies heavily on sourcing high quality/
low-cost components, efficient manufacturing processes, high volume, 
high inventory levels, and strong customer service to compete. It is 
often said that ``pennies matter'' when it comes to remaining 
competitive with Chinese manufacturers.

The Miscellaneous Tariff Bill (MTB) will provide Lasko much needed duty 
relief on motors and other important components, a critical input for 
Lasko's fan manufacturing operations. Without the MTB, Lasko will find 
itself at a disadvantage to its Chinese competitors and will lose its 
ability to maintain current U.S. employment and production levels.

There is also notably an ongoing Section 301 tariff on heaters imported 
from China that negatively impacts Lasko's products. While all 
manufacturers face this same tariff, Chinese manufacturers are given 
government rebates in return, enabling them to provide aggressive 
pricing without passing on the tariff cost to American consumers in the 
marketplace. This rebate and resulting pricing give Chinese companies a 
disproportionate advantage in the US marketplace for the same imported 
good.

If Lasko loses any of its major retailer customers to Chinese 
manufacturers, the company may be forced to shrink or close its U.S. 
manufacturing facilities. This could result in the loss of hundreds of 
U.S. manufacturing jobs. Further, if Lasko is forced to close plants or 
reduce operations, there will be a significant ripple effect on local 
economies, jobs, suppliers, service providers and a multitude of 
related industries that support Lasko's operations in the United 
States. As a result, Chinese manufacturers would also increase their 
U.S. market share. Clearly, this would not be consistent with the 
developing trade policies of this administration.

In sum, we urge Congress to advise the United States Trade 
Representative (USTR) against placing Section 301 tariffs on American 
companies that (1) have a substantial manufacturing footprint and 
legacy in the United States, (2) have demonstrated meaningful supply 
chain shifts out of China since the Section 301 investigation, (3) are 
at an unreasonable competitive disadvantage with Chinese finished 
product imports, and (4) demonstrate stewardship in diversity, equity, 
inclusion and community investment. In addition, the swift passage of 
the MTB will ensure that our business can get baseline support for 
operations during the pandemic.

We thank you for this opportunity to submit a statement for the record 
and welcome any forum to discuss further how we can be of service to 
the American economic recovery.

Very Respectfully,

Ed Vlacich
Chief Executive Officer

                                 ______
                                 
                         Rail Security Alliance

                       1341 G St., NW, 6th Floor

                          Washington, DC 20005

                              202-466-5053

                             Arpil 27, 2021

Introduction

The Rail Security Alliance (RSA) is a coalition of North American 
freight railcar manufacturers, suppliers, unions, and steel interests 
committed to ensuring the economic and national security of our 
passenger and freight rail systems. On behalf of our coalition, thank 
you for the opportunity to submit a statement for the record before the 
committee to communicate to you the work of RSA and the importance of 
protecting U.S. competitiveness and North American manufacturing jobs 
in critical industries such as rail. Given the hearing will examine 
challenges facing global competition with China and strengthening 
America's trade policies, we wanted to give you an update on the 
domestic freight rail industry and challenges they are facing.

As way of background, RSA was formed in response to the merging of 
China's two rail manufacturers into one massive 100% state-owned 
enterprise (SOE), the China Railway Rolling Stock Corporation (CRRC). 
CRRC, by their calculation, controls roughly 83 percent of the global 
rail market, with the intent to ``conquer'' the remaining 17 percent, 
per the company's own public acknowledgment.\1\ As a state-owned 
enterprise, CRRC has access to unlimited state funding that allows them 
to win rail contracts around the world by underbidding competitors. 
CRRC has made aggressive and alarming incursions into the U.S. rail 
market using state-backed financing, below-market pricing, and other 
anti-competitive tactics and has used the lingering economic effects of 
the COVID-19 pandemic to continue its domination of global market 
share. Alarmingly, CRRC was named one of 20 companies by the Department 
of Defense that it says is owned or controlled by China's People's 
Liberation Army.\2\ CRRC has won four U.S. metropolitan transit 
contracts--through severely underbidding its competitors by way of 
unlimited financing from the Chinese government--in Boston, Chicago, 
Los Angeles, and Philadelphia.
---------------------------------------------------------------------------
    \1\ @CRRC_global, ``Following CRRC's entry to Jamaica, our products 
are now offered to 104 countries and regions. So far, 83% of all rail 
products in the world are operated by #CRRC or are CRRC ones. How long 
will it take for us conquering the remaining 17%?'' Twitter, January 
11, 2018. https://twitter.com/CRRC_global/status/951476296860819456.
    \2\ U.S. Deputy Secretary of Defense David L. Norquist Letter to 
Senator Tom Cotton, June 24, 2020. https://www.cotton.senate.gov/files/
documents/Sen%20Cotton%20NDAA%20FY%201999
%20Sec%201237%20Response%2006242020.pdf.
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Threat of CRRC to the Freight Rail Industry

The North American freight industry is not immune to the advances by 
CRRC either. Their current foothold in the U.S. transit industry 
creates an opportunity to pivot into freight rail assembly, a subsector 
of rail not protected by the same Buy America requirements as transit 
rail. CRRC has attempted to enter the U.S. freight rail manufacturing 
sector with a joint venture, Vertex Rail, in North Carolina. 
Fortunately, that effort failed. CRRC also launched American Railcar 
Services, with a separate assembly facility headquartered in Miami, FL, 
and maintaining its assembly operations in Moncton, New Brunswick. This 
venture also failed.

Our concerns regarding CRRC's transition from transit railcar 
manufacturing to freight railcar manufacturing is best highlighted by 
the recent experience of the rail industry in Australia. CRRC entered 
the Australian freight rail market in 2008, and within less than 10 
years, decimated the sector. The result was four domestic suppliers 
being forced out of business and the rail market left solely to 
CRRC.\3\ We risk the same in the United States if this industry is not 
protected. We applaud action already taken by Congress in supporting 
the rail industry such as its passage of the Transit Infrastructure 
Vehicle Security Act (TIVSA), but more needs to be done to ensure this 
vital industry survives the pandemic and can stay competitive with 
China.
---------------------------------------------------------------------------
    \3\ Oxford Economics, Will We Derail U.S. Freight Rolling Stock 
Production?, May 2017, at 16.

The COVID-19 pandemic has had devastating effects on the U.S. economy 
and has greatly impacted the freight railcar manufacturing and supply 
industry. Freight railcar orders and backlog are plummeting due to the 
effects of the pandemic, with 65,000 jobs at risk if the U.S. domestic 
railcar manufacturing industry collapses.\4\ According to industry 
experts, tens of thousands of jobs in the freight rail industry have 
already been furloughed or lost due to the massive slowdown in 
production and the cancelation of orders, with the potential for even 
more significant losses if immediate action is not taken to stabilize 
the industry. Downstream effects will be felt in every sector that 
supplies the freight railcar industry, from iron and steel 
manufacturers to factory equipment suppliers. We do not want to lose 
these domestic industries and end up becoming reliant on countries such 
as China for these materials.
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    \4\ Ibid, at 4.

We urge Congress to act to protect over 65,000 American freight rail 
manufacturing jobs. Given current economic conditions, the U.S. 
industry remains concerned that CRRC could see this as a prime 
opportunity to move into the U.S. market more aggressively and pursue 
breaking into the freight market. Representatives Schneider and LaHood 
have introduced legislation, H.R. 2289, that would provide short-term 
investment tax credits to encourage the replacement or modernization of 
North America's freight railcar fleet with higher-capacity, more fuel-
efficient vehicles. This legislation aids in the stabilization of jobs 
in the railcar manufacturing industry in response to the COVID-19 
pandemic and includes proper safeguards to ensure that CRRC does not 
take advantage of federal taxpayer dollars.

Ensuring American Freight Industry Stays Competitive

While the RAILCAR Act is an important step to jumpstart the industry 
after the effects of the pandemic, more is needed. Over the past few 
years, RSA has worked closely with Obama Administration, Trump 
Administration, and now Biden Administration to educate them on the 
threats of Chinese SOEs in the rail sector. We appreciate efforts to 
take some measures to curb these threats including placing Section 301 
tariffs and the U.S. Trade Representative's (USTR) investigations into 
China's technology transfer and intellectual property theft in this 
sphere. We also applaud the fact that USTR has put tariffs on most rail 
parts from China. While important, these steps are not enough to put an 
end to CRRC's goal of dominating our rail sector and permanent policy 
action is needed.

RSA is in the process of working with leaders in Congress in drafting 
much needed legislation with input from industry stakeholders and 
bipartisan support in Congress. The legislation would put North 
American content standards in place, prohibit sensitive technology from 
Chinese SOEs from riding on freight railcars and ensure freight 
railcars are manufactured or assembled in North America. We urge 
Congress to act to help to protect the freight industry from foreign 
dominance and ensure the industry remains viable for generations to 
come. Permanent solutions will help to ensure the North American 
freight rail market remains competitive and requires those in the 
industry to play fairly.

Thank you again for the opportunity to submit testimony and we stand 
available as a resource if you have any questions.

Respectfully submitted,

Erik Robert Olson
Vice President

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