[Senate Hearing 117-622]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 117-622

                  SUPPLY CHAIN RESILIENCY: ALLEVIATING
                       BACKLOGS AND STRENGTHENING
                           LONG-TERM SECURITY

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON INTERNATIONAL TRADE, 
                   CUSTOMS, AND GLOBAL COMPETITIVENESS

                                 of the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION
                               __________

                             JUNE 15, 2022
                               __________






              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


             
                                     
                                     

            Printed for the use of the Committee on Finance 
                                 ______

                  U.S. GOVERNMENT PUBLISHING OFFICE 

55-724--PDF               WASHINGTON : 2024 

















                          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
                                 ______

                 Subcommittee on International Trade, 
                  Customs, and Global Competitiveness

                  THOMAS R. CARPER, Delaware, Chairman

RON WYDEN, Oregon                    JOHN CORNYN, Texas
DEBBIE STABENOW, Michigan            CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         ROB PORTMAN, Ohio
SHERROD BROWN, Ohio                  PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado          TIM SCOTT, South Carolina
ROBERT P. CASEY, Jr., Pennsylvania   STEVE DAINES, Montana
MARK R. WARNER, Virginia             TODD YOUNG, Indiana
CATHERINE CORTEZ MASTO, Nevada       BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                                  (II) 
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  





                                  
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Carper, Hon. Thomas R., a U.S. Senator from Delaware, chairman, 
  Subcommittee on International Trade, Customs, and Global 
  Competitiveness, Committee on Finance..........................     1
Cornyn, Hon. John, a U.S. Senator from Texas.....................     4

                               WITNESSES

Paul, Scott N., president, Alliance for American Manufacturing, 
  Washington, DC.................................................     6
Potvin, Douglas L., chief financial officer, Trinity Logistics, 
  Inc., Seaford, DE..............................................     8
Frenkel, Orit, Ph.D., founder and CEO, American Leadership 
  Initiative, Washington, DC.....................................    11
Louie, Gilman, chief executive officer, America's Frontier Fund, 
  Arlington, VA..................................................    12

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Carper, Hon. Thomas R.:
    Opening statement............................................     1
    Prepared statement...........................................    39
Cornyn, Hon. John:
    Opening statement............................................     4
    Prepared statement...........................................    40
Frenkel, Orit, Ph.D.:
    Testimony....................................................    11
    Prepared statement...........................................    41
    Responses to questions from subcommittee members.............    44
Louie, Gilman:
    Testimony....................................................    12
    Prepared statement...........................................    45
    Responses to questions from subcommittee members.............    48
Paul, Scott N.:
    Testimony....................................................     6
    Prepared statement...........................................    52
    Responses to questions from subcommittee members.............    58
Potvin, Douglas L.:
    Testimony....................................................     8
    Prepared statement...........................................    59
    Responses to questions from subcommittee members.............    63

                             Communications

American Chemistry Council.......................................    65
Center for Fiscal Equity.........................................    66
National Electrical Manufacturers Association....................    67
National Restaurant Association..................................    69

 
                  SUPPLY CHAIN RESILIENCY: ALLEVIATING
                       BACKLOGS AND STRENGTHENING
                           LONG-TERM SECURITY

                              ----------                              

                        WEDNESDAY, JUNE 15, 2022

                           U.S. Senate,    
           Subcommittee on International Trade,    
               Customs, and Global Competitiveness,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 3 p.m., in 
Room SD-215, Dirksen Senate Office Building, Hon. Thomas R. 
Carper (chairman of the subcommittee) presiding.
    Present: Senators Wyden, Menendez, Brown, Casey, 
Whitehouse, Cortez Masto, Grassley, Cornyn, Thune, and Young.
    Also present: Democratic staff: Evan Giesemann, Tax and 
Trade Policy Advisor for Senator Carper; and Naomi Zeigler, 
Legislative Aide for Senator Carper. Republican staff: Andrew 
Cooper, Legislative Assistant for Senator Cornyn; and Bailey 
McCue, Legislative Aide for Senator Cornyn.

OPENING STATEMENT OF HON. THOMAS R. CARPER, A U.S. SENATOR FROM 
   DELAWARE, CHAIRMAN, SUBCOMMITTEE ON INTERNATIONAL TRADE, 
   CUSTOMS, AND GLOBAL COMPETITIVENESS, COMMITTEE ON FINANCE

    Senator Carper. Good afternoon, everybody. It is my 
pleasure to call this hearing before the Senate Finance 
Subcommittee on International Trade, Customs, and Global 
Competitiveness to order.
    I want to give a special ``thank you'' to our witnesses for 
joining us to testify today from across the country, and a 
special ``thank you'' to Ranking Member Cornyn and his team for 
working with our staff and with me to plan this hearing, which 
is focused on supply chain challenges, an issue that continues 
to frustrate me, and it frustrates the folks across our country 
and around the globe.
    Today's hearing will offer a chance for us to examine why 
supply chain bottlenecks have developed since the onset of the 
pandemic, and to look at what kind of policies might improve 
the long-term resiliency and the security of our supply chains 
to prevent these types of shortages in the future.
    Many folks have probably heard about supply chain problems 
and know that supply chains have something to do with keeping 
our economy moving. But I am sure that a lot of folks are still 
wondering what we mean exactly when we say ``supply chains.''
    Here is what we are talking about. Supply chains include 
every step of the process to manufacture and process a product 
and move it from point A to point B. Sometimes that is halfway 
across town; sometimes it is halfway across the world in order 
to move goods from a person's wish list to their doorstep.
    One of the reasons why we are eager to address these issues 
at today's hearing is because Americans are eager to address 
these issues. In 2022, the effects of supply chain challenges 
are not some distant policy issue to folks at home. Americans 
are seeing it play out in empty shelves at their local grocery 
stores that once held baby formula, and gifts delayed and 
delivered weeks after a birthday has passed, or new cars and 
technology that they have saved up for years to buy but cannot 
find on the market.
    With Father's Day coming up this weekend--any fathers in 
the room? Happy Father's Day a couple of days early. But I am 
reminded that about a month or so ago, Mother's Day was 
approaching. Going shopping for a Mother's Day card, I went to 
our local Rite Aid pharmacy to pick one up for my wife of 36 
years, mother of our two sons, at a store where we have shopped 
for years, with a huge selection of anniversary cards, birthday 
cards, holiday cards, you name it. I walked up and down an 
entire Mother's Day card section--empty. I found an employee 
and asked what was going on. And she said, ``This year's 
Mother's Day cards never made it to the store.'' I said, ``Not 
even one?'' She said, ``Not even one.''
    That was when I knew we had a problem. That is just one 
example of the supply challenges happening all across our 
country, and Americans and this committee want to know how we 
can get back on track.
    So today we are going to explore how we got to this point 
and what we can do to ensure that we are better prepared in the 
future. I have long believed that one of the jobs of 
policymakers is to create a nurturing environment for job 
creation and job preservation so that we may enjoy economic 
growth.
    And one key to maintaining that nurturing environment is 
improving the dependability of our supply chains. And while we 
know these tremendous supply chain backlogs that we are seeing 
today come largely from the economic shock of the pandemic, 
many systemic vulnerabilities existed long before COVID. 
Fundamental weaknesses in our global logistic systems are the 
result of a 
decades-long focus on supply chains' efficiencies, just-in-time 
manufacturing, and reliance on foreign adversaries for a wide 
array of goods.
    The result--we have been joined by Senator Cornyn. John, 
thank you for being a big part of this, and thank you and your 
team for working with us preparing for this day. He has been 
busy on some other fronts, and we are very grateful for his 
leadership there. We postponed this hearing for a couple of 
weeks because of his need to return to Texas for the terrible 
tragedy there.
    But the result is, the systems have cracked under the 
pressure of the worst pandemic we have endured in over 100 
years. As Albert Einstein used to say--along with other 
things--Einstein used to say the definition of insanity is to 
do the same thing over and over again and expect a different 
result. That is not my favorite Einstein quote. My favorite 
Einstein quote is ``in adversity lies opportunity.'' That has 
guided me my whole life--in adversity lies opportunity--and it 
should guide us in this case as well.
    These challenges have introduced great adversity but some 
real opportunity for us to rethink how we move goods across the 
globe and create a system that better serves the American 
people. And that starts with investing in our own critical 
infrastructure. I am proud to say that every member of this 
committee, especially the guy here on my left--we have already 
taken some historic steps through the passage of a bipartisan 
infrastructure law to, among other things, improve the 
efficiency of our ports and make our roads and bridges safer, 
while expediting the movement of goods and people across 
America.
    However, it is clear that infrastructure investments are 
only one piece of the puzzle. Another piece is expanding 
domestic investments in the technologies we rely upon for 
semiconductors, for renewable energy products, so that we don't 
find ourselves over-
relying on a foreign adversary, or jeopardizing our national 
security for the sake of the supply chains.
    Through these investments, we can create jobs and support 
American manufacturing. That is a real win-win where I come 
from. A good place to start is the China Competition 
legislation currently being reconciled between the two chambers 
of Congress. And I again commend our friend and Ranking Member 
Cornyn for his leadership in supporting CHIPS funding, among 
other things, through that process.
    And while domestic investment is a key part of shoring up 
our supply chains for years to come, we have also come to focus 
on a fundamental principle central to the supply chain 
discussion, and that is working together with our global 
partners.
    As leaders of the subcommittee, Senator Cornyn and I have 
repeatedly called for greater U.S. engagement in leadership 
across the globe, especially--especially--in the Asia-Pacific 
region. By reaching out to our allies across the globe and 
bringing more nations into a shared economic framework, we can 
improve the security and resiliency of our supply chains, 
leading to a wider range of products and lower costs for 
American consumers.
    That is part of the reason why I was happy to see President 
Biden announce the start of an Indo-Pacific Economic Framework 
to bring more trading partners into a stronger, fairer global 
economy and create even more diverse, resilient supply chains. 
Ultimately, building secure and flexible supply chains requires 
both economic cooperation with our allies across the globe and 
more strategic investment in critical industries and workers 
here at home.
    So, we look forward to hearing from our witnesses with 
respect to their insight on solutions to these challenges so 
that the next generation of American families will not have to 
worry about the empty shelves. They will not have to worry so 
much about higher prices, because we will be ready for what is 
to come.
    Once more, my thanks to our ranking member, our respective 
staffs, and especially to our witnesses who are appearing 
before us today.
    And with that, I will turn it over to Senator Cornyn for 
any comments he would like to make.
    [The prepared statement of Senator Carper appears in the 
appendix.]
    Senator Carper. Senator Cornyn?

            OPENING STATEMENT OF HON. JOHN CORNYN, 
                   A U.S. SENATOR FROM TEXAS

    Senator Cornyn. Mr. Chairman, thank you for calling this 
hearing. It was a pleasure to work with you and your staff in 
organizing it. It is a timely and important topic. Thank you to 
all of our witnesses for being here, virtually and otherwise.
    This subcommittee continues its work in exploring the 
geopolitical benefits and consequences of America's trade 
policy with the world, and in particular our foreign 
adversaries like China and Russia. The topic of resiliency and 
critical supply chains is an important one. And as the COVID-19 
pandemic revealed, it awakened many of us to our dependence on 
foreign adversaries for critical goods--or from friends, but in 
a way that our foreign adversaries could disrupt.
    We need to reinforce the rules-based international trading 
system for those nations that at least attempt to abide by free 
trade agreements like the Comprehensive and Progressive Trans-
Pacific Partnership.
    I think I mentioned to you, Mr. Chairman, in my trip to 
Japan recently with Senator Cardin and Senator Hagerty, every 
single government official we met with talked about the Trans-
Pacific Partnership. And we told them, at least for ourselves, 
that we regretted--I regretted that we did not engage when we 
had a chance on that. But sometimes you learn lessons the hard 
way.
    The administration's Indo-Pacific Economic Framework is a 
positive step in the right direction, but we cannot play games 
with our Nation's survival by outsourcing the crown jewels of 
our economy to nations like China, which have used our free 
market system against us while not playing by the rules 
themselves.
    Nearly 20 years ago, our government opened the door to do 
business in China, and industry did what it does best: found a 
market, captured it, and achieved efficiency and innovation. 
What we have learned since is that the Chinese Communist Party, 
not its people, perverted that good will through theft and 
control to achieve a strategic advantage. Our own people and 
home-town industries suffered as a result.
    Now we need to come together--labor, business, and 
government--as one Nation and put aside past disagreements to 
find the right balance in preserving our critical supply chains 
while maintaining strong trade relations. This includes 
providing incentives in some cases, like the CHIPS for America 
Act I authored with Senator Warner--and Senator Wyden is part 
of it as well--to bring our semiconductor production back home 
to America. It means reducing the regulatory burdens on 
American businesses that want to thrive in our domestic and 
foreign markets and abide by our rules-based international 
trading system. And it means having an honest look and 
conversation about the challenges we face.
    For example, a few weeks ago the Senate Intelligence 
Committee had a hearing where a former Trump administration 
official highlighted that U.S. financial investments in China-
domiciled companies totaled $2.3 trillion in market value. It 
is pretty clear that U.S. companies have fueled China's 
economic rise. Former National Security Advisor H.R. McMaster 
recently said that last year venture capital firms invested 
$114 billion in Chinese companies that are developing dual-use 
and sensitive technologies that are going to be weaponized 
against us, or are already aiding and abetting Russians.
    I believe it is time to have a conversation, an honest 
conversation, about the role that American investment has 
played in building the Chinese economy, especially in the areas 
of critical supply chains and our over-reliance on those supply 
chains in areas such as semiconductors.
    The first step that Senator Casey and I have proposed is by 
granting the U.S. Government the authority to have visibility 
into those investments in the supply chains of our foreign 
adversaries through the establishment of an interagency 
committee led by the President that provides for a whole-of-
government approach in responding to Chinese economic coercion.
    That means, at minimum, a mandatory notification and 
circulation of investments by recipients of taxpayer funds 
designed to compete with China, such as those envisioned in the 
Bipartisan Innovation Act and the CHIPS for America Act, which 
will serve as the basic guard rails for protecting those 
investments.
    This week, Senator Casey and I, along with many of our 
colleagues, have introduced a revised version of our National 
Critical Capabilities Defense Act, demonstrating our good faith 
in trying to come up with a solution that actually works, and 
that can gain the necessary support.
    This bill incorporates input from industry and represents a 
positive step in the push to safeguard our critical 
capabilities. I look forward to hearing from more stakeholders 
in the coming days, and I am eager to discuss that topic with 
today's witnesses as well.
    We have before us Mr. Louie, who comes from the 
intelligence community, to provide us a national security 
perspective. Mr. Potvin, I believe your intimate knowledge of 
the supply chain and logistic backlogs will be of great 
importance. Dr. Frenkel, your experience in government will 
help us understand the rules-based international trading system 
and what our agreements will mean and what they do not mean 
going forward. And, Mr. Paul, you bring in valuable insight 
from a coalition of both the labor and manufacturing 
industries.
    So I look forward to hearing your testimony and answers to 
questions that follow.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Cornyn appears in the 
appendix.]
    Senator Carper. Thank you, Senator Cornyn.
    We are joined by Senator Bob Casey, to my right, Senator 
Casey from Pennsylvania. I had the pleasure of serving as 
Governor with his father, and I have the pleasure of serving in 
the U.S. Senate with his son. How lucky can one guy be? It is 
great to see you, Bob.
    Our first witness today is Mr. Scott Paul, who is the 
president of the Alliance for American Manufacturing. The 
Alliance for American Manufacturing--it is a partnership, isn't 
it? It is a partnership between the U.S. Steelworkers union and 
some of America's leading manufacturers. I just find that very 
refreshing. It is kind of like sort of the partnership that the 
three of us have on a lot of issues as well. As president, Paul 
works to support domestic manufacturing initiatives so that 
American workers and businesses can thrive.
    Mr. Paul is the past chair of the National Skills Coalition 
and sits on the board of the visitors of the political science 
department at Pennsylvania State University, the home of the 
Nittany Lions. This Buckeye welcomes the Nittany Lion to this 
hearing.
    Mr. Paul, you have the floor. Please proceed.

      STATEMENT OF SCOTT N. PAUL, PRESIDENT, ALLIANCE FOR 
            AMERICAN MANUFACTURING, WASHINGTON, DC

    Mr. Paul. Thank you, Chairman Carper, Ranking Member 
Cornyn, and Senator Casey. We will punt on the football 
opportunities here and get to the testimony.
    On behalf of the Alliance for American Manufacturing--which 
you indicated is a partnership of the Steelworkers and domestic 
manufacturers--thanks for this opportunity to testify today on 
an issue of vital importance to our economic and national 
security.
    Now, the last several years have made all Americans 
painfully aware of the tragic inadequacy of our deteriorated 
industrial capabilities and broken supply chains. The pandemic 
and its economic shock waves also exposed the dangerous 
reliance on global suppliers for many consumer and commercial 
products, revealing that the United States is ill-equipped to 
produce enough semiconductors and other products for everyday 
life, let alone the quantities needed to address a future 
emergency.
    The frailty of on-demand global supply chains and our utter 
reliance on them has left us dangerously exposed for the past 2 
years, and unprepared for future shocks. These disruptions 
should be viewed through the lens of public policy decisions 
that both facilitated, and in some cases actively encouraged, 
the offshoring of domestic production and critical supply 
chains.
    Ninety thousand American manufacturing facilities have 
closed their doors since the 1990s. China surpassed the United 
States as the world's largest manufacturing nation in 2010. 
Imports have outstripped GDP and domestic production growth 
over the past 2 decades.
    This replacement has led to the loss of 5 million good 
middle-class jobs and devastated communities across our Nation, 
and it has left us increasingly dependent on imports--often 
from adversarial countries like China and Russia--for 
everything from consumer goods and advanced technology products 
to lifesaving personal protective equipment.
    In America, we consume 20 percent of the world's goods, but 
we make far less than that: ten percent of the world's electric 
vehicles, 7 percent of lithium ion batteries, 12 percent of 
semiconductors, and 4 percent of printed circuit boards, for 
example. There is only one major domestic manufacturer of 
electrical steel needed to build out our energy grid, and there 
are many other examples of greatly diminished capacity in 
critical industries.
    To address current supply chain disruptions as well as 
anticipate and prepare for future crises, we must acknowledge 
how we got here and what went wrong. The pandemic has exposed 
in rather dramatic fashion the years of flawed tax, trade, 
procurement, and other economic policies that put the United 
States in a perilous position of over-dependence on imports.
    We recognize that the United States has important security 
and trade relationships with our allies, and we can and should 
utilize those where it makes sense. But our vulnerabilities 
reflect an outdated notion of the benefits of hyper-
globalization where our consumers, workers, domestic 
businesses, and national security suffer.
    We must break the vicious cycle of implementing policies 
that reward imports over domestic production. I cite two 
reports by former Homeland Security Secretary Tom Ridge and 
retired Brigadier General John Adams in my written testimony, 
and I would encourage the subcommittee to study these. The 
concerns they highlighted about our supply chains a decade ago 
have only grown; for instance, cancer patients facing scarcity 
of contrasting materials for essential medical imaging revealed 
last month, or the Chinese Communist Party threatening to 
weaponize rare earths. And these examples go on and on.
    Rebuilding supply chains will chart a course for a stronger 
future and create millions of new well-paid jobs along the way. 
We must acknowledge that supply chain resiliency is not a 
challenge that the private sector alone can fix. There is an 
appropriate role for government to provide leadership, 
coordination, a supportive policy framework, and funding 
directed to domestic production expansion where the 
vulnerabilities are most critical.
    That is why we support swift and successful conclusion of 
conference committee work on the competitiveness legislation 
that Senator Carper mentioned. Merging the most attractive 
provisions from each of the House and Senate bills offers the 
opportunity to create a long-overdue policy framework for 
supply chain security, resiliency, and revitalization.
    AAM has outlined our conference priorities in a letter to 
House and Senate leaders, including the CHIPS Act; expanding 
manufacturing research, development, and deployment efforts; a 
supply chain resiliency fund; strengthening trade enforcement 
tools, including the Leveling the Playing Field Act 2.0; as 
well as screening outbound investments in critical sectors, as 
Senator Cornyn mentioned.
    We have offered additional detailed policy recommendations 
in my written submission. And I would just close with this 
thought: I think we can have a brighter future for supply 
chains and manufacturing. We see examples of where public 
policies have invited new investments over the past several 
years, and I cite many of these examples in my written 
testimony.
    Just a generation ago, some economists predicted none of 
this--large new factories, or surges in manufacturing jobs--
would ever be possible again due to automation and import 
competition. But we should not pretend that a brief focus on 
supply chains alone will build on this momentum. It must be a 
sustained effort. Public policy support for American 
manufacturing is crucial to tackling supply chain challenges, 
and we look forward to working with you to ensure a better 
future.
    Thanks for the opportunity to testify at today's hearing.
    [The prepared statement of Mr. Paul appears in the 
appendix.]
    Senator Carper. We thank you, Mr. Paul. Well done. Thank 
you so much.
    Our next witness is Doug Potvin, the chief financial 
officer of a company called Trinity Logistics. Trinity 
Logistics is a third-party logistics provider that is 
headquartered in Seaford, DE, and is a company that operates 
nationwide.
    People say, where is Seaford, DE? What is it famous for? 
Seaford, DE was the home of the world's first nylon plant. It 
was established by the DuPont Company. Not that many years ago, 
4,000 people worked there forever. I think I shook every one of 
those hands many times. And we are grateful for what DuPont has 
done for our State and Nation, really, and especially in the 
Seaford area.
    For the past 40 years, Trinity Logistics has offered 
freight management, they have offered transportation, and they 
have offered innovative supply chain solutions. And as CFO, Mr. 
Potvin is responsible for overseeing financial reporting and 
payment management, as well as risk management. He also oversaw 
the implementation of Trinity's information technology 
infrastructure.
    And before I say, Mr. Potvin, that you have the floor, I 
understand you are joined today by a couple of extraordinary 
women whose first name is Sarah, one of whom happens to be your 
wife, and the other of whom happens to be the president of the 
company. And I am just going to be watching carefully to see if 
any lips move when you speak. [Laughter.]
    So, we will see how that works out. We welcome both Sarahs, 
and we especially welcome you as the front man. I am anxious to 
hear what you have to say. Welcome, and great to see you, Doug. 
Thanks. Please proceed.

        STATEMENT OF DOUGLAS L. POTVIN, CHIEF FINANCIAL 
           OFFICER, TRINITY LOGISTICS, SEAFORD, DE

    Mr. Potvin. Let me introduce myself as the CFO, chief fun 
officer, of Trinity Logistics, because we like to have fun 
while we are working hard.
    Chairman Carper, Ranking Member Cornyn, Senator Casey, 
thank you for the opportunity to speak with you today regarding 
how policymakers and business leaders are addressing the 
existing backlogs in the supply chains in the short term to 
bring more resilient supply chains in the long term.
    My name is Doug Potvin, and I am the chief financial 
officer of Trinity Logistics, a third-party logistics company 
headquartered in Seaford. I am privileged, honored, and humbled 
here today representing Trinity Logistics; our association, the 
Transportation Intermediary Association; and the entire third-
party logistics industry that we serve.
    We serve as an intermediary, solving the logistical needs 
of our shipper customers by sourcing capacity from motor 
carriers and vendor partners. We are proud to report today that 
this past year we have generated over a billion dollars in 
revenue, have arranged over half a million shipments, and 
offered 350 full- and part-time jobs. We truly are a proud 
Delaware company.
    From Charles Dickens's novel A Tale of Two Cities, ``It was 
the best of times and it was the worst of times. A season of 
light and a season of darkness. A spring of hope and a winter 
of despair.''
    Over the last 2 years, the same can be said of the 
international supply chain and, from our perspective closer to 
home, the domestic transportation industry. In March of 2020, 
as both domestic and international companies shuttered 
businesses, including the shuttering of the port cities and 
operations in China, and the fact that most consumers were at 
home facing an uncertain future, freight volumes plummeted. 
Motor carrier capacity increased dramatically due to the steep 
drop in goods moving, and the transportation market saw prices 
to motor carriers fall.
    In fact, Trinity Logistics was mentioned on a Facebook post 
that stated we were earning an average gross margin of 60 
percent, which was simply wrong. In addition, a small number of 
motor carriers came to Washington, DC and demanded rate 
transparency. Interestingly, after the businesses, ports, and 
countries opened up, freight volumes began to skyrocket, 
available market capacity tightened up, and rates paid to motor 
carriers increased to reflect the change in the market 
conditions. Demand for rate transparency went silent.
    The pricing in our industry is driven by market 
conditions--supply and demand--and no large-scale entity on 
either side of the equation has enough market share to drive 
rates. In addition, each shipment has its own variable 
considerations to take into account, including everything from 
available capacity in the various regional markets, lead time 
for products, dwell time of shippers and consignees, 
commodities being moved, and the type of equipment needed. All 
this happens in real time to ensure goods get to market, 
keeping the economy moving forward.
    Now more than ever, the role of the third-party logistics 
professionals is more valuable. Companies like Trinity and the 
other 28,000 licensed property brokers are working overtime to 
ensure that essential goods continue to be delivered in an 
efficient manner to meet their customers' and consumers' needs.
    Our industry, along with the motor carriers, is a main 
component of why, during the crisis and disruption, the supply 
chain bent but never broke.
    Turning to the U.S. Senate's and House of Representatives' 
bipartisan passage of the Infrastructure Investment and Jobs 
Act, a historic investment in transportation and 
infrastructure, we were very pleased to see how quickly the 
Federal Motor Carrier Safety Administration established the 
Safe Driver Apprenticeship Pilot Program. Trinity hopes this 3-
year pilot program will be successful and made permanent so 
that individuals ages 18 to 20 will explore interstate 
transport careers.
    Trinity also believes that if the spending under the 
investment act ramps up in the near future, it will provide 
enough support in the economy to keep the motor carriers 
employed as we are starting to see freight volumes begin to 
pull back over the last 30 to 60 days. Trinity would also like 
to thank Chairman Carper, Ranking Member Cornyn, Senator 
Menendez, and Senator Tim Scott for their support in offering 
legislation and getting the Senate to act unanimously in 
passing the Customs Trade Partnership Against Terrorism Pilot 
Program Act. We appreciate it very much. Thank you.
    Currently, the vaccine mandate for truck drivers coming 
into the country to deliver freight from Mexico and Canada 
continues. These professional drivers spend most of their 
professional time in their truck cab, presenting a zero-percent 
risk of spreading COVID-19. This should be lifted immediately 
to open up capacity and shorten the amount of time it takes for 
goods to move across borders.
    Another issue that greatly impacts not only the efficient 
movement of goods, but also highway safety is lack of a Federal 
motor carrier safety selection standard. Currently, because of 
broken safety rating systems from the Federal FMCSA, almost 90 
percent of trucking companies are considered unrated. That 
there are no requirements in place before selecting your 
trucking company drastically impacts the overall safety on our 
Nation's highways.
    The latest report from the National Highway Traffic Safety 
Administration noted that the number of accidents involving 
commercial motor vehicles increased 13 percent in 2021. The 
status quo is not working, and highway safety needs to be 
improved.
    Trinity Logistics and our trade association, TIA, fully 
support legislation to create a motor carrier safety selection 
and to amend the safety rating process.
    The U.S. trucking spot-market indications have inflected 
toward weaker and more normal conditions, but we will see what 
the future holds and how that trend continues. Hopefully, as a 
result of this meeting and coordinated action taken by the 
United States, our trading partners, manufacturers, and supply 
chain vendors, our Nation has become resilient and will 
continue to be when facing similar conditions of uncertainty.
    And again, thank you for your time today, and I look 
forward to answering any questions you may have.
    [The prepared statement of Mr. Potvin appears in the 
appendix.]
    Senator Carper. Thank you. Thanks for that testimony and 
for joining us today.
    Our third witness is Dr. Orit Frenkel. Orit; I have never 
met an Orit before. Where did that name come from?
    Dr. Frenkel. It actually is Israeli.
    Senator Carper. Israeli? Okay; well, good. Welcome.
    She is cofounder of the American Leadership Initiative, an 
organization founded to advocate for American leadership in 
both trade and foreign policy. Orit began her career with the 
Office of the U.S. Trade Representative--who was the Trade Rep 
when you started working there?
    Dr. Frankel. Clayton Yeutter.
    Senator Carper. She was a Director for Trade in High-
Technology Products and Deputy Director for Trade with Japan. 
Prior to cofounding ALI, she served as the senior manager for 
General Electric's global affairs and was responsible for 
advising GE on trade and investment policy in Asia.
    Dr. Frankel, we are glad you are here. Please proceed. You 
have the floor.

       STATEMENT OF ORIT FRENKEL, Ph.D., FOUNDER AND CEO,  
         AMERICAN LEADERSHIP INITIATIVE, WASHINGTON, DC 

    Dr. Frenkel. Thank you so much to the committee. American 
Leadership Initiative really appreciates the opportunity to 
testify. Our mission is to put our country and citizens on the 
right trajectory for the 21st century, to renew approaches to 
trade and foreign policy by strengthening global alliances and 
institutions, doubling down on values, and emphasizing 
inclusive and sustainable growth at home and abroad.
    Current supply shortages have raised awareness of the need 
to diversify supply chains and reduce U.S. dependency on 
adversarial and unreliable regimes. They have spurred 
bipartisan momentum to shore up American competitiveness and 
manufacturing, which we see in the bipartisan innovation act, 
and we urge the conference to reach agreement and pass this 
important legislation.
    We should look for ways to streamline supply chains--
including encouraging full implementation of the WTO Trade 
Facilitation Agreement signed in 2017--and assist countries to 
digitize Customs documentation. Finally, we should explore 
eliminating some of our own China 301 tariffs, especially on 
consumer goods where they do not compete with American 
suppliers.
    The supply chain crisis offers the U.S. the unique 
opportunity to find the right balance between on-shoring and 
right-shoring, and creating sourcing patterns which support our 
economic and foreign policy goals.
    Friend-shoring is important, especially when moving key 
technologies out of China. The effort to coordinate 
semiconductor supply chains under the U.S.-EU Trade and 
Technology Council, as well as with Japan and Korea, shows how 
allies can work together to ensure that sourcing of key 
technologies stays in countries that are reliable and share our 
values.
    Concerns about timely access to certain goods is an 
argument for near-shoring. Last week the U.S. launched an 
initiative to encourage private-sector investment in the 
Northern Triangle countries to encourage economic development 
and reduce the incentive for migration.
    To expand sourcing in that region, the U.S. must invest in 
capacity building to upgrade infrastructure, and expand trade 
facilitation. This initiative can be a model for U.S. sourcing 
in Africa and the rest of Latin America to counter China's 
heavy investment in those regions.
    U.S. supply chain policy should be used to advance U.S. 
standards. The newly launched Indo-Pacific Economic Framework, 
IPEF, has a pillar focused on supply chain resiliency and seeks 
to advance labor, environmental, and digital standards in Asia, 
giving those countries an alternative to China's regressive 
standards.
    To expand those sourcing partnerships, the U.S. will need 
to, again, invest in capacity building to train workers, raise 
standards, and partner with the U.S. private sector. We have 
suggested offering IPEF countries that meet key standards a 
preferred supplier status, allowing their goods to be expedited 
for U.S. Customs.
    The Uyghur Forced Labor Prevention Act, going into effect 
next week I believe, seeks to ensure that imports into the U.S. 
from Xinjiang are not produced with forced labor. This 
restriction is leading U.S. companies to find new sourcing 
destinations, and is an example of how the U.S. can advance 
labor rights and human rights in the supply chain.
    Supply chains can also encourage green sourcing. And in a 
recent path-breaking agreement on steel and aluminum, the U.S. 
and EU agreed to address carbon intensity and overcapacity of 
high-carbon steel and aluminum. This arrangement can also be a 
model to achieve low-carbon production in other sectors.
    China's Digital Silk Road has brought authoritarian digital 
standards of surveillance, monitoring, and censorship. The U.S. 
must be a standard-setter in the digital space by negotiating 
agreements and offering countries its model of transparency, 
openness, and democracy.
    The U.S. should continue to strengthen relationships with 
allies and expand its network of plurilateral arrangements to 
create new opportunities for friend-shoring, near-shoring, and 
supplier resiliency. Rethinking supply chains offers the 
opportunity to build new sourcing paradigms that protect key 
technologies, pursue American standards, benefit American 
consumers and workers, and advance U.S. values.
    Thank you.
    [The prepared statement of Dr. Frenkel appears in the 
appendix.]
    Senator Carper. Thank you, Dr. Frenkel. Thanks for your 
presence today. Thanks very much for your testimony.
    Finally, Gilman Louie, chief executive officer and co-
founder of America's Frontier Fund--I believe a public-private 
partnership created to ensure that America remains the next 
wave of technology innovation. Mr. Louie previously cofounded 
and served as CEO of In-Q-Tel, a venture capital fund created 
to invest in new technologies critical to national security.
    Mr. Louie currently serves as a member of the President's 
Intelligence Advisory Board, among many other distinctions.
    Mr. Louie, it is great to meet you today, and you have the 
floor. Welcome.

      STATEMENT OF GILMAN LOUIE, CHIEF EXECUTIVE OFFICER,  
            AMERICA'S FRONTIER FUND, ARLINGTON, VA 

    Mr. Louie. Thank you, Chairman Carper, Ranking Member 
Cornyn, and members of the committee, for inviting me here 
today. It is an honor to serve as a witness and to share my 
perspectives on supply chain resiliency, national security, and 
emerging technologies.
    I am the CEO of America's Frontier Fund, a new nonprofit 
public-private investment fund focused on deep technologies and 
platforms critical to the security and prosperity of the United 
States and its allies. I am here in my personal capacity, not 
on behalf of the U.S. Government or any of my other 
affiliations.
    After serving on the National Security Commission on 
Artificial Intelligence, I am convinced that the United States 
faces a new full-spectrum great-power competition against 
nation-states committed to out-investing and out-innovating the 
United States.
    Our supply chains are vulnerable. We are losing our lead in 
technologies, and our future is at risk. We need all of America 
engaged in this competition. We need the technologists, the 
philanthropists, the investors, the hardworking Americans from 
Wall Street to Silicon Valley, and the entire heartland in 
between--everyone.
    This is the U.S. Government's moment to do what Americans 
do best: that is, to lead. The time to act is now. But first we 
should ask how we got here in the first place.
    The challenges we face today arose from decades of just-in-
time lean manufacturing approaches to incrementally improve 
profits while moving our key manufacturing capabilities and 
risks offshore. We now have a highly efficient but increasingly 
brittle global supply chain. These well-intentioned decisions 
by individual corporations created challenges to our economic 
security through three market failures.
    First, underinvestment in foundational technologies has 
stifled innovation and deterred talent in key areas. Second, 
countries in East Asia have created artificially attractive 
offshoring investment environments. And third, the U.S. has 
high barriers to entry for domestic advanced manufacturing. 
Take microelectronics as an example. There are only two 
leading-edge microelectronic firms globally, and no leading-
edge fabrication facilities domestically, while overseas fabs 
are at real risk.
    Samsung's fabs in South Korea are within North Korea's 
artillery and missile range, and TSMC is producing the vast 
majority of cutting-edge chips. Ninety percent of the cutting-
edge chips are produced at TSMC, and it is only 110 miles off 
of China's missile batteries.
    Today the U.S. risks losing access to critical technology 
components that we have used every day. Russia's invasion of 
Ukraine highlights the perils of a fragile supply chain. And we 
do not want to become Russia if we find ourselves in a future 
conflict. Over the long term, we face an even greater risk of 
being surpassed technologically by China.
    Imagine you are driving along in the Texas hill country and 
your GPS suddenly stops working. It is a minor inconvenience. 
Unfriendly foreign nations, on the other hand, could shut down 
our weapons systems, prevent our planes from flying, cut off 
our communications, and inspect our information and our data. 
We invite trouble by falling behind our adversaries. The 
situation is unacceptable.
    Fortunately, there are still reasons for optimism. Threats 
create opportunities for revitalization, and now I will propose 
a framework with four pillars to move forward.
    First, we must reimagine U.S. manufacturing capabilities. 
Public funding should be a signal to unlock necessary private 
capital, that $45 trillion of American capital sitting could be 
invested here in the United States. We need to also expand our 
talent pools at all levels of education, not just STEM. We need 
the scientists and engineers, but we need the trades, the 
skilled labor, the technicians, the plumbers, the electricians, 
to rebuild our manufacturing capabilities here in the United 
States.
    Second, we must invest in promising technology hubs across 
America. Five coastal cities have generated 90 percent of the 
innovation jobs in the United States over the past decade. But 
the next wave of innovation must include more technology hubs 
beyond those coasts. There are 35 great technology centers 
between the coasts. We need to invest in those centers. 
Samsung's new facility in Texas is a step in the right 
direction, but there is more to do to unlock the potential of 
the American heartland.
    Third, we must disclose the risk of investing in 
authoritarian nations. It is important that companies and funds 
should report to their stakeholders and investors any 
partnerships that they have with adversarial nations. I believe 
we should add ``d'' for democracy to Wall Street's 
environmental, social, and governance criteria to help identify 
the material business risks created by investing in an 
autocratic nation. Whether a nation commits to democracy and a 
rules-based international trading order should shape American 
investments for the future.
    Finally, we need to deepen our technology engagement with 
allies and partners. This means prioritizing friend-shoring and 
creating new pathways through the cloud and other coalitions 
that are investing jointly in emerging technologies. Just as we 
have TSA Precheck for trusted fliers, we need similar systems 
for fast-
tracking allies and investors to do business here in the United 
States.
    In conclusion, we need to solve key market failures by 
reimagining U.S. manufacturing, investing in deep technologies, 
investing in promising technology hubs across the United 
States, redirecting capital to democracies, and deepening 
allied engagement.
    As this committee considers options for supply chain 
resilience and long-term technology leadership, you have an 
important role to play. With your leadership, this can be 
America's moment. Let's get everyone in this room and across 
our great country involved to seize this initiative.
    I look forward to your questions. Thank you.
    [The prepared statement of Mr. Louie appears in the 
appendix.]
    Senator Carper. Thank you so much, Mr. Louie. It is great 
to meet you, and we appreciate your presence and your 
testimony.
    One of the things that Senator Cornyn and I--and Senator 
Casey, and Senator Cortez Masto, and Senator Young, and Senator 
Whitehouse, who was here and is probably coming back--the thing 
we focus on is finding consensus on difficult issues, and we 
are pretty good at it.
    The Committee on Environment and Public Works that Senator 
Whitehouse serves on with me, we reported unanimously out of 
our committee infrastructure legislation on roads, highways, 
bridges, and climate change, unanimously. And we are doing the 
same thing on the Rural Water Resource Development Act.
    I do not know at the end of the day if we will be able to 
find consensus on some of the issues, all the issues that we 
are talking about here today, but I wanted to start off by 
asking each of you the same question.
    When we have a panel this good, this smart, this well-
versed on the issues--what do you think are a couple of areas 
where there is just really strong consensus and agreement? In 
the Navy, we used to, when we were in training, getting our 
training for whatever, doing Naval aviation in a classroom, the 
instructor going through stuff that we needed to know, he would 
stomp his foot on the issues that we were going to be tested on 
and had to really know how to conquer and take care of.
    But anyway, what are one or two of the issues where you 
think there is a real consensus here from the witnesses that 
you would say, ``We agree on this, and you ought to take that 
to heart?'' Do you want to lead us off, Mr. Paul?
    Mr. Paul. Absolutely, Senator Carper, and thank you for the 
question. I think there are a number of things, but let me 
highlight two or three.
    I think one that you have mentioned specifically--and I 
will state it more broadly--is investments in the 
competitiveness of our economy. Infrastructure, I think, was a 
first step, some of the provisions in the bipartisan innovation 
act that look at supporting research and development efforts 
and other supply chain resiliency efforts for manufacturing.
    Research and development, and not only that but deployment, 
which has been the missing part here. If you are just investing 
in R&D but you are not investing in producing that in America, 
that is leaking tax dollars. I think that is also important. 
And I think that we can find consensus on reducing dependence 
on adversaries for key goods that have commercial, military, 
and other applications that are essential to our future.
    I will just give a quick example here: lithium ion 
batteries. There is an issue where China has dominated the 
market. The government and State-related firms are behind. It 
will take a public investment to catch up to that. It is an 
energy storage feature of the future, and something that is 
going to be in demand. And I think if we focus on some efforts 
like that, we can make progress as we move ahead.
    Senator Carper. That's good. Thanks.
    Mr. Potvin, the same question: consensus. What do you see?
    Mr. Potvin. What I am hearing is simply, we cannot be 
relying on just a couple of sources providing us goods and 
services. The simple fact of the matter is it's based on a free 
market, and therefore we need to be able to source goods and 
raw materials from other places and not be worrying about 
whether there are semiconductor chip plants shut down in a 
foreign country, or the simple fact that we are relying on this 
company, or that company to provide them.
    One thing we like in the third-party logistics industry is 
the fact that no one player controls more than 4 percent of the 
entire market that we play in. The people have choices. They 
can go places. If something should happen, they can go to 
someone else and look for it.
    So we agree that there is consensus that the near-shoring, 
bringing domestic manufacturing back to the U.S., is very 
strong. It needs to happen so, again, we are not relying on 
single-sourcing, or even double-sourcing a monopoly out there. 
So, we do believe that the free market needs to grow and 
prosper in that nature.
    We also believe in the support of small industries to drive 
those types of businesses as well. So again, it is not just the 
large companies but again, we are sourcing items from different 
sectors of the economy, from different sizes of the economy as 
well. The owner-operators, people owning one truck, they 
answered the call very strongly and very powerfully when COVID 
first came. They were the ones primarily willing to go pick up 
the goods during the time of COVID. The larger companies' HR 
departments said, ``Hey, wait a second. Let's see where this is 
all going.'' So everything we see associated across the 
spectrum of the economic providers should also be consensus. We 
don't care where it comes from, as long as it comes from a 
great place working hard to support the consumers.
    Senator Carper. Thank you.
    Dr. Frenkel?
    Dr. Frenkel. Yes, I am going to agree with Mr. Paul on a 
number of things. I think here we need to really increase our 
investment in R&D. I think China is really outpacing us in that 
investment area, which is scary.
    We need to invest in key technologies like semiconductors, 
as we see in the CHIPS Act. We need to think strategically 
about what we want to friend-shore, near-shore, and on-shore.
    We need to think about what key technologies we want to 
decouple from China. We need to work with our allies, because 
we need to make sure the key technologies, in addition to being 
on-shore, are manufactured in countries that are reliable, and 
safe, and share our values.
    Lastly, we need to give other countries in Latin America or 
Asia an alternative to China, and reach agreements with them 
that can allow them to be preferred suppliers.
    Senator Carper. Thank you.
    Mr. Louie?
    Mr. Louie. I think we can all agree on what the list should 
be of the deep technologies the U.S. cannot afford to lose 
leadership position in. We have to continue to lead in 
microelectronics. We have to lead in AI and quantum sciences 
and advanced manufacturing. We cannot afford to have 5G happen 
again to us on the next 6G innovations of important 
communications capability. And we need to lead in the 
biosciences.
    I would also say we can also agree that a dollar invested 
in the U.S. is not the same as a dollar invested overseas in 
adversarial nations. Those other dollars have significant risks 
attached to them. And not only national security risks, but 
economic risks. Disclosure should be foundational for where we 
need to go to go forward, not just in public companies, but any 
public funds that are being used to fund technologies in 
adversarial nations.
    And finally, I think we all can agree that we need to 
actually extend the promise of the innovation economy to all of 
America. It cannot just be on the edges of our coasts. It 
really does need to involve every American at every level of 
education, to move forward not only our ability economically, 
but to maintain our national security.
    Senator Carper. That's good. Thank you. There is a lot of 
consensus here, and that was very helpful, so, thank you.
    Senator Cornyn?
    Senator Cornyn. Mr. Louie, I wanted to ask you about the 
proper balance between outbound investment for the United 
States, in terms of its investments in places like China.
    You heard me say that in the Intelligence Committee a few 
weeks ago we had an expert witness who pointed out that the 
market value of U.S. companies' investments in China is roughly 
$2.3 trillion. But as we know, China does not play by the 
rules. And when it comes to protecting our crown jewels--that 
is the balance we are trying to achieve, not to prevent 
investment in China or any other place. But we do not want to 
give them something we cannot afford to lose.
    What is the right balance, in your view?
    Mr. Louie. I think your points are well-taken. U.S. 
companies invest 100 times more in Chinese companies than China 
invests in American companies, to give you a sense of what that 
ratio is. I think the right balance here is--we have seen what 
took place in the days after the Ukrainian invasion. But 
American companies, for the most part, acted responsibly. They 
pulled back. They understood the dangers--not just to their 
brand, but to democracy--of having continued activity over in 
Russia.
    I think you need to give American companies the opportunity 
to make the right decision. But this is not the U.S. choosing 
to decouple from China. China has a date. They have a policy 
called Made in China 2025. They set the date. They are going to 
decouple. And our investment over there will be at risk.
    Now, we are not saying that it is not appropriate in 
certain industries for American capital to go to China to build 
great products for the rest of the world. Those companies have 
to make those decisions for themselves.
    But in areas of national security, where the technologies 
are political, in determining whether or not our systems are 
going to prevail against a competitor, or an adversarial 
system, we need to have sharp tools. We need to be decisive. 
And an industry needs to be able to get the signal quickly from 
government, with precision. We cannot use tools that are blunt. 
We cannot have our U.S. industries held back. But at the same 
time, U.S. industries have to be responsible not only to their 
stakeholders, but to democracy and the American public.
    Senator Cornyn. Again for Mr. Louie: we hear nearly every 
day about the need for ESG: environmental, social, and 
government analysis. Wall Street uses that term, and so do 
various companies. But you make an intriguing suggestion that 
we need to add a ``d'' to that for ``democracy.''
    How would that actually work? I mean, does the U.S. 
Government have a role in that? Or are we looking for good 
corporate citizens to include that? Or are we looking for Wall 
Street to try to do that for us?
    It just strikes me as a fascinating idea, but I do not know 
how you would implement it.
    Mr. Louie. I think a combination of things. So the first 
one is disclosure, right? If you are investing capital overseas 
in places that are at risk, where a country can simply make a 
decision to have a crackdown, and investors could lose 60 
percent of their market cap values overnight--American 
investors, by the way, American pension funds, American 
endowments that are at real risk. So how do you implement an 
ESG+D?
    The first one is disclosure.
    Number two, to educate investors of the risk. Investors 
will make good decisions. That is the whole principle of ESG. 
It is not about Chinese-style authoritarianism of telling 
companies what to do, but trusting our companies to do the 
right thing as long as stakeholders have visibility and the 
information they need to have good decisions be made.
    And finally, having corporate America and Wall Street set 
standards. I am a big believer in standard setting, and I think 
industry has something to say about that. The ``d'' part, how 
much of your capital is at risk? How much manufacturing is 
dependent upon another nation that can make your supply chain 
brittle? Every investor needs to understand what that risk 
factor is.
    Senator Cornyn. Thank you very much.
    Senator Carper. Thank you, Senator Cornyn.
    I will just run through the lineup here. Senator Menendez 
was here earlier, so he will be next in line. Senator Grassley 
was here earlier. He may be coming back. Senator Casey would be 
next after Senator Menendez, followed by Senator Cortez Masto, 
Senator Whitehouse, and Senator Young.
    So, Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman. Thank you for 
hosting this important hearing.
    Dr. Frenkel, thank you for hosting me at the American 
Leadership Initiative to introduce my Economic Statecraft for 
the 21st Century Act. It is a new whole-of-government approach 
to confront and compete with China's predatory international 
economic policy. Included in my legislation are provisions to 
prohibit the export of semiconductor manufacturing equipment to 
China, and to direct the State Department to coordinate with 
like-minded partners in securing global supply chains vis-a-vis 
China.
    Last month the President announced the Indo-Pacific 
Economic Framework, known as IPEF, one of its four pillars 
generally focusing on supply chain resiliency and coordination.
    So I see my Economic Statecraft bill and the President's 
IPEF as two sides of the same coin, dual efforts to revitalize 
the United States' leadership in the global economy.
    So, what else do you believe needs to be done to secure our 
supply chains around the world?
    Dr. Frenkel. Thank you, Senator. It was our pleasure to 
host you.
    So, I think IPEF is an excellent first start in terms of 
U.S. leadership in Asia, setting American standards and 
focusing on supply chain resiliency in that region. As I 
mentioned earlier, last week the administration launched an 
initiative with Latin America to look at standards, et cetera. 
And I think it would be great if that would be upgraded to be 
more like IPEF, and if we had a stronger initiative with those 
countries in our backyard.
    As you probably know, China is investing very heavily in 
Latin America at this point, buying ports and mines and key 
strategic infrastructure. So I think U.S. engagement and trade 
agreements with Latin America would be really important.
    I think the U.S.-EU Trade and Tech Council is an excellent 
initiative, and I think strengthening and doubling down on key 
technologies that we want to friend-shore and make sure stay in 
countries where we have strong alliances and shared values is 
very important.
    And that picks up on your point of looking at what 
technologies we want to on-shore. Some of those also need to be 
friend-shored. So I think that is important.
    So to my mind, I think the U.S. engaging in more 
plurilateral initiatives like IPEF is going to be very 
important. I also mentioned full implementation of the Trade 
Facilitation Agreement, which is a WTO agreement that was 
signed in 2017. Its implementation was paused for a couple of 
years because of the pandemic, and I think fully implementing 
that would be very helpful. It is an initiative to help, 
primarily, developing countries digitize their Customs 
processes and learn how to provide capacity building to them to 
really upgrade their supply chain initiatives and Customs 
processes.
    Senator Menendez. Thank you.
    Let me ask one other question further on IPEF. I applauded 
the President's leadership on economic engagement in the Indo-
Pacific. I was out there about a month ago, and I heard time 
and time again that our presence is important but our 
engagement economically is critically important.
    It is a good first step towards working with like-minded 
allies and partners to set global standards, improve 
competitiveness, and strengthen supply chains. However, I, 
along with 51 other Senators, sent a letter to President Biden 
urging him to include Taiwan in IPEF. Taiwan is a key trading 
partner of the United States, one with whom we have a strategic 
relationship that is intimately intertwined with our economic 
security, particularly as it relates to trade in 
semiconductors.
    Now, Taiwan was not included in the initial IPEF rollout, 
but I am hopeful that the recently announced U.S.-Taiwan 
Initiative on 21st Century Trade can result in a bilateral 
IPEF-like agreement.
    How beneficial would it be for our supply chain security if 
Taiwan were extended the same benefits and the same standards 
as other IPEF countries?
    Dr. Frenkel. I think it would be enormously successful. I 
mean, I understand--I mean, Taiwan, as you pointed out, is a 
very important trade partner, particularly in semiconductors. 
And I think we really should have quite a robust agreement with 
them.
    I understand the political sensitivity around maybe not 
including them in IPEF at this point, and I know that the 
administration has to do a delicate dance between supporting 
Taiwan, wanting a robust economic relationship with them, and 
maybe not alienating, not risking a strong military encounter 
with China. But I definitely support strong engagement with 
Taiwan and applaud the agreement that was negotiated. And you 
know, hopefully maybe one day that would progress into full 
inclusion into IPEF.
    Senator Menendez. Thank you. I agree. I see Mr. Louie was 
shaking his head ``yes,'' I think. I also concur.
    Thank you, Mr. Chairman.
    Senator Carper. Thank you, Senator Menendez. As the 
chairman of the Foreign Relations Committee, he certainly knows 
of what he speaks.
    Senator Casey, who also knows of what he speaks, is next. 
Senator Casey?
    Senator Casey. Mr. Chairman, thanks for calling this 
hearing. We appreciate your leadership on these issues, and it 
is great to be working with you and Senator Cornyn in 
particular on the legislation about investment review. I 
appreciate the testimony and the presence of all of our 
witnesses.
    Mr. Paul, a question for you. I was noting the sobering 
data in your statement of 90,000 American manufacturing 
facilities closing since the late 1990s; as of 2019, China 
having 29 percent of global factory output and the U.S. only 
17; the loss of 5 million good-
paying middle-class jobs; and on and on. The data is almost 
incomprehensible.
    And we have to ask ourselves some difficult questions, 
especially after the pandemic. I mean, all these questions were 
relevant before the pandemic, and even more so in the 
aftermath, or what we hope will soon be the aftermath.
    The U.S. has ceded manufacturing capacity to other 
countries, especially China, and a number of these countries do 
not play by any rules. Whether it is PPE shortages, or whether 
it is car or smartphone shortages we are facing today, it is 
affecting every facet of our economy, and that is resulting in 
higher prices, among other causes.
    One of my biggest concerns is, we do not even know the 
quantum of American capital or innovation and know-how that is 
being transferred overseas. That is why we have our critical 
capabilities legislation that Senator Cornyn and I spoke of.
    We have to find out how much we are relying upon these 
foreign adversaries, with regard to the design and manufacture 
of goods that are critical to both economic and national 
security, and the good news is, we have consensus. We have both 
Democrats and Republicans here in the House and the Senate who 
are ready to come together on a proposal.
    So I would ask you this question about outbound investment. 
How does that outbound capital flow, and also the transfer of 
the know-how and intellectual property to places like China, 
undermine our supply chain resiliency?
    Mr. Paul. Senator Casey, thank you for the question. I want 
to commend the leadership that you, Senator Cornyn, and others 
have provided on this issue. I think it is important, and we 
hope it gets across the finish line.
    I would say the impact of that investment has an outsized 
effect on our abilities in the United States to produce and to 
innovate. And it is important for these reasons.
    First of all, shareholder interests and national security 
interests are rarely ever aligned. In fact, they are often 
misaligned. There is just not that ``d'' component, as Mr. 
Louie said, that goes into that factor.
    Second, when these investments are being made, there is not 
a level playing field for them. There is an attraction of state 
capital and other incentives in China, many of which are not 
supposed to be there because of obligations to the World Trade 
Organization. And the compound effect of it is this. We know 
from good research that when production moves, innovation moves 
as well. And you lose that ecosystem for innovation in the 
United States, which is a pressing concern for the industries 
of the future.
    We also know that, in China in particular, it is subject to 
theft and replication, and of building up of national 
champions, and then it is used against us in another way as 
well. So our companies that have invested there are being 
replaced by firms that are national champions, that are either 
state-controlled or state-related. And this goes well beyond 
what I would call traditional kind of national security 
applications, because there is so much civil-military fusion in 
China it is almost impossible to disaggregate those.
    And so, this type of investment certainly deserves far more 
scrutiny than it has. And I hope that a strong provision can be 
included in the final bipartisan innovation act.
    Senator Casey. Thanks very much, Mr. Chairman. I will give 
back 11 seconds.
    Senator Carper. All right. Thank you, Senator Casey, very 
much.
    Senator Cortez Masto, please?
    Senator Cortez Masto. Mr. Chairman, thank you to you and 
Ranking Member Cornyn for holding this hearing.
    It is clear the best way to source and actually secure a 
stable supply of resources and goods that not just Nevadans but 
Americans need is to make investments domestically. We have 
been talking about that.
    One of the areas I am curious about your thoughts on--and, 
Mr. Paul, let me start with you--is I believe we have to grow 
the mining and production of critical minerals and rare earth 
materials domestically to secure our supply chains, to lower 
prices, and actually create good-paying jobs right here in the 
United States. That is one of the reasons why I was proud to 
support the Senate version of the U.S. Innovation and 
Competition Act, because it did include dedicated funding for 
research and development of new technologies for extraction and 
processing of minerals.
    I am also planning to introduce the Rare Earth Magnet 
Manufacturing Production Tax Credit Act, which would create a 
new credit for the production of rare earth magnets right here 
in the U.S. to help us grow this critical component of our 
domestic supply chain and create new jobs.
    Investing in rare earth mineral production here at home is 
also a matter of national security. And so, Mr. Paul, can you 
discuss the importance of investing and growing our domestic 
production of critical and rare earth minerals for our national 
security?
    Mr. Paul. Senator, thank you so much for raising up that 
question. I think it is important, and thank you for your 
leadership on it.
    We have seen over the last couple of decades how vulnerable 
we are because of our lack of domestic capacity with respect to 
these critical rare earth minerals, from lithium to names that 
are hard for anybody to pronounce. But at any rate, the problem 
is twofold.
    We do not make enough here, and for too much of that, we 
are dependent on the supply from China, which obviously can be 
weaponized or withdrawn at any time. And an additional concern 
is that the way in which some of these rare earth minerals are 
extracted around the world is ethically troubling as well.
    And so, the more control we have over production and supply 
chain, I think the more that aligns with not only our national 
security interests, but our values as well. It will take 
investment, because we are essentially starting from scratch 
again, as you pointed out.
    I remember, because I was raised in Indiana, not far from 
one of the last rare earth magnet manufacturing facilities in 
the United States--and it is hard to incubate new industry. 
That requires intent. That requires investments, because there 
are lots of capital barriers. And it probably does require some 
trade protections as well. In order to do that, there needs to 
be, perhaps, a transition period. But we need to ensure that 
the utilizers of these rare earths are going to be comfortable 
and supportive of building up that domestic supply as well.
    So I applaud your efforts, and I think that this is an 
essential thing, not only for our national security, but for 
the industries we want to build in the future. A lot of these 
renewable energies and EVs are going to depend heavily, heavily 
on these rare earth minerals.
    Senator Cortez Masto. Thank you.
    I noticed, Dr. Frenkel, you are also shaking your head. 
Anything else to add?
    Dr. Frenkel. No. I also applaud your effort. And as you 
know, many of these minerals are also critical for our clean 
climate initiatives. So if we want to really be able to go 
green, it is also essential that we develop domestic 
capabilities.
    Senator Cortez Masto. Thank you. And, Dr. Frenkel, let me 
ask you this: how can we use preferential supply arrangements 
to diversify sourcing away from China and Russia?
    Dr. Frenkel. So IPEF, for instance, sets out certain 
standards. It is looking to raise labor, digital, and 
environmental standards. And it gives those countries 
opportunities to move away from some of the regressive Chinese 
standards. I would like to see some of those countries get 
preferential supplier status so their products can be expedited 
to the U.S., number one.
    Number two, they should be preferred sourcing destinations 
for the U.S. When we have countries that meet our standards, we 
should really provide incentives for U.S. companies to locate 
in countries that meet our standards.
    Senator Cortez Masto. Mr. Louie, do you have any comments 
on that as well? Thank you.
    Mr. Louie. Yes, I agree. As I said earlier in my testimony, 
we need to have these fast paths to make sure that we have the 
advantage, not just here in the U.S., but with our allies.
    I would particularly point out the importance of using 
next-
generation technologies for processing of these rare earth 
minerals. Many of the rare earths that we actually source here 
in the U.S., we actually shifted to China to do the processing. 
So this is more than just a theory of what the Chinese could 
do.
    Ask Japan what happens to rare earth supplies if Japan runs 
afoul to the Chinese will. They shut them off. That could be 
us. So this investment that we are talking about is an 
investment that will have long-term benefits. Those rare earths 
are critical for many of the emerging technologies that the 
U.S. has to lead in. If we lead in the technologies but we do 
not have access to the raw materials, we cannot maintain our 
leadership, much less complete our supply chains.
    Senator Cortez Masto. Thank you.
    Thank you, Mr. Chairman.
    Senator Carper. You're welcome. Thank you so much.
    Next is Senator Whitehouse. Thanks for coming back.
    Senator Whitehouse. Thank you, Mr. Chairman. And thank you 
for your kind words about our work on the infrastructure bill. 
You were a terrific leader in that, and it is much appreciated.
    Rhode Island is facing really significant supply chain 
problems. Much of them are in the manufacturing sector. And 
some of the things that have been more resilient have been 
protected by pretty old-school stuff. So, Rhode Island used to 
be the textile center of the universe, and we still have a 
vibrant textile industry. And the Berry Amendment requires that 
certain defense materials be made here in the United States, 
that being various textiles and like that. But it has really 
helped us quite well.
    So I guess my first point is, the solutions do not have to 
be enormously complicated. You can take a Berry Amendment and 
do a lot of good with it. And it is really quite easy and 
straightforward.
    It has also been a launching pad for innovation. We have 
something called 401 Tech Bridge, which is an innovative and 
smart textile design and innovation function that we work with 
the Office of Naval Research on. They will have a lot of very 
complex textile needs in the future. And that is supported by 
the Rhode Island Textile Innovation Network, which is supported 
by the Rhode Island textile community, which is there because 
of the Berry Amendment.
    So, as we look at exotic ways to improve supply chains, 
let's not forget the extremely simple ways to protect supply 
chains which work.
    Dr. Frenkel, I just wanted to check in with you on--you 
have been talking in wonderful ways about our climate 
responsibilities--the use of the Defense Production Act to 
defend our solar installation industry and to protect battery 
materials.
    Has that been a good idea? And should we do more?
    Dr. Frenkel. I think it is a good idea. I think we need to, 
however, use it very selectively. I would not at all advise 
widespread use, but only for certain critical technology. And I 
do think those technologies are critical for us. I would 
support using it.
    I just wanted to mention, as you know, we have a government 
procurement code for the United States, and our regulations do 
specify in general that selling to the U.S. Government, 
companies that sell must have a certain percent of U.S. content 
in their product. I think it was increased from 50 percent to 
75 percent by the administration. I just mention that in 
response to your comment about the the Berry Amendment.
    Senator Whitehouse. Yes, exactly.
    Mr. Paul, should there be an Office of Supply Chain 
Resiliency, given that this is a perennial problem? And would 
national security effects and choke point concerns be two of 
the telltales that the Office of Supply Chain Resiliency should 
focus on, look out for?
    Mr. Paul. Absolutely, Senator Whitehouse. Thank you for the 
question. There should be such an office, and I appreciate your 
leadership on that, and I know that there is a version of this 
in the House bill of the COMPETES Act as well. I think it is 
important for a couple of reasons.
    First of all, the Commerce Department does have expertise 
in this area and is accustomed to supplier scouting.
    And second, I think it is very difficult, given the private 
sector in the United States, to provide that kind of 
transparency outside of a trusted actor. And so I think that is 
important for both early warning signaling and to flag 
vulnerabilities, and to also look for market opportunities for 
firms that are looking to enter into such things as well. They 
may not know that there is an opportunity in a second or third 
tier for small and mid-sized manufacturers.
    So I think the office would be very, very helpful.
    Senator Whitehouse. I will close out with one observation, 
which is that an important part of a lot of companies' supply 
chains is produce: grain, things that are grown, things that 
are caught. And what we have right now is a very significant 
hazard to our agricultural production because of climate 
change, drought, wildfires, flooding. Cargill has made really 
dark estimates of how the Midwestern grain belt will be less 
productive, and what that will mean. And that has an 
inflationary effect, obviously, because it does not reduce 
demand when there is less supply. But it also is a supply chain 
problem. Again, I will close by just observing that it connects 
to the comments that Dr. Frenkel has made about the need for 
energy transition. If we want to ignore the energy transition, 
good luck with your agricultural supply chain and good luck 
with inflation.
    Senator Carper. Senator Whitehouse, thank you very much. 
Let me say to our witnesses, Senator Whitehouse and I are 
passionate about climate change. We focus on it every day.
    Senator Brown and I are passionate about baseball, and our 
favorite teams are both American League teams. They are both 
American League Central Division teams, and we have a great 
time playing--we do not play baseball anymore. We have a great 
time talking about it. Among the other things that we are 
passionate about is the subject of today's hearing. We are 
delighted that you are here.
    Senator Brown. Thank you, Mr. Chairman. Thanks for your 
flattery of the substance of Senator Whitehouse and the 
shallowness of my interests. [Laughter.]
    It is always an honor to be in this subcommittee, so thank 
you. And thank you, my friend, Sheldon.
    Mr. Paul, I want to focus my questions on you and to you, 
if I could. Your testimony covers a lot of what we need to do 
to undo decades of harm to our economy. We have had these 
conversations before. They are crystallizing in so many ways 
what we have seen happening, beginning in the 1970s and 1980s. 
I used to walk the halls at Johnny Appleseed Junior High School 
in Mansfield with the sons and daughters of literally hundreds 
of steelworkers from Empire Detroit, autoworkers from GM, 
machinists from Ohio Brass, and the children of laborers and 
operating engineers and pipefitters and plumbers and sheet 
metal workers.
    During that period, starting in the 1970s and 1980s, large 
corporations lobbied Congress for trade deals and tax policies, 
always with their eye on cheaper labor. First, they shut down 
production in Mansfield, OH and around, particularly the 
Midwest, to go to Alabama, or Mississippi. Labor was not cheap 
enough there, so then it was Mexico, passing NAFTA. Then it was 
PNTR, going to China.
    Ohioans, individually in Mansfield, OH and other places, 
paid the price in the form of lost jobs. Communities paid the 
price in the form of devastation of their public education 
systems and their neighborhoods. And now the whole country pays 
the price. Much of the inflation right now is caused, or made 
worse, by supply chains that are too spread-out, too long, and 
too fragile.
    We ask American companies to compete against nonmarket 
economies like China that use unfair trade practices. I blame 
China for sure, but I blame U.S. companies that betrayed this 
country more so, that lobbied this Congress, and the 
politicians who went along.
    Bank of America has said--and this is pretty amazing--that 
stock prices on Wall Street are more likely to go up when we 
invest in China's economy than if we invest in America's 
economy. That is not some progressive from northern Ohio 
talking; that is Bank of America talking.
    You mentioned the importance of trade enforcement tools--to 
include Leveling the Playing Field 2.0 that Senator Portman and 
I had worked on--in the Bipartisan Innovation Act. Expand on 
your testimony and tell us why trade enforcement is an 
investment in American workers and American innovation.
    Mr. Paul. Senator, thank you for the question. It is an 
important one. I know it is important to Ohio and to the 
workers and the businesses around the country.
    Trade enforcement is important because it prevents leakage. 
And it provides--one of the principal roles of government is 
also to ensure that private-sector firms in the United States 
have the opportunity for that level playing field when 
competing abroad. They are the advocate for our private-sector 
firms abroad.
    And so too often, as you indicated, we have seen that 
either through trade policy, or through other measures, that we 
have lost good jobs. We have lost capacity. This has impacted 
our national security. It has impacted the communities, 
measurably, in terms of social and economic decline. And the 
reason for trade enforcement is that we have to have a rules-
based system that we know our private businesses can count on. 
That also sends a market signal to them that if they invest in 
the United States, we will stand up to unfair trade practices 
that may affect them in our market, in a third market, or with 
respect to China or other countries.
    The problem has been that a lot of the importers have 
figured a way around these laws over the years. They are very 
crafty. It is like Whac-A-Mole at the carnival. You know, if 
you put one trade enforcement measure up, they will figure out 
another way around it through circumvention, or a slight 
alteration of the product, as I know you well know. And so, the 
Leveling the Playing Field Act 2.0 builds on a bipartisan 
effort from 2015 that you and Senator Portman and many others 
were engaged in that would provide our government with new 
tools to be able to modernize our trade laws to keep up with 
this Whac-A-Mole strategy that a lot of the importers who 
engage in unfair trade practices have.
    I think it is an essential part of competitive legislation, 
because we can invest all we want in our domestic industries, 
but if we do not have a level playing field for them, those 
efforts will be for naught, or the impact of them will be 
dramatically diminished.
    Senator Brown. Thank you, Mr. Chairman. Thank you.
    Senator Carper. Senator Brown, thank you very much.
    We have been joined by the chairman of the full committee, 
Senator Wyden, who knows a lot about these issues, and whose 
State in these issues is incredibly important. So, Senator 
Wyden, thank you, Mr. Chair, for joining us.
    Senator Wyden. Thank you very much, Chairman Carper. I 
think this is an enormously important hearing, and I so 
appreciate your taking the lead on the supply chain efforts.
    Let me start with you, Mr. Paul. Your testimony highlights 
the critical nexus between strengthening American manufacturing 
and creating more resilient supply chains. That is just 
enormously important.
    It is especially true when it comes to clean energy. Our 
country needs to put points on the board right now against the 
climate crisis. That means investing in clean energy, like 
solar power, and bringing manufacturing back to the country so 
we are not swapping dependence on Russian and Saudi oil for 
dependence on Chinese solar panels.
    Now we know the Chinese Government is pulling out all the 
stops to run the U.S. solar manufacturers out of business. For 
years the Chinese Government and its state-owned enterprises 
have cheated and bullied and stolen from our U.S. solar 
manufacturers, decimating our domestic industry.
    Here is my question to you. You may be familiar with a bill 
that we wrote here in this room and the room next door, the 
Clean Energy for America bill. This is a bill where we 
essentially took the 45 provisions in the Federal tax code and 
we threw them in the trash can, and we said, for the future we 
would have a technology-neutral private market, and we would 
say for the first time that the more you reduce carbon 
emissions, the bigger your tax savings. And for 100 years--and 
by the way, Chairman Carper was enormously important to this. 
Basically everywhere he has gone for over a year, he said this 
can be the future: technology-neutral, 
private-market, and using incentives to drive down carbon 
emissions.
    We also have a special focus in the bill on solar 
manufacturing. And I especially want to credit our colleagues 
from Georgia who were really talking about a different energy 
future: Senator Warnock, Senator Ossoff. They would like to 
have a different energy future because the South, for reasons 
like lacking transmission capacity and others, has not been 
able to tap the future.
    So we are very serious about promoting solar manufacturing 
in this committee, in the United States, in Georgia and Oregon, 
and all over the country.
    So, tell us what other steps besides Clean Energy for 
America--which, by the way, will hit more than 50 percent of 
the President's carbon emission reduction target in one fell 
swoop. And when you add Senator Carper's methane reductions, we 
are more in the ballpark of 70 percent of the President's 
target. So this is a high-stakes area.
    What else would you do in terms of promoting solar 
manufacturing--manufacturing, not just buying panels from 
overseas--here in the United States?
    Mr. Paul. Senator Wyden, thank you for the question. Thank 
you for your leadership on this. I know that you have solar 
manufacturing in Oregon. And I want to state the fundamental 
problem so that folks are aware of this, that we have seen 
solar installations escalate dramatically over the last decade.
    We have seen solar manufacturing jobs in the United States 
decline slightly over that same period. And so the market share 
is dominated by China or pass-through countries where these 
Chinese solar panels are coming into the United States.
    I think that the fundamental principle--and I think you get 
this right--is that the incentives for both installation and 
production must be aligned. And so there must be tax credits 
for production in the United States, along with the incentives 
to install for utilities or residential or commercial. So I 
think that is very important.
    I think the second important aspect of this is, obviously, 
the trade enforcement. And so I do think that we have to take 
steps to ensure that Chinese solar panels are not being 
circumvented and entering the United States improperly that 
way.
    And I think the third is this utilization of the Defense 
Production Act, which I think is important. It could also spur 
procurement. And from a procurement perspective--I know Senator 
Whitehouse mentioned this, the Berry Amendment as well--I 
think, because of Buy American requirements, that the 
government can set an example by purchasing these Made in 
America solar panels throughout the Federal Government. And 
that is a sizeable public market. And they could also ensure 
that grants or loans made to States or some Federal entities 
have that linkage as well.
    I think those are some concrete steps that could build up 
solar manufacturing.
    Senator Wyden. My time has expired, and I do not want my 
comments directed to Mr. Paul to in any way suggest that our 
other three panelists are not making important contributions. 
You are doing it. Continue to do it. This issue that Senator 
Carper is taking the lead on for the full committee is 
absolutely crucial.
    So I am going to review your comments, and I thank all of 
you.
    Senator Carper. Thank you, Mr. Chairman. Senator Wyden 
chairs the full committee, and there are more times than the 
Senator and I can recall when we have used all of our time, and 
he has generously extended additional time to us, so I would 
never cut you off, my friend. So, thank you. Thanks for your 
kind words and for your leadership of this committee.
    Senator Thune, thanks for joining us.
    Senator Thune. Thank you, Mr. Chairman, and thanks for 
having the hearing. The supply chain challenge is a very real 
issue, and thank you all for being here to talk about it.
    In early February, Senator Klobuchar and I introduced the 
Ocean Shipping Reform Act, which passed the Senate in March, 
passed the House on Monday, and is headed to the President's 
desk this week. It is a bipartisan bill that provides the 
Federal Maritime Commission with new tools to curb unreasonable 
or anticompetitive behavior, which we believe will improve 
fluidity at our Nation's ports and across the entire supply 
chain.
    Beyond reforms at the Commission, our Nation's ports are 
desperately in need of two things: modernization and 
transparency. Failure to invest in terminal automation and port 
efficiency initiatives such as data sharing, compounds the 
problems that we are facing today and puts the United States 
below the global average in vessel wait times, which is why my 
legislation also includes provisions to improve the movement of 
freight across the supply chains.
    Mr. Potvin, do you believe that increased data sharing and 
better utilization of technology would help to mitigate 
inefficiencies in our Nation's ports?
    Mr. Potvin. I believe data analytics and data generation to 
be very helpful across the board, especially in dwell times 
when you have ships there and it is taking longer and longer to 
unload. We notice from the report, we are looking at close to 7 
days, when it used to be 5 days dwell time turnaround on a 
ship, at times going on for weeks.
    Sharing data across the ports would allow for the movement 
of vessels into different ports to utilize capacity for the 
dray carriers to make sure they are ready to move the products 
quicker from the ports to the consumers in the United States. 
So, sharing of data analytics, sharing of visibility, of 
transparency, of where your cargo is, can be very helpful to 
get the goods moving sooner and quicker in the process.
    Senator Thune. Thank you.
    Mr. Paul, outside of ports, where are you seeing the most 
significant strain on the manufacturing supply chains?
    Mr. Paul. Senator Thune, thank you for asking that 
question. A lot of this is related to inventory misalignment. 
And we have seen that in particular with respect to 
semiconductors. And the challenge essentially is that our 
domestic capacity on semiconductors is quite limited.
    Our domestic consumption of semiconductors is quite high. 
Asian customers, where many of these semiconductors are 
produced, obviously are first in line for this, and also, you 
know, it is an ocean away. And so, I think efforts to invest in 
additional domestic capacity in critical commodities like that 
that are involved in so many aspects of our daily life are 
going to be essential.
    So I am hopeful that the Bipartisan Innovation Act can 
include some provisions that would be of value there, because I 
think essentially, the more control we have over our supply 
chains, I think the better off we are going to be in terms of 
that type of inventory management. Because we have seen it, 
from cars to semiconductors to smart appliances; it is a real 
vulnerability. And so, taking steps to identify where we can 
and should be producing more in the United States is something 
that I think is a valuable use of the Senate's time.
    Senator Thune. The baby formula shortage has shown a need 
to look at supply chain failures and how to prevent this kind 
of a public health crisis from happening again. Obviously there 
are a number of factors at play, but one of the largest is the 
FDA's inability to anticipate the shortage and to ensure 
sufficient production was up and running, which is sort of 
incomprehensible to determine how we got to this point in the 
first place.
    But it has been a major crisis, I think as everybody knows, 
for American families. And I think the administration has been 
far too slow to respond. The administration finally encouraged 
overseas manufacturers to ship formula to the United States, 
easing regulations that had effectively prevented shipments 
from many of those companies.
    Now there is a lot of talk about re-shoring and supply 
chain resiliency. This crisis has shown that the importance of 
having strong economic relationships with other countries is 
just absolutely critical.
    So let's ask Mr. Potvin how important it is for America's 
supply chain to maintain and strengthen the free flow of goods 
and services with trusted nations? And are there particular 
tariffs or regulatory barriers that Congress should consider to 
better streamline baby formula imports, to better protect food 
security?
    Mr. Potvin. Senator, thank you for the question. I am not a 
real expert on the subject matter of the nature you are talking 
about, but I do know the free flow of goods is a requirement--
you know, the near-shoring, bringing it back to the United 
States. One thing I do know, we have got to take into 
consideration one of the most essential workers in this space: 
the American truck driver.
    The American truck driver needs to be protected to make 
sure there are enough of them. So we appreciate the 
infrastructure, the 3-year pilot program for the 18- to 20-
year-olds to go across interstate lines as opposed to 
intrastate. We also believe that there needs to be some type of 
safety mechanism to take the bad actors off the road so we can 
drop the insurance costs the motor carriers are paying to help 
them also to continue to operate in this type of economy with 
the fuel prices going up.
    Again, it is about the American truck driver. We can do all 
this bringing manufacturing back, but the fact of the matter 
is, we need trucks on the road and drivers in those seats to 
make sure the goods get moved. You may be able to bring them to 
the port, you may bring them in to manufacturing, wherever you 
may be, but without that American truck driver and the third-
party logistics industry being able to move those goods across 
the country, it is not going to matter.
    We need to take a serious look at the fuel prices, look at 
insurance, look at driver wages, making sure that we are 
competitive in nature so that we can supply the goods that the 
consumers need.
    I apologize that I can't answer the question you had, 
Senator, but I just wanted to share that with you.
    Senator Thune. Yes; thank you.
    Very quickly, as the chairman is trying to wrap up here, 
Dr. Frenkel, this has to do with the Indo-Pacific Economic 
Framework. It is nonbinding, and it may have potential, but it 
just seems that enforceable market access commitments in 
particular would help lower costs for consumers, increase pay 
for workers, and build more reliable supply chains.
    So, could you talk for a moment about how enforceable 
market access commitments benefit supply chain resilience for 
producers and consumers?
    Dr. Frenkel. Yes; thank you for the question. I think the 
administration was hesitant, or did not want to launch a market 
access agreement in the classical sense because I think there 
was a lot of concern about the reaction and the lack of support 
in the public, and in certain sectors of Congress, about that.
    So I think what they have launched is a positive first step 
forward. I do hope, in the fullness of time, that this could 
evolve into a market access agreement. And I do think that in 
offering market access to countries, we're looking to them to 
make very significant concessions in certain areas, and it is 
important that we be able to offer incentives for them to do 
that.
    It is also equally important that we be able to get better 
access into their markets. So I think what the administration 
is doing with IPEF is important. And as I said, I do hope, over 
the fullness of time, that it can evolve into a more 
traditional market access agreement.
    Senator Thune. I would just offer, Mr. Chairman, in 
wrapping up, that if the United States does not have a 
meaningful market access presence in the Indo-Pacific, I think 
that China very definitely can threaten our supply chain 
priorities in that area. I think that is a concern. And as we 
think about that region and particularly what I think is a very 
weak agreement, a lot more needs to be done in terms of 
tangible solutions that actually do offer market access for our 
exporters and hopefully give them an incentive to join us in 
some of these deals.
    Thank you, Mr. Chairman.
    Senator Carper. Thank you, Senator, so much for joining us, 
and I would have extended even more time to you. So, thanks for 
coming.
    I think Mr. Potvin talked a little bit about truck drivers, 
and I could not agree with you more. I would also note, 
Delaware actually happens to be a State where there are more 
Amtrak employees who live in Delaware than any State in the 
country. So trains are important to us.
    I was reminded of this statistic: you can move a ton of 
freight by rail from Washington, DC to Boston, MA with 1 gallon 
of fuel. It is pretty impressive--1 gallon of fuel.
    Okay. We have about 2 dozen more questions and we will wrap 
it up. It will not last that long, but are you guys okay for a 
couple of more questions? Thanks. You are doing a great job, by 
the way, so thank you.
    My first question would be for Mr. Potvin, if I could. In 
your testimony you noted over the last couple years that supply 
chains, and this is a quote: ``bent but never broke.'' And that 
is thanks to the resilience and flexibility of companies like 
Trinity Logistics in the face of systemic supply chain 
weaknesses both here and across the globe.
    We need to find out what works and do more of that. I 
always say that. I say it probably once or twice a day; find 
out what works and do more of that. Over the last couple of 
years, how has the private sector innovated in response to the 
supply chain crisis? And how can policymakers like us in this 
body work with logistics operators and other private-sector 
stakeholders to strengthen our supply chains moving forward, 
Mr. Potvin?
    Mr. Potvin. Senator Carper, I appreciate the question. We 
have seen over the last 2 years a lot of movement on the 
domestic manufacturing side. We saw companies such as Costco, 
Home Depot, Walmart, Ikea, actually charter or buy their own 
ships to make sure they could get their goods moved.
    We have seen manufacturers change packaging and adopt 
better ways to transport their goods at lower costs for them; 
innovation and greater visibility in supply chains through 
technology so that people can see where their goods are moving, 
or tracking on these trucks so that they could see every 15 
minutes where that carrier was, what they needed to do, if the 
carrier got stopped, immediately to think about shipping 
another order out to make the needs met.
    Better technology through the matching of our carrier 
capacity with the shippers in the various locations--so again, 
better visibility so we could move that motor carrier, send 
that motor carrier to get that load, less dead-head miles for 
you, less fuel being consumed as well.
    We saw a lot of manufacturers move from a business-to-
business model to a business-to-consumer model; changing their 
technology, getting more into the e-commerce to meet the needs 
of the individual consumer who is staying home and not being 
able to make it out to the store.
    They altered their manufacturing production location to be 
closer to the raw material they could get their hands on, to 
make sure, again, they are supplying their product. They took a 
lot of risk, but they wanted to make sure their consumers' 
demands were met that way.
    We have seen a lot of innovation around data analytics and 
data generation, transparency, and efficiencies that led to 
increased productivity and additional savings of that nature. 
If we were to take the technology and share data, as Senator 
Thune was indicating, among the ports, among the shipping lines 
so that goods could be rerouted, moved from where congestion 
was happening, or ports were shut down or something, a natural 
disaster--real-time visibility, real-time communication to move 
and react in a situation, to share data across the board in a 
safe and secure way.
    We talked about the innovation of smaller fleets and the 
owner-operators. The simple fact is, they were the first ones 
to return when production started to pick up. They were hungry 
for money, hungry for loads. And the simple fact of the matter 
is, they moved quickly to make sure that the goods kept moving.
    We need to make sure that the goods continue to flow across 
interstate lines, and certainly we want to just look at a way 
of making sure that the government promotes interstate shipping 
and not get hung up in the intrastate government issues to make 
sure the goods flow across this country and do not get stuck in 
State laws.
    Senator Carper. Mr. Potvin, thank you. Thank you for all of 
that.
    I would ask Mr. Paul another question, if I could. It is a 
question dealing with government coordination of supply chains. 
One challenge in addressing supply chain issues is that the 
U.S. Government does not effectively track supply chain 
vulnerabilities before they become a full-blown crisis.
    A provision under consideration in the so-called China 
competition bill led by our friend, Delaware Congresswoman Lisa 
Blunt Rochester, would authorize a new office in the Department 
of Commerce to monitor and also to respond to supply chain 
gaps.
    My question would be for you, Mr. Paul. How can greater 
government oversight and attention to supply chain challenges 
improve economic resilience and support domestic manufacturing 
in critical industries?
    Mr. Paul. Senator Carper, thank you for the question. And I 
have had the opportunity to tell the Representative herself 
that we strongly support this provision. We do hope it becomes 
part of the final Bipartisan Innovation Act, and we appreciate 
your support for it.
    I think that it is important to have an office in the 
Commerce Department tracking this because, again, this is not 
something where the--it is going to take a public-private 
partnership.
    Businesses are reluctant to share supply chain information. 
Many times they view it as proprietary information. I think 
having a trusted actor, at least to be able to understand what 
some of the vulnerabilities are, is going to be critically 
important. And I would add, in my experience in working with 
the Manufacturing Extension Partnership as part of the 
Department of Commerce, I know that there are many State 
affiliates of this--including one that serves Delaware--and 
that suppliers' scouting and the ability to identify 
manufacturers are important. And so it is important not only to 
understand what the vulnerabilities are, but also what the 
opportunities are.
    If there are supply chain weaknesses, or large OEMs who 
say, ``I can't find a third-tier supplier, I can't find a 
second-tier supplier,'' this type of supplier scouting can be 
valuable in seeking out new market opportunities for small and 
mid-sized firms that don't have massive marketing or sales 
staffs that can seek this out.
    And so I think that can be helpful as well. And so I am 
hopeful that as part of this innovation package, this becomes a 
piece of it. Because this is one of the most helpful things for 
the small and mid-sized firms in particular: to be part of 
opportunities in the future and to help contribute to supply 
chain resiliency.
    Senator Carper. All right. Well, I am hopeful and will pass 
on your kind words to our Congresswoman.
    Dr. Frenkel, if I might, on medical product supply chains, 
COVID-19, as we know, has laid bare serious concerns about our 
medical product supply chains. We need to work with partners 
around the world as we attempt to put this pandemic behind us 
and to ensure that we are better prepared for the next one that 
we know is coming somewhere down the line.
    Senator Cornyn and I sent a letter to the President, about 
a year ago, in which we urged the administration to reduce 
barriers in order to help shore up these supply chains.
    So my question is, Dr. Frenkel, what measures would you 
recommend that Congress and the administration consider to 
strengthen medical product supply chains?
    Dr. Frenkel. Thank you. I think--and I have to say, I am 
not an expert on medical supply chain issues, but I think, just 
in general, there are things that we can do, as you mentioned, 
to reduce barriers.
    Number two, obviously we need to decide which products we 
want to either on-shore or near-shore. I know that many of 
those products are now coming from China and elsewhere, where 
they are, again, more subject to the shutdowns in Shanghai and 
political issues and things like that.
    I think we need to offer, for things that are really 
critical--we need to offer incentives to manufacture here. I 
read, for instance, that at the height of the pandemic the U.S. 
offered incentives--since all our PPE tends to be imported, we 
offered incentives to manufacture masks in the United States, 
and a number of companies invested based on that and started 
producing masks. But then, after those incentives went away, 
hospitals started buying cheaper masks from China again, so a 
number of those facilities actually had to close down, even 
though they had made significant investments.
    So I think we need to think long-term. You know, we cannot 
just be thinking short-term, like you give an incentive but 
then you need to sustain it if you want to have that capacity 
the next time that a pandemic rolls around.
    I think also in terms of near-shoring, again some of the 
textile companies in Central America are interested in 
potentially producing PPE, but again, they need support to do 
that.
    So I think we need to look critically at the supply chain, 
decide what things are really important to manufacture in the 
U.S., manufacture close by, and for those things that we are 
still importing, we need to reduce trade barriers and 
facilitate trade.
    Senator Carper. For somebody who did not know much about 
medical product supply chains, that was pretty good. 
[Laughter.]
    I have another one. I want to ask you one more question, if 
I could. This one deals with environmental standards and supply 
chains.
    I serve as the chairman of the Committee on Environment and 
Public Works, and serve with a couple of people who have been 
here with us today, including Senator Whitehouse. But we have a 
heightened interest on that committee in the intersection of 
trade and the environment, as you might imagine.
    Dr. Frenkel, in your testimony you noted that rethinking 
our supply chains can encourage green sourcing, or procuring 
goods and services in a more sustainable way. I am heartened by 
the recent agreement between the U.S. and the EU to decarbonize 
steel and aluminum production. And my question would be this: 
moving forward, what other opportunities exist to make our 
global supply chains more environmentally sustainable?
    Dr. Frenkel. Well, one thing that I would strongly support 
is the reopening of the environmental goods negotiations. 
During my time at GE, I spent a lot of time--the company had 
many green products, from wind, solar, other batteries, and I 
was very involved in those negotiations, which actually got 
quite far. But they stopped, came to an abrupt stop in 2016 
when the administration did not support trade or environmental 
issues.
    But I think it is time to really reopen that. I would 
advise expanding it beyond environmental goods to include 
environmental services, which I think are very important. You 
know, one of the main stumbling blocks to completing the 
negotiation during the first time around was the inclusion of 
China. I think it probably makes sense this time around not to 
include China. And you know, that would probably necessitate it 
not being a WTO agreement, which I think would really 
facilitate completing it. And I think we should do a 
plurilateral agreement with as many countries as possible to 
lower tariffs on as many----
    Senator Carper. Did you say ``plurilateral''?
    Dr. Frenkel. Correct.
    Senator Carper. I have been a Senator a long time. I do not 
think I have ever heard a witness use that word.
    Dr. Frenkel. Okay; sorry.
    Senator Carper. There is a first for everything.
    Dr. Frenkel. Sorry about the jargon. Multilateral, you 
know, is like everybody. Plurilateral is maybe more like IPEF. 
IPEF is a plurilateral agreement.
    So I think we need to do an agreement with as many 
countries as we can get onboard for environmental goods and 
services to really promote and facilitate cheaper and easier 
trade in those products and services.
    Senator Carper. Okay; thank you. I have one last question I 
am going to ask each of you. The first question I will ask each 
of you is, where did you find there was consensus amongst the 
four of you?
    And the last question that I am going to ask is, what is a 
question you wish you had been asked but were not asked? So 
think about that.
    And while you are thinking about that, Mr. Louie--I like 
saying your name. Mr. Louie knows that one of my favorite songs 
as a kid growing up had his name in it two times, ``Louie, 
Louie.'' And so, I am grateful for that great memory. And also 
for your responses. Here is one more opportunity for you to 
respond, and that would be on cybersecurity and the supply 
chain, something you know a little bit about, I am told. As a 
senior member--actually as the former chairman of the Senate 
Committee on Homeland Security and Governmental Affairs, I know 
the nexus between trade and national security is a policy area 
that requires our attention.
    Over the past several years, we have seen a rise in state-
sponsored cyberattacks, including those on our supply chains. 
My question is this, Mr. Louie: what steps should the Federal 
Government take proactively to reduce cybersecurity 
vulnerabilities in supply chains? And how can information 
sharing between the private sector and the Federal Government 
help identify potential weaknesses in our critical supply 
chains?
    Mr. Louie. That is a great question. One of the critical 
tools we have is, we have some great agencies that do a great 
job in protecting the U.S. Government. CISA is a great 
organization. But you need to think about that umbrella of 
protection to extend to our commercial companies and our 
critical infrastructure beyond those that are government-
related.
    And when we think about supply chains--particularly helping 
companies understand their third-party risks that could be 
exposed because the third-party suppliers do not have the tools 
necessary, typically smaller companies--we need to do the kind 
of cyber-
protection necessary to protect those chains. It puts at great 
risk not just our smaller companies, but some of our most 
important systems. So that umbrella of protection needs to be 
broader. We need to have better information sharing. I think 
the Solarium report had some terrific recommendations. But we 
have to move beyond the recommendations and into 
implementation.
    We need a public-private solution that has larger companies 
being willing to help the smaller companies and the industry 
partners to make sure that they are secure. The Chinese and the 
Russians have particularly attacked the supply chain. I do not 
need to attack the U.S. Government if I can attack the 
companies that the government depends on. And we need to, 
again, extend that umbrella of protection.
    Senator Carper. Around here we have the opportunity to 
change leadership of subcommittees and committees, depending on 
who is in the majority and who is not, who stays, who retires 
and leaves and goes on to do other things. And about 7, 8, 9 
years ago, it was announced that I was going to be--a new 
Congress was about to start, and I was going to be the chairman 
of the Homeland Security and Governmental Affairs Committee. 
There was a wonderful article in, I think, The Wall Street 
Journal that talked about the changes in leadership in the 
different committees. It mentioned the Homeland Security 
Committee and said I was going to be the chair for the next 2 
years at least of Homeland Security. And the article went on to 
say that I was the Senate's expert on cybersecurity.
    I cut the article out, and I brought it home, and I showed 
it to my wife. I said, ``Honey, look at this. It says I am the 
Senate's expert on cybersecurity now.'' I will never forget 
what she said. She said, ``In the land of the blind, the one-
eyed man is king.'' [Laughter.]
    So we all need somebody to keep us in our place, I suppose. 
I am not an expert, by any stretch of the imagination, on 
supply chains, but thanks to all of you, I am a good deal 
smarter than I might have been a couple of hours ago, and we 
will hopefully continue to build on that going forward.
    Now the question that I want each of you to answer for me. 
I will start with you, Mr. Louie. Can you think of a question 
that you would like to have been asked but were not asked?
    Mr. Louie. The question I would have loved to be asked is, 
how does a reimagined U.S. advanced manufacturing 
infrastructure change the way we think about supply chains?
    Senator Carper. That's great. Thank you.
    Dr. Frenkel, is there a question you might like to have 
been asked?
    Dr. Frenkel. Sure. Two quick things. One is, you know we 
talked a lot about investing in manufacturing and R&D. I think 
we really need to invest in our people, and I wish that we had 
been asked about that.
    Secondly, I think we really need to invest in and reform 
the WTO. We should not forget that, and I think we should have 
been asked about that.
    Thank you.
    Senator Carper. Very good. Thanks.
    Mr. Potvin?
    Mr. Potvin. Well, I had hoped I would be asked, ``Are you 
glad to be here today?'' [Laughter.]
    And the answer would be ``yes.'' This is my first time 
here, and it is an absolutely humbling experience and a 
pleasure to be here.
    Senator Carper. It is humbling to do this kind of stuff, a 
couple of guys from Delaware.
    Mr. Potvin. It is. It is. Honestly, I think for me--and 
again, my colleagues here are much more learned in the space of 
the wider scope of the supply chain. I think for me is the 
question simply, how do we ensure that the goods, wherever they 
come from, wherever they are manufactured, can be delivered the 
best way with efficient operations? How do we pull those 
resources together to make sure that happens? That would have 
been the question.
    Senator Carper. Thank you so much.
    Mr. Paul?
    Mr. Paul. Senator, thank you. I think the question that I 
would have liked to have been asked is, is there hope? Because 
my testimony laid out a number of dire, I think, data points 
that should be very concerning. And I will answer it briefly, 
if you don't mind, with your indulgence.
    I do think there is hope. And I will just give an example. 
I remember seeing you just a couple of months ago at the 
Department of Transportation as they unveiled the electric 
vehicle charging network grants through the infrastructure 
bill, which I know you led on. And I think that is the perfect 
example of how public policy can drive investment in the United 
States towards secure, important supply chains, and it is just 
having that intent. So, yes, I do think that there is hope.
    Senator Carper. That is great. There is a reason and a 
method to my madness. One of the things that we do is, after 
this hearing we will send you questions for the record, as you 
may or may not know. And somewhere in my notes it says--let me 
just get this straight--for Senators who wish to submit 
questions for the record, those questions are due 7 days from 
today. We will assemble those questions.
    Our witnesses will have 45 days--that is a long time--to 
respond to any questions for the record. And we are going to 
use those questions, among others, to follow up with you. So 
you will have a chance to respond to those questions.
    I think most people who do not have the opportunity to sit 
in a room like this, or watch a hearing on television or over 
the Internet, they think all we do here is fight among 
ourselves--we don't work together, we never get anything done, 
we never take on difficult and challenging issues.
    And I hope today would be an antidote to those perceptions. 
We like each other, for the most part, and we like working 
together, and that includes across party lines. The stakes are 
pretty high on the issues we are discussing here today. Lincoln 
used to say that the role of government is to do for the people 
what they cannot do for themselves.
    Another one of my favorite witnesses was a fellow who, not 
long ago--he's from Wyoming, a good friend, Senator John 
Barrasso. And he had been nominated for a post in the last 
administration at the Department of the Interior, and he said, 
``Bipartisan solutions are lasting solutions''--bipartisan 
solutions are lasting solutions. And that is what we work 
toward. We do not always succeed, but that is what we work for.
    So, you have given us a lot to work with. And for that, we 
are deeply, deeply grateful.
    We have a member of our team who is sitting right behind 
me. Her name is Noami Zeigler. She will not be sitting back 
there next week. She has accepted a position to go to work for, 
I want to say OMB? Is that right?
    Ms. Zeigler. Yes, sir.
    Senator Carper. OMB. And she will not have my back like she 
has for the last several years. We are going to miss her, and 
we wish her Godspeed as she leaves from this place.
    Thank you all. It was great to be with all of you--and 
especially those whose name is Sarah. I look forward to seeing 
you back in Delaware. And you can bring your husband with you 
and your other colleague.
    And with that, it is a wrap. We are concluded. Thank you.
    [Whereupon, at 5:02 p.m., the hearing was concluded.] 
    
    
    
    
    
    
    
 
 
 
 

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


             Prepared Statement of Hon. Thomas R. Carper, 
                      a U.S. Senator From Delaware
    Good afternoon. It's my pleasure to call today's hearing before the 
Senate Finance Subcommittee on International Trade, Customs, and Global 
Competitiveness to order.

    Thank you to our witnesses for joining us to testify today, and a 
special ``thank you'' to our ranking member, Senator Cornyn, and his 
team for working with our staff and with me to plan this hearing 
focused on supply chain challenges, an issue that continues to 
frustrate folks across our country and around the globe.

    Today's hearing will be a chance to examine why supply chain 
bottlenecks have developed since the onset of the pandemic, and to look 
at what kind of policies might improve the long-term resiliency and 
security of our supply chains to prevent these types of shortages in 
the future.

    Now, there may be some folks out there who've heard about supply 
chain problems, who might know they have something to do with how we 
keep our economy moving--but who don't know just what we mean when we 
say ``supply chains.''

    Here's what we're talking about: supply chains include every step 
of the process to manufacture a product and move it from point A to 
point B--sometimes halfway across the globe--to get goods from your 
wish list to your doorstep.

    One of the reasons why I'm eager to address these issues at today's 
hearing is because Americans are eager to address these issues. In 
2022, the effects of supply chain challenges aren't some distant policy 
issue to folks at home. Americans are seeing it play out in empty 
shelves at their local grocery store that once held baby formula, in 
gifts delayed and delivered weeks after a birthday has passed, or in 
new cars and technology they've saved up for years to buy but can't 
find on the market.

    About a month ago, the week before Mother's Day, I went to my local 
Rite Aid pharmacy to pick up a card for my wife Martha. And at a store 
where we've shopped for years--with a huge selection of anniversary 
cards, birthday cards, holiday cards, you name it--I walked up and 
found an entire Mother's Day card section empty. I found an employee 
and asked what was going on, and she said this year Mother's Day cards 
never even made it to the store. This is just one example of the supply 
challenges happening all across our country. And Americans want to know 
how we can get back on track.

    So today, we will explore how we got to this point, and what we can 
do to ensure that we're better prepared in the future. I've long 
believed that one of the jobs of policymakers is to create a nurturing 
environment for job creation and economic growth--and one key to 
maintaining that nurturing environment is improving the dependability 
of our supply chains. And while we know that the tremendous supply 
chain backlogs we are seeing today come largely from the economic shock 
of the pandemic, many systemic vulnerabilities existed long before 
COVID.

    Fundamental weaknesses in our global logistics systems are the 
result of a 
decades-long focus on supply chain efficiencies, just-in-time 
manufacturing, and a reliance on foreign adversaries for a wide array 
of goods. The result is a system so brittle and fragile that it cracked 
under the pressure of the worst pandemic we've endured in over 100 
years.

    But in adversity lies opportunity, and these challenges present a 
great opportunity for us to rethink how we move goods across the globe 
and create a system that better serves the American people. That starts 
with investing in our own critical infrastructure. And I'm proud--as 
I'm sure every member of this committee is--that we have already taken 
steps through the Bipartisan Infrastructure Law to improve the 
efficiency of our ports and make our roads and bridges safer. However, 
it's clear that infrastructure investments are only one piece of the 
puzzle.

    Another piece is expanding domestic investment in the technologies 
we rely on--from semiconductors to renewable energy products--so that 
we don't find ourselves relying on a foreign adversary or jeopardizing 
our national security for the sake of a supply chain. At the same time, 
we can create jobs and support American manufacturing--a win-win. A 
good place to start is the ``China competition'' legislation currently 
being reconciled between the two chambers of Congress. And I commend 
our friend, Senator Cornyn, for his leadership in supporting chips 
funding in that bill.

    And while domestic investment is a key part of shoring up our 
supply chains for years to come, we also have to focus on a fundamental 
principle central to the supply chain discussion: working together with 
our global partners. And as leaders of this subcommittee, Senator 
Cornyn and I have repeatedly called for greater U.S. economic 
engagement and leadership across the globe, especially in the Asia-
Pacific region.

    By reaching out to our allies, bringing more nations into a shared 
economic framework, we can improve the security and resiliency of our 
supply chains--leading to a wider range of products and lower costs for 
American consumers. That's part of the reason why I was happy to see 
President Biden announce the start of an Indo-Pacific Economic 
Framework--to bring more good-faith trading partners into a stronger, 
fairer global economy and create even more diverse, resilient supply 
chains.

    Ultimately, building secure and flexible supply chains will require 
both economic cooperation with our allies across the globe, and more 
strategic investments in critical industries and workers here at home.

    So today, we look forward to hearing from our witnesses with 
respect to their insight on solutions to these challenges--so that the 
next generation of American families won't have to worry about empty 
shelves and higher prices. We'll be ready for what's to come.

    Once more, let me thank our ranking member and the witnesses 
appearing before us today. And with that, I'd like to turn it over to 
Senator Cornyn for his opening statement.

                                 ______
                                 
                Prepared Statement of Hon. John Cornyn, 
                       a U.S. Senator From Texas
    Thank you, Chairman Carper, for working with me to organize this 
hearing on such an important and timely topic. And thank you to our 
witnesses for joining us--both virtually and in-person.

    This subcommittee continues its work in exploring the geopolitical 
benefits and consequences of America's trade policy with the world and, 
in particular, our foreign adversaries such as China and Russia.

    The topic of resiliency in critical supply chains is an important 
one, as the COVID-19 pandemic awakened us to our dependence on the 
concentration in foreign adversaries of the goods we need in a time of 
crisis. We must reinforce the rules-based, international trading system 
for those nations that at least attempt to abide by it through free 
trade agreements like the Comprehensive and Progressive Trans-Pacific 
Partnership.

    The administration's Indo-Pacific Economic Framework is a positive 
first step in that direction. But we cannot play games with our 
Nation's survival by outsourcing the crown jewels to nations like China 
that have weaponized our free market system against us.

    Nearly 20 years ago, our government opened the door to do business 
in China, and our industries did what they do best--found a market, 
captured it, and achieved efficiency and innovation. What we have 
learned since is that the Chinese Communist Party, not its people, 
perverted that goodwill through theft and control to achieve a 
strategic advantage. Our own people in homegrown industries suffered as 
a result.

    Now we must all come together--labor, business, and government--as 
one Nation and put past disputes, jurisdictions, and political contests 
aside to find the right balance in preserving our critical supply 
chains while continuing to trade with the people of China. That 
includes providing incentives, like the CHIPS for America Act I 
authored with Senator Warner, to bring semiconductor production back 
home.

    It means reducing the regulatory burdens on American businesses 
that want to thrive in our domestic and foreign markets that abide by 
the rules-based international trading system. And it means having an 
honest look and conversation about the problems at hand.

    For example, a few weeks ago at the Senate Intelligence Committee, 
I heard from a former Trump administration official who highlighted 
that U.S. financial investments in Chinese-domiciled companies totaled 
over $2.3 trillion in 2020.

    Former National Security Advisor H.R. McMaster recently stated: 
``Last year, venture capital firms invested $114 billion in Chinese 
companies that are developing dual-use and sensitive technologies that 
are going to be weaponized against us or already are aiding and 
abetting the Russians.''

    I believe that it is time we had an honest conversation about the 
role that American investment has played in building the Chinese 
economy, especially in the area of critical supply chains and our over-
reliance on those supply chains, in areas such as semiconductors.

    The first step in doing that is granting the U.S. Government the 
authority to have visibility into U.S. investments in the supply chains 
of foreign adversaries through the establishment of an interagency 
committee, led by the President, that provides a whole-of-government 
approach in responding to Chinese economic coercion. That means, at a 
minimum, mandatory notification and circulation of investments by 
recipients of taxpayer funds designed to compete with China, such as 
those envisioned in the Bipartisan Innovation Act and the CHIPS for 
America act. This will serve as the basic guard rail to protecting 
those taxpayer funds.

    Yesterday, I released a revised version of the National Critical 
Capabilities Defense Act I co-authored with Senator Casey and my House 
colleagues that responded to industry feedback and does just that. I 
look forward to hearing more from industry in the coming days on that 
legislation and this topic from today's witnesses.

    We have before us Mr. Louie, who comes from the intelligence 
community, to provide us with a national security perspective.

    Mr. Potvin, I believe your intimate knowledge of the supply chain 
and logistics backlogs will be of great importance.

    Dr. Frenkel, your experience in government will help us to 
understand the rules-based international trading system and what our 
agreements will mean moving forward.

    And, Mr. Paul, you bring valuable insight from a coalition of both 
the labor and manufacturing industry.

    I look forward to hearing your testimony and questions to follow.

                                 ______
                                 
      Prepared Statement of Orit Frenkel, Ph.D., Founder and CEO, 
                     American Leadership Initiative
    The American Leadership Initiative (ALI) appreciates the 
opportunity to testify before the Senate Finance Committee's 
Subcommittee on International Trade, Customs, and Global 
Competitiveness on the important topic of supply chain resiliency.

    ALI's mission is to put our country and citizens on the right 
trajectory for 21st-century realities. We champion a holistic vision 
that: embraces a long-term alternative to populist isolationism that 
undermines American interests; strengthens and reforms our global 
alliances and institutions; doubles-down on our shared American values; 
addresses climate change collaboratively; and demands inclusive and 
sustainable growth--at home and abroad.

    This hearing's topic is extremely important and timely, as we have 
witnessed waves of shortages over the past few years, from toilet paper 
to bicycles, from semiconductors to baby formula. These supply chain 
shortages, spurred by a variety of factors, including the pandemic, 
Russia's invasion of Ukraine, and lockdowns in China, have led to a 
bipartisan momentum to shore up American competitiveness and encourage 
U.S. manufacturing. national security concerns about China, combined 
with Russia's invasion of Ukraine, have raised awareness of the need to 
reduce U.S. supply chain dependency on these autocratic regimes.

    In late February, the White House released a plan \1\ to revitalize 
American manufacturing and secure critical supply chains. This policy 
shift towards restoring American competitiveness and manufacturing, 
providing important funding to expand U.S. semiconductor production, 
and constructively working with allies to address the China challenge. 
is also seen in the United States Innovation and Competition Act 
(USICA) \2\ and the House-passed America COMPETES Act \3\ of 2022. ALI 
applauds both these initiatives and urges the conference to reach 
agreement and pass this critical legislation. The U.S. should also look 
for ways to streamline its import processes where possible, including 
exploring whether to eliminate some China 301 tariffs on consumer goods 
where they don't compete with domestic suppliers.
---------------------------------------------------------------------------
    \1\ https://www.whitehouse.gov/briefing-room/statements-releases/
2022/02/24/the-biden-harris-plan-to-revitalize-american-manufacturing-
and-secure-critical-supply-chains-in-2022/.
    \2\ https://www.congress.gov/bill/117th-congress/senate-bill/1260.
    \3\ https://www.congress.gov/bill/117th-congress/house-bill/4521.

    Fully implementing the Trade Facilitation Agreement is an important 
step to streamline import and export processes globally. This 
agreement, which entered into force in 2017, specifies that technical 
and financial support should be provided to developing countries to 
help them implement the provisions to streamline their customs 
procedures. Implementation has been delayed over the past couple of 
---------------------------------------------------------------------------
years due to the pandemic and should now be expedited.

    USICA includes several important provisions to facilitate the 
diversification of supply chains and facilitate the onshoring of 
critical manufacturing, and the Congress should consider funding to 
support these initiatives.

    Having stable and secure access to critical products like 
semiconductors or medical equipment is essential to both the U.S. 
economy and national security. This crisis offers the U.S. an 
opportunity to think strategically about our economic and foreign 
policy goals and recreate our supply chains to support those goals. 
Current trade tensions with China provide an ideal time to begin 
reevaluating our trade policies with partner countries to strengthen 
those relationships and build more resilient supply chains.

    Not everything can be produced in domestically, and the U.S. should 
strive to find the right balance between onshoring and right-shoring 
global supply chains to achieve a range of foreign policy goals. 
Different solutions will work for different sectors, so it is important 
to consider the particular needs of each one when looking at supplier 
diversification.

    As Treasury Secretary Janet Yellen said recently in her comments to 
the Atlantic Council, ``friend-shoring'' of supply chains to trusted 
countries allows us to securely extend market access and lower the 
risks to our economy, as well as to our trusted trade partners.\4\ 
Friend-shoring is an important part of supplier resilience, especially 
when moving sourcing for key technologies out of China. The effort to 
coordinate semiconductor supply chains under the U.S.-EU Tech and Trade 
Council, as well as efforts to coordinate with Japan and Korea, are 
important examples of how allies can coordinate moving sourcing of key 
technologies out of China and keep these technologies within countries 
that share U.S. values.
---------------------------------------------------------------------------
    \4\ https://www.atlanticcouncil.org/news/transcripts/transcript-us-
treasury-secretary-janet-yellen-on-the-next-steps-for-russia-sanctions-
and-friend-shoring-supply-chains/.

    Concern about the ability to access certain goods quickly is an 
argument for turning to countries closer to the U.S., such as Canada 
and Mexico, to allow for ground shipment and eliminate port delays. 
This near shoring can also be used to encourage growth in developing 
countries that have strategic importance. The Biden administration has 
initiated a program \5\ to encourage private sector investment in the 
Northern Triangle--El Salvador, Guatemala, and Honduras--with the goal 
of spurring economic development to reduce the incentive for migration 
from those countries to the United States. This program engages the 
State Department, USAID and other agencies to support U.S. companies 
looking to invest or source there.
---------------------------------------------------------------------------
    \5\ https://www.whitehouse.gov/briefing-room/statements-releases/
2021/05/27/fact-sheet-vice-president-harris-launches-a-call-to-action-
to-the-private-sector-to-deepen-investment-in-the-northern-triangle/.

    For companies wanting to relocate textile manufacturing from 
Xinjiang, the Northern Triangle countries are an option to explore. To 
make the Caribbean and Central America an sourcing attractive 
destination for near shoring, the USG must invest in additional 
capacity building to upgrade infrastructure, facilitate investment 
---------------------------------------------------------------------------
financing and invest in expanded trade facilitation programs.

    Supporting sourcing in countries of strategic interest is an 
important tool to counter China growing global footprint. The 
administration's Northern Triangle initiative can be a model for 
supporting other developing countries, notably in Africa and Latin 
America, to counter China's heavy investment in those regions. Such 
sourcing investments not only strengthen our economic relationships, 
but also our national security by bring jobs and investment and 
creating stronger relationships in those regions.

    The Indo-Pacific Economic Framework (IPEF), launched earlier this 
week, is also a key tool in the U.S. supply chain strategy. In addition 
to strengthening U.S. leadership in Asia, it has a pillar focused on 
supply chain resiliency that will help the U.S. work with regional 
allies to ensure that key supply chains are reliable and secure.

    U.S. supply chain policy should be used to advance U.S. standards, 
especially labor, environmental and digital standards. The IPEF 
framework seeks to advance those standards in Asia and provide 
countries a vital alternative to China's regressive standards.

    To fully develop new sourcing partnerships, the U.S. will need to 
invest in capacity building to train workers, provide assistance in 
raising standards, and partner with the U.S. private sector to 
facilitate these countries becoming new sourcing destinations. ALI has 
suggested offering IPEF countries who meet key standards in the 
framework, a ``preferred supplier'' status, allowing their goods to be 
expedited through U.S. customs.

    Investing in digital trade facilitation as part of IPEF and in 
other countries the U.S. sourcing destinations, is an important tool to 
reduce Customs bottlenecks. The U.S. should assist these countries to 
transition to e-invoicing, as well as to implement digital rules of 
origin, sanitary phytosanitary certificates, and other digital customs 
documentation to expedite the customs process, as well as reduce 
opportunities for corruption.

    In December, President Biden signed the Uyghur Forced Labor 
Prevention Act,\6\ which bans imports from Xinjiang and seeks to ensure 
that goods produced wholly or in part with forced labor in other areas 
of China do not enter the U.S. The law also calls on the United States 
to lead international efforts to end forced labor practices around the 
globe and to coordinate with Mexico and Canada to implement the USMCA 
prohibition on importing goods produced by forced labor into the three 
countries.\7\ This prohibition on imports produced with forced labor 
creates a necessity for U.S. companies to find new sourcing 
destinations with higher labor standards and is an important example of 
how the U.S. can advance labor rights and human rights through supply 
chain regulations.
---------------------------------------------------------------------------
    \6\ https://www.congress.gov/bill/117th-congress/house-bill/6256/
text.
    \7\ https://ustr.gov/trade-agreements/free-trade-agreements/united-
states-mexico-canada-agreement.

    A rethinking of supply chains can encourage green sourcing as well. 
In a recent path-breaking agreement on steel and aluminum, the United 
States and the European Union agreed to address carbon intensity and 
overcapacity of high-carbon steel and aluminum. This arrangement is 
meant to discourage the production of high-
carbon steel and aluminum and ensure domestic policies to lower the 
carbon intensity of these industries, and it could be a model for the 
---------------------------------------------------------------------------
U.S. to achieve lower-carbon production in other sectors.

    U.S. leadership on digital standards is of critical importance. As 
China's Digital Silk Road \8\ has expanded, it has brought 
authoritarian standards of surveillance, monitoring and censorship with 
the Internet and telecommunication equipment it sells. The U.S. must be 
a standards setter in the digital space and offer countries its digital 
model of transparency, openness and democracy or risk ceding this 
critical space to China.
---------------------------------------------------------------------------
    \8\ https://www.cfr.org/china-digital-silk-road/.

    The U.S. should continue to strengthen constructive relationships 
with allies as well as expand its network of plurilateral arrangements 
to create new opportunities for friend shoring and supplier resiliency. 
Rethinking supply chains also offers the opportunity to emphasize trade 
facilitation, align standards, and strengthen near shoring in the 
Western Hemisphere to create economic opportunity and build new 
resilient sourcing paradigms that benefit American consumers and 
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workers, as well as advance American values.

                                 ______
                                 
       Questions Submitted for the Record to Orit Frenkel, Ph.D.
              Questions Submitted by Hon. Thomas R. Carper
    Question. We talked a lot about investing in manufacturing, but our 
economic strength also depends on investments in our workers and 
families.

    What investments should we make in our people, as part of our 
effort to build resilient supply chains and a fair and well-functioning 
economy?

    Answer. The most important step that the U.S. can take is to invest 
more in educating its children and workforce. As the American 
Leadership Initiative discusses in its report, A Global Digital 
Strategy for America,\1\ increasing automation and digitization across 
the economy means that more jobs are require digital skills, a trend 
that will continue to accelerate. A deep digital divide that drives 
economic inequality is undermining American economic competitiveness. 
This divide is especially profound in rural America, among communities 
of color, and other disadvantaged communities. As of 2021, Pew Research 
Center reported that roughly a quarter of adults with household incomes 
below $30,000 a year do not own a smartphone. And more than 4 in 10 
don't have home broadband services or a computer. This reality 
increases U.S. economic inequality, leaving the U.S. unable to harness 
the full potential of its human capital, and weakening U.S. global 
competitiveness.
---------------------------------------------------------------------------
    \1\ https://static1.squarespace.com/static/
5c9904eaebfc7f03f980b72a/t/60341bbf7245f02766f5c99b/1614027711334/
ALI++GDSA++Full+Report++Rev+02.22.21.pdf.

    The Bipartisan Infrastructure Law allocated money for universal 
broadband, which is an important first step, however this needs to be 
matched with comprehensive digital skills training, starting with K-12 
schools, community colleges, and company training programs. It is 
especially important that these trainings be available to underserved 
---------------------------------------------------------------------------
communities in the U.S.

    The U.S. ranks near the bottom among OECD countries on public 
spending on labor market programs as a share of GDP; and the trendline 
is headed in the wrong direction. During the past 15 years, the 
Department of Labor's (DOL) budget for grants to States to support job 
training programs has fallen by more than half after counting for 
inflation. Worse, the past several decades has seen steady declines in 
private-sector investment in workforce training--with a falling share 
of workers receiving on-the-job or employer-sponsored training. The 
U.S. should provide incentives for companies to expand their training 
programs, especially for underserved communities. We should also 
significantly increase federally sponsored apprenticeship programs, 
which have been shown to be effective training for all levels of 
workers.

    Question. What reforms should we make at the WTO to strengthen 
supply chain resiliency and improve global economic cooperation?

    Answer. The United States should work with the EU, Canada, Japan, 
and other allies to reform the WTO to be more relevant to today's 
economy, including negotiating tougher rules on subsidies and state-
owned enterprises, and reforming the dispute resolution system so that 
it can function. The WTO plays an important role in the international 
trading system, setting basic standards of trade and promoting global 
economic cooperation. However, it is unlikely, given the size and 
diversity of economies of its members, that parties will successfully 
conclude significant multilateral agreements in the near term. The WTO, 
should use and is using its convening power to draw attention to the 
underlying causes of supply chain disruptions. In 2022, the WTO held a 
Global Supply Chains Forum to discuss the role it can play in 
strengthening global supply chains. In addition to its monitoring 
function, the Director-General noted that the WTO can contribute by 
enhancing trade facilitation, supporting the quick clearance of goods 
at borders and promoting further liberalization of trade in transport 
and logistics services to bolster supply chain infrastructure.

    At the same time, the U.S. should continue to seek to negotiate 
agreements with countries that are like-minded and willing to uphold 
agreed upon standards and values, in order to strengthen supply chain 
resiliency, particularly for key technologies.

    The WTO Trade Facilitation Agreement was completed in 2017 and is 
focused on upgrading and digitizing customs processes for signatories, 
especially in the developing world. Full implementation will go a long 
way to streamlining supply chains.

                                 ______
                                 
     Prepared Statement of Gilman Louie, Chief Executive Officer, 
                        America's Frontier Fund
    Chairman Carper, Ranking Member Cornyn, and members of the 
Subcommittee on International Trade, Customs, and Global 
Competitiveness, thank you for inviting me to testify on the important 
topics of supply chain resiliency, national security, and emerging 
technologies.

    My name is Gilman Louie, and I am the CEO of America's Frontier 
Fund, a new nonprofit public-private investment fund focused on deep 
technologies and platforms critical to the security and prosperity of 
the United States and its allies. Before I begin, I should note that I 
am offering these remarks in my personal capacity. I am not speaking on 
behalf of the U.S. Government, the President's Intelligence Advisory 
Board, or any other organizations with which I am affiliated.

    The United States is in a new full spectrum great-power competition 
against peer nation-state competitors committed to out-investing and 
out-innovating the United States. We can no longer take our supply 
chains for granted, nor can we assume continued U.S. technology 
leadership. We need a whole-of-nation approach to aligning public- and 
private-sector incentives that address the root causes of our eroding 
global leadership, secure our critical supply chains, and catalyze the 
next generation of innovation.

    Before looking for solutions, we must first ask how we reached this 
point. The truth is, the challenges we face today arose from decades of 
supply chain optimization, just-in-time manufacturing, and fractional 
improvements in cost savings and profitability. The result has been a 
highly efficient but increasingly brittle global supply chain. These 
well-intentioned decisions by individuals and corporations have created 
a systemic challenge to our economic security centered on three market 
failures:

      1.  Decades of underinvestment in foundational technology 
startups have stifled innovation and deterred talent in key sectors.

      2.  Other countries, especially in East Asia, have created an 
artificially attractive offshore investment environment.

      3.  The U.S. has high barriers to entry and challenging economies 
of scale for domestic leading-edge manufacturing.

    Microelectronics offers a case in point for understanding these 
three market failures.

    Underinvestment in hardware: For the past 3 decades, U.S. venture 
capital investment has heavily skewed towards software development 
rather than hardware advancements, leading to a lack of access to 
capital for domestic chip startups. In 2021, U.S. venture capital 
investment in hardware startups was just $9 billion. By comparison 
nearly 14 times the investment went to software, or $124 billion.\1\ 
Chinese venture investment in microelectronics tripled from 2019 to 
2020.\2\ And last year, microelectronics startups in China received six 
times the amount invested in comparable U.S. firms.\3\ This makes 
investing in a U.S. hardware company less attractive, which partially 
explains the skewed investment in software.
---------------------------------------------------------------------------
    \1\ ``National Venture Capital Association 2022 Yearbook.'' 
National Venture Capital Association, March 2022, nvca.org/wp-content/
uploads/2022/03/NVCA-2022-Yearbook-Final.pdf, pg. 28.
    \2\ Lu, Shen. ``Chinese Chip Companies Raised a Record $11 Billion 
in 2021.'' Protocol, 2 March 2022, www.protocol.com/bulletins/china-
chip-funding-11-billion; as a comparison, entrepreneurs in China 
launched 22,800 new semiconductor companies, in 2020 up 195 percent 
from 2019. See Ravi, Sarah. ``Taking Stock of China's Semiconductor 
Industry.'' Semiconductor Industry Association, 13 July 2021, 
www.semiconductors.org/taking-stock-of-chinas-semiconductor-industry.
    \3\ Liu, Coco. ``China Venture Funding Hits Record $131 Billion 
Despite Crackdown.'' Bloomberg, January 9, 2022, www.bloomberg.com/
news/articles/2022-01-09/china-venture-funding-hits-record-131-billion-
despite-crackdown.

    Artificially attractive overseas investment environment: U.S. firms 
recognized it is cheaper and faster to establish microelectronics 
manufacturing centers offshore, especially in East Asia. Without the 
funding proposed in the U.S. Innovation and Competition Act (USICA), 
the 10-year total cost of ownership of a fabrication facility (fab) in 
the United States is 30-50 percent higher than in East Asia.\4\ And 
during the same period, U.S. industry invested $14 billion in 
electronics manufacturing projects in China. For comparison, China 
invested only $141 million in similar projects in the United States.\5\ 
The Chinese government has also translated its position as a low-cost 
manufacturing hub into strategic advantage. China often requires that 
joint ventures with foreign manufacturing firms must establish 
operations in China. This in turn grants local Chinese firms access to 
foreign IP.\6\ China has also flooded the market with capital for 
strategic technology sectors and manufacturing. In exchange for access 
to China's market and low-cost manufacturing, firms from the U.S. and 
our allies have deferred investing in manufacturing at home in favor of 
the cheaper and readily accessible market in China. This shifts the 
cost burden for manufacturing and other high capital expenditure 
projects from U.S. and allied shareholders onto the Chinese Government.
---------------------------------------------------------------------------
    \4\ Varas, Antonio, et al. ``Government Incentives and US 
Competitiveness in Semiconductor Manufacturing.'' Boston Consulting 
Group and Semiconductor Industry Association, September 2020, https://
web-assets.bcg.com/27/cf/9fa28eeb43649ef8674fe764726d/bcg-government-
incentives-and-us-competitiveness-in-semiconductor-manufacturing-sep-
2020.pdf, pg. 1.
    \5\ U.S. Department of Commerce and U.S. Department of Homeland 
Security. ``Assessment of the Critical Supply Chains Supporting the 
U.S. Information and Communications Technology Industry.'' U.S. 
Department of Commerce, February 24, 2022, https://www.commerce.gov/
sites/default/files/2022-02/Assessment-Critical-Supply-Chains-
Supporting-US-ICT-Industry.pdf, pg. 72.
    \6\ Bradsher, Keith. ``How China Obtains American Trade Secrets.'' 
The New York Times, January 15, 2020, https://www.nytimes.com/2020/01/
15/business/china-technology-transfer.html.

    High barriers to entry and challenging economies of scale: In 
recent years there has been a drastic increase in the cost, complexity, 
and time to introduce, develop, and scale new semiconductor 
technologies.\7\ This is in addition to the rising capital expenditures 
and R&D intensity required to remain competitive. Only two firms in the 
world--Taiwan Semiconductor Manufacturing Corporation (TSMC) and South 
Korea's Samsung--can currently fabricate leading-edge logic chips. Of 
significant concern is the location of Samsung's semiconductor 
fabrication facilities in South Korea within North Korean artillery and 
missile range.\8\ Similarly, TSMC produces the vast majority of 
cutting-edge chips, a mere 110 miles from China, our principal 
strategic competitor.\9\ Proposed Federal incentives in USICA would 
help mitigate the cost of locating a fab in the United States.\10\ But 
additional measures are necessary to make the United States an enduring 
home for advanced manufacturing. The lack of coordination between 
Federal, State, and local regulations are making it difficult to on-
shore advance manufacturing capabilities such as fabs. For example, it 
takes approximately 5 months longer on average to build a fab in the 
United States compared to Japan, in large part due to permitting.\11\
---------------------------------------------------------------------------
    \7\ As an example, complexity--as measured by number of process 
steps--is roughly double for a 5 nm chip compared to a 10 nm chip. 
``CMC Materials Investor Presentation.'' CMC Materials, December 2020, 
s23.q4cdn.com/881970339/files/doc_presentations/2020/12/CMC_Investor
Presentation_Dec_2020_FINAL.pdf, slide 11 .
    \8\ Mazarr, Michael, et al. ``The Korean Peninsula: Three Dangerous 
Scenarios.'' The RAND Corporation, 2018, https://www.rand.org/content/
dam/rand/pubs/perspectives/PE200/PE262/RAND_PE262.pdf, pg. 9.
    \9\ National Security Commission on Artificial Intelligence, Final 
Report, March 2021, https://www.nscai.gov/wp-content/uploads/2021/03/
Full-Report-Digital-1.pdf, pg. 3.
    \10\ Varas, Antonio, et al. ``Government Incentives and US 
Competitiveness in Semiconductor Manufacturing.'' Boston Consulting 
Group and Semiconductor Industry Association, September 2020, pg. 1.
    \11\ VerWey, John. ``No Permits, No Fabs.'' Center for Security and 
Emerging Technology, April 1, 2022, https://cset.georgetown.edu/
publication/no-permits-no-fabs, pg. 5.

    Today the U.S. is at risk of losing access to the critical 
technology components that we rely upon every day. This impacts 
everything from our personal communications devices to our Nation's 
defense systems. Russia's invasion of Ukraine highlights the peril of 
depending upon supply chains that can be severed by an adversary.\12\ 
The United States has rightly responded to Russian aggression by 
imposing sanctions designed to eliminate Russia's access to the 
technological goods that are critical to a diversified economy as well 
as Vladimir Putin's ability to project power. By blocking key 
technology imports--including semiconductors--in coordination with the 
European Union, South Korea, Japan, Taiwan, and others, the United 
States is bringing Russia's technological development to a screeching 
halt. The cautionary tale here is that we must continue to innovate and 
protect our supply chains, otherwise another nation may one day do the 
same thing to us. We must do whatever it takes to avoid a future 
scenario in which the United States can be cut off from key 
technologies by an authoritarian regime such as Russia or China.
---------------------------------------------------------------------------
    \12\ Inboden, William, and Adam Klein. ``A Lesson from the Ukraine 
War: Secure Our Semiconductor Supply Chains.'' The Hill, May 22, 2022, 
https://thehill.com/opinion/technology/3494860-a-lesson-from-the-
ukraine-war-secure-our-semiconductor-supply-chains/.

    Over the long term, we face an even greater risk of being surpassed 
technologically by China. This situation is unacceptable. We face a 
renewed era of great-power competition in which the primary 
battleground is ``winner-take-all'' technologies. We have never failed 
as a Nation to answer such a challenge, whether in war or in peace. I 
am encouraged this committee is taking a leadership role to address 
---------------------------------------------------------------------------
these urgent issues.

    Fortunately, there are still good reasons for optimism. The threats 
to our national security and economic competitiveness that I have 
described are also creating opportunities for revitalization in the 
United States and allied nations. Addressing underlying market failures 
and securing supply chains over the long-term can be the catalyst to 
grow our domestic manufacturing industry, create high-paying jobs, and 
deepen our security and economic partnerships with allies around the 
world. I'll now offer a framework with four pillars for tackling these 
problems.

    First, we must redesign and reimagine U.S. manufacturing 
capabilities. Bringing advanced and agile manufacturing home means 
producing goods closer to consumers. This transition would lower 
transportation costs while accelerating the product design and 
manufacturing cycle. What we need is public funding to act as a signal 
to investors, along with credits for trade and investment. These are 
important tools to unlock the necessary private capital. We also need 
to expand our talent pool at all levels of educational attainment, from 
knowledge workers to trade skills. Plumbers, electricians, and 
construction workers are all critical enablers for our R&D and capacity 
investments.

    Second, we must invest across America to promote promising tech 
hubs. Currently, five coastal cities have generated 90 percent of the 
innovation sector's growth over the last decade.\13\ But the next wave 
of innovation must be broader than Silicon Valley and include more 
technology hubs across the country. Samsung's announcement of a $17-
billion semiconductor fabrication facility in Taylor, TX is an 
excellent example of what is possible.\14\ The FinTech Innovation Hub 
under construction at the University of Delaware is another example of 
a promising center of excellence.\15\ These are steps in the right 
direction toward creating new hubs but there is more work to do to 
unlock the potential of places like Delaware, Texas, and the American 
heartland.
---------------------------------------------------------------------------
    \13\ Atkinson, Robert, and Mark D. Muro. ``The Case for Growth 
Centers: How to Spread Tech Innovation across America.'' Brookings, 
March 9, 2022, https://www.brookings.edu/wp-content/uploads/2019/12/
Full-Report-Growth-Centers_PDF_BrookingsMetro-BassCenter-ITIF.pdf, pg. 
23.
    \14\ Sayers, Justin. ``Taylor Has Annexed 1,200-plus Acres for 
Samsung Site.'' Austin Business Journal, January 26, 2022, https://
www.kxan.com/news/texas/taylor-has-annexed-1200-plus-acres-for-samsung-
site/; ``Samsung Electronics Announces New Advanced Semiconductor Fab 
Site in Taylor, Texas.'' Samsung, January 24, 2022, news.samsung.com/
global/samsung-electronics-announces-new-advanced-semiconductor-fab-
site-in-taylor-texas.
    \15\ Weir, Polly, et al. ``UD Requests $6.5M from State for FinTech 
Fit-Out.'' Delaware Business Times, April 1, 2022, https://
delawarebusinesstimes.com/colleges-and-universities/ud-requests-6-5-
mfrom-state-for-fintech-fit-out.

    Third, we must disclose and internalize the risk of investing in 
authoritarian nations. As the sanctions on Russia have shown, U.S. 
firms investing and operating in nondemocratic nations face material 
business risks. Wall Street is increasingly applying Environmental, 
Social, and Governance (ESG) assessments to guide investment decisions, 
identify growth opportunities, and identify material risks. Building on 
the ESG framework, I believe it is important to add ``D'' for 
``Democracy,'' or ESGD. Whether a nation is committed to democracy and 
a rules-based international trading order should shape firms' 
investment decisions. Firms should also report on resiliency as a 
measure of supply chain effectiveness for risk committees. Ultimately, 
additional transparency would raise the cost of capital for investing 
in authoritarian nations and make investing in democratic nations more 
---------------------------------------------------------------------------
attractive.

    Finally, we need to deepen our engagement with our allies and 
partners on emerging technologies and supply chains. We cannot become 
resilient on our own. Reshoring the entire supply chain for 
microelectronics--just one of several critical industries--would cost 
$1 trillion. We need to prioritize ``near-shoring'' and ``friend-
shoring'' with our allies. As we work together with our allies on 
supply chains, we should also create new pathways for investing jointly 
in emerging technologies. Coalitions will be vital forums for pooling 
capital and creating new networks of democratic investors. The U.S.-EU 
Trade and Technology Council, the Quad Security Dialogue, and AUKUS 
will play a key role. In addition to increasing disclosure and vetting 
requirements for our competitors, we must also make it easier for 
trusted partners to invest in the United States. Just as we have 
developed TSA Pre-Check for prescreening fliers, we need a similar 
system to make it easier for allied investors to do business in the 
United States. Such a program would allow us to fast-track joint 
ventures, technology partnerships, and transactions with allies and 
like-
minded democracies. These types of programs will make more capital 
available for re-shoring and near-shoring, while also building support 
for restricting truly sensitive technologies from being transferred to 
our competitors. In my role as a Commissioner on the National Security 
Commission on Artificial Intelligence, we submitted several 
recommendations to Congress and the President aligned with these 
goals.\16\
---------------------------------------------------------------------------
    \16\ National Security Commission on Artificial Intelligence, Final 
Report, March 2021, https://www.nscai.gov/wp-content/uploads/2021/03/
Full-Report-Digital-1.pdf, pg. 495.

    In conclusion, we must target solutions against three market 
failures: underinvestment in foundational technologies, an artificially 
attractive offshore investment environment, and high barriers to entry. 
We must reimagine U.S. manufacturing, invest in promising tech hubs 
across America, redirect capital from autocracies to democracies, and 
deepen allied engagement. As the subcommittee considers policy tools 
for improving supply chain resiliency and long-term technology 
leadership, you have an important role to play in improving our 
national security while generating economic growth, creating good jobs, 
and reinforcing the rules-based international system. The time to act 
---------------------------------------------------------------------------
is now.

                                 ______
                                 
           Questions Submitted for the Record to Gilman Louie
              Question Submitted by Hon. Thomas R. Carper
    Question. How does a reimagined advanced manufacturing 
infrastructure in the United States change the way we think about 
supply chains?

    Answer. The return of advanced manufacturing infrastructure back to 
the United States will generate immense economic and national security 
benefits. Manufacturing closer to the point of consumption reduces our 
reliance on long supply chains across thousands of miles that include 
competitors and risks of disruption. By bringing manufacturing back to 
the United States, we can also develop new digital tools and advanced 
clusters of infrastructure that will enable agile, tailorable, and 
scalable manufacturing.

    This return will ultimately create a virtuous cycle of innovation 
and improve supply chain resilience. Economically, clusters of advanced 
manufacturing in regions across the country will expedite the product 
design cycle and accelerate the pace of innovation. In addition, 
shortening the distance between producers and consumers reduces both 
transportation costs and emissions.

    To realize this vision requires public funding coupled with tax and 
trade credits. These actions are critical because investors will 
perceive them as positive signals that will unlock private capital. 
Simultaneously, steps must be taken to expand workforce skills at all 
levels. Opportunities from construction to operation and maintenance of 
facilities will require an increase in our talent pool across every 
region of the country and every educational attainment level. Building 
and operating advanced manufacturing facilities across the country will 
create good, high-paying jobs in growing industries.

    Finally, the United States still requires cooperation with U.S. 
allies and our partners, even under a new paradigm for advanced 
domestic manufacturing. Cooperation and trade among allies and partners 
will lower costs and further increase resilience across all inputs to 
the supply chain.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
    Question. In your opening testimony, you said that ``five coastal 
cities have generated 90 percent of the innovation sector's growth over 
the past decade.'' You also acknowledged that there are ``35 great 
technology centers between the coasts'' that we should be investing in. 
Ohio is an example of the potential for growth-driving innovation in 
the American heartland. In January, for example, Intel announced a $20-
billion investment to build a semiconductor plant in New Albany. This 
will leverage Ohio's expertise in manufacturing and the skilled 
workforce graduating from the State's colleges and universities.

    Could you please explain and elaborate on the importance of 
investing in innovation between the coasts, in States like Ohio?

    Answer. Competition and diversity are critical to U.S. economic 
competitiveness. The U.S. Government should foster an environment in 
which innovative startups in all parts of the country are empowered to 
develop new products, create new categories, and grow into global 
industry leaders. A thoughtful combination of policies and incentives 
can reduce the barriers to entry for startups, especially companies at 
the cutting edge of deep tech sectors. Such an approach would 
accelerate and expand innovation in industries critical to U.S. 
leadership.

    As the National Security Commission on AI (NSCAI) highlighted in 
its final report, the current practice of clustering technology firms 
in regions like Silicon Valley has created dynamic and globally 
competitive industries. However, this trend has benefited some regions 
and demographics more than others. For example, there are untapped 
reservoirs of highly capable talent across the country in emerging 
centers of technological excellence. We have a massive opportunity to 
harness the best and brightest across America to lead the next 
generation of deep tech innovation. Existing regional clusters, outside 
of the coastal cities in places like Ohio, are on the cusp of becoming 
world-class innovation hubs. They are supported by public and private 
capital, incubators, university and lab networks, and shared tools and 
services. The creation of new jobs in a wider swath of the country will 
also help these hubs reach their potential and bolster U.S. economic 
competitiveness.

    As a specific example, there is a tremendous opportunity in Ohio to 
capitalize on Intel's recent announcement, the expertise of the Air 
Force Research Laboratory, and the Ohio State University's world-class 
faculty in radiation-hardened microelectronics. Combining these key 
ingredients with government support, industry partners, and private 
capital is an ideal ecosystem to develop and scale the next generation 
of trusted radiation-hardened microelectronics for advanced defense 
systems.

    Question. The House-passed America COMPETES Act, currently being 
conferenced, includes the CHIPS for America Act that I co-sponsored 
with Senator Portman. This bill will make a once-in-a-generation 
investment in American science, technology, and innovation.

    How does the CHIPS for America Act help the U.S. preserve its 
competitive edge? Getting the CHIPS for America Act signed into law is 
critical to both addressing the current chip shortage and supporting 
American competitiveness in the future, and it's essential that we get 
this legislation to the President's desk for his signature as quickly 
as possible. Can you please share what a delay in passage of the CHIPS 
Act could mean for domestic semiconductor chip manufacturers and those 
industries that rely on its products?

    Answer. Fully funding the CHIPS for America Act is a critical step 
toward bolstering our U.S. economic competitiveness and national 
security. Computational power is the foundation of the technology stack 
which underpins all emerging technologies. Therefore, microelectronics 
are at the heart of the competition to design, prototype, and scale 
advanced technologies, including AI, 5G, biotechnology, and advanced 
energy systems. The CHIPS Act provides an opportunity to increase 
domestic innovation by accelerating the pace of hardware development, 
lowering barriers to entry for hardware startups, and creating new 
talent clusters throughout the country. Implemented effectively, it 
will create a lab-to-fab pathway for new capabilities in 
microelectronics and related technologies while also increasing the 
resilience of the domestic semiconductor supply chain.

    As Senator Cornyn has pointed out, we should act quickly to 
mitigate the risks we face today. If the U.S. were to lose access to 
the advanced semiconductors we import from East Asia in a single year, 
our GDP could shrink by 3.2 percent and we could lose 2.4 million jobs. 
In a scenario where the United States is cut off from advanced 
microelectronics, the estimated GDP loss would be $718 billion. 
Compared to the chip shortage last year, this could be roughly three 
times larger than the estimated $240 billion in lost U.S. GDP. In the 
event we no longer had access to advanced chips for 3 years, we would 
lose more than $2 trillion of U.S. GDP and over 5 million jobs. In 
total, this would mean a GDP loss of over 9 percent and an employment 
loss of 3.5 percent.

    Even if the U.S. is not cut off from importing advanced 
semiconductors, our lack of domestic capabilities for prototyping and 
scaling microelectronics presents a risk to our long-term economic 
competitiveness. Innovation is the key to future capabilities and the 
United States faces a lab-to-fab capabilities gap. While I am pleased 
to see Congress pass CHIPS Act funding, passing this legislation is 
just the beginning. We must ensure the money is spent swiftly and 
wisely. We must utilize this funding to target the most strategically 
important sectors of the microelectronics industry and unlock private 
capital to further leverage U.S. capital markets.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. Over the years, China has dominated the market for rare 
earth elements, creating a global over-reliance on one country for 
refined products. As you can imagine, this creates major pitfalls as it 
relates to our national security.

    In your opinion, what strategies should the U.S. be focused on to 
reinvigorate our supply chain for critical minerals in order to prevent 
a single point of failure should China economically weaponize its share 
of the market?

    Answer. Rare earths and related supply chain inputs such as noble 
gasses are the building blocks for developing advanced technologies. 
Without resilient access to these key supply chain inputs, the United 
States is allowing the future of its technological development to be 
controlled by other nations. The United States needs a multi-pronged 
strategy to reinvigorate our supply chain for critical minerals focused 
on friend-shoring, reshoring, innovation, and domestic stockpiling.

    In the short term, we must work with our allies and partners to 
ensure more resilient supply chains for rare earth mining, processing, 
and magnet production in nations outside of China. Allied nations such 
as Australia is home to mining industry leaders and we should deepen 
our cooperation in strategically important areas. Over the longer term, 
we should also prioritize onshoring rare earth mining and processing. 
However, onshoring will take time, which highlights the need for 
friend-shoring in the near term.

    China's substantial market share in rare earth minerals extraction 
and processing is partly due to its willingness to pay the high 
environmental costs associated with this industry. With greater Federal 
support for innovation and R&D in this sector, the U.S. and its allies 
can work towards cleaner approaches to mining and processing that would 
make domestic mining more attractive and environmentally sustainable. 
R&D at all stages of the mining value chain could also enable smart 
mining and processing for rare-earth deposits in the United States, 
including Alaska, Nevada, and Arizona. For example, innovative new 
techniques for surgical mining and multiple extractions could enable 
every molecule to be used rather than extracting and processing a 
single target with the rest lost as waste.

    Finally, as an immediate response while we develop new techniques, 
we should launch an urgent domestic stockpiling effort to hedge against 
the risk of conflict or a decision by China to deploy its economic 
leverage in rare earth minerals. The United States government should 
move out now to establish a stockpile of rare earth minerals for each 
Department of Defense major defense acquisition program by 2025.

    Question. Currently, there is no certification scheme, or unified 
global standards, for rare earth minerals. As a result, producers have 
to navigate a patchwork of requirements.

    With this in mind, do you believe there's a use for advanced 
technology--such as blockchain--to track rare earths from mining to 
end-of-life?

    Answer. The lack of standards and data for rare earth minerals 
makes it difficult for firms and the U.S. Government to match supply 
and demand while also identifying and mitigating supply chain risks. 
Advanced technologies, such as the blockchain, could help with tracking 
rare earth minerals. But advanced technologies are only as good as the 
data they have available to process. With this in mind, the U.S. 
Government should begin with additional disclosure requirements for 
rare earth minerals. For example, contractors delivering systems to the 
U.S. military should be required to disclose the origins of their rare 
earth magnets.

    Armed with better data sources and standards, tools such as the 
blockchain could enable rare-earth minerals to be ``fingerprinted'' at 
the point of origin. This would allow them to be tracked throughout 
their lifecycle and confirm they have not been altered or contaminated.

    In addition, the U.S. Government should work closely with allies 
and partners to develop and coordinate global standards for rare earth 
minerals that allow greater visibility into the supply chain. A clearer 
system of global standards will also help to root out unfair trade and 
labor practices around the world.

    Question. The Fourth Industrial Revolution--or Industry 4.0--refers 
to a new phase that focuses heavily on machine learning, automation, 
interconnectivity, and real-time data.

    Given your experience with deep technologies and AI, what are the 
most influential technologies of Industry 4.0 for creating more 
responsive and resilient supply chains?

    Answer. The National Security Commission on AI highlighted the risk 
the United States faces from losing our edge in microelectronics, AI, 
5G, biotechnology, advanced materials, and quantum. We cannot take this 
risk as our nation's technological advantage is a strategic advantage. 
We are also on the cusp of a new wave of innovation that will create 
new industries and categories of good jobs. Companies are reinventing 
supply chains, governments are increasing frontier tech funding, and 
disruptive technologies are emerging from labs across the country. Each 
critical emerging technology sector--microelectronics, AI, 5G, 
biotechnology, advanced materials, and quantum--has overlapping but 
unique supply chains. In formulating a comprehensive approach to 
responsive and resilient supply chains for Industry 4.0 technologies, 
we should consider the lessons of the U.S. microelectronics industry. 
Fortunately, we are preparing to revitalize the domestic 
microelectronics industry with the support of CHIPS Act funding. A 
thoughtful, coordinated approach to each emerging sector now would 
allow us to put in place incentives for U.S. and allied industries to 
maintain strategic supply chain nodes domestically. Acting now will 
help prevent a situation where we are forced to reshore strategic 
sectors in the future after they have already shifted offshore when the 
risks and costs are higher.

    Question. Do you believe the passage of the U.S. Innovation and 
Competition Act would encourage the adoption of Industry 4.0 
technologies?

    Answer. The U.S. Innovation and Competition Act is a critical piece 
of legislation for the United States and our allies to achieve a 
leadership position in Industry 4.0 technologies. Many Industry 4.0 
technologies feature winner-take-all dynamics that require us to move 
quickly or risk losing out to committed competitors such as China.

    Achieving the promise of Industry 4.0 technologies also depends on 
more closely linking the physical and the digital worlds using advanced 
technologies, specifically the Internet of things (IoT), AI, robotics, 
drones, autonomous vehicles, 3D printing, cloud computing, 
nanotechnology, and more. Combined, these capabilities enable us to 
communicate, analyze, and execute decisions faster, more flexibly, and 
more intelligently.

    With the support of CHIPS Act funding, reshoring domestic 
microelectronics innovation will enable the United States to develop 
and scale Industry 4.0 technologies far more rapidly. Combining 
advanced manufacturing with digital engineering and digital twin 
capabilities generated by AI and high-performance computing will also 
unlock a new wave of innovation across Industry 4.0 technologies. To 
encourage the widest adoption of Industry 4.0 technologies, we should 
focus on democratizing the process for designing, manufacturing, and 
scaling new products. AI has the power to dramatically simplify product 
design, empowering humans without deep engineering expertise to focus 
on the creative elements of the process while algorithms tackle the 
technical aspects. Broadening access to the tools of innovation will 
also ensure all Americans enjoy the benefits and jobs generated by 
Industry 4.0 technologies.

    Question. For months, agencies have focused on a top-down review of 
our supply chains, but I believe we need something more permanent, more 
comprehensive, and more accessible.

    As I have said before, I believe this can be achieved through 
aggregated demand mapping for industries critical to our economic 
health and national security.

    Included in the trade title of the U.S. Innovation and Competition 
Act, I've authored a provision to establish a voluntary database and 
online toolkit to support the identification of suppliers of certain 
inputs and/or finished products in the U.S. and abroad.

    From a national security perspective, can you explain the merits of 
implementing a voluntary database for supply chain mapping?

    Answer. A voluntary database with shared standards for supply chain 
mapping is a critical first step toward identifying and mitigating 
risks, especially in critical sectors such as technology, health care, 
and defense. A voluntary database would also help the U.S. Government 
expand the data available for supply chain analyses using machine 
learning and other advanced analytic techniques. It is also important 
that the U.S. Government develop broad standards and shared interfaces 
for supply chain reporting, thereby allowing easier access among 
government and industry stakeholders who can identify potential issues. 
Working with the private sector, the U.S. Government has an opportunity 
to develop and deploy new tools and analytic techniques to identify 
high-risk nodes in its complex and rapidly evolving supply chains. This 
is already an area of promising investment in the commercial sector, 
especially in light of the business challenges and supply chain 
disruptions created by COVID-19.

    Even with the most advanced analytic tools, our understanding of 
the supply chain is only as good as the data available. Today supply 
chain data is not easily accessible, in part because it is not 
transparently reported and lacks standard interfaces. The U.S. 
Government would benefit from greater awareness of the vendors and sub-
vendors supplying critical goods in a range of product categories. 
Without visibility into the supply chain, the government and Nation as 
a whole will be unable to adapt to disruptions of all types, from 
natural disasters to interference by other nations.

    Moving beyond voluntary reporting, the National Security Commission 
on AI recommended that the U.S. Government consider revising the 
Defense Federal Acquisition Regulation Supplement to require additional 
disclosure and reporting requirements on the location of manufacturing 
centers for firms supplying critical systems and subsystems for the 
U.S. military. Additional disclosures would enable the U.S. Government 
to better identify vendors and sub-vendors in nations that pose risks 
to the United States. Combined with broader voluntary reporting, this 
increase in transparency would empower officials to weigh the risks and 
respond more effectively before unexpected supply chain disruptions 
occur.

                                 ______
                                 
            Prepared Statement of Scott N. Paul, President, 
                  Alliance for American Manufacturing
    Chairman Carper, Ranking Member Cornyn, and members of the 
subcommittee, on behalf of the Alliance for American Manufacturing, 
thank you for the opportunity to testify today on an issue of vital 
importance to our economic and national security: strengthening the 
resiliency of our supply chains to respond to new realities and the 
chaotic events of the past several years.

    AAM is a non-profit, non-partisan partnership formed in 2007 by 
some of America's leading manufacturers and the United Steelworkers. 
Our mission is to strengthen American manufacturing and support new 
private-sector jobs through smart public policies. We believe that an 
innovative and growing manufacturing base is vital to America's 
economic and national security, as well as to providing good jobs for 
future generations. AAM achieves its mission through research, public 
education, advocacy, strategic communications, and coalition building 
around the issues that matter most to America's manufacturers and 
workers.
            domestic supply chain resiliency is an economic 
                     and national security priority
    The last several years have made all Americans painfully aware of 
the tragic inadequacy of our deteriorated industrial capabilities and 
broken supply chains for respirators, ventilators, medicines, and other 
products essential for pandemic response. The pandemic and its economic 
shock waves also exposed a dangerous reliance on global suppliers for 
many other consumer and commercial products--revealing that the United 
States is ill-equipped to produce enough semiconductors, automobiles 
and parts, building materials, and consumer goods for everyday life, 
let alone the quantities needed to address a future emergency.

    The frailty of on-demand global supply chains and our utter 
reliance on them has left us dangerously exposed during an 
international health emergency and unprepared for future shocks. These 
disruptions should be viewed through the lens of years of public policy 
decisions that both facilitated, and in some cases actively encouraged, 
the offshoring of domestic production and critical supply chains.

    As a result, over 90,000 American manufacturing facilities have 
closed their doors since the late 1990s. China surpassed the United 
States as the world's largest manufacturing nation in 2010, and in 2019 
held nearly 29 percent of global factory output while the U.S. share 
had shrunk to 17 percent.\1\ With our high domestic consumption rates, 
this means imports have replaced domestic production throughout our 
supply chains at an alarming rate. We imported $1.2 trillion in goods 
in 2000. By last year, that total surged to $2.8 trillion, a 133-
percent increase, while our GDP grew over the same period at a slower 
(115 percent) rate. Not only has this replacement led to the loss of 5 
million good, middle-class jobs and devastated communities across our 
Nation, it has left us increasingly dependent on imports, often from 
adversarial countries like China and Russia, for everything from 
consumer goods and advanced technology products to lifesaving personal 
protective equipment.
---------------------------------------------------------------------------
    \1\ ``China Is the World's Manufacturing Superpower,'' Felix 
Richter. Statista. May 4, 2021. Accessed via weblink: https://
www.statista.com/chart/20858/top-10-countries-by-share-of-global-
manufacturing-output/.

    For example, even though the United States generally accounts for 
20 percent of the world's consumption, our global market share for 
making things falls woefully short of that. We manufacture about 10 
percent of electric vehicles, 7 percent of 
lithium-ion batteries, 12 percent of semiconductors (down from 37 
percent in less than a generation), and 4 percent of printed circuit 
boards. There is only one major domestic manufacturer of electrical 
steel needed to build out our energy grid, and there are many other 
examples of greatly diminished capacity in critical industries such as 
---------------------------------------------------------------------------
machine tools.

    To address these supply chain disruptions, as well as anticipate 
and prepare for future crises, we must acknowledge how we got here and 
what went wrong. The pandemic has exposed in rather dramatic fashion 
that years of flawed tax, trade, procurement, and other economic 
policies have put the United States in a perilous position of over 
dependence on imports. As the United States looks to address supply 
chain challenges, we must move away from the status quo approach that 
fosters continued and growing over reliance on imports, and instead 
focus on efforts that increase our own production capabilities. While 
we recognize that the United States has important security and trade 
relationships with our allies, and we can and should utilize those 
where it makes sense, the primary solution should not be to double down 
on imports or more globally integrated supply chains. Our 
vulnerabilities reflect an outdated notion of the benefits of hyper-
globalization, where our consumers, workers, domestic businesses, and 
our national security suffer. We must break the vicious cycle of 
implementing policies that reward imports over domestic production.
 Experts Have Been Warning That Offshoring and Reliance on Imports is a 
        National Security Risk
    The unfortunate, yet entirely predictable, reality we now face is 
that decades of offshoring have contributed to ongoing supply chain 
shortages and risks that continue to hinder growth and have forced some 
factories to go idle. This is an alarming economic and national 
security issue that experts have predicted for years.

        In a 2012 report, entitled ``Preparing for 21st Century 
Risks,''\2\ former Department of Homeland Security Secretary Tom Ridge 
warned that the United States was at risk of being unprepared to 
recover from disaster--whether it was terrorism, natural disaster, 
cyber disruption, or pandemic influenza--due to its dependence on other 
countries for critical manufacturing. Governor Ridge argued that at the 
root of the problem was an increasing reliance on foreign suppliers for 
products needed in the wake of catastrophic events. His report 
highlighted case studies on the domestic steel industry, our water 
infrastructure, and the commercial power grid which, because of its 
dependence on foreign sources, has reduced the number of domestic 
producers of electrical steel used in transformers to one. Governor 
Ridge warned that hostile trading partners may make a deliberate choice 
to not supply needed products, materials or technologies during a time 
of domestic crisis--citing U.S. reliance on imports as a national 
security risk.
---------------------------------------------------------------------------
    \2\ https://www.americanmanufacturing.org/wp-content/uploads/2017/
02/Homeland-Security-Report.July23.2012.pdf.

        In a 2013 report, entitled ``ReMaking American Security,''\3\ 
Brigadier General John Adams, U.S. Army (Ret.) found that U.S. national 
security is at-risk due to our military's reliance on foreign nations 
for the raw materials, parts, and products used to defend the American 
people. He examined the risks and vulnerabilities associated with 14 
defense-critical natural resources, inputs, and components--including 
semiconductors and rare-earth minerals--and presented recommendations 
to help mitigate the risks to our national security posed by the 
pervasive outsourcing of our defense industrial base.
---------------------------------------------------------------------------
    \3\ https://docs.house.gov/meetings/FA/FA14/20130725/101216/HHRG-
113-FA14-Wstate-AdamsB-20130725.pdf.

    Regrettably, these reports proved prescient, and the authors' 
warnings and recommendations were largely ignored. It took the COVID-19 
pandemic to bring these concerns to the national spotlight, as the one-
two punch of our gutted domestic supply chains and over reliance on 
foreign sources are impacting Americans in countless ways. We must be 
better prepared for the next crisis, and that requires taking bold 
action, starting right away. Moreover, the United States has a once-in-
a-
generation opportunity to take concrete steps to strengthen domestic 
manufacturing and rebuild critical supply chains, from semiconductors 
---------------------------------------------------------------------------
to face masks to batteries to solar panels.

    We must also prioritize the expansion of all stages of 
manufacturing in the United States, including upstream inputs that are 
critical for the completion of a final product assembly or manufacture. 
Too often our policies overlook the components, parts, and upstream raw 
materials fundamentally necessary to produce a given product. In a 
future emergency, relying only on end products that are assembled or 
manufactured in the United States from all or mostly imported products 
is not a solution to the problems that have plagued our economy over 
the past several years. In fact, such approaches will only set us up to 
repeat this failure.

    We have seen repeated failures affecting Americans in countless 
ways. Just this month, press reports highlighted that cancer patients 
and others needing imaging for their care and survival were dependent 
on contrast materials coming from China that are now in short 
supply.\4\ We have learned in the past that a large number of 
components of the pandemic drug Remdesivir are produced in China. We 
have seen China threatening to weaponize supplies of rare earths to 
advance the CCP's political aims. These are but a few examples of the 
dangerous dependence that we now face.
---------------------------------------------------------------------------
    \4\ ``Hospitals ration CT scans, other procedures over shortage of 
contrast dye,'' Elizabeth Chuck. NBC News. May 18, 2022. Weblink: 
https://www.nbcnews.com/news/us-news/shortage-contrast-dye-hospitals-
ration-ct-scans-procedures-rcna29379.

    Rebuilding supply chains will chart a course for a stronger future 
and create millions of new, well-paid jobs along the way. It's time to 
put an industrial policy in place to supercharge domestic manufacturing 
and grow supply chains.
      aam supports a policy framework for more secure, resilient, 
                     and revitalized supply chains
    We must acknowledge that supply chain resiliency is not a challenge 
that the private sector alone can fix. There is an appropriate role for 
government to provide leadership, coordination, a supportive policy 
framework, and funding directed to domestic production expansion where 
the vulnerabilities are most critical. This is not an easy task, but it 
is one that the American people demand because it is critical to our 
future security and prosperity.
Enactment of the Bipartisan Innovation Act (USICA/COMPETES Act)
    We support a swift and successful conclusion of conference 
committee work on competitiveness and innovation legislation that has 
separately worked its way through the House and Senate. Merging the 
most attractive provisions from each of these bills offers the 
opportunity to create a long-overdue policy framework for supply chain 
security, resiliency, and revitalization.

    AAM has outlined our conference priorities in a letter to House and 
Senate leaders,\5\ but please allow me to outline several topics that 
are particularly important to today's hearing.
---------------------------------------------------------------------------
    \5\ March 23, 2022, AAM letter regarding UCISA/COMPETES priorities. 
Weblink: https://www.americanmanufacturing.org/wp-content/uploads/2022/
04/AAM-letter_USICA-_COM
PETES-Conference.pdf.

        Strengthening U.S. investments in critical industries. 
Conferees should prioritize CHIPS Act funding to strengthen domestic 
semiconductor manufacturing and other Federal assistance to sustain and 
expand manufacturing research, development, and deployment efforts 
through the network of institutes and State-level extension 
partnerships that are crucial to inventing, scaling, and making the 
---------------------------------------------------------------------------
next generation of products here in America.

        Supply chain resiliency fund. Similarly, the supply chain 
resiliency fund in the House bill will act to fill gaps in our Nation's 
critical industrial capabilities. I would caution, however, that 
critical supply chains strengthened by Federal dollars should be those 
here in America, not offshore. Loans, loan guarantees, grants, and 
other forms of assistance awarded as part of a supply chain resiliency 
fund should be predicated on investments being made in the United 
States with construction activities giving preference to goods produced 
by American workers. American taxpayers want their hard-earned tax 
payments used to promote American jobs.

        Trade enforcement. AAM supports strengthening trade 
enforcement tools to ensure that our efforts to secure critical supply 
chains are not undermined by unfair trade practices from China, Russia, 
and other countries. Specifically, we urge inclusion of the Leveling 
the Playing Field Act 2.0 \6\ in the final conference report. Several 
members of this subcommittee--including Senators Brown, Portman, Casey, 
and Young--are sponsors of this timely legislation.
---------------------------------------------------------------------------
    \6\ S. 1187--Eliminating Global Market Distortions To Protect 
American Jobs Act of 2021.

         Within the trade title, AAM also supports efforts to reform 
the current de minimis policy and opposes language that would 
---------------------------------------------------------------------------
circumvent and undermine USTR's section 301 exclusion process.

        Screening outbound investments in critical sectors. AAM 
supports the National Critical Capabilities Defense Act--sponsored by 
Senator Casey and Ranking Member Cornyn--to establish an outbound 
investment review process designed to avert the offshoring of 
production capacity to foreign adversaries in critical U.S. sectors. 
This legislation--backed up by a 2021 recommendation of the bipartisan, 
independent U.S.-China Economic and Security Review Commission--merits 
enactment.
Additional Policy Initiatives
    More broadly, there are some guiding principles that we believe 
Congress and the administration would be wise to follow as a new policy 
framework for supply chain resiliency is developed.

    Federal dollars and other forms of assistance should not be 
available to entities that are owned by or affiliated with the foreign 
government or militaries of countries that that are uncooperative or 
pose risks to our economic and national security interests. We must 
confront the reality that China's government has used and will continue 
to use global disruptions, including the pandemic, to advance its own 
economic and geopolitical interests. In 2020, an official in China 
remarked that ``it is possible to turn the crisis into an opportunity--
to increase the trust and the dependence of all countries around the 
world of `Made in China.'''\7\
---------------------------------------------------------------------------
    \7\ ``Opinion: How China is planning to use the coronavirus crisis 
to its advantage,'' Josh Rogin. Washington Post, March 16, 2020.

    Unfortunately, Congress neglected to implement sufficient 
guardrails as part of previous COVID relief packages. As a result, The 
New York Times reported that more than 125 China-owned or -invested 
companies received hundreds of millions of dollars in loans from the 
Paycheck Protection Program (PPP)--many of them state-owned with 
concerning links to China's military.\8\ The PPP program was created at 
the start of the COVID-19 shutdowns to keep America's small businesses 
afloat and keep workers employed during this unprecedented crisis--not 
to support the CCP's ambitions.
---------------------------------------------------------------------------
    \8\ ``U.S. Small Business Bailout Money Flowed to Chinese-Owned 
Companies,'' Alan Rappeport. New York Times. August 2, 2020.

    The reporting was based on research by Horizon Advisory,\9\ which 
noted:
---------------------------------------------------------------------------
    \9\ https://www.horizonadvisory.org/paycheckprotection.

        These PRC entities span state-owned enterprises (SOEs); 
        companies with ties to China's military and military-civil 
        fusion programs; companies that the U.S. Government has 
        identified as national security threats; companies complicit in 
        China's genocide against the Uighur minority in Xinjiang; and 
---------------------------------------------------------------------------
        media outlets owned by, or that take direction from, the CCP.

        The identified recipients linked to PRC-based ownership span 
        critical and strategic industries including aerospace and 
        defense; pharmaceuticals and medical technology; legacy and 
        emerging automotive manufacturing; advanced manufacturing and 
        manufacturing components (e.g., semiconductors, robotics); 
        telecommunications; financial technology; entertainment; and 
        media.

    Congress should prioritize domestic content in our infrastructure, 
procurement, and supply chain rebuilding efforts. Federal financial 
assistance should be conditioned on the use of iron, steel, 
manufactured products, and construction materials that are produced in 
the United States by America's workers.

    Reinvesting tax dollars here at home creates American jobs, invests 
in goods produced under strong environmental and workplace safety 
standards, and protects our economic and national security. Without 
these policies in place, predatory foreign governments would be free to 
undercut domestic production with dumped and subsidized, 
environmentally-unfriendly, and substandard products--bypassing 
American workers and sending U.S. tax dollars offshore rather than 
reinvesting in the United States.

    We applaud Senators Brown and Portman for their leadership in 
enacting the Build America, Buy America legislation as part of the 
recent Bipartisan Infrastructure Law. Congress now has an important 
role to play in seeing that Federal departments and agencies 
effectively implement this policy.

    It is critically important that our trade policies be closely 
aligned and coordinated with supply chain resiliency efforts. To create 
the market conditions that allow for the incubation of new technologies 
into domestic production, manufacturers should have the confidence that 
they will not be wiped out by a surge of subsidized imports from 
foreign state-owned enterprises seeking to capture our markets. U.S. 
companies and American workers are among the most efficient, 
hardworking, and capable in the world, but even they cannot compete 
against predatory foreign governments determined to dominate supply 
chains and use them as a weapon of foreign coercion. We need to enforce 
our trade laws to ensure a level playing field for American workers and 
manufacturers.

    Congress and the administration must not return to flawed trade 
policies. AAM supports smart global engagement in the Indo-Pacific to 
advance the rights, interests, and futures of American manufacturing 
and its workers. Yet, as the United States commences Indo-Pacific 
Economic Framework (IPEF) discussions to deepen economic engagement 
within the context of the overall Indo-Pacific Strategy, we cannot 
return to the flawed trade and other policies that created our 
dangerous reliance on global suppliers or that will exacerbate the 
existing imbalanced trade relationships with many of the Indo-Pacific 
countries. The United States must learn from its mistakes, not double 
down on them. The United States is long overdue for a new and 
innovative approach to trade and economic cooperation. It is both 
possible and desirable to create a trade and economic policy framework 
to support a resurgent, domestic manufacturing base.

    It should be noted that the United States already has robust 
engagement in the Indo-Pacific region with multiple Free Trade 
Agreements, alternative section 232 arrangements with multiple 
countries, more than $1 trillion in foreign direct investment in the 
region, and various defense and security arrangements. Regrettably, the 
United States also has substantial trade deficits with a handful of key 
participants. The United States has massive 2021 trade deficits in the 
region, including $90 billion with Vietnam, $60 billion with Japan, $41 
billion with Malaysia, $35 billion with Thailand, and $33 billion with 
India.

    So then, the key question for IPEF is determining the goals and 
objectives for future engagement in the region. As I write this 
testimony, information available on the various issues within a 
potential IPEF is simply in development. We do not know which countries 
will ultimately participate, whether additional countries will be able 
to join via ``docking'' provisions in the future, whether the framework 
will include market access commitments now or in the future, the role 
of American manufacturing and its workers, and whether enforceable 
workers' rights and corporate accountability will apply across all 
modules.

    The IPEF should not under any circumstances extend benefits, direct 
or indirect, to countries like China that are not a signatory. In fact, 
IPEF participants should be prepared to join the United States in 
confronting China's predatory practices.

    While many argue that the IPEF represents an opportunity to address 
supply chain challenges, we must not move away from the lessons learned 
during the COVID-19 pandemic--that is, that the United States must 
prioritize reshoring U.S. supply chains. IPEF cooperation that shifts 
production or sourcing decisions away from China may be a worthwhile 
endeavor but is nevertheless insufficient without concurrent efforts to 
domestically produce goods and materials necessary for our economic, 
health, and national security. Merely reshuffling offshore supply chain 
continues to leave our Nation overly reliant on foreign production and 
susceptible to shocks from geopolitical or other events. The IPEF 
represents an opportunity to break the vicious cycle of adopting trade 
and economic policies that reward imports over domestic production and 
American workers.

    Congress and the administration should proceed cautiously with 
respect to altering or removing existing trade enforcement actions. Any 
proposals to ease imports of finished goods or inputs should be 
carefully examined to ensure that we are not doubling down on risky 
global supply chains and making it more difficult to reshore them or 
undermine existing producers. While an accessible and transparent 
exclusion process is essential for trade enforcement actions, 
unwarranted tariff relief may very well signal the demise of a U.S. 
company that is seeking to establish a market foothold or one that has 
reinvented itself to fill gaps in our domestic supply chains.

    China has not earned the right to additional U.S. market access. In 
fact, China has ramped up its industrial subsidies, strengthened its 
state-owned enterprises (SOEs), continued its horrific genocide of 
ethnic minorities, taken the side of Vladimir Putin, broken its 
promises on Hong Kong, and become more aggressive in the South China 
Sea and in its threatening posture towards Taiwan. Despite its empty 
promises, Beijing continues these egregious activities to the detriment 
of U.S. companies and American workers. If Beijing continues to 
disregard its commitments under the modest Phase One agreement, the 
United States should pursue its enforcement rights under that deal.

    Senators, a brighter future for supply chains and manufacturing is 
possible. We see examples of where public policies have invited new 
investments over the past several years. Steel and aluminum industry 
capital investment in America has boomed since 2018. An electric 
vehicle charging network company based in Australia is establishing a 
factory in Tennessee thanks in part to new public investments and 
domestic preference rules. Semiconductor makers Intel, Texas 
Instruments, TSMC, GlobalFoundries, and others have announced new 
plants in America, based in part on CHIPS Act support. Ford, General 
Motors, and other automakers and partners are establishing EV 
production and battery plants in the United States rather than overseas 
in part because of USMCA domestic content rules, other existing trade 
policies, and public-private partnerships to build out charging 
networks. Overall, we've seen robust manufacturing job growth during 
this recovery. Just a generation ago, some economists predicted none of 
this--large new factories or surges in manufacturing jobs--would ever 
be possible again thanks to automation and import competition.

    But we should not pretend that a brief focus on supply chains will 
right the ship. According to a new CSIS study, China spends 1.73 
percent of its GDP on identifiable industrial subsidies, or $407 
billion exchange rate weighted equivalent. By contrast, the U.S. spends 
0.39 percent for this purpose. The proposed CHIPS Act investment is 
exponentially smaller than what China is prepared to invest in 
semiconductors: $150 billion. We don't need to spend that much, but we 
do need to be much more intentional about policies to strengthen supply 
chains for the long haul.

    Public policy support for American manufacturing is crucial to 
tackling supply chain challenges, and we look forward to working with 
you to ensure a better future. Thank you for the opportunity to testify 
at today's hearing.

                                 ______
                                 
          Questions Submitted for the Record to Scott N. Paul
               Questions Submitted by Hon. Sherrod Brown
    Question. Dexstar, a company in Ohio, once told me that keeping 
their company running while competing with unfair dumping felt like 
what happens when you don't keep up with the maintenance of your car. 
You can get away with it for a while--but eventually if you ignore it 
for too long, your car breaks down. If you don't invest in your 
workers, they'll leave. If you don't invest in your facilities, they 
start to fall apart. If you don't invest in new technology or 
innovation in your field, you'll fail to keep up.

    It's nearly impossible for industries that are constantly battling 
unfair dumping to successfully compete. We've seen the importance of 
trade enforcement across dozens of industries, from tires, to steel, to 
paper making, to washing machines and other household electronics. 
Trade remedy laws need to keep up with the ways that countries try to 
cheat the rules.

    What are some of the ways that countries attempt to circumvent 
antidumping and countervailing duties (AD/CVD)? One method of 
circumvention involves moving a company's operations to new country in 
order to evade trade rules, even when the product is mostly made in the 
original country. Why is it important for our trade remedy laws keep up 
with enforcement of strong circumvention provisions?

    Answer. Thank you for bringing attention to circumvention of 
antidumping and countervailing duty (AD/CVD) orders. When domestic 
manufacturers and their workers are confronted with circumvention of 
trade enforcement actions, it is truly insult upon injury because 
injury, lost time, and significant resources have already been incurred 
to secure relief in the first place. When circumvention occurs, these 
domestic manufacturers and workers are forced to again spend additional 
time and resources to reestablish a level playing field for their 
operations and workers.

    As you note in your question, there are a variety of methods used 
by foreign producers--and in some cases in conjunction with 
unscrupulous importers--to circumvent AD/CVD orders, including the 
relocation or coordination with third parties of downstream finishing, 
processing, and often lesser activities to a new country--even when the 
product itself is mostly or even entirely made in the subject country.

    Moreover, these egregious efforts often involve foreign governments 
directly aiding in circumvention. The use of subsidies by China and 
other countries to enable these circumvention tactics is especially 
concerning as it demonstrates a concerted effort by foreign governments 
to undermine American manufacturing, its workers, and our trade 
enforcement tools.

    It is critical that Congress provide new authorities and tools to 
the Department of Commerce to address these increasingly sophisticated, 
yet blatant, circumvention tactics. If we do not immediately address 
this issue, our efforts to revitalize U.S. manufacturing will face 
massive obstacles as it becomes more difficult for the incubation of 
new technologies into domestic production. Companies will be reluctant 
to invest in the United States for fear of being wiped out by a dumped 
and subsidized imports with seemingly no available opportunities to 
secure meaningful and sustainable relief.

    AAM is a strong supporter of the Eliminating Global Market 
Distortions To Protect American Jobs Act (S. 1187/H.R. 6121), also 
known as Leveling the Playing Field Act 2.0. We appreciate your 
leadership on this issue and urge passage of this bipartisan measure.

    Question. Do you have any additional recommendations for updating 
our trade remedy laws in a way that centers American workers and 
consumers?

    Answer. Congressional action is urgently needed to address the 
systematic unfair trade practices of China and many other countries who 
promote market distorting policies designed to undercut American 
workers and U.S. production by passing the Eliminating Global Market 
Distortions To Protect American Jobs Act (S. 1187/H.R. 6121), also 
known as Leveling the Playing Field Act 2.0. This bipartisan 
legislation modernizes our antidumping and countervailing duty (AD/CVD) 
trade remedy laws to keep up with new and evolving unfair trade tactics 
used by foreign competition to seize U.S. market share.

    Moreover, it is imperative that Congress act quickly to reauthorize 
Trade Adjustment Assistance (TAA) for these same workers who experience 
job losses or wage reductions resulting from unfair and other trade 
disruptions. TAA benefits are already disrupted for workers who 
experience layoffs after June 30, 2022.

    Establishment of an outbound investment review process would warn 
of and avert the offshoring of production capacity to foreign 
adversaries in critical U.S. sectors. Congress should pass the 
bipartisan National Critical Capabilities Defense Act (S. 1854/H.R. 
6329) as stand-alone legislation or as part of the National Defense 
Authorization Act (NDAA).

    Congress should make common-sense reforms to our flawed de minimis 
policy that as currently structured invites duty evasion and systematic 
abuse of Customs enforcement by passing the Import Security and 
Fairness Act (H.R. 6412).

    Question. U.S. trade and tax policies over the last 30 years have 
incentivized the movement of manufacturing capabilities and risks 
offshore in exchange for efficiency and profits. As a result, global 
trade is increasingly integral to supply chains. The Supply Chain 
Resiliency Act I introduced last November would help ease supply chain 
bottlenecks and decrease American reliance on long supply chains. In 
response to questions from Senator Whitehouse, a co-sponsor of my 
legislation, you expressed support for the establishment of an Office 
of Supply Chain Resiliency at the Commerce Department--something the 
Supply Chain Resiliency Act would provide for.

    How would an Office of Supply Chain Resiliency help to better 
address supply chain vulnerabilities and decrease American reliance on 
long, off-shore supply chains?

    Answer. An Office of Supply Chain Resiliency is an important 
component of creating a long-overdue policy framework for supply chain 
security, resiliency, and revitalization. This proposed office would 
have the ability to work with the private sector to coordinate and 
develop standards and best practices that encourage reliance on 
existing domestic capabilities. By mapping existing current supply 
chain vulnerabilities, it would also enable targeted, proactive policy 
actions to incentivize U.S. investments that increase the resiliency of 
critical supply chains.

    To be effective, the Director of the proposed Supply Chain 
Resilience and Crisis Response Office, in setting standards and issuing 
guidance, should prioritize the expansion of all stages of 
manufacturing, including upstream inputs that are critical for the 
completion of a final product assembly or manufacture. Too often our 
policies overlook the components, parts, and upstream raw materials 
fundamentally necessary to produce a given product. In a future 
emergency, relying only on end products that are assembled or 
manufactured in the United States from all or mostly imported products 
is not a solution to the problems that have plagued our economy over 
the past 2-plus years. In fact, such approaches will only set us up to 
repeat this failure.

                                 ______
                                 
               Prepared Statement of Douglas L. Potvin, 
            Chief Financial Officer, Trinity Logistics, Inc.
    Chairman Carper, Ranking Member Cornyn, and members of the Finance 
Subcommittee on International Trade, Customs, and Global 
Competitiveness and other members of the Finance Committee, thank you 
for the opportunity to speak with you today regarding how policymakers 
and business leaders are addressing the existing backlogs in our supply 
chain in the short term and build more resilient supply chains in the 
long term. I appreciate the invitation and opportunity to share Trinity 
Logistics' perspective on these significant issues facing international 
and domestic logistical supply chain issues.

    My name is Doug Potvin; I am the chief financial officer of Trinity 
Logistics, Inc., a third-party logistics company, headquartered in 
Seaford, DE and with regional services centers located in Florida, 
Minnesota, Iowa, Missouri, Texas, and Arizona, and with agent offices 
located throughout the United States, Canada, and Mexico. I am 
privileged, honored, and humbled to be here today representing Trinity 
Logistics, our association, the Transportation Intermediaries 
Association (TIA), and the entire third-party logistics industry that 
we serve.

    Trinity Logistics is a Burris Logistics Company, offering people-
centric freight solutions. Our mission is to deliver creative 
logistics solutions through a mix of human ingenuity and innovative 
technology, enriching the lives of those we serve.

    For more than 40 years, Trinity Logistics has been arranging 
freight for businesses of all sizes, offering truckload, less-than-
truckload (LTL), warehousing, intermodal, drayage, expedited, 
international, and technology solutions. We serve as the intermediary 
solving the logistical needs of our shipper customers by sourcing 
capacity from our motor carrier and vendor partners. We are proud to 
report today that this past year, we generated over $1B in revenue, 
arranged over 500,000 shipments nationwide, and offered over 350 
individuals full and part time jobs. We are truly a proud Delaware 
company.

    Trinity is currently recognized in the top 25 freight brokerages on 
Transport Topics' Top 100 Freight Brokerage List, in the Top 100 3PLs 
list by Inbound Logistics, and is named a top company for women to work 
for, in transportation, by Women in Trucking.

    From Charles Dickens's novel A Tale of Two Cities, ``It was the 
best of times, it was the worst of times, it was a season of Light, it 
was the season of Darkness, it was the spring of hope, it was winter of 
despair. . . .'' Over the last 2 years, the same can be said for the 
international's supply chain, and from our perspective and closer to 
home, the domestic transportation industry. In March of 2020, as both 
domestic and international countries shuttered businesses (with varying 
coordination for closings or determination of essential businesses--
including the shuttering of port cities and operations in China) and 
the fact that most consumers were at home facing an uncertain future, 
freight volumes plummeted. Motor carrier capacity increased 
dramatically due to the steep drop of goods moving and the 
transportation market saw prices to motor carriers fall. In fact, 
Trinity Logistics was mentioned on a Facebook post that stated we were 
earning an average gross margin over 60 percent, which was simply 
wrong. In addition, a small number of motor carriers came to 
Washington, DC and demanded rate transparency, wanting to know the 
rates of what all 3PLs charge shippers. Interestingly, after 
businesses, ports, and countries opened up, freight volumes began to 
skyrocket, available motor carrier capacity became scarce, rates paid 
to the motor carriers increased to reflect the change in the market 
conditions, the demand for rate transparency went silent. We believe if 
rate transparency is granted to motor carriers, it would cause even 
more disruption in the supply chain. Pricing would no longer be based 
on the free market. The pricing in our industry is driven by market 
conditions, supply and demand on a large scale. No entity, on either 
side of the equation, has enough market share to drive rates. In 
addition, each shipment has its own variables and considerations to 
take into account, including everything from available capacity in the 
various regional markets, lead time for products, dwell time at the 
shippers and consignees, commodities needing moved, and the type of 
equipment needed. All of this happens real time to ensure goods get to 
market, keeping our economy moving forward.

    Unfortunately, due to the closing of businesses and trade ports, a 
surge in consumer spending on goods versus services, a lack of motor 
carrier drivers, and several other reasons, the regular and consistent 
movement of equipment has become largely imbalanced, hindering the 
transport of goods globally and domestically. Due primarily to the 
massive lockdowns in China including the closing of port operations, we 
have heard that talk of near shoring some of those manufacturing 
activities here in the United States, Canada, and Mexico and reducing 
our customer's reliance on activities an ocean away. Trinity Logistics 
stands ready to assist in sourcing available capacity to ensure those 
new investments will have the necessary equipment to meet their 
logistical needs.

    Now more than ever, the role of the third-party logistics 
professionals has become more valuable. Companies like Trinity and the 
other 28,000 licensed property brokers are working overtime to ensure 
that essential goods continue to be delivered in an efficient manner to 
meet our customers and consumer's needs. Our industry, along with motor 
carriers, are a main component of why during this crisis and 
disruption, the supply chain bent but never broke.

    Trinity Logistics applauds the U.S. Senate's and House of 
Representatives' bipartisan passage of the Infrastructure Investment 
and Jobs Act (IIJA) and the historic investment in transportation and 
infrastructure. We were very pleased to hear how quickly the Federal 
Motor Carrier Safety Administration (FMCSA) established the Safe Driver 
Apprenticeship Pilot Program. Trinity hopes this 3-year pilot program 
will be successful, and made permanent, so that individuals ages 18-20 
will explore interstate transport careers. This will go a long way in 
helping trucking companies hire and train drivers through the program 
and help to alleviate driver shortages in the future. Trinity also 
believes that as spending under the IIJA ramps up in the near future, 
it will provide enough support in the economy to keep the motor 
carriers employed as we are starting to see freight volumes begin to 
pull back over the last 30 to 60 days.

    Trinity would also like to thank Chairman Carper, Ranking Member 
Cornyn, Senator Menendez, and Senator Tim Scott for their support in 
offering legislation to initiate the pilot program for brokers to 
become a part of the Customs Trade Partnership Against Terrorism 
program (CTPAT). We believe by allowing freight brokers to become CTPAT 
certified, this will add another valuable layer in assisting with 
providing a safe and smooth Customs clearance process for shippers 
moving cargo cross-border. Today we urge S. 2322 to be quickly sent to 
President Biden's desk for signature. We believe the third-party 
logistics industry does play a role in the safety and national 
security, in that the industry selects motor carriers who enter the 
country through our borders and plays an integral role in assuring the 
carriers are legitimate and understand the cargo transported.

    Currently, the vaccine mandate for truck drivers coming into the 
country to deliver freight from Mexico and Canada continues. These 
professional drivers spend most of their professional time alone in a 
truck cab, presenting 0-percent risk of spreading COVID-19. This should 
be lifted immediately to open up capacity and shorten the amount of 
time to cover a load.

    Another issue that greatly impacts not only the efficient movement 
of goods, but also highway safety is the lack of a Federal Motor 
Carrier Safety Selection Standard. Currently, because of a broken 
safety rating system from the Federal Motor Carrier Safety 
Administration (FMCSA) almost 90 percent of trucking companies are 
considered ``unrated,'' due to the fact they have not received the in-
person compliance review that promulgates a safety rating. This 
confusion logjams the carrier selection process and adds to the time it 
takes to vet a trucking company to the extent we are able to without a 
standard. Further exacerbate the situation with the fact that there are 
no requirements in place before selecting a trucking company 
drastically impacts the overall safety on our Nation's highways. The 
latest report from the National Highway Traffic Safety Administration 
(NHTSA) noted that the number of accidents involving commercial motor 
vehicles increased 13 percent in 2021, the status quo is not working, 
and highway safety needs to be improved. Trinity Logistics and our 
trade association, TIA fully support legislation to create a motor 
carrier safety selection and amend the safety rating process by 
shifting to a system built on data not physical audits.

    I started my testimony with the opening sentence from A Tale of Two 
Cities. I wanted to turn our attention to the actual impact on the 
domestic transportation industry during the last 2 years, specifically 
from the various activities that took place during the COVID 
disruption. The activities, as I have mentioned, included the closing/
opening of business, but those did not happen in a coordinated way 
globally or domestically. The disruption of manufacturing due to a lack 
of raw materials or goods to be utilized, the tremendous amount of 
stimulus injected into economies that drove consumer spending in 
magnitudes and ways that we had not seen before, the lack of workers 
and productivity in some areas, and others as well, caused the supply 
chain to experience a level of swings of such magnitudes between high 
and low over a very short period. We are just now seeing some return to 
normalcy (as best as it can be defined). With that said, let me 
interject some metrics to give a perspective of what has happened in 
the freight markets. Metrics to review:

    The outbound tender rejection rate index--which is an indication of 
the percentage of loads being rejected by contract carriers on their 
contracted rates with shippers.

    The Transactional Spot Market Rate for Dry Van Loads in $/Mile--
these are negotiated rates as mentioned earlier that occur daily 
between shipper/broker and motor carrier.

    The percent of Freight Volume Increase/Decrease from a 2018 
baseline.


------------------------------------------------------------------------
                                                      July 2020-
 Index--Number                                         December
  Approximates         2019         March-June 2020     2021       2022
 
------------------------------------------------------------------------
Outbound Tender           5 to 6%           1 to 2%  20%-25%     Steadil
 Rejection Rate                                       approachi   y
                                                      ng 30% in   declin
                                                      some        ing to
                                                      instances   8.4%
                                                                  (curre
                                                                  ntly)
------------------------------------------------------------------------
Van Spot Rate         <$2.25/mile       <$1.50/mile  Climbed     Steadil
                                                      steadily    y
                                                      to a high   declin
                                                      $3.75/      ing to
                                                      mile        $2.80/
                                                                  mile
                                                                  (diese
                                                                  l
                                                                  price
                                                                  keep
                                                                  elevat
                                                                  ed)
------------------------------------------------------------------------
Freight Volumes    Slightly lower        75% to 90%  Climbing    Steadil
                                                      more than   y
                                                      50%         declin
                                                                  ing to
                                                                  now
                                                                  26%
                                                                  over
                                                                  2018
------------------------------------------------------------------------


    As these numbers indicate, simply the decrease in freight volumes 
and excess capacity drove the pricing significantly lower at the 
beginning pandemic. Carriers were competing against one another to 
secure freight to keep their truck operational, including asset-based 
carriers who contracted freight was not available during this time and 
added their excess capacity into the spot market. Once the businesses 
began to open up (though unevenly thus causing down chain issues), 
pricing begin to soar as trucking capacity got tight, and asset-based 
carriers were moving away from contracted freight to the spot market, 
forcing their customer to post more freight out into the spot market, 
driving up prices. Finally, as trucking volumes begin to retreat, the 
market forces depressed pricing, though it is still elevated by diesel 
prices and port operational challenges.

    Another measure of freight capacity that Trinity utilizes is the 
Truckstop Market Demand Index (MDI) which measures the number of 
shipping loads posted by 
shipper/brokers in comparison to motor carriers posting their available 
equipment--a higher number indicates trucking capacity has gotten 
tighter as motor carriers no longer need to post available equipment as 
they are receiving enough inbound traffic from shippers and third-party 
logistics to get their equipment on a load. Here are the numbers for 
the same period.


------------------------------------------------------------------------
                                                 July 2020-
   Index--Number       2019       March-June      December       2022
   Approximates                      2020           2021
------------------------------------------------------------------------
MID                 35 to 45    Less than 25    On average    Steadily
                     Shipper     Shipper Loads   over 150      Declining
                     Loads Per   Per One Truck   with some     to
                     One Truck   Posting         periods       approxima
                     Posting     (higher truck   exceeding     tely 100
                                 postings)       200 Shipper   Shipper
                                                 Loads Per     Loads Per
                                                 One Truck     One Truck
                                                 Posting       Posting
                                                               (currentl
                                                               y)
------------------------------------------------------------------------


    And finally, I would like to share with you, comments from 
Transportation Intermediaries (TIA) Association Chief Economist Noel 
Perry from the latest TIA Quarterly Market Report (1Q22).

        The latest data released by the U.S. Bureau of Economics (BEA) 
        show a declining economy in the first quarter of 2022, creating 
        a second consecutive quarter of slow growth in freight. This 
        negative news is consistent with an unusual convergence of 
        negative signals headlined by inflation, energy uncertainty, 
        the war in Ukraine, and COVID lockdowns in China. Unless those 
        situations change for the better soon, the U.S. economy is 
        headed for recession. Fortunately, economists tell us that a 
        timely resolution of the Ukrainian war could ease inflation and 
        consumer fears. Also, the growing availability of computer 
        chips should allow the auto market to recover from its supply-
        constrained lethargy. Nonetheless, inflation, lockdowns in 
        China, and the Ukraine situation have proven surprisingly 
        resistant to improvement, giving weight to the pessimist's 
        fears. Deutsche Bank's economists are forecasting a global 
        recession in 2023, perhaps a bad one. Finally, you will see 
        that the U.S. trucking spot market conditions have inflected 
        towards weaker conditions. Whatever the result, conditions in 
        the second half of 2022 and all of 2023 will not continue the 
        historically favorable conditions of the last 2 years.

    As earlier metrics have indicated, the U.S. trucking spot market 
conditions have inflected towards weaker and more normal conditions--
though we will see what the future holds and how that trend continues. 
Hopefully, as the result of this meeting and coordinated actions taken 
by the U.S., our trading partners, manufacturers, and supply chain 
vendors, our Nation will become resilient when facing similar 
conditions or uncertainties in the future.

    Again, I want to thank you for your time today and the opportunity 
to speak before you and present Trinity Logistics' perspective on the 
state of the supply chain. I would be happy to answer any questions.

                                 ______
                                 
        Questions Submitted for the Record to Douglas L. Potvin
              Question Submitted by Hon. Thomas R. Carper
    Question. Regardless of where goods are sourced or manufactured, 
how can we ensure they are delivered with efficiency and reliability, 
and what resources are needed to make this happen?

    Answer. This is a very important question, and the answer is quite 
simple. No matter where the freight is sourced from, we as logistics 
companies just need the flexibility to continue to do our job without 
unnecessary interference and limitations. As I mentioned in my 
testimony, we describe the current supply chain discussion as the 
perfect storm of multiple factors that eventually bent the supply 
chain. Whether it be a shortage of truck drivers, trucks, real estate 
to store the containers, etc., all these conditions will over time work 
themselves out. The problem occurs when unnecessary constraints are 
continued to be added on top. Let me give you two examples, the first 
being the cross-border vaccine mandate for Canadian truck drivers. 
These mandates put additional constraints on capacity in cross border 
movements and added days on the carrier selection process, which causes 
disruptions. We in the United States classified our truck drivers as 
exempt because they are in a truck by themselves, the same should have 
been true for truck drivers entering the country, especially those from 
a country with an over 90-percent vaccination rate. Finally, 
California's AB5 law, this law now in effect will drastically change 
the way business in done in the State of California and could have a 
detrimental chain reaction throughout the country, especially if the 
PRO Act were to become law. This anti-business law will drive thousands 
of owner-operators out of the market and further hamper the capacity 
constraints that logistics companies like ours are facing today.

    Simply put, the supply chain needs more time to normalize, not 
further roadblocks that continue to set back the recovery from this 
devastating pandemic and its effects on the supply chain.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. Earlier this month, the Port of Shanghai began returning 
to normal after a 2-month COVID lockdown.

    Fortunately, congestion in our major west coast ports of Los 
Angeles and Long Beach eased earlier this year, but that doesn't mean 
we won't have logistical challenges due to more output from Shanghai.

    The bottlenecks that occurred at our west coast ports were perfect 
visualizations of logistical breakdowns due to the pandemic. Given your 
experience in this sector, how should Congress--or the administration--
prepare for Shanghai's reopening?

    Answer. The best thing the Federal Government and the States can do 
is remove burdensome constraints on the supply chain. For example, in 
the State of California there are extreme regulations in place from the 
California Air Resources Board (ARB) that limit capacity (especially at 
the ports) and the California law AB5 is now in effect, that will 
without a doubt take thousands of trucks out of the State of California 
or off the highways completely. We need to ensure that the PRO Act 
never becomes law and that logistics companies are given the 
flexibility they need to ensure motor carriers are properly registered 
through the carrier selection process. As a country, we need to do a 
better job incentivizing new truck drivers into the marketplace, not 
restricting to the point they want out. These men and women were the 
heroes on the front lines during the pandemic that keep the American 
economy moving forward.

    Question. How can Congress help optimize our logistics sector to 
prepare for future surges in product demand?

    Answer. One issue that would help ease future surges and 
drastically improve safety would be the passage of a Motor Carrier 
Safety Selection Standard. As entities that utilize the services of 
motor carriers, we are asked to second guess the Federal Motor Carrier 
Safety Administration (FMCSA) in determining which carriers are safe to 
operate and which are not. FMCSA's incomplete database exposes the 
public to an unacceptable level of risk by having 90 percent of the 
motor carrier population being rated ``unrated.'' Congress tasked the 
FMCSA with evaluating motor carrier safety and empowering them with the 
sole authority to revoke the interstate operating authority of unsafe 
motor carriers or otherwise place unsafe motor carriers out of service 
and off the road. There is bipartisan support to get FMCSA the 
necessary resources to continue to expand their reach into the motor 
carrier population and shifting the safety rating process to a data 
driven system, would greatly reduce the burden on the agency.

    The lack of a clear safety standards by which to compare motor 
carriers, places entities that utilize motor carriers in an impossible 
situation in trying to responsibly select a carrier. It is worth noting 
that the situation is exacerbated because there is currently no Federal 
or State standard that requires an entity to check a single piece of 
information relating to the carrier safety history or credibility.

    The Federal Motor Carrier Safety Selection Standard that our 
association, the Transportation Intermediaries Association (TIA), has 
been advocating for would address these concerns by establishing an 
interim selection standard and change the way that motor carriers are 
given a safety rating by shifting away from the current physical audit 
system. This shift would give logistics companies like Trinity 
Logistics the certainty in the carrier selection process, which would 
allow us to freely adapt to surges in the supply chain without 
hesitation.

                                 ______
                                 

                             Communications

                              ----------                              


                       American Chemistry Council

                           700 Second St., NE

                          Washington, DC 20002

                             (202) 249-7000

                   https://www.americanchemistry.com/

The American Chemistry Council (ACC) appreciates the Subcommittee 
holding this hearing to examine supply chain resiliency, alleviate 
backlogs and strengthen long-term security. ACC represents more than 
150 of America's leading chemical companies. Our members manufacture a 
wide variety of chemicals, polymers, and related products that make our 
lives and our world healthier, safer, more sustainable, and more 
productive. The business of chemistry supports over 25% of the U.S. GDP 
and directly touches nearly all manufactured goods. In addition to 
supporting a vast supply chain, our members help create more than half 
a million skilled, good-paying American jobs.

Chemicals and plastics are pivotal inputs to many critical supply 
chains such as for semiconductors, high-capacity batteries, critical 
minerals, automotive goods, and pharmaceuticals. For example, 
fluoropolymer chemistries are essential in the manufacture of 
semiconductors; bromine-based chemistries support the development of 
printed circuit boards; lithium batteries employ chemistry to create 
high-capacity batteries; industry uses many critical minerals to 
produce important chemistries of value in a wide range of products, 
including renewable energy, polymers, refrigerants, and water 
purification chemicals; solar power relies on important silicon-based 
chemistry. The business of chemistry is also essential to building and 
construction, electronics, farming, food production, vaccines, 
medicine, automobiles, aerospace and much more.

Supply chain and freight transportation disruptions have caused 
considerable challenges for U.S. chemical producers. In a recent survey 
of ACC members,\1\ 97 percent of companies reported that they have been 
forced to modify or curtail operations because of supply chain issues 
and/or transportation disruptions. ACC recognizes and applauds the 
important steps that Congress and the Administration have taken to help 
address these challenges, including implementation of the 
Infrastructure Investment and Jobs Act, the Senate's passage of the 
Ocean Shipping Reform Act, and other supply-chain related measures 
included in U.S. Innovation and Competition Act (USICA) S. 1260. 
However, more needs to be done.
---------------------------------------------------------------------------
    \1\ See ACC's Survey Report: Supply Chain and Freight 
Transportation Constraints for Chemical Manufacturers. Learn more at: 
https://www.americanchemistry.com/media/files/acc/better-policy-
regulation/transportation-infrastructure/infrastructure/supply-chain-
and-freight-logistics-survey-findings-report.

We would encourage this Subcommittee to take a holistic approach to 
these supply chain issues and examine and address policies that 
negatively affect the business of chemistry and can harm U.S. 
manufacturers, especially small businesses, potentially impairing the 
availability of delivering these essential goods across the supply 
chain. Such policies can work in cross-purposes to this Subcommittee 
and other Administration efforts to facilitate supply chains and make 
them more secure and resilient. In particular, several issues have 
emerged with one federal agency program, the EPA's Toxic Substances 
Control Act (TSCA) program,\2\ that could negatively impact the 
resilience of U.S. chemical supply chains. Under the 2016 amendments to 
TSCA, EPA is tasked with evaluating potential risks to human health and 
the environment from new and existing chemicals and acting to address 
any unreasonable risks. New chemistries face regulatory barriers under 
TSCA that impact the timing of reviews and availability of products, 
creating uncertainty in the supply chain and negatively affecting the 
ability of companies to bring new products to market. Such barriers and 
delays have led to a lack of innovation and onshoring of new chemicals 
in the U.S. Challenges in the EPA's implementation of the TSCA program 
also have the potential to jeopardize the availability of existing 
chemistries critical to this Subcommittee and other Administration 
efforts to promote the use of alternative energy, reduce greenhouse gas 
emissions, and ensure the availability of semiconductors and other 
critical goods.
---------------------------------------------------------------------------
    \2\ See ACC's State of TSCA Report: Fix Implementation Now Before 
It Is Too Late. Learn more at: https://www.americanchemistry.com/
better-policy-regulation/chemical-management.

We understand that there are many issues that affect supply chain 
resiliency and security, some of which may be outside the direct 
control of this Subcommittee and the Government. However, this 
Subcommittee can address these regulatory policies and encourage EPA to 
adopt a strategic approach to sound chemicals management through the 
TSCA program that supports the availability and creation of chemistries 
that strengthen supply chains and allows for transparency and 
timeliness in their reviews according to statutory requirements. 
Because of the chemical industry's large footprint across major 
economic sectors, such efforts would pay dividends across all critical 
supply chains and industrial bases of concerns to this Subcommittee and 
---------------------------------------------------------------------------
the Administration.

ACC stands ready and willing to assist this Subcommittee in such 
efforts and hopes the Subcommittee will use ACC as a source of 
information and experience regarding the role of the business of 
chemistry in enabling more vibrant, resilient, and secure supply chains 
in the United States.

                                 ______
                                 
                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                    Statement of Michael G. Bindner

Chairman Carper and the Ranking Member Cornyn, thank you for the 
opportunity to submit these comments for the record to the Subcommittee 
on International Trade, Customs, and Global Competitiveness of the 
Committee on Finance. Please allow me to mention a few issues that the 
invited witnesses cannot.

The first is the role of the Chinese in the supply chain crisis. SARS-
CoV-2 was not the reason for this issue, at least not directly. Rather, 
according to published reports, the Chinese government was offended by 
off-hand remarks by the Prime Minister of Australia on the origins of 
COVID, leading to an embargo on Australian coal. This led to an energy 
crisis in the industrial coast of China. In essence, China cut off its 
nose to spite its face. When Indonesia suspended all coal exports, 
including to China, the crisis deepened.

The Trump-manufactured trade war with China showed how bad petulance 
can be in trade policy. Such petulance is a key feature of 
authoritarianism. This always backfires on the authoritarian. The 
Chinese fit of pique had ramifications for the United States supply 
chain. Profiteering by port operators was not the sole cause of our 
current supply chain issues.

The United States and its commercial sector need to diversify, but not 
in the way capitalists would do so on their own. Africa will be the 
next major labor market. In the past, capitalist firms would set up 
factories in developing nations with excess labor forces (usually due 
to modernization of agriculture or rent seeking by landed elites) and 
pay the workers as cheaply as possible. It is the messy way to 
industrialize. It seems to work, but it carries human costs while 
workers gather the leverage to organize and the power to increase 
domestic demand by consumption. Both of these factors increase wages.

We need not be messy about assisting the Motherland on its road to 
industrialization. As capitalism moves toward establishing a foothold 
in Africa, our trade policy must be ready to insist on the right of 
African workers to organize, partnered with the American labor movement 
in helping them to do so. We can partner with American colleges to 
establish campuses in sub-Saharan Africa so that their best and 
brightest need not come to us. We can come to them.

Technical assistance on employee-ownership (which is still emergent in 
the United States), as well as in the creation of property rights for 
farmers, is essential. Finally, we can assist Africa in creating 
commodity futures markets of their own so that farmers can obtain 
working capital by selling futures and decide whether it is in their 
interest to sell food abroad. The natural progress toward 
industrialization is not inevitable. It can move past exploitation 
without stopping there.

This brings us to the second supply chain issue: energy prices.

The world has plenty of available oil. What it does not have is an 
honest futures market. The Dodd-Frank reforms led to regulation of the 
New York Mercantile Exchange, especially the oil futures floor. When 
Mick Mulvaney was made acting director of the Consumer Financial 
Protection Authority, these regulations were quietly gutted.

The petulance of Trump strikes again. If Obama did it, Trump tried to 
undo it. That the inevitable oil futures bubble happened to this 
Administration is simply bad luck. The prior Administration did not 
have the mental faculties to play such three dimensional chess.

The challenge for the current Administration is to quietly restore 
these regulations, which I assume it is doing. If this can be managed, 
energy prices will decline rather than crash--as they did in 2008. When 
Congress made attempts at regulating oil futures trading, the balloon 
burst and traders had to cover their positions. The assets available to 
do this were mortgage backed securities and credit default swaps. We 
all know where that led.

Action to increase capital gains taxes as part of Build Back Better 
will also help deflate commodity prices as smart traders cash out of 
all sorts of assets. As they do so, junk assets will quietly be 
devalued rather than starting a rush for the exits. When the oil 
futures prices begin to slide, those holding the bag may be able to 
cover their currently insane bets. At least we can hope so.

Massive pain may be inevitable, but we must at least try to avoid it. 
The best shot we have is to Build Back Better. Members of both parties 
need to put duty to country ahead of loyalty to party and make sure the 
bill passes (even with Potemkin opposition). Overt obstruction will be 
remembered in November if it leads to collapse. In November 2008, 
voters knew who to blame. They will know who to blame if the economic 
ship is not righted soon and obvious sabotage has occurred.

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.

                                 ______
                                 
             National Electrical Manufacturers Association

                   1300 North 17th Street, Suite 900

                           Rosslyn, VA 22209

The National Electrical Manufacturers Association (NEMA) represents 
more than 325 electrical equipment and medical-imaging manufacturers 
that make safe, reliable, and efficient products and systems. Member 
companies support more than 370,000 American manufacturing jobs in 
6,100 locations across all 50 states. NEMA companies play a key role in 
transportation systems, building systems, lighting, utilities, and 
medical-imaging technologies and are playing a critical role in the 
implementation of the Bipartisan Infrastructure Law (BIL). These 
industries produce $130 billion in shipments and $38 billion in exports 
of electrical equipment and medical imaging technologies per year.

NEMA applauds the Subcommittee's leadership in addressing the supply 
chain crisis and working to highlight solutions via its hearing 
entitled ``Supply Chain Resiliency: Alleviating Backlogs and 
Strengthening Long-Term Security.'' NEMA member companies continue to 
experience supply chain disruptions, labor shortages, and resulting 
inflationary pressures which have resulted in disrupted domestic 
production, reduced sales, increased consumer costs, and delayed 
delivery of critical products. The electro industry, like many other 
industries, has suffered grave supply chain disruptions. Securing 
critical components and materials--like semiconductors, transformer 
cores and laminations, and small electronic components--has become 
increasingly difficult.

Failure to solve short and long-term supply chain challenges stalls the 
transformation of U.S. infrastructure and energy systems, potentially 
delaying an accessible and electrified transportation system, 
modernized buildings and lighting, a more resilient grid, and increased 
efficiency of expanded domestic manufacturing. These supply chain 
issues require both near-term and long-term solutions and Congress has 
a crucial role in leading the nation's strategic solutions. In addition 
to Congressional hearings and enhanced oversight of supply chain 
challenges, NEMA urges Congress to expeditiously reach a bipartisan 
compromise as it continues to work through the conference process for 
the pending competitiveness legislation. Specifically, NEMA urges 
Congress to:

      Support Supply Chain Provisions. The Manufacturing Security and 
Resilience Program and other provisions within the America COMPETES Act 
would bolster government-wide efforts to strengthen supply chains 
deemed critical to the nation's economic and national security. The 
bipartisan supply chain provisions would enable a source of funding for 
grants, loans, and loan guarantees to increase U.S. domestic 
manufacturing capacity as well as help to move manufacturing operations 
out of countries of concern into the U.S. or allied nations. These 
provisions would also ensure the U.S. can effectively map and monitor 
supply chains, identify gaps and vulnerabilities, and take proactive 
action in collaboration with manufacturers to mitigate supply chain 
vulnerabilities.

      Support funding for CHIPS. Efforts to increase onshore chip 
manufacturing and build a strong semiconductor supply will help to 
alleviate supply chain concerns tied to semiconductor chips in the long 
term. NEMA urges Congress to ensure the funding will support the 
availability of all types of chips, including legacy chips as well as 
elements of the broader semiconductor ecosystem, including transistors, 
diodes, and other components which are critical to manufacturing many 
electrical products and are not currently available from U.S. sources.

      Authorize Key Tariff Relief Measures. One of the most direct and 
timely actions Congress could take to alleviate inflationary pressures 
in the supply chain is to restart and reform the Section 301 tariff 
exclusions process in a way that has clear eligibility standards for 
companies, is transparent, and is fair to all who apply. Further, NEMA 
supports the re-authorization of the Miscellaneous Tariff Bill and the 
Generalized System of Preferences program.

In addition to legislative actions, including enacting key supply chain 
provisions via the pending competitiveness legislation, NEMA urges 
Congress to use its oversight authority to help proactively identify 
and mitigate supply chain pressures and constraints. The Subcommittee's 
hearing is a good example of how Congress can evaluate supply chain 
concerns, identify solutions, and work in a bipartisan manner to help 
address issues both long and short term.

Critically in the near term, the current labor contract between the 
International Longshore and Warehouse Union (ILWU) and the Pacific 
Maritime Association (PMA) will expire on June 30. Failure for the two 
parties to come to a timely contractual agreement would have a 
crippling effect on some of our nation's most important ports and 
result in additional supply chain disruptions and shipping delays. 
Disruptions of essential port operations, even for a limited time, 
would result in exacerbating supply chain disruptions for the U.S. 
economy and the electro industry. NEMA urges Congress to closely 
monitor developments in negotiations between the two parties in advance 
of the looming expiration of the current labor contract.

Given the urgency of lingering supply chain disruptions, inflationary 
pressures affecting all aspects of the U.S. manufacturing value chain, 
long lead times needed for manufacturing investments, volatility in 
sourcing material components currently experienced by NEMA member 
companies, and the Congress' conciliatory power to bring parties 
together to solve supply chain issues, we urge you to exercise your 
legislative and oversight responsibilities to identify, mitigate, and 
alleviate supply chain constraints in the immediate and long term.

                                 ______
                                 
                    National Restaurant Association

                       2055 L St., NW, Suite 700

                          Washington, DC 20036

                             (202) 331-5900

                             (800) 424-5156

                        https://restaurant.org/

June 15, 2022

The Honorable Thomas R. Carper      The Honorable John Cornyn
Chair                               Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
Subcommittee on International 
Trade,                              Subcommittee on International 
                                    Trade,
Customs, and Global Competitiveness Customs, and Global Competitiveness
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510-6200           Washington, DC 20510-6200

Dear Chairman Carper and Ranking Member Cornyn:

Restaurants appreciate the Subcommittee's examination of ``Supply Chain 
Resiliency: Alleviating Backlogs and Strengthening Long-Term 
Security.'' The current supply chain backlogs and inflationary price 
increases are once again ratcheting up anxiety and uncertainty across 
our industry. We write today to urge Congress to help remove harmful 
tariffs that are contributing these supply chain challenges and price 
inflation.

Wholesale food prices increased more than 15% during the last 12 
months, according to the consumer price index (CPI). Key commodities 
are creating whiplash for restaurants and customers, especially for 
eggs (259.9%), butter (50%), unprocessed fin fish (47.3%), flour 
(36.7%), fats and oils (32.5%), and processed poultry (25.2%). The 
fresh vegetables index jumped 39.6%. During this time, menu prices have 
only gone up 7.4%. For an industry that runs on 3-5% pre-tax margins, 
these prices increases are unmanageable.

Maguire's Craft Kitchen and Catering in Dallas is experiencing price 
increases on an unprecedented scale--if products are available at all. 
Fish, cooking oil, and packaging materials have all become unexpectedly 
unavailable during portions of the year. This year alone, costs have 
doubled or tripled for these ingredients essential to their menu:

 Boneless chicken breast            Atlantic salmon
 Canola oil                         Grade A large eggs
 Jumbo lump crab meat               Styrofoam containers
 Roof top unit HVAC system

Grotto Pizza in Rehoboth Beach, Del., is experiencing price shocks 
across the board. Each of their top ten product expenses rose by 10% or 
more over the past 12-18 months. When Grotto Pizza opened a new 
location in 2021, the exact same kitchen equipment package was 21% 
higher than it was 14 months prior. Skyrocketing prices are causing the 
company to hold off on growth.

The chef/owner of Mac's on Main in Grapevine, Texas, recently expanded 
her location. The costs to expand the restaurant were about the same as 
the total cost of the original location in 2015. Not only was the 
equipment generally 20-40% higher than similar items purchased in the 
past three years, but she waited more than six months for the delivery 
of some items. Tariffs on aluminum, building supplies, and more items 
are adding costs and complexity to the supply chain.

Platinum Dining Group in New Castle County, Del., helped sustained 
operations during COVID with off-premises sales and takeout orders. 
However, the cost for takeout containers and related products have 
jumped, nearly eliminating any financial benefit. The group has been 
considering additional projects and restaurant locations, which would 
significantly expand its 400-employee team. However, price inflation is 
putting a hold on much of this growth.

We urge Congress to take action to address cost increases for 
restaurants, such as: (1) removing tariffs on U.S. imports and any 
retaliatory tariffs; (2) adopting the tariff exclusion process in the 
Senate's U.S. Innovation and Competition Act (USICA) conference, and; 
(3) including the Senate language on Sec. 71002 seafood regulations, 
``Preventing Importation of Seafood and Seafood Products Harvested or 
Produced Using Forced Labor,'' in the final USICA conference report.

Restaurants, our employees, and our customers bear the brunt \1\ of 
U.S. and global tariffs on the food and equipment supply chain. We 
appreciate that both of you signed onto the bipartisan Senate letter in 
February urging U.S. Trade Representative (USTR) Katherine Tai to 
relaunch a comprehensive tariff exclusion process. However, prices 
continue climbing higher each months, and restaurants are left without 
any answers on sustainability of operations.
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    \1\ https://thehill.com/policy/finance/trade/554136-trumps-china-
tariffs-hit-us-businesses-consumers-hardest-moodys/.

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Thank you for your consideration.

Sincerely,

Sean Kennedy
Executive Vice President for Public Affairs

                                   [all]