[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
THE DANGER CHINA POSES TO AMERICAN AGRICULTURE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
MARCH 20, 2024
__________
Serial No. 118-21
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Agriculture
agriculture.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
56-421PDF WASHINGTON : 2024
COMMITTEE ON AGRICULTURE
GLENN THOMPSON, Pennsylvania, Chairman
FRANK D. LUCAS, Oklahoma DAVID SCOTT, Georgia, Ranking
AUSTIN SCOTT, Georgia, Vice Minority Member
Chairman JIM COSTA, California
ERIC A. ``RICK'' CRAWFORD, Arkansas JAMES P. McGOVERN, Massachusetts
SCOTT DesJARLAIS, Tennessee ALMA S. ADAMS, North Carolina
DOUG LaMALFA, California ABIGAIL DAVIS SPANBERGER, Virginia
DAVID ROUZER, North Carolina JAHANA HAYES, Connecticut
TRENT KELLY, Mississippi SHONTEL M. BROWN, Ohio
DON BACON, Nebraska SHARICE DAVIDS, Kansas
MIKE BOST, Illinois ELISSA SLOTKIN, Michigan
DUSTY JOHNSON, South Dakota YADIRA CARAVEO, Colorado
JAMES R. BAIRD, Indiana ANDREA SALINAS, Oregon
TRACEY MANN, Kansas MARIE GLUESENKAMP PEREZ,
RANDY FEENSTRA, Iowa Washington
MARY E. MILLER, Illinois DONALD G. DAVIS, North Carolina,
BARRY MOORE, Alabama Vice Ranking Minority Member
KAT CAMMACK, Florida JILL N. TOKUDA, Hawaii
BRAD FINSTAD, Minnesota NIKKI BUDZINSKI, Illinois
JOHN W. ROSE, Tennessee ERIC SORENSEN, Illinois
RONNY JACKSON, Texas GABE VASQUEZ, New Mexico
MARCUS J. MOLINARO, New York JASMINE CROCKETT, Texas
MONICA De La CRUZ, Texas JONATHAN L. JACKSON, Illinois
NICHOLAS A. LANGWORTHY, New York GREG CASAR, Texas
JOHN S. DUARTE, California CHELLIE PINGREE, Maine
ZACHARY NUNN, Iowa SALUD O. CARBAJAL, California
MARK ALFORD, Missouri ANGIE CRAIG, Minnesota
DERRICK VAN ORDEN, Wisconsin DARREN SOTO, Florida
LORI CHAVEZ-DeREMER, Oregon SANFORD D. BISHOP, Jr., Georgia
MAX L. MILLER, Ohio
______
Parish Braden, Staff Director
Anne Simmons, Minority Staff Director
(ii)
C O N T E N T S
----------
Page
McGovern, Hon. James P., a Representative in Congress from
Massachusetts, submitted article............................... 131
Scott, Hon. David, a Representative in Congress from Georgia,
opening statement.............................................. 3
Thompson, Hon. Glenn, a Representative in Congress from
Pennsylvania, opening statement................................ 1
Prepared statement........................................... 2
Submitted report............................................. 101
Witnesses
Noem, Hon. Kristi L., Governor, State of South Dakota, Pierre, SD 5
Prepared statement........................................... 9
Gallagher, Hon. Mike, a Representative in Congress from
Wisconsin; Chairman, Select Committee on the Strategic
Competition Between the United States and the Chinese Communist
Party, U.S. House of Representatives, Washington, D.C.......... 11
Prepared statement........................................... 13
Krishnamoorthi, Hon. Raja, a Representative in Congress from
Illinois; Ranking Minority Member, Select Committee on the
Strategic Competition Between the United States and the Chinese
Communist Party, U.S. House of Representatives, Washington,
D.C............................................................ 25
Prepared statement........................................... 27
Gackle, Josh, President, American Soybean Association,
Washington, D.C................................................ 28
Prepared statement........................................... 30
Submitted questions.......................................... 138
Daly, Nova J., Senior Public Policy Advisor, Wiley Rein LLP;
former Deputy Assistant Secretary for Investment Security, U.S.
Department of the Treasury, Washington, D.C.................... 36
Prepared statement........................................... 38
Submitted questions.......................................... 141
Tom, Hon. Kip, Managing Member and Chief Executive Officer, Tom
Farms LLC; former United States Ambassador to the United
Nations Agencies Food and Agriculture, Leesburg, IN............ 49
Prepared statement........................................... 51
Submitted questions.......................................... 183
THE DANGER CHINA POSES TO AMERICAN AGRICULTURE
----------
WEDNESDAY, MARCH 20, 2024
House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 11:33 a.m., in Room
1300 of the Longworth House Office Building, Hon. Glenn
Thompson [Chairman of the Committee] presiding.
Members present: Representatives Thompson, Lucas, Austin
Scott of Georgia, LaMalfa, Kelly, Bacon, Johnson, Baird, Mann,
Feenstra, Miller of Illinois, Moore, Finstad, Rose, Jackson of
Texas, Molinaro, De La Cruz, Langworthy, Duarte, Nunn, Alford,
Chavez-DeRemer, Miller of Ohio, David Scott of Georgia, Costa,
McGovern, Adams, Spanberger, Hayes, Brown, Slotkin, Caraveo,
Salinas, Perez, Davis of North Carolina, Tokuda, Budzinski,
Sorensen, Vasquez, Jackson of Illinois, Carbajal, Craig, and
Bishop.
Staff present: Justin Benavidez, Parish Braden, Tim
Fitzgerald, Justina Graff, Kelsey Holt, Josh Maxwell, Samuel
Rogers, Patricia Straughn, Jennifer Tiller, Erin Wilson, Daniel
Feingold, Kate Fink, Clark Ogilvie, Ashley Smith, Michael
Stein, and Dana Sandman.
OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN
CONGRESS FROM PENNSYLVANIA
The Chairman. The Committee will come to order. Good
morning, and thank you all for joining today's hearing
entitled, The Danger China Poses to American Agriculture. After
brief opening remarks, Members will receive testimony from our
witnesses today, and then the hearing will be open to
questions.
Traditionally, we don't do questions with our panels of our
colleagues. I know that Governor Noem was interested in taking
a few questions. Time-wise, I am not sure we are going to be
able to do a full 5 minute round with the Governor. And the
second panel will be 5 minutes of questions as normal.
So good morning, and thanks to all for being here for a
timely and necessary conversation about threats China poses to
American agriculture. The People's Republic of China, governed
by the Chinese Communist Party, which is where this threat
comes from. It doesn't come from individuals. This is imposed
basically where we are looking at links to the Chinese
Communist Party--has gone out of its way to reduce its reliance
on American agriculture, all while aggressively pursuing
tactics that threaten our nation's ability to feed itself.
Now, these threats are multifaceted, strategic, incendiary,
and require a coordinated and a proactive response. These last
few years have seen China steal U.S. intellectual property,
hack critical cybersecurity and related infrastructure,
weaponize agriculture trade, and acquire American farmland at
an alarming rate. Each of these disrupt our national security,
our rural communities, and our resiliency.
Now, China has long used its legal and regulatory system to
steal intellectual property, and we have seen this in
everything from semiconductors to seeds, not to mention the
scale and the sophistication by which China can manipulate
critical infrastructure has exposed vulnerabilities in American
technologies. Now, this interference has ranged from data
breaches and theft of agriculture research to ramping up
disruptions of irrigation and transportation systems.
In 2022, Chairman Comer and I, with more than 125 of our
Republican colleagues, asked the Government Accountability
Office to evaluate foreign investments in U.S. farmland and its
impact on national security, trade, and food security. As many
of you know, in 2021, the Department of Agriculture estimated
that foreign investments in U.S. agriculture land grew to
nearly 40 million acres.
A few months ago, we received the final report, which
showed Congress where gaps exist in our reporting framework and
how better and more timely coordination between Federal
agencies could help increase visibility into potential national
security risks related to foreign investment. Congress took a
natural first step with the recent passage of the Consolidated
Appropriations Act, 2024 (Pub. L. 118-42) where the bill
addressed foreign ownership of land by improving the tracking
system of it.
The fact China imports almost as much food as the U.S.
exports to the whole world makes this conversation more
difficult. In recent years, the U.S. has seen record export
values to China for soybeans, corn, beef, chicken meat, tree
nuts, and sorghum, all of which are major contributors to our
domestic farm economy, underscoring the importance of expanded
market access and market diversity elsewhere.
So how do we strike the balance, protecting our producers
and consumers in every piece of the agriculture value chain
while keeping pace with China's needs? How do we reduce our
reliance on one country without undermining the necessity of a
strong export market? How do we think smartly about policies
that mitigate threats while protecting our best assets?
Today's witnesses come to the table with lived experience
and decades of knowledge on China and these very questions. And
I welcome each of you and look forward to the discussion.
[The prepared statement of Mr. Thompson follows:]
Prepared Statement of Hon. Glenn Thompson, a Representative in Congress
from Pennsylvania
Good morning, and thanks to all for being here for a timely and
necessary conversation about the threats China poses to American
agriculture.
The People's Republic of China, governed by the Chinese Communist
Party, has gone out of its way to reduce its reliance on American
agriculture, all the while aggressively pursuing tactics that threaten
our nation's ability to feed itself. These threats are multifaceted,
strategic, incendiary, and require a coordinated and proactive
response.
These last few years have seen China steal U.S. intellectual
property, hack critical cybersecurity and related infrastructure,
weaponize agricultural trade, and acquire American farmland at an
alarming rate. Each of these disrupt our national security, our rural
communities, and our resiliency.
China has long used its legal and regulatory system to steal
intellectual property; we have seen this in everything from
semiconductors to seeds. Not to mention the scale and sophistication by
which China can manipulate critical infrastructure has exposed
vulnerabilities in American technologies. This interference has ranged
from data breaches and theft of agricultural research to ramping up
disruptions of irrigation and transportation systems.
In 2022, Chairman Comer and I, with more than 125 of our Republican
colleagues, asked the Government Accountability Office to evaluate
foreign investment in U.S. farmland, and its impact on national
security, trade, and food security. As many of you know, in 2021, the
Department of Agriculture estimated that foreign investment in U.S.
agricultural land grew to nearly 40 million acres.
A few months ago, we received the final report, which showed
Congress where gaps exist in our reporting framework, and how better,
more timely coordination between Federal agencies could help increase
visibility into potential national security risks related to foreign
investment. Congress took a natural first step with the recent passage
of the Consolidated Appropriations Act, where the bill addressed
foreign ownership of land by improving the tracking system of it.
The fact China imports almost as much food as the U.S. exports to
the whole world makes this conversation more difficult. In recent
years, the U.S. has seen record export values to China for soybeans,
corn, beef, chicken meat, tree nuts, and sorghum, all of which are
major contributors to our domestic farm economy, underscoring the
importance of expanded market access and market diversity elsewhere.
So, how do we strike the balance of protecting our producers and
consumers, and every piece of the agricultural value chain, while
keeping pace with China's needs? How do we reduce our reliance on one
country without undermining the necessity of a strong export market?
How do we think smartly about policies that mitigate threats while
protecting our best assets?
Today's witnesses come to the table with lived experience and
decades of knowledge on China and these very questions. I welcome each
of you and look forward to the discussion.
The Chairman. With that, I would now like to welcome the
distinguished Ranking Member, the gentleman from Georgia, Mr.
Scott, for any opening remarks he would like to make.
OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN
CONGRESS FROM GEORGIA
Mr. David Scott of Georgia. Yes, thank you, Mr. Chairman.
Ladies and gentlemen, the purpose of today's hearing is to
discuss the influence that China has on American agriculture.
But unfortunately, some of the rhetoric surrounding this topic
may derail us from tackling the real issues at hand and may
contribute--hopefully not--but may contribute to violence
against Asian Americans. And I want all Americans to know that
we on the Agriculture Committee condemn all bigotry, including
race-motivated threats and acts of violence. This is about
agriculture policy, not people policy.
I also want us to keep in mind that China is an important
trading partner to the United States, and we need a thorough
and policy-heavy conversation so that we can help the American
farmers and our agricultural system navigate this difficult,
challenging, and somewhat thorny issue. And I hope everyone
here today will engage in a serious, fact-minded, fact-based
conversation and avoid fear-mongering, and alarmism.
Though I am told that this isn't the topic of this hearing,
I am also pleased that the recently enacted Agriculture
appropriations bill will help USDA update its outdated system
of tracking foreign agricultural land ownership in the United
States of America. And if we are going to have a serious
discussion about foreign influence on American agriculture, we
must remember that China is our largest trade partner,
accounting for $33.7 billion in U.S. agricultural exports just
last fiscal year alone.
American farmers are the most efficient and productive, and
because of this, we produce far more than we Americans can
consume. My colleagues will often note that we are in an
agricultural trade deficit right now, and I am here to tell you
that alienating our trade partners will only deepen that
deficit. American farmers need large markets to export their
products, and when those markets are lost, who does it harm?
Our farmers, and then the American people. We saw the
implications of this when the Trump Administration started a
trade war with China, creating chaos and undermining markets
for our American farmers and since the trade war shut American
farmers out of China, guess what? Brazilian farmers have filled
that gap, increasing their exports to China as our market share
decreases. Now Trump is calling for a 60 percent tariff on all
Chinese goods. This would have drastic impacts on American
agricultural production, it would increase costs for consumers,
and would almost certainly lead to devastating retaliatory
tariffs place on the U.S. agriculture exports.
So I think it is fair to think that the U.S. being so
dependent on a single export market, who is also a strategic
competitor, raises and poses a risk for our American farmers.
And one way that we can address this concern is to expand trade
in existing markets while we open new markets. And I continue
to support increasing the Market Access Program--that is the
way to go--and Foreign Market Development Program in the farm
bill. And I believe that this new trade deal is critical for
our American agriculture.
However, there are many places where I am very critical of
the Chinese Government. The theft of seed and other agriculture
technology is highly concerning to me and continues to be a
problem. Market distortion through domestic price support
programs and ignoring WTO decisions hinders access and creates
an uneven playing field for U.S. farmers.
And I also remain highly critical of any foreign government
seeking to buy American land near essential intelligence or our
military installations. This is now a major national security
threat. We must protect our national security interests. This
is a national security issue of soaring magnitude to this
nation. We have to protect our farmland and not let it get into
the hands of foreign interests, particularly China.
I look forward to hearing from our witnesses, Mr. Chairman,
today and coming out of this hearing with an improved
understanding of our relationship with China and how we can
work together to protect America's agriculture interests. Thank
you.
The Chairman. I thank the gentleman.
The chair would request that other Members submit their
opening statements for the record so our witnesses may begin
their testimony to ensure that there is ample time for
questions. I am pleased to recognize our colleague, the
gentleman from South Dakota, Mr. Dusty Johnson, to introduce
our first witness today.
Mr. Johnson. Mr. Chairman, governing the nation should be a
team sport. Unfortunately, there are a lot of free agents and
politics. People who don't understand the value of shared
vision and shared efforts. Luckily, our speaker this morning,
my friend and my Governor, she knows how to work together. She
understands that we get a lot more done when the Federal
Government and the state governments are trying to find a path
forward together.
I would tell you, I don't think there is a month that goes
by that she isn't showing the kind of leadership necessary to
be able to have our team work with her team, whether it is
protecting American farmland from the Chinese Communist Party,
getting TikTok off Government devices, making sure that her
state pension program has the flexibility to divest from CCP
influences, making sure that the farm bill priorities are
right, managing the Black Hills National Forest in an
appropriate way, protecting Mount Rushmore. I could go on for
an hour, sir--and I know you don't want me to--of the ways that
our speaker and I have been able to work together.
And so I just have to tell you, I am honored to be able to
have a real South Dakotan, a real leader, and a real partner
come on back to the Agriculture Committee and share some wisdom
with us. Mr. Chairman, the Governor of the great State of South
Dakota, Kristi Noem.
The Chairman. I thank the gentleman. And welcome, Governor
Noem.
Our second witness is our esteemed colleague, the gentleman
from Wisconsin, Mr. Mike Gallagher, who is the Chairman of the
Select Committee on the Chinese Communist Party. Congressman,
thanks for joining us.
Hopefully, our third witness today--and I know he has
scheduling conflicts initially here, we are hoping he will be
able to join us in time to offer his perspective--is another
respected colleague of ours, somebody I work with on many
issues, including career and technical education, the gentleman
from Illinois, Mr. Raja Krishnamoorthi, who is the Ranking
Member of the Select Committee on the Chinese Communist Party.
Thank you to all our witnesses for joining us today. We
will now proceed to your testimony. You each have 5 minutes.
The timer in front of you will count down to zero, at which
point your time has expired.
Governor Noem, please begin when you are ready.
STATEMENT OF HON. KRISTI L. NOEM, GOVERNOR, STATE OF SOUTH
DAKOTA, PIERRE, SD
Governor Noem. Well, thank you. Thank you, Mr. Chairman. It
is an honor to be with all of you today, and thank you,
Congressman, for that very kind introduction. You are a
wonderful friend, and you are doing such a great job, maybe
because you stole half my staff and kept them when I left the
Hill. No, but you are wonderful Representative for South
Dakota. Thank you for caring so passionately for all of our
people.
Chairman Thompson, I also have the honor of having one of
my former Chairmen on this Committee sit in front of me today.
Chairman Lucas was my Chairman as I served here in the House of
Representatives and had the chance to do two farm bills, but
serving under his leadership on this Committee was a special
honor for me. And I loved being a member of his team as we put
together farm policy, which I always refer to as food policy
for the United States of America. So it is wonderful to see you
again, Chairman Lucas, and I look forward to continuing to
receive your advice and wisdom over the years.
Ranking Member Scott and Members of the Committee, thank
you so much for letting me be here with you today to discuss
this topic. As a former Member of this Committee, I know it
very well, that each day that you protect not only our nation's
food supply, but you also are stewards of our land. And it is a
treasure for us to be able to do that each and every day.
I come before you today and sit as the 33rd Governor of
South Dakota. My home state is known for its gorgeous Black
Hills, its rolling plains, but also iconic Mount Rushmore. We
have a lot to be proud of, and if you haven't come to visit us,
you probably should because it is beautiful. Agriculture is the
number one industry in our state, but tourism is our second
largest industry. It is incredibly important to our people that
our land stay in good shape and we continue to produce.
This year is special to me because this is the 30th year
that I have worked on agriculture policy. I have spent my
lifetime working on policy, not just being a farmer and a
rancher and raising my family on the land, but also being
involved in meetings. At just the age of 22, my dad was killed
in an accident on our family farm, and I got angry when I found
out how our family was going to be hit tragically by the death
tax. I started showing up at meetings to talk about policy and
how it impacted small farms.
At that time, the U.S. Senate Majority Leader was Tom
Daschle, who was a Democrat, and I ended up with him appointing
me to serve on the Farm Service Agency State Committee, which
is the committee that oversees all the Federal farm programs in
the State of South Dakota. I did that for many years as a young
wife and mother and also as a farmer and rancher running a
large operation in our state, so I was heavily involved in the
implementation of Federal farm programs in our state, making
sure they worked for all of our ranchers there and that they
were as flexible as possible to give them the freedom to choose
how they ran their farms and to do it very well.
I also served on many different commissions and task forces
out here in Washington, D.C., during those years to help
disadvantaged farmers, people that were in tough situations, in
different critical situations, and as the general manager of
our business operations, I ran our farm for many decades.
I was first elected to our state legislature in 2006, and
became the Assistant Majority Leader in the House. While there,
I rewrote our agricultural property tax system. I ended up
running for Congress, was elected, served on this Committee,
and we worked on two farm bills while I served on this
Committee, also served on Natural Resources, on the Armed
Services Committee, Education and Workforce Committee, and then
ended on Ways and Means Committee when we did tax reform and
was very proud to see that signed into law.
In 2018, I ran for Governor in our state where I won and
then was reelected again in 2022 and I am in my second term
now. I tell you all of this because I think it is important for
you to know that my heart is with the land, and it is with our
people, but when it comes to policy, that I know what I am
talking about, and I know it because I live it.
Today, the focus of this Committee is the danger that China
poses to American agriculture. Over the years, I have witnessed
this hostile communist country work to systematically take over
our food supply chain. They have decades ago started buying our
fertilizer companies, controlling our ability to access
fertilizer, bring it into the United States. Then I watched
them buy up our chemical companies. As I worked on
implementation of programs and policies at our state level and
at the Federal level, I watched us as we sold citizenship to
Chinese communist members of the Communist Party for investment
into our processing systems, and now most of our processing
facilities are owned by the Communist Party or Chinese
Government.
Now they are coming for our land, and when they buy up our
land, they will complete their chain of control of our food
supply. Between 2010 and 2020, the Chinese Communist Party's
holdings of ag land increased by 5,300 percent. Reports now
show that China owns about 384,000 acres of U.S. ag land valued
at over $2 billion. This should be alarming to all of us. USDA
admits that this may not even account for all of the land that
they own because there is very little track of foreign
interests that are involved in these large transactions. In
fact, there is very little reporting that happens at the state
or the Federal level and little consequences for allowing
countries who hate us from owning our land.
Just this past summer, we had members of the Communist
Party contact our state government and want to come and visit
our processing facilities, see our farms, and visit South
Dakota. We declined all of those meetings, but just within
days, we received a phone call from the State Department
telling us that those were Chinese spies. They were there to
steal our intellectual property, to steal our genetics, and
wanted to debrief us if we had met with them. Thank God we did
not. We were told they were there to help improve our trade
relations, that they were there to improve our business and our
exports, and instead, they were there to steal from the United
States of America.
So the threat is very real to us every single day, what
China is doing, and they have 1,000 year plan to become the
world-dominating power. And the only thing standing in their
way is America. Just this past summer, it was very clear to me
when those Chinese spies were in our state that China wants to
control us, and they want to do that by controlling our food
supply.
The Chinese Communist Party is not our friend, they are not
our partner, and they are not our ally. They are our enemy, and
they are a rapidly expanding national security threat that
can't be ignored.
So let me be clear. They are buying up our entire food
supply chain, and when America can't feed itself and we rely on
members of another country to feed us, it becomes a national
security issue. The country that feeds us will control us.
And let me remind you why we do a farm bill. And I am well
aware that you have a priority to get that done, and I am
looking forward to getting a farm bill done because that is the
safety net for our farmers out there. In the past, the farm
bill has always been a bipartisan issue, and it should continue
to be a bipartisan issue. I had the opportunity to work on two
of them, and it is simply a safety net for our farmers.
It is important, and America decided years ago that we
needed to have a farm bill to ensure that every family in this
country had a safe and affordable food supply, that they had
the ability to go to a grocery store and to put food on the
table for their families, and that if a farmer had a good year,
he could pay his bills, but if he had a bad year, he could lose
everything. And we didn't want to have a drought or a flood or
something happened that caused us to lose all of our small
family farms and allow us to lose the ability to feed
ourselves. Every family in this country recognizes the
importance of a farm bill. I know you do, too, and I am looking
forward to you getting one completed to make sure that we
continue to feed ourselves in this country.
The farm bill should be designed to help farmers and not
environmental extremists. I hope that you will continue to
focus on making sure that we are working--as a conservationist
myself, I am committed to protecting the abundance of our
natural resources in my state, but so-called climate-smart
agriculture dictated by the Biden Administration does not help
farmers, and it does not help us put food on the table or
conserve our natural resources. We want wildlife habitat
solutions that meet the needs of the people and the states that
best serve this country and our ability to feed ourselves and
protect ourselves. The farm bill manages risk and it is a
safety net, and I hope that you can get that done.
Recent media reports show that the largest Chinese holder
of American ag land is shipping food and medical supplies to
China to be stockpiled by the Chinese military. We all saw when
China purchased land in North Dakota that they claimed was for
a corn processing plant, that there wasn't going to be enough
corn in that area to supply that plant, and that it was just
miles from a military installation. They were purchasing that
land on purpose for national security reasons, and that is why
I have made it a priority in my state to ensure that that
doesn't happen on my watch.
In South Dakota, we worked for 2 years to make sure that we
had a bill in place that would make sure we know who is buying
our land and that it wasn't going to be from a country that
hated us. China would never allow us to go to their country and
buy land in their country. They don't even allow their own
people to buy their land. There is no reason we should allow
them to come into our country and buy our land and especially
not close to our military installations.
South Dakota is the home to Ellsworth Air Force Base. It is
the home of the B-1 bomber that has protected this country for
the last 50 years. It is also home to the MQ-9 Reaper drones,
which are in operation protecting us as well. But it will be
the first home of the B-21s, which will be the bombing platform
that will protect this country for the next 50 years.
And it is incredibly important that we stop China and that
we make sure other evil foreign governments don't come in and
have the opportunity to buy up land next to these military
installations.
When we talk about food policy, please talk about it from a
national security standpoint. It is important that we grow our
own food, that we produce it here, and that we are doing it in
a way that protects the United States of America.
And with that, Mr. Chairman, I will yield back.
[The prepared statement of Governor Noem follows:]
Prepared Statement of Hon. Kristi L. Noem, Governor, State of South
Dakota, Pierre, SD
Chairman Thompson, Ranking Member Scott, and Members of the
Committee. It is such an honor to be with so many of you here today. As
a former Member of this Committee, I know well the vital work you do
each day to protect our nation's food supply and be stewards of our
treasured land.
I come before you today as the 33rd Governor of South Dakota. My
home state is known for the gorgeous Black Hills, rolling plains, and,
of course, the historic and iconic Mount Rushmore. If you haven't
visited us yet, consider this a personal invitation.
Agriculture is our number one industry, followed by tourism, so
protecting our land is incredibly important to our people.
This year marks the 30th year since I began working on agriculture
policy. When I was just twenty-two, my father was killed in a tragic
accident on our family farm--and I soon became the general manager of
our business operations, which I ran for the next several decades with
my family.
After learning of the heavy death tax burden our family faced
because of this tragedy, I got angry and started showing up at
meetings. I was quickly chosen to serve on local ag commodity boards.
Then, I was selected by then-Senate Majority Leader Tom Daschle, a
Democrat, to serve on the Farm Service Agency State Committee. This is
the committee that oversees all Federal farm programs in the state.
Over the next several years, I served on many task forces and
commissions dedicated to helping disadvantaged and underserved
producers and bringing efficiency to programs at the Federal level.
I was first elected to the state legislature in 2006. My peers
elected me as the Assistant Majority Leader in our House of
Representatives, where I helped rewrite our agriculture property tax
system. I then ran for Congress and served 8 years here as a Member of
this body. Serving on the Agriculture, Natural Resources, Education and
Workforce, Armed Services, and Ways and Means Committees. I was also
part of the House leadership team.
In 2018, I ran for Governor of our state, won, and was re-elected
again in 2022. I tell you all this because I think it is essential for
you to know that my heart is with the land and our people, and when it
comes to policy, I know what I'm talking about because I live it.
Today, the focus of this Committee hearing is The Danger China
Poses to American Agriculture. Over the years, I have witnessed this
hostile communist country work to systematically take over more of
America's vital food supply chain. Decades ago, I watched China start
buying our fertilizer companies and making us more dependent on them
for this crop care product. Then, they went after ownership of our
chemical companies. I watched our government offer citizenship to
members of the CCP in exchange for investment and ownership of our food
processing systems. Now, they're buying up our land.
Between 2010 and 2020, the Chinese Communist Party's holdings of
U.S. agricultural land increased by 5,300%. Reports show China owns
about 384,000 acres of U.S. ag land valued at about $2 billion. This
should be alarming to all of us. The USDA admits this may not even
account for all of the land that has been purchased. Why? Because the
Federal Government does not monitor and track foreign interests in
these large transactions. There is little reporting and very few
consequences for allowing countries that hate us to buy up our assets.
Just this past summer, my Department of Agriculture and Natural
Resources was contacted by Chinese nationals wishing to meet, tour, and
have conversations about how we process and grow our food. We declined
those meetings, and within days, the State Department contacted us to
notify us that those individuals were Chinese spies trying to steal our
Intellectual Property and crop genetics.
Make no mistake, the CCP will do anything to control our food
supply.
The Chinese Communist Party is not our friend. It is not our
partner. It is not our ally. The CCP is our enemy--a rapidly expanding
national security threat that cannot be ignored.
Let me be clear. China is buying up our entire food supply chain.
When America can't feed itself and relies on another country to feed
us, it becomes a national security issue. The country that feeds us
controls us.
Let me remind you of why we do a farm bill. In the past, the farm
bill has always been a bipartisan issue. I had the opportunity to work
on two of them as a Member of Congress. A farm bill is simply a safety
net. America decided years ago that our nation's security needed a safe
and affordable food supply that we grow.
Every family in this country should be able to afford to go to a
grocery store and buy their family's necessities. The farm bill ensures
that. Farmers who get up every day to make sure there are groceries on
those shelves can have one good year and pay their bills and look
forward to the next planting season, or have one bad year and have
drought, hail, or flooding and lose everything. It is a risky business,
and I've often said some of the biggest gamblers I know are our family
farmers.
The farm bill should be designed to help farmers, not environmental
extremists. Our farmers don't want President Biden dictating their
agriculture practices to fulfill his extreme climate agenda. As a
conservationist committed to protecting the abundance of natural
resources in my state, so-called ``climate-smart'' agriculture dictated
by the Biden Administration does not help farmers who need help
developing conservation, natural resource, and wildlife habitat
solutions that best meet their needs at the local level.
It is in our nation's best interests that those farmers exist
because we do not want one entity to eliminate their ability to keep
prices low for our families.
The farm bill manages that risk and is their safety net. I implore
you to do your jobs and get it done.
Recent media reports show the largest Chinese holder of American ag
land is shipping food and medical supplies to China to be stockpiled by
the Chinese military.
We all saw when China purchased land in North Dakota that they
claimed it was for a corn processing plant. But there wasn't enough
corn around to support that kind of a facility. And it was just a few
miles from a U.S. Air Force base.
South Dakota is home to Ellsworth Air Force Base, the B-1 bomber,
and the MQ-9 Reaper drone. It will soon be home to our next-generation
bombers--the B-21s. This platform will protect our nation for the next
50 years. As Governor, I refused to let what happened in North Dakota
happen in South Dakota.
For almost 2 years, I worked with our legislature, our ag
community, and our business community to stop China and five other Evil
Foreign Governments from buying ag land in our state near our military
assets. I'm happy to report that we've banned them--and strengthened
reporting requirements to identify and stop illegal purchases in the
future.
States like South Dakota have stepped up in many ways and will
continue to do so. South Dakota led the movement to ban TikTok for
state government devices, and dozens of states followed our lead.
Congress passed a bill that does that at the Federal level as well--
thank you for following South Dakota's example. That's a significant
step in preventing America's most prominent adversary from continuing
to poison the minds of our young people. You closed the back door and
locked it . . . but you can't open the front door.
China doesn't allow American companies to own their land--they
don't even allow their people to own land. Why would we allow them to
purchase our most significant asset?
It's clear President Biden does not have a plan to protect the
American people--not against crime in our major cities, not at the
southern border, and not against the threat of China. So, today, I'm
here urging Congress to stop the CCP and other nations that hate us
from infiltrating our country.
In summary, let me remind you that for decades, China has
manipulated their currency, stolen our IP, spied on us, mistreated us
in trade practices, is purchasing our nation's debt, controls our
nation's prescription drug supply chain, is poisoning our children with
Fentanyl, unleashed a deadly virus on the world, uses TikTok to spy on
and control our nation's population and is willing to put their people
through horrific situations to fulfill the plan they have had for
thousands of years to be the dominating world power. The only thing
standing in their way is us.
America.
If we lose this country, where will we go?
The time is now to ensure that every policy we pass and champion
puts America First.
Our safety depends on it. Our security depends on it. Our American
way of life depends on it.
Thank you, Mr. Chairman, for holding this Committee hearing on this
critical topic. I yield back my time.
The Chairman. Very good. Thank you, Governor. I am now
pleased to recognize Chairman Gallagher. Begin when you are
ready.
STATEMENT OF HON. MIKE GALLAGHER, A REPRESENTATIVE IN CONGRESS
FROM WISCONSIN; CHAIRMAN, SELECT
COMMITTEE ON THE STRATEGIC COMPETITION BETWEEN THE UNITED
STATES AND THE CHINESE COMMUNIST PARTY, U.S. HOUSE OF
REPRESENTATIVES, WASHINGTON, D.C.
Mr. Gallagher. Thank you, Chairman Thompson, Ranking Member
Scott, and Members of the Committee. What an incredible
opportunity to be able to discuss the threat posed by the
Chinese Communist Party in general but to American agriculture
in particular. I want to thank the Governor for her leadership
in really sounding the alarm about this threat and also for
carrying the burden of dealing with Dusty Johnson before he
leaves the room. He may not technically weigh that much, but
that is a heavy burden, and I believe he is from your Dakota. I
always get it confused.
A year ago, a gentleman named Xiang Haitao, a PRC national,
pled guilty to conspiracy to commit economic espionage and was
sentenced to more than 2 years in prison for stealing
intellectual property from his employer, which was a Monsanto
subsidiary. Xiang took copies of the algorithm on a one-way
flight back to China, where he later worked for the Chinese
Academy of Sciences Institute of Soil Science. So here you have
an example of someone stealing American technology and bringing
it directly back to the Chinese Communist Party, which reflects
the CCP's approach to agriculture and food security in that it
is not just about economic competition, to quote General
Secretary Xi Jinping himself, it is a national security issue
of extreme importance.
The PRC is the largest importer of corn, soybeans, wheat,
rice, and dairy products in the world. The CCP views food
security as an existential issue. Xi understands that if China
were to invade Taiwan, it would be subject to blockade and
economic sanctions, and therefore, the PRC would face massive
challenges in feeding its population. So to put it bluntly, the
Chinese Communist Party is actively engaged in economic warfare
against the United States, and our agriculture sector is
already a prime target.
The Governor mentioned the share of U.S. farmland owned by
Chinese-linked firms increasing more than fivefold between 2010
and 2021. These are only the acquisitions that we know about.
There could be much more because, as you all know, the Federal
oversight system for reporting foreign ownership is alarmingly
lax, and enforcement is very minimal. For example, the Governor
referenced the issue with the Fufeng Group, which attempted to
purchase land close to Grand Forks Air Force Base in the other
Dakota in 2021. They did not report the purchase to USDA until
the U.S. media started asking questions about it. That is
unacceptable.
If you look more broadly at the entire CFIUS (Committee on
Foreign Investment in the United States) process, at least
three problems emerge. One, the U.S. Government has no way of
tracking land purchases by foreign adversaries. There was a
recent GAO report that found USDA is incapable of properly
tracking such land purchases by problematic actors.
Second, even upon discovering a problematic transaction,
CFIUS often finds it has no jurisdiction, despite the fact that
in the FIRRMA bill (H.R. 5841, Foreign Investment Risk Review
Modernization Act of 2018, 117th Congress) we tried to give
CFIUS said jurisdiction. So just as happened with the Fufeng
acquisition, because the Air Force Base in question was not
listed as a sensitive site by CFIUS, CFIUS claimed they had no
authority to even review the transaction. That is unacceptable.
And third, and finally, CFIUS can't review greenfield
investments in our farmland or consider our domestic food
security as a risk factor, so our foreign adversaries are able
to purchase thousands of acres of our farmland, and CFIUS can't
even consider the potential impact on our food supply.
This strikes me as something that Democrats and Republicans
could come together right now in this Congress and solve by
passing something like the Protecting U.S. Farmland and
Sensitive Sites from Foreign Adversaries Act (H.R. 4577). I
know there are Members of this Committee on both sides of the
aisle. Ms. Slotkin and I have worked very productively on this
issue. This is something we can get done even in divided
government. Give CFIUS the authorities and resources it needs
to make sure that our foremost adversary can't buy land near
critical infrastructure and military bases. It should be a no-
brainer.
I would also suggest we can do better in protecting our
agricultural IP by passing bills like the BIOSECURE Act (H.R.
7085), which my Ranking Member Raja Krishnamoorthi is a
cosponsor of. This would ensure that U.S. taxpayer dollars
don't go to CCP-backed firms like Beijing Genomics Institute
that want to collect the genetic sequences of plants and
animals from American farmers. And on the flip side, we should
protect our food security for generations to come by cataloging
the genetic sequences of U.S. plants and animals that we need
to help keep American families fed.
So in closing, I will just say I spent a lot of my time as
Chairman of the Select Committee on China asking why any of
this matters. Why are you having this hearing? Why do we care
about the threat posed by the Chinese Communist Party? And it
is not just that they are stealing our intellectual property or
trying to dominate our food supply. I really do think--and I
don't think this is alarmism. I think this is a recognition of
reality if you read what Xi Jinping is saying to the party and
to his people. I believe that the CCP is preparing for a war
with the United States. There is no doubt they would prefer the
fruits of war without the actual costs. That is to be sure. But
they are preparing nonetheless. And he has told us repeatedly
that he is prepared to use force if necessary to achieve his
lifelong ambition, which is, of course, taking Taiwan, thereby
dominating the region and ultimately displacing the United
States as the most powerful country in the world.
So if we want to avoid that outcome, which would be a
terrible outcome--a war with China would be horrific if you
have ever participated in a wargame. And I know there are many
on this Committee that served that understand the costs of war.
We have to abide by the old adage, if we want peace, we must
prepare for war. And that is the challenge, to mobilize our
colleagues and our constituents to do difficult, costly, but
important things that put us on a path to deterring war.
Thank you for having this important hearing, and thank you
for letting me go a little bit longer.
[The prepared statement of Mr. Gallagher follows:]
Prepared Statement of Hon. Mike Gallagher, a Representative in Congress
from Wisconsin; Chairman, Select Committee on the Strategic Competition
Between the United States and the Chinese Communist Party, U.S. House
of Representatives, Washington, D.C.
Chairman Thompson, Ranking Member Scott, Members of the Committee,
thank you for the opportunity to address the Committee on the threat
posed by the People's Republic of China (PRC) and the Chinese Communist
Party (CCP) to U.S. national security as it relates to agriculture. We
should be clear: the CCP is engaged in economic warfare against the
United States on a daily basis. Agriculture and our critical food
supply chains are no exception.
The CCP considers agriculture and related technology to be critical
to its national defense. Part of its strategy involves degrading its
adversaries' capabilities and subjecting them to the CCP's whims and
wishes. The CCP's acquisition of land in the United States, its
investments in U.S. agricultural technology, and its collection of U.S.
farm data and trade secrets represent offensive maneuvers designed to
degrade U.S. preparedness and competitiveness. Simultaneously, the CCP
prioritizes defensive strategies, such as domestic investment in
agricultural biotechnology, to ensure the CCP's adversaries cannot use
its offensive playbook against itself. The U.S. Government has been
slow to recognize the problem, and even slower to act. Today, we lack
sufficient authorities to combat these challenges. I look forward to
working on these issues with you and ensuring we are properly prepared
to protect our agricultural industry and national security.
1. The CCP's View of Agriculture and Food Security
For decades, the CCP has considered agriculture and food security
not just as national security issues, but as critical to securing the
survival of the regime. Amidst the COVID-19 pandemic, disruptions to
the food supply sparked waves of protests in more than a dozen cities,
with protesters demanding, ``we want food, not COVID tests,'' a rare
public demonstration of dissent against the CCP.\1\ Ultimately, its
food security policies center on safeguarding and boosting domestic
production, buoyed by degrading the United States' security.
---------------------------------------------------------------------------
\1\ Liu, Zhongyuan Zoe, ``China's Farmland Is in Serious Trouble.''
Foreign Policy, February 27, 2023, https://foreignpolicy.com/2023/02/
27/china-xi-agriculture-tax/.
---------------------------------------------------------------------------
At an annual central rural work conference in December 2022, CCP
General Secretary Xi Jinping declared that agriculture is a ``national
security issue of extreme importance'' and emphasized the need for food
self-sufficiency.\2\ Indeed, Beijing views the issue of agriculture
security as life-or-death. According to a former CCP official in charge
of rural economic research, the PRC must ensure ``absolute'' security
of staple foods because the global economy would never save the
country. Xi himself believes that ``once something is wrong with [our]
agriculture, our bowls will be held in someone else's hands,'' \3\ and
that ``the food of the Chinese people must be made by and remain in the
hands of the Chinese.'' \4\ These beliefs are grounded in the fact that
without food security, the future of the party is at stake.
---------------------------------------------------------------------------
\2\ Mandy Zhou, ``China's Xi Jinping Says Ukraine War Has Shown the
`Extreme Importance' of Food Security,'' South China Morning Post,
March 16, 2023, https://www.scmp.com/economy/china-economy/article/
3213767/chinas-xi-jinping-says-ukraine-war-has-shown-extreme-
importance-food-security.
\3\ Ibid.
\4\ Donnellon-May, Genevieve. ``Understanding China's Food
Priorities for 2024.'' The Diplomat, January 6, 2024. https://
thediplomat.com/2024/01/understanding-chinas-food-priorities-for-2024/.
---------------------------------------------------------------------------
Just last month, the CCP published its National Food Security Law,
which aims to ensure that the PRC achieves ``absolute security'' in
staple grains for food use and basic self-sufficiency in all others.\5\
At the same time, the CCP reiterated its concerns over food security in
its annual agricultural policy document. The ``No. 1 Central Document''
outlines priorities for promoting rural revitalization, with
``safeguarding national food security'' being the primary pillar to do
so.\6\ The document emphasizes reducing reliance on foreign
agricultural imports (particularly soybeans and corn), diversifying
foreign import sources, developing a PRC seed industry, and innovating
in agricultural biotechnology.\7\
---------------------------------------------------------------------------
\5\ ``China: National Food Security Law Published,'' U.S.
Department of Agriculture, February 14, 2024. https://fas.usda.gov/
data/china-national-food-security-law-published.
\6\ ``China's No. 1 Central Document for 2024 Charts Road-Map for
Rural Revitalizations.'' The State Council Information Office The PRC,
February 4, 2024. http://english.scio.gov.cn/m/topnews/2024-02/04/
content_116985045.htm.
\7\ Ibid.
---------------------------------------------------------------------------
The CCP's views that it cannot afford to rely on foreign sources of
food make clear the CCP has started the clock on importing agriculture
products from the United States. In pursuit of this goal, the CCP
anticompetitively supports PRC companies abroad, buys foreign
agricultural land, and bolsters domestic capacity to the detriment of
the United States. Moreover, attempts to develop a PRC seed industry
and biotechnology innovations rely on stealing U.S. intellectual
property and U.S. data. These activities directly harm U.S. national
security and U.S. agricultural competitiveness.
2. PRC Land Purchases in the United States
A critical part of the CCP's policy to boost its food security and
control over global food supply chains, it must purchase non-PRC
farmland. This is because the PRC has a dramatic shortage of arable
land compared to other major countries, with the PRC's arable land per
capita at \1/3\ the average for member states of the Organization of
Economic Cooperation and Development (OECD), and freshwater resources
per capita are less than \1/10\ of the OECD average.\8\ According to
the U.S.-China Economic and Security Review Commission: ``the amount of
arable land [the PRC] does have is not sustainable or sufficient for
meeting its food production goals.'' \9\ To feed its population, the
CCP must import food, a fact the regime recognizes. The 2007 No. 1
document explicitly called for farming and agriculture ``going out''
into the world as a national strategy to reduce foreign reliance, and
the 2016 document focused on international agricultural investment and
supporting PRC companies' overseas operations.\10\
---------------------------------------------------------------------------
\8\ ``Chapter 2. Overview of the Food and Agriculture Situation in
China.'' Essay. In OECD Food and Agriculture Reviews. Paris: OECD
Publishing, n.d.
\9\ Lauren Greenwood, rep., China's Interests in U.S. Agriculture:
Augmenting Food Security through Investment Abroad (Washington, D.C.:
U.S.-China Economic and Security Review Commission, May 26, 2022),
https://www.uscc.gov/sites/default/files/2022-05/Chinas_Interests_
in_U.S._Agriculture.pdf.
\10\ Liu, Zhongyuan Zoe, ``China's Farmland Is in Serious
Trouble.'' Foreign Policy, February 27, 2023, https://
foreignpolicy.com/2023/02/27/china-xi-agriculture-tax/.
---------------------------------------------------------------------------
The desire to control foreign agriculture does not just sit on a
policy wish list--it is being actioned by the CCP. The U.S. Department
of Agriculture (USDA) reported in 2018 that the PRC's international
agricultural investments have grown more than tenfold since 2009.\11\
In the United States, the PRC's share of U.S. farmland has risen more
than five times between 2010 and 2021.\12\ From PRC firms acquiring
Smithfield Foods in 2013 and the agricultural land the company owned
(then the world's largest pork producer), to attempting to install wind
farms in Texas near sensitive sites, to using U.S. arable land for
agricultural technology research, the CCP is attempting increase its
influence in our food supply and agriculture industry to support its
goals of food security, all while increase PRC leverage over the U.S.
agriculture industry.
---------------------------------------------------------------------------
\11\ Ryan McCrimmon, ``China is buying up American farms.
Washington wants to crack down.'' Politico, July 19, 2021, https://
www.politico.com/news/2021/07/19/china-buying-us-farms-foreign-
purchase-499893.
\12\ Nathan Owens and Julia Himmel, ``How farms became the latest
battleground in U.S.-China relations,'' Agriculture Dive, December 5,
2023, https://www.agriculturedive.com/news/us-china-foreign-ownership-
farmland-agriculture/700792/.
---------------------------------------------------------------------------
Although official data indicates a small percentage of U.S.
agricultural land is owned by PRC interests, the Federal oversight
system for reporting foreign ownership is lax, and enforcement is
minimal. For example, Fufeng Group, which attempted to purchase land
close to Grand Forks Airforce Base in North Dakota in 2021, did not
report their purchase to USDA until U.S. media inquired into the
deal.\13\ CFIUS later determined it did not have jurisdiction over the
purchase, which would have led to a green light for the deal if it had
not been for state and local government intervention.
---------------------------------------------------------------------------
\13\ Laura Stickler and Nicole Moeder, ``Is China really buying up
U.S. farmland? Here's what we found,'' NBC News, August 25, 2023,
https://www.nbcnews.com/news/investigations/how-much-us-farmland-china-
own-rcna99274.
---------------------------------------------------------------------------
In fact, the U.S. Government Accountability Office (GAO) recently
reported that USDA is incapable of properly tracking agricultural land
purchases by foreign adversaries. In a January 2024 report, GAO found
that USDA published errors in the reporting of PRC agricultural land
holdings, such as listing the largest PRC land holding twice.\14\ USDA
was also found to not share data with the national security apparatus
(CFIUS, DOD, NSC, etc.) on land purchases in an effective manner, and
data USDA is required to collect under the Agriculture Foreign
Investment Disclosure Act (such as names, countries of citizenship,
when the land was transferred/acquired, etc.) is not typically
shared.\15\
---------------------------------------------------------------------------
\14\ https://www.gao.gov/products/gao-24-106337.
\15\ Ibid.
---------------------------------------------------------------------------
CFIUS relies in part, on USDA, as an expert agency, for help
analyzing the national security implications of farm purchases. With
the Fufeng Group's purchase of land in North Dakota in 2021, and
Gotion's purchase of land in Michigan in 2023, both of which pose
serious national security concerns, it is alarming that the U.S.
Government agency responsible for tracking those purchases cannot
adequately share basic information.
There are 2.4 million acres of U.S. land under unknown foreign
ownership.\16\ We have little understanding of who really owns our land
and who is operating in the United States, yet the CCP's policies
advocate for increased foreign land ownership. Our national security is
jeopardized daily by our inability to respond to a very blatant threat:
the CCP's acquisition of U.S. farmland.
---------------------------------------------------------------------------
\16\ Kristen Sindelar, ``Foreign land investments exposes U.S.
security issues,'' Midwest Messenger, October 26, 2023, https://
agupdate.com/midwestmessenger/news/state-and-regional/foreign-land-
investments-exposes-u-s-security-issues/article_24f6c0e8-6de7-11ee-
ad7b-ff8ca99a03
25.html.
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3. PRC Investment and Activity in the U.S. Agricultural Sector
Past examples of investments and acquisitions by the CCP in the
U.S. agricultural sector underscore the threat posed by CCP control in
our agricultural industry and supply chain. CCP investments in U.S.
agriculture target land, livestock, seeds, and supporting
infrastructure, all to support the regime's goals of food security and
self-sufficiency. By owning these assets, the CCP can diversify their
supply chains and mitigate risks from issues such as natural disasters,
expedite production processes from farm to table, and acquire new
technology and know-how. These advantages come at the expense of the
United States' national security.
Nowhere is the PRC's pursuit of overseas agriculture infrastructure
more clear than the $7.1 billion purchase in U.S. agriculture giant
Smithfield Foods by PRC company WH Group in 2013. Smithfield Foods was
the largest pork producer in the United States. Its sale to WH Group
was approved by CFIUS despite concerns raised by lawmakers that WH
Group's then Chairman, Wan Long, was tied to the CCP. WH Group gained
more than 146,000 acres of U.S. farmland in the acquisition (which held
hog farms, processing plants, and feed mills), and Smithfield's
advanced hog genetics and valuable technology were cutting-edge and
desirable to a regime looking to increase yields and diversify.\17\
Smithfield has supplied the PRC with record levels of pork, one of the
CCP's primary focuses for its agricultural stockpile, as the country's
domestic pork production cratered due to disease and pandemic lockdowns
in 2020 and 2021.\18\ In a May 2022 report, the U.S.-China Economic and
Security Review Commission (USCC) warned that ``if further
consolidations and Chinese investments in U.S. agricultural assets take
place, [the PRC] may have undue leverage over U.S. supply chains.''
\19\
---------------------------------------------------------------------------
\17\ Lauren Greenwood, rep., China's Interests in U.S. Agriculture:
Augmenting Food Security through Investment Abroad (Washington, D.C.:
U.S.-China Economic and Security Review Commission, May 26, 2022),
https://www.uscc.gov/sites/default/files/2022-05/Chinas_Interests_
in_U.S._Agriculture.pdf.
\18\ Ibid.
\19\ Lauren Greenwood, rep., China's Interests in U.S. Agriculture:
Augmenting Food Security through Investment Abroad (Washington, D.C.:
U.S.-China Economic and Security Review Commission, May 26, 2022),
https://www.uscc.gov/sites/default/files/2022-05/Chinas_Interests_in
_U.S._Agriculture.pdf.
---------------------------------------------------------------------------
If direct investments do not demonstrate the CCP's recognition of
the agricultural industry as vital to national security, their
treatment of their domestic agriculture market provides further proof.
The PRC's Foreign Direct Investment Act, among other legislation,
includes prohibitions on seed sales, technology licensing, mergers and
acquisitions, and land ownership by foreign companies due to national
security concerns.\20\ The PRC also maintains broad discretion to limit
or condition foreign investment in sectors designated as
``restricted.'' In agriculture, these include GMO research, production,
processing, or import; agricultural related transportation; production,
sale, or trade of food; transfer of land management rights, and other
areas.\21\
---------------------------------------------------------------------------
\20\ Karen M. Sutter, rep., China's Recent Trade Measures and
Countermeasures (Washington, D.C.: Congressional Research Service,
December 10, 2021), https://crsreports.congress.gov/product/pdf/R/
R46915.
\21\ Ibid.
---------------------------------------------------------------------------
Yet, in the United States, we allow these activities by PRC
companies. PRC state-owned enterprises (SOEs) operate without
impediment in the U.S. agriculture market. Syngenta Group, a wholly
owned subsidiary of the PRC SOE ChemChina, and the China Oil and
Foodstuffs Corporation (COFCO) are prominent SOEs which conduct
business in the United States, and which pose national security risks.
Syngenta is the world's largest seed and agricultural chemicals
conglomerate, with 21 manufacturing, and research and development
facilities in just the United States. Syngenta operates an outsized
role in the domestic crop protection industry; its insecticide,
herbicide, fungicide, and similar crop protection product sales in the
United States amounted to $3.2 billion in 2021, and its seed business
engages in licensing arrangements of genetically engineered seed
technologies designed and owned by U.S. farmers. Syngenta and the CCP
have deeply rooted themselves in our agricultural supply chains,
creating untenable dependencies and giving the CCP leverage over the
United States in a possible conflict.
In October 2022, Syngenta's parent company, ChemChina, was
designated on the U.S. Department of Defense's 1260H List, which
identifies ``Chinese military companies operating in the United
States.'' Similarly, COFCO represents the PRC's largest food processor,
manufacturer, and trader and one of the country's largest SOEs. COFCO
maintains outsized influence over the U.S. agricultural industry and
exports; it was the largest single customer for U.S. soybean and U.S.
corn in 2021 and receives preferential access to the PRC market over
international firms. A COFCO subsidiary was placed late last year on
the UFLPA Entity List by the U.S. Department of Homeland Security for
using forced labor in its supply chains. Not only are we giving away
our food security to the CCP, but we are giving it to the regime's
companies responsible for its military modernization and human rights
abuses.
4. Investments in Agricultural Technology
These concerns are especially salient when we consider U.S. and PRC
investments in agricultural biotechnology. Per USDA, agricultural
biotechnology is a range of tools, including traditional breeding
techniques, that alter living organisms to make or modify products;
improve plants or animals; or develop microorganisms for specific
agricultural uses. It represents the next battlefield of food security,
enabling more efficient, nutritious, and risk-tolerant crop yields.
Although the PRC has yet to develop any genetically engineered food or
fed products for domestic commercial cultivation, the CCP outpaces the
United States in biotechnology R&D. It has provided significant support
for the development of genetically modified food products and continues
to highlight advancements in agricultural biotechnology as a critical
piece of its food security plan. At the end of 2020, for example, just
one special research project received nearly $3.5 billion of investment
to develop new biotechnology varieties.\22\
---------------------------------------------------------------------------
\22\ United States Department of Agriculture--Foreign Agricultural
Service, ``Agricultural Biotechnology Annual,'' Foreign Agricultural
Service Staff. CH2022-0112, Global Agricultural Information Network,
2022. https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportBy
FileName?fileName=Agricultural%20Biotechnology%20Annual_Beijing_China%20
-%20People%
27s%20Republic%20of_CH2022-0112.pdf (accessed March 14, 2024).
---------------------------------------------------------------------------
In some areas of agricultural biotechnology, the PRC also
outperforms the United States. As one expert testified before the
Select Committee, the PRC maintains a strong lead in publishing
research papers describing the use of CRISPR-based gene-editing
techniques. Its applications can involve the biomanufacturing of meat
from animal stem cells to provide new protein sources to meet growing
demands, efforts which have been explicitly endorsed by General
Secretary Xi.\23\ We are losing the agricultural biotechnology
competition with the CCP, and without stronger action by the United
States, our future food security is in jeopardy.
---------------------------------------------------------------------------
\23\ ``Growing Stakes: The Bioeconomy and American National
security,'' Testimony before the Select Committee on the Strategic
Competition Between the United States and the Chinese Communist Party,
118th Cong. (2024) (testimony of Dr. Tara O'Toole, In-Q-Tel)
---------------------------------------------------------------------------
5. PRC Acquisition of U.S. Farm Data and Intellectual Property
When the PRC cannot co-opt U.S. agricultural technology legally, it
resorts to illegal means. The PRC considers developing a seed industry
paramount to its goal of self-sufficiency. Advanced seed technology can
mitigate risks posed by droughts, pests, and diseases, and it can
minimize the amount of land required for planting. The 14th Five-Year
Plan specifically advocates for developing new agricultural varieties,
accelerating the commercialization and industrial application of
biological breeding, and fostering ``leading enterprises in the seed
industry with international competitiveness.'' \24\
---------------------------------------------------------------------------
\24\ People's Government of Fujian Province, Outline of the 14th
Five-Year Plan (2021-2025) for National Economic and Social Development
and Vision 2035 of the People's Republic of China, August 9, 2021.
---------------------------------------------------------------------------
Innovation had generated billions of dollars in revenue for U.S.
companies, such as Monsanto, but the process is expensive. Creating a
single hybrid seed, for example, requires breeding two inbred seed
lines. USCC estimates that ``each inbred seed can cost up to $30
million to $40 million in lab costs, field work, and trial and error,
not to mention the time spent completing this work.'' \25\
---------------------------------------------------------------------------
\25\ Lauren Greenwood, rep., China's Interests in U.S. Agriculture:
Augmenting Food Security through Investment Abroad (Washington, D.C.:
U.S.-China Economic and Security Review Commission, May 26, 2022),
https://www.uscc.gov/sites/default/files/2022-05/Chinas_Interests_
in_U.S._Agriculture.pdf.
---------------------------------------------------------------------------
PRC entities frequently resort to IP theft. For example, on April
4, 2018, PRC scientist Zhang Weiqiang was sentenced to more than 10
years in prison for conspiring to steal samples of a variety of rice
seeds from a Kansas biopharmaceutical research facility. According to
trial evidence, Zhang acquired hundreds of rice seeds produced by
Ventria Bioscience and stored them at his residence in Manhattan, New
York. The seeds have a wide variety of health research applications and
represent millions of dollars of R&D investment by Ventria. Personnel
affiliated with the Tianjin Academy of Agricultural Sciences visited
Zhang at his residence, and U.S. Customs and Border Protection officers
later found the Ventria seeds in the visitors' luggage as they prepared
to leave the United States for the PRC.\26\
---------------------------------------------------------------------------
\26\ Office of Public Affairs, ``Chinese Scientist Sentenced to
Prison in Theft of Engineered Rice,'' U.S. Department of Justice, April
4, 2018, https://www.justice.gov/opa/pr/chinese-scientist-sentenced-
prison-theft-engineered-rice.
---------------------------------------------------------------------------
In another case, just 2 years earlier, PRC national Mo Hailong,
also known as Robert Mo, was sentenced to 3 years in prison for
conspiracy to steal trade secrets on October 5, 2016, and was ordered
to forfeit two farms in Iowa and Illinois that he purchased and
utilized during the conspiracy. Mo was employed as the Director of
International Business of the Beijing Dabeinong Technology Group
Company (DBN), a PRC conglomerate with a corn seed subsidiary company,
Kings Nower Seed. Mo admitted, through a plea agreement, to
participating in a long-term conspiracy to steal trade secrets from
DuPont Pioneer and Monsanto. Mo aimed to steal inbred corn seeds for
the purpose of transporting the seeds to DBN.\27\
---------------------------------------------------------------------------
\27\ Office of Public Affairs, ``Chinese National Sentenced to
Prison for Conspiracy to Steal Trade Secrets,'' U.S. Department of
Justice, October 5, 2016, https://www.justice.gov/opa/pr/chinese-
national-sentenced-prison-conspiracy-steal-trade-secrets.
---------------------------------------------------------------------------
Agricultural technology is not just tied to seed innovation.
Analytic software and data flows are vital components of agricultural
efficiency and maximization. Once again, the CCP sponsors trade secret
theft to gain a competitive edge. In 2022, Xiang Haitao, a PRC
national, pled guilty to economic espionage and was sentenced to more
than 2 years in prison. Charges of economic espionage require evidence
that the activities were state-sponsored and for the benefit of a
foreign government. Xiang was employed by Monsanto and its subsidiary,
The Climate Corporation, which develops digital farming software that
farmers use to visualize and analyze field data. A critical component
to the platform is a proprietary predictive algorithm, which Monsanto
considered a valuable trade secret. Xiang traveled to the PRC on a one-
way flight with copies of the algorithm and later worked for the
Chinese Academy of Science's Institute of Soil Science. Xiang was
arrested when he returned to the United States 2 years later.\28\
---------------------------------------------------------------------------
\28\ Office of Public Affairs, ``Chinese National Sentenced for
Economic Espionage Conspiracy,'' U.S. Department of Justice, April 7,
2022, https://www.justice.gov/opa/pr/chinese-national-sentenced-
economic-espionage-conspiracy.
---------------------------------------------------------------------------
Even beyond illegal activities, there are no legal restrictions on
the flow of agricultural data across the United States border.
Restrictions only exist when imposed by corporations on trade secrets
and intellectual property-designated data, such as gene sequences of
genetically modified organisms.
6. Policy Recommendations for the Committee
Despite these concerns, there are fortunately a few ways Congress
can act to shore up the United States' food security and supply chains
in our competition with the CCP.
1. Pass H.R. 4577, the Protecting U.S. Farmland and Sensitive Sites
from Foreign Adversaries Act: The Committee on Foreign
Investment in the United States (CFIUS) has limited
jurisdiction over specific land purchases and does not
require mandatory disclosure if a foreign adversary tries
to purchase land near a sensitive national security site.
The Protecting U.S. Farmland and Sensitive Sites from
Foreign Adversaries Act address this challenge by expanding
CFIUS to cover the purchase of agriculture land; require
mandatory disclosure for foreign adversaries purchasing
land near military sites; and expands the list of sites
that are designated as ``sensitive'' to include key
infrastructure projects such as telecommunication nodes.
2. Pass H.R. 7085 the BIOSECURE Act: The PRC is rapidly making
inroads in the U.S. and global biotech market through
state-backed firms like BGI and its subsidiaries MGI and
Complete Genomics. BGI has been a global campaign to
collect the genetic sequences of plants and animals, with a
focus on plants that have implications for agriculture. The
BIOSECURE Act ensure U.S. taxpayer dollars are not
subsidizing this activity, by creating a framework to
restrict the flow of U.S. taxpayer dollars to foreign
adversary biotech companies, such as BGI, and firms that
contract with these firms.
3. Stop the Flow of Agriculture Date to Foreign Adversaries: Despite
an increased recognition that the United States should
protect its data for national security and privacy
concerns, agriculture data is often forgotten as a critical
source of data. The PRC is able to acquire mass amounts of
data related to U.S. farmland, including satellite images,
chemical and pesticide use, and even the genetic data of
the plants we grow in our fields. The United States should
impose a restriction on the flow of U.S. agriculture data
to foreign adversaries.
4. Stop Foreign Adversary Ag Drones from Operating on our Farms: The
threat posed by PRC drones operating in the United States
is well known. PRC drones, including those from DJI, tuned
for agriculture collect mass amounts of sensitive data
about our fields and are undercutting U.S. agriculture
drone providers, creating a supply chain risk. The U.S.
Department of Agriculture should impose requirements on any
recipient of USDA funds that prevent recipients from
acquiring agriculture drones that are produced in a foreign
adversary country.
5. Create a Plant Genome Project: Genetic data is rapidly becoming
one of the most valuable resources in advancing
biotechnology. The U.S. Government led the way, beginning
in the 1990s, to sequence the human genome. The next
frontier in biological data is plants. As of 2021, only 10%
of the nearly 700 historically cultivated food craps have
been genetically sequenced. We cannot allow the PRC to
sequence our own plants critical to our food supply before
the United States. The USDA should be tasked and resourced
to lead an international ``Plant Genome Project'' that
would give our farmers and developers of ag biotech the
data they need to continue leading food production into the
21st century.
The Chairman. Mr. Chairman, thank you so much. Thanks for
your leadership and your testimony. And I know you have a
hearing to get to, so feel free to----
Mr. Gallagher. I could imagine what Raj would say if he
were here if you would like me to--we have spent so much time
together, I feel like I could finish his sentences.
The Chairman. There you go. Well, C-SPAN is covering this
hearing. You will be able to hear him time delayed.
Mr. Gallagher. All right. Thank you so much.
The Chairman. No, thank you.
We are going to take an opportunity while Mr.
Krishnamoorthi is at another hearing right now on his way, and
so we are going to take two questions from each side of the
dais here for the Governor, who has been more than generous
with her time, so, first, I recognize Mr. Lucas from Oklahoma
for 5 minutes of questions.
Mr. Lucas. Thank you, Mr. Chairman.
And, Governor, it is good to see you back in this room
again. I think we both agree that a strong, healthy, vibrant
rural America and production agriculture is a key to our
national security, but I serve in a body now where memories are
short, and I would like to go back 10 years ago to when you and
I worked together, that 2\1/2\ year struggle, as you remember,
to create the third-generation farm bill. And maybe memories
have numbed with time, but not just the way you conducted
yourself in this Committee on behalf of your constituents, but
in those Republican conference committee meetings where we
together battled diligently to get the attention of elected
leadership about the importance of these farm bills, I will
forever be eternally grateful for you backing me up in the way
you handled the Speaker and the Floor leader on behalf of rural
America and production agriculture, so thank you for that
tenacity, which I suspect has only grown stronger with time in
your role as Governor.
Governor Noem. Well, sir, you keep lighting people on fire,
and they get a little tougher, and understand that what you all
say matters and what you do matters. The words you use have
consequences, and it matters who is in leadership. So I have
gone at times in my different roles and recognize that
leadership needs to sit and listen to people and have
conversations. We have become a country that has become
addicted to being offended by each other, and therefore, we
would love to be offended by something that somebody has said.
And I would just ask that we start listening to each other.
The farm bill should be bipartisan. It should be
bipartisan, that we be able to put a safety net out there, and
I am asking you to do it for the consideration of our food
policy. If we think a pandemic was scary, can you imagine what
happens if we can't feed our people? We are only three meals
away from a crisis. And I have recognized and noticed as
Governor, as the CEO of my state, how much control China has,
not just over manipulating our currency, stealing our IP,
things we have known forever that even I--my pension funds, I
can't even get Vanguard to say that China's not an emerging
market anymore. Everybody in the world will agree that they are
not an emerging market. They should give me an ability to
invest in a fund that doesn't have China if I don't want to do
that as a Governor for my people to get them the best returns
possible.
But now when I look at our food supply system and our
processing system, and we recognize that China's not our ally.
We do trade with them, and when we do trade--and I worked on
trade agreements when I served on the Ways and Means Committee,
I had the ability to notice that when we did trade agreements,
we created friendlier neighborhoods. But we can't do that if we
are not talking to each other and having conversations.
So that farm bill, even though I picked a lot of fights
with my own fellow Republicans, we got them done, and we are
going to have to challenge Members of both parties to come back
to the table to make sure we have that safety net so we
continue to feed our families.
Mr. Lucas. And thank goodness for that tenacity you
demonstrated then and continue to demonstrate.
With that, I yield back, Mr. Chairman.
The Chairman. The gentleman yields back.
I am now pleased to recognize the Ranking Member for 5
minutes of questions.
Mr. David Scott of Georgia. Thank you very much.
Governor, how are you?
Governor Noem. Doing good. Good to see you again.
Mr. David Scott of Georgia. And it is good to have you with
us. But tell me this. What is your opinion of Trump's proposal
for a 60 percent tariff on all Chinese imports? And are your
farmers ready to face the potential consequences of this?
Governor Noem. I think that that is a proposal that people
are still looking at and having conversations about, and that
is a great conversation for you to continue to have as well
with the Republican Members here as well to weigh in to make
sure we get the best policy in place because policy is what
matters. And the debate and the discussion is incredibly
important.
You made a comment in your opening statement, Ranking
Member Scott. You talked about the fact that we were here to
talk about ag policy, not about people policy. And for me, I
would say that all ag policy is people policy, that what you do
on this Committee is people policy. It is about feeding people.
It is about the programs that take care of needy folks that
need to have that kind of help. It is also about making sure we
have many farmers out on our land and that we have that safety
net there. So you have an incredible opportunity to do
something here in this Committee that is not happening anywhere
else on Capitol Hill, and I hope you catch that vision.
Nobody really cared, I would say, years ago that much about
a little state called South Dakota. We get one Member of the
House. When I came here as a Congresswoman, I didn't get a
delegation. I was all by myself. So I became friends with
everybody, Republicans or Democrats, because if I wanted to get
stuff done, I could.
We were the first state to ban TikTok and after that,
dozens of states banned TikTok because of the threat that it
is. We also----
Mr. David Scott of Georgia. Okay. Governor, I got one more
question for you, in my short time.
Governor Noem. Yes, sir.
Mr. David Scott of Georgia. If you listened to my opening
statement, I hope you understand how concerned I am about
foreign governments coming in and buying up our land,
especially our farmland. Food makes the Agriculture Committee
the most powerful Committee up here in Congress because you can
do without a lot of things, but the one thing we cannot do
without is food.
Governor Noem. Right.
Mr. David Scott of Georgia. And I am concerned about the
China impact, especially, in buying up this farmland. And when
you correlate that with the number of immigrants coming into
this country from China, that is a long way to walk. And they
aren't walking to get to Mexico or South America to get in
those trips where they are coming across our border. I have to
wonder about that. And I want to ask you. How much land in
South Dakota has gone to foreign interests?
And I want you to know that I agree with you. This is a
national security of high monumental interest, and we have to
get to the bottom of it. How is your state reacting to the
buying up of land by foreign governments, particularly China,
in your state?
Governor Noem. Well, sir, that was the question that I had
when I became Governor, and what I found is we had a law on the
books that prevented foreign evil governments from buying our
land, but there was no reporting mechanism, and there were no
consequences. So therefore, we didn't know who owned our land.
We couldn't determine that because nobody was reporting it, and
then if we did find that there was somebody purchasing land
that was a country such as North Korea, Iran, Russia, China,
Venezuela, Cuba, there was no reporting. Therefore, we didn't
know, and there would be no consequences if we did find out.
So last year to my legislature I brought a bill that would
have allowed me to create a CFIUS board at the state level.
That is really what I wanted to have in place was that the
states had the opportunity to have a CFIUS board that reviewed
those transactions and then put forward consequences to make
sure that it was done closer to the people, and that we had
more accountability, and we are truly looking at real estate
transactions and putting that in place.
That bill did not pass, and what we ended up passing this
year was a bill that added reporting mechanisms to the law we
already had with consequences forcing the sale of that land.
So now I will know when we have a bill in the books that
has those two components we need to know to really truly get
the answer that you are looking for.
Mr. David Scott of Georgia. But there are foreign interests
that are buying land in South Dakota?
Governor Noem. I believe that there are countries that own
land that are friendly to the United States. I do not know if
there are unfriendly ones that are buying ag land right now. I
do know that some of our biggest processing facilities are
owned by China. I mean, Smithfield Foods processes in Sioux
Falls, South Dakota, my largest city, and they are Chinese-
owned, and they have been difficult for me to work with so----
Mr. David Scott of Georgia. Well, I want to thank you,
Chairman, for having this hearing because I truly believe that
food is now a national security issue. Thank you.
Governor Noem. Thank you, Ranking Member.
The Chairman. I thank the gentleman.
We are going to have two additional questions for the
Governor, and then we are going to get testimony from my good
friend from Illinois, my son and daughter-in-law's Congressman,
Mr. Krishnamoorthi. So I am going to yield to Congressman
Austin Scott, and that will be followed by Congresswoman
Slotkin. Mr. Scott, yield 5 minutes for questioning.
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman.
And I am going to get a little technical in this, but the
reason that it is so important for us to be aggressive with
China on the ag issue is that this is a basic necessity. We are
not talking about toys. We are talking about the chemicals it
takes for our food supply. We are talking about the technology
in our seed supply. And U.S. companies less than 10 years ago
were 80 percent of the global seed supply, and today, we are
about 30 percent of the global seed supply. And so when you
allow countries like China, through companies like Syngenta
that have become one of the largest seed suppliers in the world
and the largest chemical supplier in the world, I might add,
then you are putting one of your basic daily needs at risk,
which is your food supply.
And so, Governor, I want to commend you for being
aggressive with that. I think that it is way past time we be
aggressive with China. They are not an economic competitor
anymore. They are an adversary, and we have to acknowledge
that. And if tariffs are what it takes to bring manufacturing
back not just to the United States and to the Western
Hemisphere, then that is just part of what it is going to take
for us to have self-control over our basic necessities.
You were here during the last farm bill. One of the big
discussions that we have asked for help for and not been able
to get it from many of my colleagues on the other side of the
aisle is an increase in reference prices. As you have talked
with your farmers and your producers out there, can you tell me
what you are hearing from them about the increase in input
costs and the need for an increase in reference prices so that
they have a safety net as we push forward?
Governor Noem. If you don't address the increase in
reference prices and don't bring them up to where they should
be, there is no safety net. So just as far as doing these
programs and making sure that you are making adjustments to all
the programs and the components that are a part of a farm bill,
that is one of the very most important things you can do to
manage risk.
And I want you to remember what farmers do every year. And
for those of you that aren't farmers, they literally go to a
bank and they borrow money to buy land. Then they borrow more
money to go buy a tractor and a corn planter, and then they go
back and they get an operating note so that they can buy their
seed, their fertilizer, their chemical, and then they put it in
the dirt. And they hope that maybe it will rain and something
will grow, and that months later, they will be able to go back
and pick something up and harvest enough so that they can pay
their bills. They are some of the biggest gamblers that I know
in the world because they bury millions of dollars in the dirt,
and they are taking a chance because they really, truly do
believe that producing food is a world need, and it is a need
that America needs to have.
So at least give them a safety net because it is not just
the fact that they operate on faith and that they operate
heavily leveraged, that is why they can have 1 year that is a
drought and lose their entire operation was because of the risk
that they take. But increasing those reference prices is
critical to them to give them a safety net that even works and
functions to get them through a situation like that.
And that is why I have always talked about the farm bill as
our national food policy. It is because we decided as a country
it was important that we always feed ourselves, that we don't
depend on another country to feed us, and therefore, it does us
good to have a much more competitive and affordable food
supply--there are a lot of farmers out here--and that it is a
safe and an affordable one because we have a farm bill, and we
have a safety net program to ensure that they stay on the land.
Mr. Austin Scott of Georgia. Well, let me say thank you for
your testimony. I appreciate you and the type of Member that
you were when you were here and the Governor you have been.
I would finish with this, Mr. Chairman. I think the last
call I got was not actually from a farmer. It was from a
banker.
Governor Noem. Yes.
Mr. Austin Scott of Georgia. His response was I don't think
that there is a commodity that we grow in the State of Georgia
where our farmers can make a profit this year at the current
prices with the input costs where they are.
So I will yield back, and I appreciate you.
The Chairman. The gentleman yields back. I now recognize
Congresswoman Slotkin for 5 minutes.
Ms. Slotkin. Thank you, Mr. Chairman. Thank you, Governor,
for being here.
I want to reiterate and support I think what you have seen
on a bipartisan basis, which is food security is national
security. I am a former CIA officer. There are two of us on
this Committee, and that is my entire sort of lens with which I
look through this. We should always be able to feed ourselves
by ourselves. And you are right, during COVID, my family is in
the hotdog business, and during COVID, we were concerned with
the meat processing plants going down with COVID.
Governor Noem. Right.
Ms. Slotkin. Americans don't know what it is like to walk
into a store and see no protein on the shelves and the panic
that that would create and the concern that that would create.
I also live on my family farm.
I guess just to pick up on a thread that Representative
Gallagher mentioned, this idea of having farmland purchases go
through what is called the CFIUS process--and I think, again, I
see it as a Federal issue because, based on your example,
right, where the intelligence community, the full weight of our
sort of insider information that we may have on a company, on
individuals, on their intentions does reside within the Federal
Government. I respect your attempt to do one at the state
level, but just like you were about to meet with a bunch of
businessmen and the State Department came in and said we have
real issues with them, that resides at the Federal Government
level.
So there is a bunch of bipartisan bills on putting all
purchases of farmland not just farmland adjacent to a military
base, adjacent to a sensitive site, but all farmland to go
through that CFIUS process and let our intelligence community
tell us whether this is a risk or not.
Last week, myself and Congressman Blake Moore from Utah, a
Republican, went a step further, and I would ask you to think
about this. And we said, it is not just farmland. If you have a
company coming in building a big manufacturing site--I am from
Michigan, right? If you have a company coming in to do a huge
purchase of our infrastructure like hog slaughter.
Governor Noem. Right.
Ms. Slotkin. You should be putting that through that same
intelligence community process to help us understand if that is
a strategic threat to us. And I think we all are trying to
solve the same problem, which is how do we make sure that
nations that could be real adversaries potentially down the
road are not able to purchase major infrastructure and assets
in the United States. But we have to make distinction. We can't
hit it with a giant club.
Biggest purchasers of farmland in Michigan are Canada and
Holland. I am not real stressed about the Canadians who are my
neighbors. I used to go there to drink when the drinking age
was 19.
Governor Noem. Yes.
Ms. Slotkin. I am not real stressed about the Canadians
buying land in the State of Michigan. It has to be limited,
tailored. But I do think it is an area of bipartisan
cooperation.
We have to do that without demonizing people from China who
are living under this government that I bet they really, really
don't like. We want the best and brightest from China to want
to be students here and stay here and build their lives here,
as opposed to take information back to China.
So that is my one ask is let's have a real policy
conversation. Let's do it on a bipartisan basis. We have the
will here, but let's also in the process not demonize all human
beings with a giant brush in a way, again, as you mentioned,
where leaders set the tone.
But I agree with you on many, many things on this, would
ask you to think about taking it one step further from just
farmland to the big infrastructure that we know that they are
interested in purchasing here with connections to the Chinese
Communist Party.
Governor Noem. Well, and that would be something that
obviously we have had a lot of conversations about in South
Dakota because I am alarmed at that because the next question
is, well, what about commercial property? What about----
Ms. Slotkin. Yes.
Governor Noem. I mean, it is not that they haven't been
conducting nefarious activities from smaller tracts of land,
and where does this stop? We should all be analyzing it. That
is why I proposed a CFIUS model at the state level is because I
get the privilege and I get the opportunity to be solely
focused on South Dakota, so I know what is going on there
better than I think someone does that doesn't live in South
Dakota and lives all the way across the country.
And it is no offense to the Federal Government, but it is
very rare that you guys fix anything. And a lot of times when
we are doing something, I am doing it in South Dakota or
another Governor's doing it, and you are taking that as a model
then and using it. And frankly, the Constitution of the United
States gives us states' rights and a lot more opportunities to
lead than what it grants to the Federal Government.
So by giving us the opportunity for me to fight for my
people and to bring policies forward, it gives other states the
chance to do that, and the Federal Government follows in place.
I would use TikTok as an example. By us leading by banning
TikTok on government devices, dozens of states followed our
lead. Then the Federal Government came in and recognized the
threat that TikTok was and how it was collecting data and
spying on us and being used to study the American people and
figure out how to continue to steal our information.
So, I would think let the states be incubators of using
what our Constitution intended us to be on possible models like
this that then the Federal Government as well can proliferate
and move forward and do things right. I am much more nimble
than the Federal Government is.
The Chairman. I thank the gentlelady, and I thank the
Governor.
Governor Noem. Yes, thank you, sir.
It is an honor and a privilege.
The Chairman. Thank you so much for taking the time, the
expense to come and to spend some time with us and your
leadership on this issue. It is much appreciated.
So at this point, you are excused.
I am going to recognize my good friend from Illinois who is
the Ranking Member of the Select Committee on China, Mr. Raja
Krishnamoorthi for his 5 minute testimony. Congressman, go
ahead whenever you are ready.
STATEMENT OF HON. RAJA KRISHNAMOORTHI, A
REPRESENTATIVE IN CONGRESS FROM ILLINOIS; RANKING MINORITY
MEMBER, SELECT COMMITTEE ON THE
STRATEGIC COMPETITION BETWEEN THE UNITED STATES AND THE CHINESE
COMMUNIST PARTY, U.S. HOUSE OF
REPRESENTATIVES, WASHINGTON, D.C.
Mr. Krishnamoorthi. Thank you, Mr. Chairman. Thank you,
Ranking Member Scott. Thank you to the Committee for inviting
me to speak today.
Ag has always been a cornerstone of the U.S.-China
relationship, and Chairman Gallagher and I work closely with
our Members on the Agriculture Committee on this important
issue. In August 2023, the Chairman and I traveled to Dysart, a
small town in Iowa. In 2011, not very far from Dysart, a farmer
saw a man digging in the cornfields. After some investigation,
authorities discovered that this man was not just digging for
fun. He was looking for proprietary corn seeds to send back to
his employer, a Chinese seed corn company. The man eventually
tried to ship 250 pounds of corn seeds to Hong Kong disguised
in Costco-sized packs of microwavable popcorn just like this.
The total cost of this one case of IP theft was estimated to be
$30 million because the folks in China wanted to reverse
engineer the contents of this to be able to produce the same
back in China.
Ag technology is a prime target of IP theft because
American technology and farming are the best and most
productive in the world. The Select Committee's bipartisan
economic report released in December last year included broad
recommendations on how to best protect IP. For the ag sector,
we need to continue to improve coordination between local and
Federal law enforcement agencies and properly resource and
train the DOJ to prosecute these particular crimes.
There are other ag-related concerns addressed in our
economic report. Congresswoman Slotkin and Congresswoman Hinson
have already transformed another economic report recommendation
into the Securing American Agriculture Act (H.R. 8003), which
will require the USDA to study the supply chains of our ag
inputs, including vitamins, animal feed, and pesticides, where
China has been increasingly dominating the market and crowding
out American and other suppliers.
As we continue to remain in an era of uncertainty in our
trade relationship with China, we also need to better protect
American farmers from retaliation by the CCP, including by
diversifying ag export markets for American farmers.
Now, I know this Committee has been looking at the issue of
land sales. There are legitimate concerns with certain land
purchases by CCP-affiliated entities, especially close to
sensitive and military sites. However, as we address these
problems, we have to make sure that the cure is not worse than
the disease. Some purported solutions have had very real and
harmful effects on the Asian American community as well.
Dozens of bills across the country, for instance, target
Chinese nationals regardless of whether they are affiliated
with the CCP and regardless of the proximity of their land
acquisitions to sensitive sites. Florida, for example, passed
SB 264 (Interests of Foreign Countries), a law that prohibits
Chinese nationals from purchasing real property in the state.
This law had a serious negative impact on the Asian American
community. I will just give you one example. There is a case of
Zhiming Xu, a political asylee living in Florida who was
persecuted by the CCP and who fled to the United States. He was
beginning to rebuild his life in Florida. Since the passage of
SB 264. Mr. Xu was forced to cancel the contract for the
purchase of what was otherwise going to be his new home in his
new country.
The lesson here is very clear. When land purchase bills
target individuals who are merely Chinese immigrants, they
often target those outside of the intended audience. The Asian
American Legal Defense and Education Fund filed a lawsuit
against this particular Florida law on equal protection
grounds. Laws like SB 264 are neither fair nor justified. And
in the early 20th century, states passed similar alien land
laws in more than a dozen other states prohibiting Chinese and
Japanese immigrants from becoming landowners. Those policies
severely restricted economic opportunities and exacerbated
discrimination, and every single one of those laws were
repealed one by one by one in all of those states.
So please, as you consider these land purchase laws, let's
be careful. You folks don't want to pursue policies that
discriminate against anybody. So in that spirit, let's be
careful not to adopt or to encourage those types of policies.
Chairman Thompson and Ranking Member Scott, thank you again
for this very special opportunity to testify before this very
distinguished Committee. The Select Committee very much looks
forward to working with your Committee in the future, and I
thank you again.
[The prepared statement of Mr. Krishnamoorthi follows:]
Prepared Statement of Hon. Raja Krishnamoorthi, a Representative in
Congress from Illinois; Ranking Minority Member, Select Committee on
the Strategic Competition Between the United States and the Chinese
Communist Party, U.S. House of Representatives, Washington, D.C.
Chairman Thompson, Ranking Member Scott, Members of the Committee,
thank you for the invitation and the opportunity to speak today.
Congressman Johnson, Congresswoman Brown, it's great to see you from
this side of the dais.
Agriculture is and has historically been a cornerstone of the U.S.-
China relationship, and Chairman Gallagher and I have worked closely
with our Members on the Agriculture Committee on this important issue.
In August 2023, the Chairman and I traveled to Dysart, a small town in
Iowa.
In 2011, not very far from Dysart, a farmer saw a man digging in
the cornfields. After some investigation, authorities discovered that
this man was not just digging for fun. He was looking for proprietary
corn seeds to send back to his employer, a Chinese corn seed
company.\1\ The man eventually tried to ship 250 pounds of corn seeds
to Hong Kong disguised in Costco-sized packs of microwave popcorn. The
total cost of this one case of IP theft was estimated to be $30
million.
---------------------------------------------------------------------------
\1\ Federal Bureau of Investigation, ``Protecting Vital Assets:
Pilfering of Corn Seeds Illustrates Intellectual Property Theft,''
December 19, 2016, https://www.fbi.gov/news/stories/sentencing-in-corn-
seed-intellectual-property-theft-case.
---------------------------------------------------------------------------
Agricultural technology is a prime target of intellectual property
theft because American technology and farming are the best and most
productive in the world. The Select Committee's bipartisan Economic
Report, released in December last year, included broad recommendations
on how to best protect our intellectual property. For the ag sector, we
need to continue to improve coordination between local and Federal law
enforcement agencies, and properly resource and train the Department of
Justice to prosecute these crimes.
There are other ag-related concerns addressed in our Economic
Report. Congresswomen Brown and Slotkin, along with Congresswoman
Hinson, have already transformed another Econ Report recommendation
into the Securing American Agriculture Act, which will require the USDA
to study the supply chains of our agricultural inputs, including
vitamins, animal feed, and pesticides, where the PRC has been
increasingly dominating the market and crowding out American and other
suppliers. As we continue to remain in an era of uncertainty in our
trade relationship with the PRC, we also need to better protect
American farmers from retaliation by the CCP, including by diversifying
American agricultural exports to different markets.
Chairman Gallagher has spoken about the issue of land sales. There
are legitimate concerns with a few land purchases by PRC entities close
to sensitive and military sites. However, as we address these problems,
we have to make sure that the cure is not worse than the disease. Some
purported solutions have had very real and harmful effects on the Asian
American community as well. Dozens of bills, for instance, target
Chinese nationals regardless of their connection to the CCP and
regardless of their proximity to sensitive sites.
Florida, for example, passed SB 264, a law that prohibits
individuals who are ``domiciled'' in the PRC and are not U.S. citizens
or green card holders from purchasing buildings or land in the state.
This law had a profound impact on the Asian American community, and
families that are trying to build lives suddenly found themselves in an
impossible position. Take the case of Zhiming Xu, a political asylee
living in Florida who was persecuted by the PRC Government. He had fled
the U.S. earlier and was beginning to rebuild his life in United
States. Since the passage of SB 264, Mr. Xu was forced to cancel the
contract for the purchase of what was supposed to be his new home. Both
his property and his $30,000 deposit were in jeopardy.\2\ The lesson
here is clear: when land purchase bills target individuals who are
Chinese immigrants, they often target those outside their intended
audience.
---------------------------------------------------------------------------
\2\ Carroll, Michael, ``Florida Record: Appeals court blocks
Florida from enforcing property restrictions against 2 Chinese
citizens,'' February 26, 2024, https://www.aaldef.org/news/florida-
record-appeals-court-blocks-florida-from-enforcing-property-
restrictions-against-2/.
---------------------------------------------------------------------------
The Asian American Legal Defense and Education fund filed an
injunction against the Florida law on equal protection grounds. Laws
like SB 264 are neither fair nor justified. In the early 20th century,
states passed similar ``alien land laws'' in more than a dozen other
states, prohibiting Chinese and Japanese immigrants from becoming
landowners. These racist policies severely restricted economic
opportunities and exacerbated discrimination against Asian communities
in the United States, before eventually being overturned one by one. We
must be clear that we do not stand for laws that discriminate based on
ethnicity and nationality.
Chairman Thompson, Ranking Member Scott, thank you again for this
opportunity to testify today. The Select Committee looks forward to
working with your Committee in the future.
The Chairman. Well, Congressman Krishnamoorthi, thank you
so much for your testimony. I know that this is a busy day for
all of us, including you. You have been bouncing from hearings,
and so we are going to excuse you from the panel as well, but
thank you for joining us. Thank you for your leadership and for
sharing with us this morning, much appreciated.
Mr. Krishnamoorthi. Thank you so much.
The Chairman. We are going to take just a brief break, no
more than 5 minute recess to allow our first panel witnesses to
depart and our second panel of witnesses to take their seats,
and then we will reconvene. So we will reconvene basically as
soon as our witnesses gets comfortably seated here and ready to
go.
[Recess.]
The Chairman. The Committee will come to order. I am really
pleased to welcome our second panel on this topic today
regarding the threats of China to American agriculture.
Our first witness for the second panel of our hearing today
is Mr. Josh Gackle, who is the President of the American
Soybean Association.
Our second witness for this panel is Mr. Nova Daly, who
brings extensive public- and private-sector experience,
numerous agencies, the Senate, and the CFIUS Committee, all
involved on national security matters.
Our third and final witness for this panel is a great
friend of the Committee and of the industry, Ambassador Kip
Tom, the former United States Ambassador to the United Nations'
Agencies for Food and Agriculture.
Thank you to our witnesses for joining us today. We will
now proceed with your testimony. You will each have 5 minutes.
The timer in front of you will count down to zero, at which
point your time has expired, and then that will be followed by
a question-and-answer period after all three of you have
spoken.
So, Mr. Gackle, please begin whenever you are ready.
STATEMENT OF JOSH GACKLE, PRESIDENT, AMERICAN SOYBEAN
ASSOCIATION, WASHINGTON, D.C.
Mr. Gackle. Thank you, Chairman Thompson, Ranking Member
Scott, and Members of the House Agriculture Committee, and
thank you for allowing me to testify today.
My name is Josh Gackle, and I am a soybean farmer from
North Dakota, where I farm with my dad and brother on a third-
generation family farm. This year, I also have the privilege of
serving as President of the American Soybean Association, which
represents U.S. soybean farmers across 30 states.
Soybeans are the largest U.S. agricultural export, and
robust international trade is a priority for our farmers. U.S.
soy is actively working in 112 markets across the world to
introduce new customers to our high-quality, high-protein crop.
Opening new markets is just one step followed by time,
attention, and long-term relationship maintenance to ensure
market access.
Our trading partners are all critical to the success of
U.S. soy farmers, but no export destination compares to China.
In the last marketing year, the export value of U.S. soybeans
totaled over $32 billion. China accounted for nearly $19
billion of this total. For prospective, the next largest
destination by value totaled approximately $3 billion. The
sheer scale of China's demand for soybeans cannot be replaced.
In farmer terms, one in every three rows grown in the U.S. is
shipped to China to fill demand.
During the 2018 trade war, U.S. soybean exports to China
came to a halt. In an estimate of the impact of retaliatory
tariffs on U.S. agriculture, the USDA found that the value of
U.S. exports to China decreased 76 percent from 2017 to 2018.
It also estimated the trade war cost U.S. agriculture over $27
billion. Soybeans accounted for 71 percent of these annualized
losses.
This has had major consequences on the competitive
landscape for U.S. soybean growers. As a result of the trade
war, Brazil ramped up production to meet Chinese demand. Beyond
capturing additional market share in China, Brazil was prompted
to increase its land area in agriculture production. In the
2017 and 2018 marketing year, Brazil overtook the United States
as the world's largest producer of soybeans. Our farmers now
face increasing competition with Brazil in every export market,
not just China.
The trade war also damaged our reputation as a reliable
provider of soybeans and soy products in global markets. The
section 301 tariffs and the retaliatory trade actions have
jeopardized our place in these markets and damaged in-country
relationships developed over decades. At times, our customers
looked elsewhere for their needs to avoid trade risk or excess
duties.
As the United States considers actions to protect our
national security interests, we must also maintain and protect
our economic and trade interests as well. Soybean growers need
predictability and certainty that we will retain market access
in China.
My written testimony provides three policy recommendations.
Number one, reject legislative attempts to repeal or modify
China's permanent normal trade relation status. ASA is very
concerned that revoking PNTR for China would have severe
consequences. In 2018, U.S. soybean exports to China were among
the first agricultural commodities targeted for retaliatory
tariffs, and if past is prologue, it is entirely possible that
U.S. soybeans would be impacted yet again.
Number two, pass a comprehensive farm bill this year that
meets the needs of U.S. agriculture. The new farm bill should
include additional investment into trade promotion programs
that are critical to the long-term success of U.S. soy abroad.
Funding levels for the Market Access Program and the Foreign
Market Development Program have been largely unchanged for
decades even though demand for these programs has increased.
The new farm bill should also include improvements to the farm
safety net. During the trade war, U.S. soybean farmers
experienced firsthand the insufficient farm safety net under
the current farm bill. Very simply, we need better tools to
help farmers in times of economic disruption and greater
resources to expand and diversify trade markets.
And finally, number three, exercise Congressional oversight
authority to press the Administration to reengage in
negotiations for bilateral and multilateral free trade
agreements. The U.S. was once a leader in establishing new free
trade agreements, but our last new FTA entered into force in
2012 despite the U.S. having negotiated the Trans-Pacific
Partnership. That is over 10 years of inactivity for codified
market expansion that could have helped U.S. agriculture, while
at the same time our international competitors have worked to
gain increased market access.
So thank you again. As a farmer from North Dakota and on
behalf of the American Soybean Association, it is a privilege
to be with you, and thank you for this opportunity to share the
perspective of U.S. soybean farmers with you. I look forward to
your questions, Mr. Chairman.
[The prepared statement of Mr. Gackle follows:]
Prepared Statement of Josh Gackle, President, American Soybean
Association, Washington, D.C.
Introduction
Chairman Thompson, Ranking Member Scott, and Members of the House
Agriculture Committee, it is an honor to testify before you today to
share the viewpoint of U.S. soybean farmers concerning China. My name
is Josh Gackle. I am a soybean farmer from Kulm, North Dakota, on a
third-generation farm where I farm with my dad and brother. Our family
farm is our is our sole business and means of economic livelihood. This
year, I have the privilege of serving as President of the American
Soybean Association (ASA). Our association, founded in 1920, represents
all U.S. soybean farmers on domestic and international policy issues
important to the soybean industry. ASA has 26 affiliated state soybean
associations representing more than 500,000 farmers in 30 primary
soybean-producing states.
The U.S. soybean industry has a profound, positive impact on the
U.S. economy. We have long been U.S. agriculture's No. 1 export crop,
and a by-the-numbers look demonstrates soy's value to our domestic
economic health. The U.S. Department of Agriculture (USDA) projects
82.4 million acres of soy will be harvested in 2024, with a production
forecast of 4.2 billion bushels. Soybean production accounts for more
than $4 billion in wages and over $80 billion in economic impacts,
according to a study by the United Soybean Board (USB) [1]/
Soy Checkoff and National Oilseeds Processors Association
(NOPA).[2] This does not even include secondary soy markets
and supporting industries like biodiesel, grain elevators, feed mills,
ports, rail, refining, barges, etc., which bring soy's national total
economic impact to a significant $124 billion.
---------------------------------------------------------------------------
\[1]\ http://asa.informz.net/z/
cjUucD9taT05NjMxMTMyJnA9MSZ1PTExMzkyMDY0NzAmbGk
9ODEwOTg5OTM/index.html
\[2]\ http://asa.informz.net/z/
cjUucD9taT05NjMxMTMyJnA9MSZ1PTExMzkyMDY0NzAmbGk
9ODEwOTg5OTQ/index.html.
---------------------------------------------------------------------------
Soybeans are the largest agricultural export in the U.S., and
robust international trade is a priority of the U.S. soybean industry.
In conjunction with our partners at the U.S. Soybean Export Council
(USSEC), the World Initiative for Soy in Human Health (ASA-WISHH),
USDA, and the Office of the U.S. Trade Representative (USTR), U.S. soy
is working actively across the world to open new markets and introduce
new customers to the value of high quality, high protein U.S. soy.
Opening new markets is just the beginning: Markets require time,
attention, and long-term relationship maintenance to ensure that once a
market is open to U.S. soybean exports, access remains unhindered.
Our trading partners are all critical to the success of U.S. soy
growers, but no export destination compares to China. In marketing year
(MY) 2022/2023, the export value of U.S. soybeans totaled approximately
$32.6 billion. China accounted for over $18.8 billion of this total;
for perspective, the next largest destination by value totaled
approximately $3.3 billion. The sheer scale of China's demand for
soybeans--more than 60% of global soy imports--cannot be replaced. One
in three rows of soybeans grown in the U.S. is destined for China.
As this Committee--and Congress more broadly--discusses the complex
relationship our nation has with China, there are two distinct
considerations. There is a geopolitical relationship that affects
national security and includes issues such as data privacy, human
rights, and intellectual property; and there is the economic,
commercial trading relationship. Our strong appeal is that careful
consideration be given to maintain, rather than alienate, the economic
relationship when discussions move forward in addressing geopolitical
and other significant issues.
Soybeans have held the unfortunate distinction of serving as the
prime casualty for what happened when the United States imposed tariffs
on Chinese imports, and China responded with retaliatory tariffs on
U.S. exports, including soybeans. In 2018, we saw not only an immediate
loss in market share in our largest export market but also a price drop
of $2 per bushel \1\ practically overnight.
---------------------------------------------------------------------------
\1\ The standard weight for a bushel of soybeans is 60 pounds--
https://ussec.org/resources/conversion-table/.
---------------------------------------------------------------------------
This statement provides insights into the soybean industry's work
in China, how farmers were impacted by the U.S.-China trade war in
recent years, how our global competitors gained market share as a
result, and policy recommendations for consideration.
U.S. Soy's Work in China
While U.S. soy is actively working in 112 markets around the world,
I will focus my testimony today on our largest export market: China.
Our industry has been developing the Chinese market since 1982 when ASA
opened an international marketing office in Beijing. At the time, China
did not have a vertically integrated animal feed industry, and
livestock production lacked health and nutritional standards. Chinese
farmers did not incorporate soy into their animal feed rations, despite
maintaining the largest swine herd in the world. The same is true for
aquaculture production; while China produces more farmed fish than the
rest of the world combined, no Chinese producers were incorporating soy
into fish feed at the time.
Due to the work of U.S. soy in China, soy utilization there has
changed dramatically. Since 1995--and prior to the trade disruption in
2018--soybean meal use in animal feed has grown by 389%. Use of soybean
meal in aquaculture feed has also risen dramatically, from zero to
nearly 6 million metric tons in 2022. China is now the world leader in
pork, egg, and aquaculture production. The country also leads the world
in soy food consumption. U.S. soy contributed to this progress through
professional and technical training, conducting animal feeding
experiments and organizing seminars to exchange knowledge with local
organizations; this work helped Chinese businesses capture value from
U.S. soybeans and soy components.
Exports to China were also boosted in 2000 when President Clinton
signed legislation into law granting Permanent Normal Trade Relations
(PNTR) status to China. ASA strongly supported and applauded China's
ascension to PNTR status, having seen the growth potential for U.S.
soybeans. At the time PNTR was granted, exports of soybeans and soy
products to China were valued at $1 billion, and our industry estimated
at the time those export numbers could double by 2010.\2\
---------------------------------------------------------------------------
\2\ https://soygrowers.com/news-releases/asa-celebrates-signing-of-
pntr-for-china-legislation/.
---------------------------------------------------------------------------
Our estimations were wrong: The numbers far surpassed doubling. In
the MY 2022/2023, U.S. exporters shipped 67.6 million metric tons (MMT)
of soy (beans, meal and oil) to foreign markets, accounting for nearly
$40 billion in sales. Of those exports, 31.4 MMT of soybeans were bound
for China, which is primarily a whole soybean importer. That volume
represents 60% of U.S. soybean exports and accounts for $18.8 billion
in value for U.S. soybean farmers. By comparison, our next two largest
export markets were the Mexico and the European Union (EU). Mexico
purchased 6.6 MMT of U.S. soy (beans, meal, and oil), and the EU
purchased 6.4 MMT. For U.S. soybean farmers, China's demand for
soybeans is greater than the rest of our foreign export markets
combined, despite continuous efforts to diversify.
I farm soybeans in the Northern Plains. The growth of soybean
production in this area has corresponded with China's increased
imports. Almost all the soybeans from my farm are sent by rail to the
Pacific Northwest, where they are loaded onto ships--many of which are
bound for China. Without access to China's market, soybean production
in my part of the country and on my farm would be reduced significantly
due to a loss of demand. During the trade war, soybeans stored in my
area (versus exported) increased significantly due to the loss of our
primary market, and our local prices dropped at a rate higher than
national prices.
The 2018 Trade War
In 2018, President Trump levied tariffs on imports from China under
Section 301 of the Trade Act of 1974, starting a tit-for-tat trade war
between our two global economies. As a response, China applied
retaliatory duties against U.S. soybeans that reached up to 27.5%.
These duties, combined with uncertainty in the trade relationship,
severely constrained U.S. soybean exports to China, which had exceeded
a record amount of 36.1 MMT in MY 2016/2017, the last complete
marketing year before implementation of the retaliatory tariffs. When
tariffs were imposed late in MY 2017/2018, we saw an immediate impact,
with the year finishing at 28.2 MMT exported to China--a 22% decrease
from the previous year. In MY 2018/2019 and 2019/2020, these exports
fell to 13.4 and 16.1 MMT, drops of 62% and 55% respectively from MY
2016/2017.
The impact of this crippled market was severe for both farmers and
exporters. USDA's Economic Research Service (ERS) estimated the impact
of retaliatory tariffs on U.S. agriculture, including Section 301
tariffs and Section 232 tariffs on steel and aluminum: The ERS estimate
shows a 76% reduction in the value of U.S. exports to China from 2017
to 2018. ERS also estimated the trade war cost U.S. agriculture over
$27 billion.\3\ Soybeans accounted for 71% of the annualized losses.
---------------------------------------------------------------------------
\3\ Morgan, Stephen, Shawn Arita, Jayson Beckman, Saquib Ahsan,
Dylan Russell, Philip Jarrell, and Bart Kenner. January 2022. The
Economic Impacts of Retaliatory Tariffs on U.S. Agriculture, ERR-304,
U.S. Department of Agriculture, Economic Research Service.
---------------------------------------------------------------------------
Figure 4. Percent Share of Annualized Losses Caused by Retaliatory
Tariffs by Commodity
[Source: https://www.ers.usda.gov/webdocs/publications/
102980/err-304.pdf]
Notes: Estimates reflect annualized losses calculated using
data from mid-2018 through the end of calendar year 2019.
Shares calculated over selected commodities reported in
Appendix 2. Data may not equal 100 due to rounding.
Source: USDA, Economic Research Service (ERS) estimations
using data from USDA, ERS, State Exports, Cash Receipts
Estimates, Trade Data Monitor (2021), and Grant, et al. 2021.
``Agricultural Exports and Retaliatory Trade Actions: An
Empirical Assessment of the 2018/2019 Trade Conflict,'' Applied
Economic Perspectives and Policy 43: 619-640.
Loss of about \1/3\ of the demand for U.S. soybeans has had major
consequences. As a result of the trade war, Brazil ramped up production
to meet Chinese demand. Beyond capturing additional market share in
China, Brazil was prompted to increase its land area in agricultural
production: This has done irreparable and long-lasting harm to the U.S.
soybean industry. In the 2017/2018 marketing year, Brazil overtook the
United States as the world's largest producer of soybeans. As a result
of the trade war and the incentives it provided to Brazil to
significantly increase production, our industry now faces increasing
competition with Brazil in every export market, not just China.
Global Soybean Exports
Source: USDA Office of the Chief Economist.
The U.S.-China Phase One agreement was signed January 15, 2020.
This agreement was critical in providing relief from damaging
retaliatory tariffs, as it provided an exclusion mechanism for Chinese
importers. Customers were able to apply to their government to reduce
the trade war tariff level of 27.5% back to Most Favored Nation (MFN)
levels of 3%. As a result, U.S. soybean exports to China stabilized and
have returned to near pre-2018 levels. While that exclusion process is
functional, it is not guaranteed by China and could change at any time.
China may choose to discontinue the waiver procedure, a move that would
have an immediate damaging effect on U.S. soy exports.
This environment, anti-China rhetoric from Congress, the continued
threat of tariffs from both the U.S. and China, and the lack of a
roadmap for long-term resolution of these challenges combine to
increase uncertainty for U.S. farmers and exporters. There is
substantial risk that more unanticipated tariff action will undermine
investments, export prices, and farm income.
Finally, the trade war also damaged U.S. soy's reputation as a
reliable provider of soybeans and soy products in global markets.
Section 301 tariffs and the retaliatory trade actions have jeopardized
our place in these markets, undermined the U.S.'s reliable reputation,
and thus damaged in-country relationships developed over decades.
Because trade uncertainty has brought into question our reliability as
a consistent supplier, it has in some years forced our customers to
look elsewhere for their needs to avoid trade risk or excess duties.
Despite regaining our foothold in the Chinese market, the long-term
reputational damage to U.S. soybean growers will not be so quick to
rebound.
I cannot emphasize this point enough--even as the United States
considers actions to protect our national security interests, we must
also maintain and protect our economic and trade interests as well.
Soybean growers need predictability and certainty that we will retain
market access in China. U.S. soy growers started building the China
market for U.S. soybeans more than 40 years ago. Soybean growers are
keenly aware of the time, financial and other related investments it
takes to establish new markets and are likewise aware that markets,
once lost, are extremely difficult to rebuild.
ASA Policy Recommendations
ASA appreciates the work Congress has invested in examining ways
the legislative body could best address the relationship between the
U.S. and China. We want to extend our appreciation to Chairman Mike
Gallagher, Ranking Member Raja Krishnamoorthi, and Members of the House
Select Committee on the Chinese Communist Party (SCCCP) for their
endeavors over the past year, which resulted in the committee's release
of over a hundred policy recommendations in its December 2023 \4\
report. While ASA does not have a position on all the issues outlined,
there were several recommendations we strongly support, including
directing USTR to publish a full assessment of China's compliance with
the Phase One agreement, reauthorization of the Generalized System of
Preferences (GSP) program, renewal of Trade Promotion Authority (TPA),
and the addition of the Secretary of Agriculture to the Committee on
Foreign Investment in the United States (CFIUS).
---------------------------------------------------------------------------
\4\ https://selectcommitteeontheccp.house.gov/sites/evo-subsites/
selectcommitteeontheccp.house.
gov/files/evo-media-document/reset-prevent-build-scc-report.pdf.
---------------------------------------------------------------------------
ASA recognizes that the foreign ownership of farmland by China is a
hot topic at both the state and national levels. ASA's voting delegates
have adopted resolutions that take a prudent approach to this issue and
address both national security and farmer concerns; we urge Congress to
take a prudent approach as well. Specifically, ASA's voting delegates
adopted a resolution last year that supports a Federal approach to this
issue. It protects national security and economic interests without
limiting soybean industry research or market access. And less than a
month ago, ASA's voting delegates adopted additional language that
supports adding the Secretary of Agriculture to the Committee on
Foreign Investment in the United States (CFIUS) and stated our belief
that CFIUS is the proper entity to review agricultural and other
transactions by China and others to ensure national security interests
are appropriately protected. We were grateful to see the inclusion of
the Secretary of Agriculture in CFIUS was included in H.R. 4366, the
Consolidated Appropriations Act, 2024, and thereafter signed into law
by President Biden on March 9, 2024.
As this Committee and others look to the Select Committee's report
and other policy ideas to curtail China's influence on the United
States, ASA offers the following recommendations from the perspective
of U.S. soybean growers:
1. Reject legislative attempts to repeal or modify China's Permanent
Normal Trade Relations (PNTR) status.
As highlighted in this testimony, China's ascension to PNTR
status helped U.S. soy exports to China skyrocket. From 191
million bushels, or 5.2 MMT of soybeans sold in MY 1999/
2000, to 31.4 MMT sold in MY 2022/2023, the pre-trade war
certainty our customers in China gained from tariff
stability was invaluable in growing that market to the
behemoth it is today.
All members of the World Trade Organization (WTO) are granted
MFN/PNTR as part of joining the WTO. Revocation of PNTR
would move China from Column One of the Harmonized Tariff
Schedule to Column Two. Countries in Column One enjoy
duties set at a very low rate and are agreed upon by both
countries. Countries in Column Two are subject to much
higher duties that can be lowered and raised by the U.S. at
any time. Currently, the only countries subject to Column
Two duty rates are Cuba, North Korea, Russia, and Belarus
(the latter two added most recently due to the invasion of
Ukraine).
ASA is very concerned that revoking PNTR for China would
immediately raise tariffs on imports from China. As this
testimony has laid out, it is very likely that a change in
China's trade status would result in immediate retaliation
from Beijing. In 2018, U.S. soybean exports to China were
among the first agricultural commodities targeted for
retaliatory tariffs, and if past is prologue, it is
entirely possible that U.S. soybeans would be impacted yet
again.
Bear in mind, the retaliatory tariffs levied by China in 2018-
2019 are technically still in place. While currently waived
due to the Phase One Agreement, that agreement does not
include an enforcement mechanism and could go away at any
time. Were that to happen, we would be back to facing a
27.5% tariff to enter the Chinese market--before any
additional potential retaliation.
During the trade dispute, USDA created the Market Facilitation
Program (MFP) and the Agricultural Trade Promotion (ATP)
program to provide some relief for producers. MFP was
created to provide ad hoc financial assistance to farmers
and ranchers of commodities directly impacted by foreign
retaliatory tariffs. ATP's purpose was to help U.S.
agricultural exporters develop new markets and mitigate the
adverse effects of other countries' tariff and non-tariff
barriers.
In the SCCCP's report, the committee recommends Congress should
also consider additional appropriations to offset
retaliation for farmers and ranchers, U.S. exporters, and
other American workers, acknowledging that increased
tariffs and retaliation against U.S. agriculture
unfortunately go hand in hand. As ASA stated publicly in
2019 when the MFP was announced by USDA, it is important to
note the key word in that program's name is
``facilitation.'' Trade assistance only facilitates
growers' ability to farm. It does not make their losses
whole, or their tariff woes disappear long term. Trade
assistance is a short-term solution for a trade war with
long-term consequences. Farmers would prefer access to
open, predictable and profitable markets, rather than
reliance on government payments.
2. Pass a comprehensive farm bill this year that meets the needs of
U.S. agriculture.
The long-term success of U.S. soy abroad would not be possible
without the foresight of Congress. Resources provided
through USDA are vital in assisting farmers with promoting
agricultural products on a global stage and expanding and
diversifying export opportunities. ASA is a longtime
cooperator of these programs, particularly the Market
Access Program (MAP) and Foreign Market Development (FMD)
program. Utilizing MAP and FMD, ASA has leveraged funds
received to increase market access, address technical
barriers to entry and create on-the-ground capacity and
demand for U.S. soy. These cost-share programs are an
excellent example of public-private partnership.
Over the lifespan of these programs, however, industry funds
have risen dramatically while funding from the U.S.
Government has remained stagnant. Seventy-seven percent of
total annual spending on market development and promotion
now comes from industry dollars, up from just 45% in 1996.
We greatly appreciate the USDA's recent creation of the
Regional Agricultural Promotion Program (RAPP) and the
additional investments it will create in cultivating new
markets abroad. However, this funding does not change the
very real need for additional funds in the farm bill to
enhance long-term market development and diversification
opportunities.
While these programs have been greatly successful, it is
concerning that government investment levels have remained
mostly unchanged--even as the number of cooperators to
these programs has increased. FMD has been funded at the
same level--$34.5 million annually--since the 2002 Farm
Bill, and MAP funding has been level at $200 million since
2006. As we look toward the next farm bill, ASA strongly
supports efforts to double these funding numbers to $400
million for MAP and $69 million for FMD.
Outside the farm bill's Title III programs, there is a need for
certainty in farm country, particularly when access to
export markets may be at risk. During the U.S.-China trade
war, U.S. soybean farmers endured significant market
impacts but experienced an insufficient farm safety net
under the current farm bill. This farm safety net must be
improved in the next farm bill. A soybean farmer's worst-
case scenario during a time of export market loss or other
economic disruption is a combination of policy developments
that looks like this: a new farm bill that maintains or
further diminishes the inadequate farm safety net for soy,
restrictions placed on USDA that limit its ability to
respond to farmers in need, and a Congressional stalemate
on emergency appropriations for farmers in need. This is a
scenario that ASA hopes will not come to fruition, and we
look forward to working with the Committee to develop a
more meaningful, predictable farm safety net.
3. Exercise Congressional oversight authority to press the
Administration to reengage in negotiations for bilateral
and multilateral free trade agreements (FTA).
Trade promotion and market access are major priorities for the
U.S. soybean industry. Tariff and non-tariff barriers to
trade are frequent problems for our exports, and these
barriers limit the potential for predictable global market
access for soybeans, soybean meal and soybean oil. Barriers
facing U.S. soybeans and soy products include tariffs and
quotas, unjustified or risk-unproportionate sanitary and
phytosanitary measures, and rules and regulations not based
in science. These obstacles distort markets and reduce the
potential for U.S. soy exports.
As we previously have stated before this Committee, we remain
greatly concerned with the current U.S. approach to
bilateral and multilateral agreements. The U.S. was once a
leader in establishing new free trade agreements.
Nevertheless, the FTA landscape has changed considerably
since the last new U.S.-based FTA was signed with Colombia.
While the U.S. has engaged in negotiations of existing
agreements such as USMCA and the updated U.S. Korean Free
Trade Agreement (KORUS), our last new FTA entered into
force in 2012, despite having negotiated the Trans-Pacific
Partnership (TPP). That is over 10 years of stagnation for
codified market expansion for U.S. agriculture.
ASA recognizes the international landscape has changed since
the U.S. first negotiated the original TPP, and we are
grateful for Ambassador Katherine Tai's leadership both
during those negotiations and now in her role as the U.S.
Trade Representative. Continued market access in the Indo-
Pacific region is of critical importance to the ongoing
success of U.S. soybean growers. Outside of China, several
of U.S. soy's top ten export markets are in the region:
Indonesia, Japan, Taiwan, Thailand, and Bangladesh.
The importance of expanded market access for U.S. soybean
exports cannot be overstated, particularly if we are to
diversify our export markets and decrease our reliance on
the Chinese market. An original intent of TPP was to create
a hedge around China, and ASA still believes that agreement
and the markets party to that agreement hold tremendous
potential for U.S. agriculture. We encourage Congress to
press the Administration on the importance of traditional
FTAs, and we likewise encourage USTR to look to
multilateral free trade agreements to maximize the U.S.'s
strategic position in the global economy and provide U.S.
agriculture much-needed market access in emerging
economies.
Finally, ASA strongly encourages Congress to reauthorize TPA.
TPA is an important tool in the toolbox for the U.S. to
engage in FTA negotiations. Ensuring TPA is in place will
not only allow the President a chance to codify both the
priorities of this Administration and Congressional intent
in negotiating procedures, but also it will give assurance
to our trading partners that there will be a
straightforward procedure in the U.S. Congress for
consideration of a final deal.
Conclusion
Chairman Thompson, Ranking Member Scott, and Members of the House
Agriculture Committee, thank you again for the opportunity to testify
on behalf of U.S. soybean farmers regarding the importance of the
Chinese market to our industry. The scars of the 2018 trade war are
still fresh--and ongoing--for our farmers. Market access is one of the
most important issues for U.S. soy, and we need certainty that access
to our largest trading partner will remain, despite ongoing
geopolitical issues.
ASA appreciates and understands the momentous work ahead of this
Committee, and I am grateful for the opportunity to share the
perspective of U.S. soybean farmers with you. The soy industry stands
as a resource for the Committee, Congress, and the Administration as
this dialogue continues to unfold. Thank you again for the opportunity
to testify today.
The Chairman. Mr. Gackle, thank you so much for your
leadership and your testimony today.
I am now pleased to recognize Mr. Daly. Please begin when
you are ready.
STATEMENT OF NOVA J. DALY, SENIOR PUBLIC POLICY
ADVISOR, WILEY REIN LLP; FORMER DEPUTY ASSISTANT SECRETARY FOR
INVESTMENT SECURITY, U.S. DEPARTMENT OF THE TREASURY,
WASHINGTON, D.C.
Mr. Daly. Chairman Thompson, Ranking Member Scott, and
distinguished Members of this Committee, thank you for the
opportunity to appear before you today to discuss this critical
and timely matter. I am honored and humbled to be before you
today among the exceptional panelists that you have assembled.
The views I share are my own and are informed by my service in
the U.S. Government, where I was fortunate enough to serve
along colleagues in the National Security Council, Commerce
Department, Senate, and the Treasury, where I ran the Committee
on Foreign Investment in the United States.
I got to witness firsthand for many years the actions of
China as it conducted and directed actions through its
businesses nefariously through third parties. Given that
experience and years of private-sector helping U.S. companies
address competition and malicious activity by Chinese entities,
the focus of my testimony is the national and economic security
considerations involved in Chinese acquisition of U.S.
agriculture and agriculture-related business and supply chains.
That said as a baseline, and as my witness testimony
relays, recent laws implemented by China effectively compel any
Chinese entity to act at the direction of the Chinese State,
i.e., the Communist Party of China. So the question before the
Committee is really what do you, as leaders of this country,
believe that the United States should accept regarding
ownership and control by the Communist Party of China over U.S.
assets of agriculture land, production, and supply chains?
Problematically, as you know, there are serious gaps in
current Federal laws and reporting that expose our military and
critical infrastructure to vulnerabilities and increasingly
impact U.S. farmers, ranchers, and producers as they face
challenges from state-driven Chinese actors. Forwarded and
planned Chinese investments like the Fufeng wet corn mill plant
in North Dakota and land and farm acquisitions in Oregon,
Texas, Nevada. The close proximity to point-of-the-spear U.S.
military bases and nuclear facilities is not coincidental.
Given China's regional and global military-intense vectors
that provide intelligence are constantly being sought where
they provide locations for cranes, silos, windmills, or farms
above or adjacent to military or sensitive facilities or
telecommunication towers or underground cables. Brazen IP
violations of U.S. seed, GMOs, and other agricultural
technologies have placed at risk the nation's continued
agricultural technology leadership. There are ample cases of
Chinese agents having been caught attempting to take such
technologies. China's perpetual dependence on agricultural
imports ensures that their goals for independence from foreign
dependencies will remain a priority.
Further, China's massive cyber warfare divisions, notably
PLA Unit 61398, have the capability to disrupt key American
infrastructure critical to our agriculture. This includes power
and water utilities, as well as communication and
transportation systems.
China's global acquisitions and supply chain monopolies
including Internet-of-Things technologies continue to expand
unchecked and unaddressed. We have significant dependencies on
parts, electronics, and other inputs to our agricultural
machinery. The nutritional needs of our livestock is also under
significant dependence, as well as inputs to pesticides and
herbicides.
China is also acquiring companies as export platforms for
Chinese market globally and in the United States. Such
diversion of product can have sizeable negative impacts on U.S.
producers. Further, China's acquisition of global agricultural
storage and logistic assets and trading markets should be
examined.
Last, given the advances in farm technologies, our reliance
on supply chains that provide nefarious Chinese actors kill
switches to our machinery, all eyes are on our production.
These all are matters that should be addressed.
But there are solutions. Federal laws addressing foreign
ownership should be considered, changes to them, given the
legal vulnerabilities of state-to-state restrictions. There are
adjustments that can be made to the jurisdiction of CFIUS to
better respond to Chinese farm and other agricultural
acquisitions.
As led by this Committee, the GAO has provided solutions
for better foreign farm ownership reporting standards, and a
number of Members have pointed to additional solutions in
reporting. Stronger cybersecurity vigilance championed by
Members here is also critical, and there are a host of other
possible solutions in the face of funding challenges that can
ensure our nation remains vigilant on applying solutions to the
uninvited, unwarranted, and increasingly sophisticated threats
that certain actors present to our nation and food security.
That concludes my opening remarks, and I look forward to
hearing from you and addressing to the best of my ability any
questions on matters you wish to raise.
[The prepared statement of Mr. Daly follows:]
Prepared Statement of Nova J. Daly, Senior Public Policy Advisor, Wiley
Rein LLP; Former Deputy Assistant Secretary for Investment Security,
U.S. Department of the Treasury, Washington, D.C.
Chinese Acquisitions of U.S. Agriculture and Land Holdings and Control
of Relevant U.S. Supply Chains: Addressing National Security
Risks
Chairman Thompson, Ranking Member Scott, and distinguished Members
of this Committee,
Thank you for the opportunity to appear before you today to discuss
this critical and timely matter, namely the danger that the People's
Republic of China (PRC or China) poses to American agriculture. I am
honored and humbled to be among the exceptional panelists that you have
assembled before you today.
The views I share are my own and are informed by my years of
service in Federal Government, as an analyst at the U.S. Department of
Commerce (Commerce), where I adjudicated antidumping and countervailing
duty (AD/CVD) cases (many involving dumped and subsidized Chinese
goods); as a trade policy advisor to the Secretary of Commerce; in my
service at the U.S. Senate Committee on Finance; as a director at the
National Security Council in the White House; as a Deputy Assistant
Secretary at Treasury responsible for the administration and
determinations of the Committee on Foreign Investment in the United
States (CFIUS); and finally in private practice, where I have had the
privilege to represent clients facing and addressing unwarranted,
unfair, and/or illegal actions by Chinese entities and the Chinese
state.
In my early years in Federal Government, and for a good portion of
that service, there was a generally held notion that China, through
economic and trade liberalization, would become more democratic and a
more responsible stakeholder, globally. There was also a view that
Chinese private entities functioned as more rational economic actors,
differently and generally separate from Chinese state-owned and
controlled entities (SOEs). Further, such private Chinese entities were
treated differently under U.S. laws and practice. However, over time,
China has implemented an ever-tightening strand of laws and policies
that have effectively eclipsed the notion that its private entities and
actors can or will act separately from state goals or direction.
Informative to that, recently implemented Chinese laws effectively
compel any Chinese entity to act at the direction of the state, thus at
the direction of the Chinese Communist Party (CCP). For instance,
China's 2017 National Intelligence law requires that: ``All
organizations and citizens shall support, assist, and cooperate with
national intelligence efforts,'' with the term ``national
intelligence'' involving ``the national security and interests of the
People's Republic of China.'' \1\ At Article 14 of that law, Chinese
intelligence agencies are provided with the authority to demand
cooperation. Further, China's 2021 Counterespionage Law effectively
empowers or normalizes all its citizens to act as agents of the state
on intelligence matters. Given the breadth of these and other Chinese
laws, and formal and informal penalties inflicted on entities or
individuals that do not comply, effectively, any information, and
broadly constructed, any possession that comes under ownership or
control of a Chinese entity can ultimately be utilized by the CCP as a
resource or asset.
---------------------------------------------------------------------------
\1\ See Federal Bureau of Investigation, The Threat Posed by the
Chinese Government and the Chinese Communist Party to the Economic and
National Security of the United States (July 7, 2020), available at
https://www.fbi.gov/news/speeches/the-threat-posed-by-the-chinese-
government-and-the-chinese-communist-party-to-the-economic-and-
national-security-of-the-united-states; see also Elaine K. Dezenski and
David Rader, The U.S. Must Combat CCP-Sanctioned Overseas Spying by
Private Entities, Foundation for Defense of Democracies (Nov. 22,
2023), available at https://www.fdd.org/analysis/2023/11/22/the-u-s-
must-combat-ccp-sanctioned-overseas-spying-by-private-entities-2/.
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Given that our food security is our national security, the
fundamental question before this Committee and its Members, as leaders
of our country, is what the United States should accept regarding the
ownership and control by the CCP over U.S. agriculture land,
production, and/or supply chains.
Problematically, as you know, U.S. state laws restricting foreign
land ownership have their limitations and legal hurdles. Further,
Federal laws, notably CFIUS, have jurisdictional gaps. Compounding
that, as this Committee has pointed out, there are reporting problems
concerning foreign acquisitions of U.S. agricultural land, as recently
highlighted by the U.S. Government Accountability Office (GAO). Lastly,
multiple critical U.S. and global supply chains for agricultural inputs
and technologies are controlled by China.
This witness statement hopes to inform this Committee in its
assessment of the breadth of what may be considered acceptable in terms
of CCP ownership and control, to explore what can or should be done to
address agricultural assets and supply chains that should not be owned
or controlled by the CCP, and to consider action and resources that may
be leveraged to address these matters. To that end, my statement
addresses four broad topics:
I. National and economic security considerations involved in Chinese
acquisitions of U.S. farm and land holdings and agriculture
and agricultural-related businesses;
II. National and economic security considerations involved in
China's control of agricultural supply chains;
III. China's broader global agriculture and supply chain policies
and controls; and
IV. Policy and legal options and considerations.
I. National and Economic Security Concerns Regarding Chinese
Acquisitions of U.S. Agricultural Land and Production
While it is well reported that U.S. agricultural land holdings by
Chinese entities are relatively small compared with other foreign
countries,\2\ * these acquisitions have increased fivefold over the
past decade and 30 percent from 2019-2020.\3\ Given a U.S. reporting
system in need of reform (as noted by the GAO),\4\ complex corporate
structures and investment vehicles, as well as ``other land'' holding
categories under U.S. Department of Agriculture (USDA) reporting, the
amount of Chinese agricultural land holdings may be higher than
reported.
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\2\ China owns approximately 384,000 acres, or one percent of
foreign-owned agricultural land holdings in the United States. See
Ximena Bustillo and Connie Hanzhang Jin, China owns 380,000 acres of
land in the U.S. Here's where, NPR (June 26, 2023), available at
https://www.npr.org/2023/06/26/1184053690/chinese-owned-farmland-
united-states. A map of Chinese-owned farmland is attached as Annex 1.
* Editor's note: the referenced Annex 1 was not included in Mr.
Daly's submitted statement. However, the referenced article, China owns
380,000 acres of land in the U.S. Here's where, does have two images of
maps (specifically, interactive graphics) one of which is named, Where
in the U.S. do Chinese entities own farmland?. A screenshot of this map
is located on p. 49.
\3\ Emily Washburn, How Much U.S. Farmland Does China Really Own?
More Than Bill Gates--And Less Than 17 Other Countries, Forbes (Mar. 1,
2023), available at https://www.forbes.com/sites/emilywashburn/2023/03/
01/how-much-us-farmland-does-china-really-own-more-than-bill-gates-and-
less-than-17-other-countries/?sh=3c7cb93f421f.
\4\ See U.S. Government Accountability Office, Foreign Investments
in U.S. Agricultural Land: Enhancing Efforts to Collect, Track, and
Share Key Information Could Better Identify National Security Risks
(Jan. 18, 2024), available at https://www.gao.gov/products/gao-24-
106337 (``GAO Report'').
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Notable recent transactions include the Fufeng Group's acquisition
of 370 acres of land to build a wet corn mill plant near the Grand
Forks Air Force Base in North Dakota; \5\ a series of land acquisitions
by Sun Guangxin (a billionaire from Xinjiang Province and a former
captain for the People's Liberation Army) to build a wind farm near
Laughlin Air Force Base, which is a training ground for military
pilots; \6\ and the discovered ownership, since 2015, of 200,000 acres
of forest land in Oregon by Chinese video gaming magnate Tianqiao Chen
(making him the second-largest non-U.S. citizen owner of U.S. land).\7\
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\5\ Jerry Dunleavy, North Dakota rejects Chinese project near U.S.
military base after Biden Administration refuses to act, Washington
Examiner (Feb. 7, 2023), available at https://
www.washingtonexaminer.com/news/justice/1062498/north-dakota-town-
rejects-chinese-project-near-us-military-base-after-biden-
administration-refuses-to-act/.
\6\ See Nathan Owens and Julia Himmel, How farms became the latest
battleground in U.S.-China relations, AgricultureDive (Dec. 5, 2023),
available at https://www.agriculturedive.com/news/us-china-foreign-
ownership-farmland-agriculture/700792/.
\7\ See Zoe Sayler, Oregon's Biggest Landowner Sparks Controversy,
Portland Monthly (Jan. 22, 2024), available at https://
www.pdxmonthly.com/news-and-city-life/2024/01/landowner-foreign-oregon-
acres.
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National security concerns arising from Chinese acquisitions of
agricultural property near military and other U.S. critical
infrastructure is not a recent development. Notable past transactions
include the 2012 acquisition by Chinese-owned Ralls Corporation (Ralls)
of interests in four wind farm project companies in Oregon. The project
sites, conveniently, overlapped with a restricted airspace and a
bombing zone used by military aircraft out of Naval Air Station Whidbey
Island. Other acquisitions that raised serious national security
concerns included a 2009 deal by China-based Northwest Nonferrous
International Investment Company Ltd. and a 2013 deal by China National
Machinery Industry Corporation. Both transactions involved properties
very near the Fallon Naval Air Station in Nevada, where the Top Gun
flight training school is located. While these transactions were
eventually blocked by CFIUS, some had to be discovered as they were
never originally notified.
Additional acquisitions of U.S. land holdings, specifically
agricultural, that also included proximity to U.S. military bases
include the Shuanghui (now WH Group) acquisition of pork producer
Smithfield in 2013 and the 2016 acquisition of Syngenta by China
National Chemical Corporation. Both deals, unlike those above, were
approved by CFIUS.
While recent transactions involving agriculture are not voluminous,
they are significant, and there is a growing trend. Further, given
Chinese intelligence activities in the United States, whether stemming
from spy balloons, the theft of U.S. seed technology, or otherwise,
such acquisitions and land holdings raise compelling national and
economic security concerns.
A. National Security Concerns
As noted above, there have been a number of Chinese acquisitions
involving agricultural and other land holdings near U.S. military
bases. The following examples provide an indication of the national
security considerations raised by Chinese entity acquisitions of U.S.
agricultural and other properties.
a. Fufeng Group
In November 2021, the Fufeng Group, a large Chinese bi-fermentation
corporation, announced its intent to construct a wet corn mill 12 miles
from the Grand Forks Air Force Base.\8\ Concerns were quickly raised
regarding the proximity of the planned facility and the potential for
PRC espionage. North Dakota Senators Kevin Cramer and John Hoeven
requested a closer review of the matter.\9\
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\8\ Grand Forks Herald, The Fufeng Controversy, available at
https://www.grandforksherald.com/businesses-organizations/fufeng.
\9\ Id.
---------------------------------------------------------------------------
In December 2022, CFIUS found that it did not have jurisdiction to
review the planned Fufeng facility, as the U.S. Air Force base was not
listed as a sensitive facility.\10\ This lack of CFIUS jurisdiction due
to the confines of its regulations was troubling, especially given that
the base's mission was being expanded by the Air Force to include
leading future intelligence surveillance reconnaissance missions.\11\
Given the lack of regulatory jurisdiction by CFIUS, the Air Force sent
a letter to Senator Cramer relaying the Department's view that: ``The
proposed project presents a significant threat to national security
with both near- and long-term risks of significant impacts to our
operations in the area.'' \12\ This lack of CFIUS jurisdiction is
further discussed in the recommendations section of this statement.
Despite CFIUS' inability to take action, following the Air Force
letter, local Grand Forks leaders stepped in to prevent the
construction of the facility, and this past fall, Fufeng listed its
land holding in Grand Forks for sale.\13\
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\10\ Khushboo Razdan, Chinese agribusiness giant Fufeng gets U.S.
Federal clearance for controversial North Dakota land sale, South China
Morning Post (Dec. 14, 2022, available at https://www.scmp.com/news/
china/diplomacy/article/3203228/chinese-agribusiness-giant-fufeng-gets-
us-federal-clearance-controversial-north-dakota-land-sale.
\11\ Sommer Brokaw, North Dakota Air Force base to lead future
intelligence missions, SpaceWar (Aug. 26, 2021), available at https://
www.spacewar.com/reports/
North_Dakota_Air_Force_base_to_lead_future_intelligence_missions_999.htm
l.
\12\ Office of Kevin Cramer, Fufeng Land Purchase Poses
`Significant Threat to National Security' (Jan. 31, 2023), available at
https://www.cramer.senate.gov/news/press-releases/sen-cramer-statement-
air-force-says-fufeng-land-purchase-poses-significant-threat-to-
national-security.
\13\ Greg Norman, Chinese company's North Dakota corn mill project
struck down by Grand Forks, prompting cheers of `USA!', Fox Business
(Feb. 7, 2023), available at https://www.foxbusiness.com/economy/china-
fufeng-north-dakota-corn-mill-project-halted-grand-forks-city-council;
Matthew Voigt, Fufeng land in Grand Forks for sale; tax payments are up
to date, Inforum (Oct. 7, 2023), available at https://www.inforum.com/
news/north-dakota/fufeng-land-in-grand-forks-for-sale-taxes-are.
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Fufeng is a major producer of food additives, biochemical products,
and starch-based products based in Shandong Province, China. It has
manufacturing plants throughout China, including a prominent facility
in the Xinjiang Uyghur Autonomous Region (XUAR).\14\ Fufeng's facility
in Xinjiang is located in close proximity to three Uyghur re-education
camps. Fufeng also has U.S. subsidiaries--Fufeng USA Inc.,
headquartered in Chicago, Illinois, and First Biotech Inc., located in
Brea, California--that sell biological products in the United States.
---------------------------------------------------------------------------
\14\ Fufeng Group Limited, 2021 Annual Report (Apr. 23, 2022) at
75, available at http://www.hkexnews.hk/listedco/listconews/sehk/2022/
0422/2022042200520.pdf (``Fufeng 2021 Annual Report'').
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Substantial evidence and market intelligence indicate that Fufeng
is affiliated with and possibly controlled by the Government of China
and that its operations in the XUAR involve forced labor. Despite the
evidence, Fufeng has not been sanctioned under the Uyghur Human Rights
Policy Act of 2020 (UHRPA) or otherwise placed on the U.S. Government's
Specially Designated Nationals and Blocked Persons (SDN) List. Although
Fufeng was prevented from building its agricultural processing plant in
North Dakota, it is still seeking to build plants in the United States,
including seeking property to do so in Indiana.\15\
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\15\ Whiney Downard, Senate moves foreign ownership of farmland
bill over economic development concerns, Indiana Capital Chronicle
(Mar. 5, 2024), available at https://indianacapitalchronicle.com/2024/
03/05/senate-moves-foreign-ownership-of-farmland-bill-over-economic-
development-concerns/.
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Given Fufeng's ties to the Chinese state, and the new and
significant mission of the Grand Forks Air Force Base, the planned wet
corn milling plant could provide numerous vectors for espionage and
intelligence, including possible electronic monitoring placed on the
mill facilities.
b. Ralls
One past transaction that harkens to the land acquisitions by Sun
Guangxin to build a wind farm near Laughlin Air Force Base in Texas is
the Ralls matter. In March 2012, Ralls, an Oregon corporation owned by
two Chinese nationals who also held senior management positions within
the Sany Group (Sany), a Chinese global manufacturing company, acquired
interests in four wind farm-project companies in Oregon. The project
sites were in close proximity to Naval Air Station Whidbey Island,
which conducts advanced weapons testing involving unmanned drones and
electronic warfare aircraft.\16\
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\16\ See Thilo Hanemann and Daniel H. Rosen, Ralls vs. CFIUS: What
Are the Implications for Chinese Investment?, Rhodium Group (Oct. 5,
2012), available at https://rhg.com/research/ralls-vs-cfius-what-are-
the-implications-for-chinese-investment/.
---------------------------------------------------------------------------
Ralls' planned to begin construction at the project sites to
install wind turbine generators constructed in China. Ralls did not
voluntarily notify CFIUS of the transaction prior to closing the deal.
Instead, it submitted a CFIUS notice only after CFIUS requested that it
do so. While the U.S. Department of the Treasury advised Ralls to
postpone construction on the project sites until after CFIUS' review
was completed, Ralls declined. Ultimately, to stop Ralls, President
Obama was forced to issue a Presidential Order prohibiting the
acquisition, on account of ``credible evidence'' indicating that the
parties, ``through exercising control of the [companies,] might take
action that threatened to impair the national security of the United
States.'' \17\
---------------------------------------------------------------------------
\17\ See Regarding the Acquisition of Four U.S. Wind Farm Project
Companies by Ralls Corporation, 77 Fed. Reg. 60,281 (Executive Office
of the President Oct. 3, 2012), available at https://www.govinfo.gov/
content/pkg/FR-2012-10-03/pdf/2012-24533.pdf.
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Electronic devices can be placed in wind towers, as well as cranes
that load and unload cargo,\18\ and atop plants (like the wet corn mill
facility that Fufeng sought to build) to monitor U.S. military
capabilities and technologies. The higher the facilities, the better.
Troubling as well, important telecommunication/fiber optic cables often
run under U.S. agricultural land or abutting such land, which also
creates a ground vulnerability. Thus, espionage technologies need not
be utilized on towers to have effect and depending on the target.
---------------------------------------------------------------------------
\18\ See Isaac Kardon, Washington Tackles a New National Security
Threat: Chinese-Made Cranes, Carnegie Endowment for International Peace
(Feb. 28, 2024), available at https://carnegieendowment.org/2024/02/28/
washington-tackles-new-national-security-threat-chinese-made-cranes-
pub-91843.
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The acquisition of U.S. agricultural land located near military
bases raises direct national security considerations. However, given
other U.S. ground base vulnerabilities including telecommunication
cable and rail lines and proximity to other critical infrastructure,
acquisitions of agricultural land broadly, depending on the investor or
beneficiary, can raise serious national security concerns where CFIUS
and other Federal laws lack jurisdiction to address the matter.
B. Economic Security Concerns
China's agricultural acquisitions pose multiple national economic
security risks. In the first part, such acquisitions have been found to
be specifically designed as export platforms for the Chinese market. As
an example, following the Smithfield takeover, the WH Group
significantly increased its share of exports to China, leading to
potential increases in U.S. retail pork prices due to tightening
supply.\19\ Such supply diversion represents potential risks to U.S.
agricultural security, as food security in many countries remains
vulnerable to economic and geopolitical shocks, which contribute to
economic strains that stoke regional conflicts and instability.\20\
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\19\ Id.
\20\ Office of the Director of National Intelligence, Annual Threat
Assessment of the U.S. Intelligence Community (Feb. 5, 2024) at 5-6,
available at https://www.odni.gov/files/ODNI/documents/assessments/ATA-
2024-Unclassified-Report.pdf.
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As discussed below, China currently and for the perceivable future
will face domestic agricultural production issues due to natural
disasters, shifting demographics, and diminishing arable land, among
other factors.\21\ For these reasons, food, farm, and agricultural
firms outside China are a common target for PRC investors. The most
high-profile of these types of acquisitions in the United States were
the 2013 takeover of Smithfield Foods and the 2016 purchase of
Syngenta, both of which benefitted from Chinese Government support.
Syngenta, a Swiss agrichemical and seed company, is the largest seller
of agrichemicals in the United States and a major seller of U.S. field
crop seeds.\22\ It is a leading player in seed treatment and
genetically modified traits.\23\
---------------------------------------------------------------------------
\21\ U.S.-China Economic and Security Review Commission, China's
Interests in U.S. Agriculture: Augmenting Food Security through
Investment Abroad (May 16, 2022) at 1, available at https://
www.uscc.gov/sites/default/files/2022-05/
Chinas_Interests_in_U.S._Agriculture.pdf (``USCC Report'').
\22\ Jacob Bunge and Brent Kendall. Merger of Dow, DuPont likely to
get close antitrust scrutiny, Wall Street Journal (Dec. 9, 2015),
available at https://www.wsj.com/articles/merger-of-dow-dupont-likely-
to-get-close-antitrust-scrutiny-1449709088.
\23\ Syngenta, Annual Review 2015 at 8-10, available at https://
www.syngenta.com/sites/syngenta/files/presentation-and-publication/
updated/annual%20reports/2015/syngenta-annual-review-2015.pdf.
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Given China's import [dependence], there has also been a pattern of
intellectual property theft of U.S. genetically modified seeds and
other agricultural IP. In December 2013, the Federal Bureau of
Investigation indicted six Chinese nationals for conspiring to steal
trade secrets from several American seed manufacturing companies.\24\
More recently, in April 2022, Xiang Haitao, a Chinese national, was
sentenced to 29 months in prison and fined $150,000 for stealing the
Nutrient Optimizer algorithm from Monsanto by transferring it to a
memory card and attempting to take it to China.\25\ Larger-scale
schemes have also been discovered. In 2016, Chinese scientist Robert Mo
collected thousands of seed samples from Monsanto and Pioneer test
fields.\26\ Acquisitions of U.S. trade secrets, through agricultural
espionage, impact the ability of U.S. companies to fund continued
improvements in agricultural R&D.
---------------------------------------------------------------------------
\24\ Federal Bureau of Investigation, Six Chinese Nationals
Indicted for Conspiring to Steal Trade Secrets from U.S. Seed Companies
(Dec. 19, 2013), available at https://archives.fbi.gov/archives/omaha/
press-releases/2013/six-chinese-nationals-indicted-for-conspiring-to-
steal-trade-secrets-from-u.s.-seed-companies.
\25\ U.S. Department of Justice Office of Public Affairs, Press
Release: Chinese National Pleads Guilty to Economic Espionage
Conspiracy (Jan. 6, 2022), available at https://www.justice.gov/opa/pr/
chinese-national-pleads-guilty-economic-espionage-conspiracy.
\26\ Robert Farley, Robert Mo, Wen Ho Lee, and Non-Military Chinese
Intellectual Property Theft, The Diplomat (July 7, 2020), available at
https://thediplomat.com/2020/07/robert-mo-wen-ho-lee-and-non-military-
chinese-intellectual-property-theft/.
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To illustrate that economic security concern further, illicit
acquisitions of genetically engineered seeds may erode U.S.
competitiveness in agriculture technology that supports food
production.\27\ Genetically engineered seeds promise new opportunities
for mitigating risk of drought and pests while improving seed stock to
minimize the amount of farmland required for production. The United
States exported $173.91 million of seeds to China in 2021,\28\ but
illicit acquisitions of genetically modified seeds deprive American
companies of additional revenue. Further, these acquisitions of
technology pose national security risks because agricultural genetic
technologies present dual-use potential.\29\ Agricultural IP can
potentially be weaponized as it offers an opportunity to discover
vulnerabilities in U.S. crops.\30\
---------------------------------------------------------------------------
\27\ USCC Report at 2.
\28\ Id. at 15.
\29\ Chinese Investment in the United States: Impacts and Issues
for Policymakers: Hearing Before the U.S.-China Economic and Security
Review Commission, 114 Cong. 2 (Jan. 26, 2016) (Statement of Patrick
Woodall, Research Director and Senior Policy Advocate, Food & Water
Watch) at 16, available at https://www.uscc.gov/sites/default/files/
Woodall_USCC%20Hearing
%20Testimony012617.pdf (``Woodall Testimony'').
\30\ Id.
---------------------------------------------------------------------------
China's acquisitions of agricultural land are not limited to the
United States. China has been going global with acquisitions of
farmland, as discussed further below. Syngenta operates in 90 countries
and Smithfield has facilities in Mexico, Romania, and Poland.\31\
Further, while direct ownership of land near military installations can
raise serious national and economic concerns, control over global
supply chains can present more dire risks.
---------------------------------------------------------------------------
\31\ Id. at 13.
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II. CCP Control in Certain U.S. Agricultural Supply Chains
A. Farm Technology and Internet of Things
Cellular connectivity modules, or components that enable Internet
of Things (IoT) devices, supplied by companies subject to the
jurisdiction, direction, or control of the CCP pose potential
significant national security risks to the United States.\32\
---------------------------------------------------------------------------
\32\ Letter from Mike Gallagher, Chairman, Select Committee on the
Chinese Communist Party and Raja Krishnamoorthi, Ranking Member, Select
Committee on the Chinese Communist Party to Jessica Rosenworcel,
Chairwoman, Federal Communications Commission (Aug. 7, 2023) at 1,
available at https://docs.fcc.gov/public/attachments/DOC-396816A1.pdf
(``CCP Select Committee Letter'').
---------------------------------------------------------------------------
The United States uses such connectivity modules in a wide variety
of devices, including smart devices and domestic telecom networks.\33\
These modules serve as a link between devices and the internet, which
means that they have the capacity to both stop devices from operating
as well as potentially accessing the data flowing from devices to the
web server that runs each device.\34\ Importantly then, nefarious
actors could exfiltrate data or remotely shut down the IoT device
should they be able to control the connectivity module. In the coming
years, American farmers will increasingly use IoT devices to plant and
monitor their crops.\35\ Vulnerabilities in these devices and the
potential consequences of such vulnerabilities could prove detrimental
in their impacts to farmers and other agricultural producers.
---------------------------------------------------------------------------
\33\ Charles Parton, Cellular IoT modules--Supply Chain Security
(Nov. 25, 2022), available at https://www.fcc.gov/ecfs/document/
10509287356174/1.
\34\ CCP Select Committee Letter at 2.
\35\ Jonathan Seelig, Five Use Cases For IoT And Edge Cloud
Technology In Smart Farming (June 16, 2022), available at https://
www.forbes.com/sites/forbesbusinesscouncil/2022/06/16/five-use-cases-
for-iot-and-edge-cloud-technology-in-smart-farming/?sh=1d6ee38f89dc.
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Recent international events demonstrate the immense power of these
modules. In May 2022, for example, the Russian military stole $5
million worth of farm equipment from a John Deere dealership in Ukraine
and attempted to bring it to Russia.\36\ However, this equipment, which
incorporated Western-made connectivity modules, ultimately could not be
used by the Russian army because its owners remotely locked the
equipment.\37\
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\36\ Olexsandr Fylyppov and Tim Lister, Russians plunder $5M farm
vehicles from Ukraine--to find they've been remotely disabled, CNN (May
1, 2022), available at https://www.cnn.com/2022/05/01/europe/russia-
farm-vehicles-ukraine-disabled-melitopol-intl/index.html.
\37\ CCP Select Committee Letter at 1.
---------------------------------------------------------------------------
B. Vitamins
Vitamins included in animal feed are a critical part of the
agriculture supply chain ecosystem, helping to provide adequate yields
for American agricultural products by ensuring that livestock are
nutritionally healthy. Vitamins are considered critical for livestock
feeds. Such vitamins ensure various biological processes, including
proper growth, reproduction, milk production, and immune response.
Despite their importance to the U.S. supply chain, China has become the
predominant producer and provider of many of these vitamins. Chinese
control over these vitamins poses a potential serious risk to the U.S.
agricultural market and to the U.S. supply chain. Disruptions to supply
could notably reduce domestic production and any restriction on such
vitamin access would greatly impact the U.S. agriculture market.
C. Pesticides and Herbicides
Pesticides and herbicides are an essential part of the agricultural
supply chain, ensuring that planted croplands are protected against
weeds, grass, and pests and that croplands produce adequate yield to
meet demand. Chinese ownership over the U.S. supply chain for
pesticides and herbicides creates significant risks for U.S.
agricultural production. Restrictions on the availability of popular
pesticides and herbicides would reduce the yield of U.S. farmland,
raising costs for U.S. farmers and consumers. China maintains a
dominate global position in the production of the following popular
pesticides and herbicides.
i. Glyphosate
Glyphosate, also known by its trade name Roundup, is the most
commonly used herbicide in the United States.\38\ China is the dominant
global producer of glyphosate, controlling between 60 and 70 percent of
the worldwide market.\39\
---------------------------------------------------------------------------
\38\ U.S. Dep't of Agriculture Economic Research Service, ERS
Charts of Note, available at https://www.ers.usda.gov/data-products/
charts-of-note/charts-of-note/?topicId=29bf0f43-e3cd-4b16-8f34-
76a69ce2ed48.
\39\ Tyne Morgan, What in the World is Going On With Glyphosate
Prices?, Ag Web (July 19, 2023), available at https://www.agweb.com/
news/crops/crop-production/what-world-going-glyphosate-prices.
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ii. Atrazine
Atrazine is the second-most widely used weed killer in the United
States, primarily used on crops such as sugarcane, corn, and
sorghum.\40\ Atrazine was invented by and primarily produced by Sygenta
Corporation.\41\ Sygenta Corporation is owned by Chinese state-owned
company ChemChina.\42\
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\40\ Environmental Protection Agency, Indicators: Atrazine,
available at https://www.epa.gov/national-aquatic-resource-surveys/
indicators-atrazine.
\41\ Mikaela Conley, Atrazine, an endocrine-disrupting herbicide
banned in Europe, is widely used in the U.S., U.S. Right to Know (Sept.
12, 2023), available at https://usrtk.org/pesticides/atrazine.
\42\ Id.
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iii. Paraquat
Paraquat is one of the most common herbicides in the United States
and sold under the brand name Gramoxone.\43\ Similar to Atrazine,
Paraquat is owned and produced by Sygenta, which itself is owned by
ChemChina.\44\
---------------------------------------------------------------------------
\43\ University of Tennessee Institute of Agriculture, Paraquat
Herbicide Information, available at https://psep.tennessee.edu/
paraquat.
\44\ Mikaela Conley, Atrazine, an endocrine-disrupting herbicide
banned in Europe, is widely used in the U.S., U.S. Right to Know (Sept.
12, 2023), available at https://usrtk.org/pesticides/atrazine/.
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iv. Imidacloprid
Imidacloprid is the world's most used insecticide and has been in
the U.S. market since 1994.\45\ The PRC is the largest producing and
exporting country of imidacloprid.\46\
---------------------------------------------------------------------------
\45\ American Chemical Society, Molecule of the Week Archive:
Imidacloprid (Aug. 25, 2014), available at https://www.acs.org/
molecule-of-the-week/archive/i/imidacloprid.html.
\46\ Xusheng Shao, et. al., Overall status of neonicotinoid
insecticides in China: Production, application and innovation, Journal
of Pesticide Science (2013), available at https://www.jstage.jst.go.jp/
article/jpestics/38/1/38_D12-037/_html/-char/en.
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v. Acephate
Acephate is a common U.S. insecticide used on a variety of crops
including cotton, tobacco, cranberries, and mint.\47\ The United States
uses approximately 4 to 5 million pounds of Acephate each year. The PRC
is one of the global leaders in the production of Acephate.\48\
---------------------------------------------------------------------------
\47\ Environmental Protection Agency, Acephate Facts (Sept. 2001),
available at https://www.epa.gov/pesticides/chem_search/reg_actions/
reregistration/fs_PC-103301_1-Sep-01.pdf.
\48\ Agropages, China conducts risk reviews of acephate, three
other pesticide products (Aug. 20, 2015), available at https://
news.agropages.com/News/NewsDetail---15646.htm.
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III. China's Global Agricultural Program
Food security is one of the most important issues facing China's
economic security. The PRC is the world's largest food importer, and
conditions in the Chinese agricultural sector point to Chinese import
dependence growing in the coming years.\49\ Increased urbanization and
industrial growth have covered what was once productive agricultural
land.\50\ In addition, pollution due to Chinese industry has resulted
in 15.5 percent of Chinese groundwater and 19.4 percent of soil being
polluted and/or unusable for Chinese agricultural production.\51\
Overgrazing and deforestation have resulted in increased
desertification in China's Western and Central provinces, further
limiting the availability of arable land.\52\ China's agricultural
sector has also faced climate and ecological challenges. Livestock
diseases such as African swine fever have been a perpetual challenge
for the Chinese swine industry, and pests such as the Fall Army Worm
have been a continued challenge to Chinese crop production.\53\ Rising
global temperatures have also resulted in more extreme weather events
in China, damaging Chinese agricultural output.\54\
---------------------------------------------------------------------------
\49\ People's Daily Online, China becomes world's largest food
importer (Dec. 4, 2023), available at http://en.people.cn/n3/2023/1204/
c90000-20105550.html; see U.S.-China Economic and Security Review
Commission, China's Interests in U.S. Agriculture: Augmenting Food
Security through Investment Abroad (May 26, 2022), available at https:/
/www.uscc.gov/sites/default/files/2022-05/
Chinas_Interests_in_U.S._Agriculture.pdf (``USCC Chinese Agriculture
Report'').
\50\ Id.
\51\ Id.
\52\ Amelia Browne, Desertification in China: Causes, Impacts, and
Solutions, Earth.Org (Dec. 20, 2022), available at https://earth.org/
desertification-in-china/.
\53\ USCC Chinese Agriculture Report.
\54\ Id.
---------------------------------------------------------------------------
The CCP has recognized the existential threat faced by increasing
agricultural export dependence, with Xi Jinping discussing the matter
regularly and engaging in numerous public appearances revolving around
agricultural matters.\55\ The most recent version of ``Document Number
1,'' a CCP report on the Chinese Agricultural sector, again focused
heavily on food security matters highlighting steps to reduce Chinese
dependence on foreign agriculture and agricultural supply chains.\56\
Domestically, the CCP has taken several steps to bolster the
agricultural industry, including significant investment in improving
cropland resiliency, increasing mechanization, and reducing
agricultural pollution.\57\
---------------------------------------------------------------------------
\55\ Kevin Dong, et al., China's Food Security: Key Challenges and
Emerging Policy Responses, CSIS (Mar. 15, 2024), available at https://
www.csis.org/analysis/chinas-food-security-key-challenges-and-emerging-
policy-responses.
\56\ Scott Rozelle and Scott Kennedy, China's Latest Document
Number One: Promoting Rural Development (Feb. 16, 2024), available at
https://www.csis.org/blogs/trustee-china-hand/chinas-latest-document-
number-one-promoting-rural-development.
\57\ USCC Chinese Agriculture Report.
---------------------------------------------------------------------------
However, steps to improve domestic agricultural throughput will not
be enough to address the gap between PRC agricultural supply and
demand. As a result, the PRC has dedicated substantial efforts to
improving the resiliency of their agriculture imports by engaging in a
large-scale agricultural asset acquisition campaign. According to AEI's
Chinese Investment Tracker, the PRC has invested over $106 billion in
foreign agricultural projects since 2005.\58\ PRC agricultural FDI can
be found in over 100 countries with a particular level of investment in
regions involved in the PRC's Belt and Road Initiative and African
states.\59\ In 2022, at the China-Africa Summit, Xi Jinping announced
several initiatives to boost Chinese imports from Africa, including
agricultural products, to achieve $300 billion in yearly African
imports by 2035.\60\ Given China's agricultural dependencies, its farm
and food production acquisitions tend to be export oriented.\61\ **
---------------------------------------------------------------------------
\58\ American Enterprise Institute, China Global Investment
Tracker, available at https://www.aei.org/china-global-investment-
tracker/.
\59\ Elizabeth Gooch and Fred Gale, China's Foreign Agriculture
Investments, U.S. Dep't of Agriculture, available at https://
www.ers.usda.gov/webdocs/publications/88572/eib-192.pdf.
\60\ Duncan Miriri and Joe Bavier, Insight: Africa's dream of
feeding China hits hard reality, Reuters (June 28, 2022), available at
https://www.reuters.com/world/africa/africas-dream-feeding-china-hits-
hard-reality-2022-06-28/.
\61\ See Woodall Testimony at 12.
** Editor's note: the above footnote appears to be formatted as a
hyperlink. However, there is no hyperlink in the submitted statement.
It has been reproduced herein as submitted.
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Chinese ownership extends beyond farmland and includes components
throughout the agricultural supply chain, including mills, logistics
companies, and numerous critical agricultural intellectual property
owners. Companies acquired by or partnered with Chinese companies such
as Smithfield, Syngenta, Growmark, and Lansing Trade Group are examples
of an increasingly concerning trend.
As mentioned, the PRC's agriculture supply chain vulnerability will
not improve in the near term, and the CCP will likely take ever-
increasingly aggressive steps to ensure the security of its supply. The
United States should expect further efforts by the PRC to acquire
agricultural assets domestically and worldwide.
III. Recommendations
China restricts nearly all foreign investment into its agricultural
sector unless companies incorporate in and share data with China. As
such, Congress should consider a policy of reciprocity with respect to
China while maintaining the longstanding U.S. policy of encouraging
foreign investment, where it does not threaten national and economic
security. China's policy is a deliberate exercise of directing
investments toward global and U.S. agricultural supply chains. Given
the breadth of recent Chinese laws that condition the behavior of
Chinese entities operating abroad, such investments can raise
significant threats, depending on the vulnerabilities in the U.S.
agricultural assets and/or supply chain. Further, investments in
farmland located near U.S. military installations present clear and
pressing risks to U.S. national security. Congress should consider
legislative changes to that would address these matters. Moreover,
Congress should target investments in and strengthen U.S. food supply
chains.
A. Empowering CFIUS and USDA to Effectively Address National Security
Risks from Investments in Agriculture
i. The Secretary of Agriculture as a Member of CFIUS
With the passage of the 2024 Consolidated Appropriations Act the
Secretary of Agriculture is now officially a member of CFIUS on a case
by case basis with respect to covered transactions involving
agricultural land, agriculture biotechnology, or the agriculture
industry (including agricultural transportation, agricultural storage,
and agricultural processing), as determined by the CFIUS Chairperson in
coordination with the Secretary of Agriculture.\62\ Section 787 of the
Act also codifies USDA's role in reviewing investments by directing the
Secretary of Agriculture to notify CFIUS if it has reason to believe
that any agricultural land transaction is a covered transaction that
may pose a risk to national security, with emphasis on foreign
governments or entities of concern, including China, the Democratic
People's Republic of Korea, Russia, and Iran.\63\ USDA would also
report to CFIUS whether the transaction was reported through a filing
under the Agricultural Foreign Investment Disclosure Act of 1978
(AFIDA). This was a useful step and will build on the growing
capabilities of CFIUS.
---------------------------------------------------------------------------
\62\ Consolidated Appropriations Act, 2024, available at https://
www.congress.gov/bill/118th-congress/house-resolution/1061/text.
\63\ See Consolidated Appropriations Act, 2024, available at
https://www.congress.gov/bill/118th-congress/house-bill/4366/text.
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B. Modify CFIUS Jurisdiction for Real Estate Holdings to Allow Swift
Action
i. Bypass Notice and Comment for Designation of Military Installations
FIRRMA expanded CFIUS's jurisdiction to cover real estate
transactions within close proximity of ``military installations'' and
other sensitive U.S. facilities. Appendix A to 31 CFR 802 lists these
facilities for use in determining whether a real estate transaction is
a covered investment pursuant to 31 CFR 802.211. Under the current
regulatory framework, to designate additional military installations
and other facilities, Treasury must promulgate a modified rule under
Section 553(b) of the Administrative Procedure Act (5 U.S.C. 553)
(APA).
In the Fufeng transaction, for example, CFIUS did not have
jurisdiction for two reasons. First, the Grand Forks Air Force Base was
not listed in Appendix A to 31 CFR 802, and second, the land on which
the wet corn mill plant was to be built is considered to be in an
urbanized zone, which are exempt from CFIUS review. Real estate
transactions and the construction of buildings and facilities happen
quickly. CFIUS should at least have discretion to designate a military
installation where there is an immediate and significant national
security concern, without the need to first provide public notice and a
comment period.
To provide CFIUS with the discretion to designate military
installations, Congress should consider a modification to the
definition of a covered real estate transaction \64\ in relevant part
to include real estate that ``is in close proximity to a United States
military installation or another facility or property of the United
States Government that is sensitive for reasons relating to national
security as designated where the Committee, in consensus, makes a
finding of significant national security concerns''. In time sensitive
situations, CFIUS needs this catchall to enable it to review
transactions concerning real estate within extended range of a military
installation or government facility where notice and comment
requirements would be impracticable, unnecessary, or contrary to the
public interest.
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\64\ 50 U.S.C. 4565(a)(4)(B). The specific provision to be
modified is 50 U.S.C. 4565(a)(4)(B)(ii)(II)(bb)(AA).
---------------------------------------------------------------------------
ii. Give CFIUS Discretion to Make Exceptions to the Urban Zone
Exclusion
FIRRMA excludes real estate in ``urbanized areas'' from CFIUS's
jurisdiction. Recent attempts to acquire land near sensitive military
installations in urbanized areas demonstrate that the carveout in
FIRRMA may be inappropriate in certain cases. Specifically, FIRRMA
exempts ``real estate in `urbanized areas', as defined by the Census
Bureau in the most recent census, except as otherwise prescribed by the
Committee in regulations in consultation with the Secretary of
Defense.'' \65\
---------------------------------------------------------------------------
\65\ 50 U.S.C. 4565 (C)(i)(II); P.L. 155-232 (Aug. 13, 2018),
Title XVII Sec. 1703.
---------------------------------------------------------------------------
Under the current CFIUS regulations governing certain transactions
by foreign persons involving real estate in the United States, 31 CFR
part 802, real estate transactions are excepted from CFIUS review when
they are within an urbanized area or urban cluster \66\ unless the real
estate is located within close proximity of any military installation
or a U.S. Government property or facility as identified in Appendix A
to Part 802, or is a covered port.\67\ Close proximity is defined as
the area extending outward 1 mile from the boundary of a military
installation, government facility, or government property.\68\
Transactions involving real estate that is not in an urbanized area or
urban cluster is covered if it is in the area that extends 99 miles
outward from the boundary of a listed military installation or U.S.
Government site.\69\
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\66\ 31 CFR 802.216(c).
\67\ See id., referencing 31 CFR 802.211(a), 31 CFR
802.211(b)(1).
\68\ 31 CFR 802.203.
\69\ 31 CFR 802.211(b)(2); 31 CFR 802.217.
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Congress can make a slight modification to the text of 50 U.S.C.
4565(C)(i)(II) to provide an exception when a significant national
security exception exists. 50 U.S.C. 4565 (C)(i)(II) could read, with
the modification, ``real estate in `urbanized areas', as defined by the
Census Bureau in the most recent census, except where the Committee, in
consensus, makes a finding of significant national security concerns or
as otherwise prescribed by the Committee in regulations in consultation
with the Secretary of Defense.''
C. Address the Concerns Raised in the GAO Report
As this Committee knows well, in response to a request from 51
Members of Congress, the GAO in January 2024 released a report on
enhancing efforts to collect, track, and share key information on
foreign investments in U.S. agricultural land to better identify
national security risks.\70\ The Agricultural Foreign Investment
Disclosure Act of 1978 (AFIDA) requires foreign persons and legal
entities acquiring or transferring interests in U.S. agricultural land
to file a report with the USDA containing information on the
transactions. It provides for increasing civil penalties of up to 25%
of the land's value when a filing is late.\71\ The USDA assessed only
eight penalties for AFIDA late-filing or non-filing between 2012 and
2021. USDA is currently reliant on foreign persons to self-report AFIDA
information.\72\
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\70\ GAO Report at 1.
\71\ 7 U.S.C. 3502.
\72\ GAO Report at 2.
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In addition to the recommendations made by the GAO report, Congress
should address potential gaps in reporting requirements, including
reporting complex ownership structures and investment intentions, among
other changes.
D. Provide Funding and Support to Secure U.S. Agricultural Supply
Chains
In the recent past, Congress has identified reshoring the U.S.
agricultural supply chain as an important priority. In 2021, as a part
of the American Rescue Plan, Section 1001(b)(4) directed the USDA
Secretary to create grant programs that would invest in American
agricultural supply chain resiliency.\73\ As a result of this section,
the USDA established several grant programs that supported domestic
supply chain resiliency, including the Food Supply Chain Guaranteed
Loan Program,\74\ the Meat and Poultry Processing Expansion
Program,\75\ and the Meat and Poultry Intermediary Lending Program.\76\
Unfortunately, Congress rescinded the funding for these critical
programs as part of the Fiscal Responsibility Act of 2023.
---------------------------------------------------------------------------
\73\ See American Rescue Plan Act of 2021, H.R. 1319, 117th Cong.
1001(b)(4) (2021).
\74\ See U.S. Dep't of Agriculture, Rural Development, Food Supply
Chain Guaranteed Loan Program, available at https://www.rd.usda.gov/
food-supply-chain-guaranteed-loans.
\75\ See U.S. Dep't of Agriculture, Rural Development, Meat and
Poultry Processing Expansion Program, available at https://
www.rd.usda.gov/programs-services/business-programs/meat-and-poultry-
processing-expansion-program.
\76\ See U.S. Dep't of Agriculture, Rural Development, Meat and
Poultry Intermediary Lending Program, available at https://
www.rd.usda.gov/programs-services/business-programs/meat-and-poultry-
intermediary-lending-program.
---------------------------------------------------------------------------
It would be useful for Congress to allocate funding for domestic
food supply chain resiliency to address critical vulnerabilities in the
U.S. agricultural supply chain. Congress could also pair investments in
domestic food supply chain resiliency with increased efforts to invest
in agricultural R&D to develop innovative practices that provide U.S.
producers a technological advantage over foreign competition. Such
strategic investment would strengthen the domestic supply chain and
ensure its health and adaptability into the future. Where reshoring the
domestic supply chain is not economically feasible, efforts could be
made to develop a secure supply chain for agricultural inputs through
trusted U.S. partners.
Last, given the vulnerabilities to U.S. supply chains stemming from
existing and new technologies, especially those that address farm
productivity and security, Congress should focus on policies and
reporting that build stronger cybersecurity awareness and protections
for America's agricultural producers and supply chains.
E. Consider Ways to Address State-by-State Ownership Restrictions
The growing number of state laws that address foreign investments
in agricultural land create uncertainty and inconsistencies across
states and with state rights vs. Federal law.
While 24 U.S. states have enacted laws limiting foreign land
ownership,\77\ those laws can be subject to challenges in state and
Federal court. For example, Shames v. Nebraska was a challenge to
Nebraska's law restricting aliens and corporations not incorporated
under Nebraska laws from acquiring title under Nebraska laws in Federal
court.\78\ Although the U.S. District Court of Nebraska upheld the law,
such challenges can delay implementation of or overturn state laws.
Notably, the U.S. Court of Appeals for the Eleventh Circuit recently
granted a partial injunction blocking the enforcement of a Florida law
restricting certain foreign investments in land holdings. The court's
order rests on the plaintiffs' argument that the law violates the
Supremacy Clause of the U.S. Constitution in conflicting with the
Federal Government's powers (i.e., CFIUS) to regulate land purchases by
foreign investors.\79\
---------------------------------------------------------------------------
\77\ National Agricultural Law Center, Foreign Ownership of
Agricultural Land: FAQs & Resource Library (listing Alabama, Arkansas,
Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota,
Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma,
Pennsylvania, South Carolina, South Dakota, Tennessee, Utah, Virginia,
and Wisconsin) (accessed Mar. 17, 2024) https://
nationalaglawcenter.org/foreign-investments-in-ag/.
\78\ 323 F. Supp. 1321, 1136 (D. Neb. 1971).
\79\ See https://nationalaglawcenter.org/eleventh-circuit-narrowly-
blocks-florida-from-enforcing-foreign-ownership-law.
---------------------------------------------------------------------------
These state laws can also be challenged or circumvented when the
land at issue in a transaction is reclassified. In Koepnick v. Arizona
State Land Department, the Court of Appeals of Arizona upheld a
reclassification of land at issue as ``commercial'' to allow greater
flexibility for buying and selling land.\80\ Further, the definition of
``agricultural land'' is inconsistent across state laws. For example,
Pennsylvania's definition of ``agricultural land'' includes timber as a
potential use that would make land qualify as agricultural\81\ while
the definition under North Dakota's statute does not.\82\
---------------------------------------------------------------------------
\80\ 212 P.3d 62, 72 (Ariz. Ct. App. 2009).
\81\ 68 PA. STAT. 41 (West 1980).
\82\ See 68 P.S.C.S. 47.
---------------------------------------------------------------------------
Conclusion
Given the recent action by the U.S. Court of Appeals, and likely
continued challenges to state-to-state laws involving land ownership
restrictions, Congress should consider whether broader Federal law is
warranted. In either case, U.S. laws and policies designed to address
national security matters arising out of Chinese ownership and control
of U.S. agricultural assets and supply chains is incomplete and exposes
our military and critical infrastructure to vulnerabilities.
Importantly, such vulnerabilities do and may increasingly impact U.S.
farmers, ranchers and producers as they face challenges from state
driven actors. Lastly, the continued technological leadership of our
agricultural sector is in danger of erosion if we do not remain
vigilant on finding solutions to the uninvited, unwarranted and
increasingly sophisticated threats that certain actors present to our
nation and our food security.
[Screenshot]
Source: USDA AFIDA annual report [1]
---------------------------------------------------------------------------
\[1]\ https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/
EPAS/PDF/2021_afida_
annual_report_through_12_31_2021.pdf
---------------------------------------------------------------------------
Credit: Connie Hanzhang Jin/NPR
The Chairman. Sir, thank you very much. I appreciate your
significant experience, and your input.
I am now pleased to recognize Ambassador Tom. Please
proceed with 5 minutes of testimony whenever you are ready.
STATEMENT OF HON. KIP TOM, MANAGING MEMBER AND CHIEF EXECUTIVE
OFFICER, TOM FARMS LLC; FORMER UNITED STATES AMBASSADOR TO THE
UNITED NATIONS AGENCIES FOOD AND AGRICULTURE, LEESBURG, IN
Mr. Tom. Honorable Chairman Thompson, Ranking Member Scott,
and distinguished Members of the House Committee on
Agriculture, as a lifelong farmer and a former Ambassador to
the Rome-based U.N. Food and Agriculture Organizations, I would
like to share my perspective with you today on the threat of
China to America's food supply and agricultural systems. I add,
the world is watching us today.
Americans need to understand that our national security is
dependent upon our food security. Americans cannot any longer
take agriculture and our food systems for granted. Xi Jinping
and the Chinese Communist Party recognize the importance of
food in relation to their position of power in the world. The
CCP's goal is to reshape the world order through their control
of the BRIC nations, global trade, and the Belt and Road
Initiative, all to attain economic superiority over the United
States and our allies. To meet these goals, they are
strategically growing their agriculture production domestically
and globally at the expense of the United States.
I will address a number of these risks by the CCP that we
could deal with immediately. First, cybersecurity: Threats to
United States agriculture are diverse and can have significant
impacts on the industry. Some of the key concerns include
intellectual property theft. The Chinese have targeted
proprietary farming data such as crop yield data, seeding or
fertilizer algorithms, breeding information, and biotechnology
research, which will lead to a loss of competitive advantage
for the United States. I have seen this firsthand in the seed
production industry. Several Chinese nationals were sending
proprietary seeds in our area from production fields and
shipping them back to China. These Chinese nationals were
caught and convicted, but how many were not caught? According
to the American Seed Trade Association, it takes 5 to 15 years
to develop a seed variety at a cost of over $100 million. It
also estimates that the annual value of agriculture seed
production in the U.S. is over $11 billion annually.
Data-driven attacks: Precision agriculture rely heavily on
this data as examples like farms like ours produce over a
terabyte of data annually that is exclusive to our farm and is
a major driver to our sustainability and productivity. We are
at extreme risk of the theft or attack of this data, which
could alter or disrupt our systems and lead to incorrect
farming decisions and likely harm yields. There have been
numerous attempts also by the Chinese to steal this data, but
fortunately, they have been caught and convicted. Again, how
many were not caught?
Infrastructure attacks: Critical infrastructure from the
electrical grid to supply chain logistics and broadband could
be targeted in disrupting our food supply. When we consider
ransomware, farming operations could be halted by ransomware
attacks, demanding payments to restore access to essential
digital systems. And we all can remember the ransom attacks on
JBS several years ago, which disrupted the entire supply chain
from livestock production operations to the consumers' dinner
table. The $11 million ransom was paid, but the cost to JBS and
the agricultural supply chain was many multiples greater.
Espionage: The Chinese are creative in their attempts to
steal as much information as possible from as many sources as
possible from the USDA FSA offices, to our industries, to
cranes in our ports, and from any conduit that flows data or
conversations. Although the U.S. Government is aware of these
threats, we need to strengthen protection for America's food
supply and economic advantage. This includes identifying
vulnerabilities and improving the protective measures of
government and private entities against cyber threats.
Next, portions of our supply chain have been offshored,
including several critical building blocks for our food systems
such as crop protection products and crop nutrients. These are
the basic elements that nourish crops, protect them from weeds,
insects, and diseases. A recent USDA supply chain report
indicates that 70 percent--70 percent--of the crop protection
products that are produced globally, most from China. Another
40 percent of the world's phosphorus supply originates in
China. Imagine if they shut off our supply.
Without crop protection, products, or crop nutrients,
yields will decrease, requiring substantially more land to
maintain current production levels. The economic impact to
farmers, consumers, and our nation would have devastating
consequences. This would lead to higher consumer prices and
food insecurity in United States and around the world. This is
a national security threat to the United States and our allies.
Therefore, the absence of crop protection and crop nutrient
products would have a complex and far-reaching impact. The
answer is we need to allow for reasonable and durable
regulations to prevail to allow the United States to bring this
manufacturing capacity back home, while supporting those that
are already manufacturing these critical products here at home
in the U.S. to feed the Americans and the world.
In summary, whether the impact is from cybersecurity
threats or from minimized access to crop nutrients or crop
protection products, the Chinese are strategically attempting
to build their dominance in a world over food systems. These
moves are coming at the expense of American innovation that are
amplified by our burdensome regulatory environment. The people
in these chambers on this Hill need to take action to bring our
supply chains home, protect our innovation, and increase our
funding for research and development. Now is the time for a
national strategy for our agricultural and food systems. If
not, America could once again face food insecurity like we did
100 years ago. It is time to stop taking agriculture and our
food systems for granted. Again, the world is watching.
I yield the floor back to you, Chairman Thompson.
[The prepared statement of Mr. Tom follows:]
Prepared Statement of Hon. Kip Tom, Managing Member and Chief Executive
Officer, Tom Farms LLC; Former United States Ambassador to the United
Nations Agencies Food and Agriculture, Leesburg, IN
Honorable Chairman Thompson, Ranking Member Scott, and
Distinguished Members of the House Committee on Agriculture. As a
lifelong farmer and the former Ambassador to the Rome Based UN Food and
Agriculture Organizations, I would like to share my perspective with
you today on the threat of China to America's Food and Agriculture
systems.
Americans need to understand that our national security is
dependent upon our food security; Americans cannot take our food
systems for granted.
After experiencing multiple famines in the last century, Xi Jinping
and the Chinese Communist Party recognize the importance of food in
relation to their position of power in the world. To meet their goals,
they are strategically growing their agriculture production
domestically and globally at the expense of the United States.
There are many threats by the Chinese. I will highlight just a few:
First, cybersecurity threats to U.S. agriculture are diverse and
can have significant impacts on the industry. Some of the key concerns
include:
Intellectual Property Theft: The Chinese have targeted proprietary
farming data, such as crop yield data, seeding or fertility algorithms,
breeding information, and biotechnology research which will lead to a
loss of competitive advantage for the U.S. I have seen this firsthand
in the seed production industry in which we are involved. Several
Chinese nationals were stealing proprietary seeds from production
fields and shipping them back to China. The Chinese nationals were
caught and convicted, but how many were not caught? According to the
American Seed Trade Association, it takes 5-15 years to develop a new
seed variety at a cost of over U$S100 million. It is also estimated
that the annual value of agriculture seed production in the U.S. is
over $11 billion annually.
Data-Driven Attacks: Precision agriculture relies heavily on data.
As an example, farms like ours produce over a terabyte of data annually
that is exclusive to our farm and is a major driver to our
sustainability and productivity. We are at extreme risk of the theft or
attack of this data which could alter or disrupt our systems and lead
to incorrect farming decisions and likely harm yields. There have been
numerous attempts by the Chinese to steal this data but fortunately
they have been caught and convicted. Again, how many were not caught?
Infrastructure Attacks: Critical infrastructure from the electrical
grid to supply chain logistics and broadband could be targeted
disrupting food supply chains.
Ransomware: Farming operations could be halted by ransomware
attacks, demanding payments to restore access to essential digital
systems. We all can remember the ransomware attack on JBS several years
ago which disrupted the entire supply chain from livestock production
operations to the consumer. The $11 million Ransome was paid but the
cost to JBS and the agriculture supply chains was many multiples
greater.
Espionage: Spans all the prior mentioned risk and undermines the
agriculture sector competitiveness.
Although the U.S. Government is aware of these threats, we need to
strengthen protection for America's food supply and economic
advantages. This includes identifying vulnerabilities and improving the
protective measures of government and private entities against cyber
threats.
Next, portions of our supply chain have been offshored, including
several critical building blocks for our food systems such as crop
protection products and crop nutrients. These are the basic elements
that nourish crops and protect them from weeds, insects, and diseases.
A recent USDA Supply Chain Report indicates that 70% of the crop
protection products are produced by the Chinese. Imagine if they shut
off our supply? The economic impact of not using crop protection
products in the U.S. would be significant. Without crop protection
products, crop yields would decrease, requiring more land to maintain
current production levels. This would lead to higher consumer prices,
and food insecurity in the U.S. and around the world. This would be a
national security threat to the U.S. and our allies.
Additionally, the cost associated with adjusting production
practices and the potential loss of access to export markets will have
a direct impact on U.S. agriculture and the broader U.S. economy.
Therefore, the absence of crop protection products would have a
complex and far-reaching impact. The answer: We need to allow for
reasonable regulations to prevail to allow the U.S. to bring this
manufacturing capacity back home while supporting those that are
already manufacturing these critical products to feed Americans and the
world.
As we look to crop nutrients, nearly 40% of the world's phosphate
and 28% of the world's nitrogen is produced by China, and their market
continues to grow globally. In the meantime, our U.S. regulators and
policy makers impose even greater burdens on our own manufacturers,
forcing an offshoring to our [adversaries] such as China. Again, what
if China shuts off our access to these critical inputs?
In summary, whether the impact is from cybersecurity threats, or
from minimized access to crop nutrients or crop protection products,
the Chinese are strategically attempting to build their dominance in
the world over food systems. These moves are coming at the expense of
American innovation but are amplified by our burdensome regulatory
environment.
We need a national agriculture strategy to eliminate these threats
by China to our food systems.
It is time for the United States of America to put our long-term
security over our short-term prosperity.
The Chairman. Ambassador, thank you so much for your record
of service, leadership, and, quite frankly, your input today in
this very important topic.
At this time, Members will be recognized for questions in
order of seniority, alternating between Majority and Minority
Members in order of arrival for those who joined us after the
hearing convened. I am going to defer my line of questions to
the very end. Each of us will be recognized for 5 minutes each
in order to allow us to get as many questions as possible,
starting on the Majority side. I now recognize Mr. Lucas from
Oklahoma for 5 minutes.
Mr. Lucas. Thank you, Chairman Thompson, for calling this
hearing and to the witnesses for testifying today.
During my time in Congress, I have been engaged in and
party to many discussions around the topic of foreign
investment in the United States due to my position on the House
Financial Services Committee. This is due to the committee's
jurisdiction over the Committee on Foreign Investment in the
United States, or CFIUS, that is located within the Treasury.
One of the most challenging aspects of this topic is the
tension between two widely shared goals of protecting our
national security, while fostering a welcoming economic
environment. Congress has attempted to strike that balance
during various reforms of the CFIUS process, most notably 2007
with FINSA (Pub. L. 110-49, Foreign Investment and National
Security Act of 2007) and in 2017 with FIRRMA. Today, I invite
you to join me, to our panel friends, in that discussion.
First to Mr. Daly, then to the rest of the panel, from your
viewpoint, what is the correct balance between national
security, while also allowing the international investment in
our economy? Let's just cut straight to the chase.
Mr. Daly. Well, we have to keep our open investment policy
that has been sustained since President Carter on through now.
One of the greatest strengths we have as a country is the
investment we get from abroad. Trade is very important, but
foreign investment pales it.
That said, as you know, sir, in your oversight capacity,
there are serious national security issues that are drawn from
foreign investment, and Chinese actors have been interesting in
the way that they have found vulnerabilities not only in our
laws and the gaps that proceed from it, but also in their
capabilities to nefariously use third-party actors to gain
entrance and access to places where we have point-of-the-spear
needs in terms of our national security.
So the great balance is to continue with our open
investment policy but be incredibly smart in how we apply our
national security apparatus, especially the CFIUS process.
Mr. Lucas. Either of you other gentlemen wish to touch on
this. Oh, be brave.
Mr. Gackle. Thank you, Congressman, maybe I would just add
from a farmer's perspective, from a grower on two different
areas, as a grower and a landowner and farming land in North
Dakota, the concern around foreign investment is real for
growers as well. That added investment that outside buyers
come--and it is not just China. It is other, out-of-state and
foreign owners, that potentially could drive up the cost of
land and the cost of producing for a farmer in North Dakota, so
there is a concern there.
And then I would say on the input side, there is foreign
ownership of research and development facilities when it comes
to seed, chemical, and other inputs, research and development
facilities that benefit me on the farm when I am able to use
new and improved product. So in those two areas, I think there
is some work to be done probably. And you are right. It is a
tough balance. I don't envy the job that Congress has and the
Administration and finding that right balance, but I think from
a grower's perspective, again, two places to look at.
Mr. Lucas. Any thoughts, Ambassador?
Mr. Tom. Yes, most certainly. So I am going to share my
experiences that I have seen globally in my time serving as
Ambassador, extensive travel throughout the Middle East, a lot
in Africa, and then, over the years, businesses that we had in
Latin America. And I can assure you that the Chinese are
aggressive in their approach in investing in a lot of these
developing nations to make sure they can secure a food source.
I look in particular in Africa. They have nearly 1.1 billion
hectares of arable farmland. The United States is around 150
million. I can tell you as I travel across Africa, we think
that they are the most essential part that China is gaming for
is the minerals. It is not. Longer run, it is them as their
breadbasket.
I look into Central America. I see the Belt and Road
Initiative, how China has invested there. It is same goes, and
that is why we see the growth in Brazilian soybeans moving into
China. The BRIC nations are really forming up together, and it
is through the investment of the Chinese Party.
When it comes back to the United States, I think we have to
be extremely careful where they do invest. We need to have eyes
on this. I only encourage you to please be careful.
Mr. Lucas. Mr. Chairman, I can't think of any more
important subject than what we are addressing today, and I
don't have much time left, but I would say this in closing. I
want to thank you, Chairman Thompson, for your support of my
legislation, the Agriculture Security Risk Review Act (H.R.
3378), that was signed into law earlier this month. This
legislation officially adds the Secretary of Agriculture to the
CFIUS Committee. This is the first formal addition of a Cabinet
Secretary to CFIUS since 2007 and reflects that what we all on
this Committee know to be true, a country that cannot feed
itself cannot defend itself.
And with that, I want to thank you, and I yield back the
balance of my time.
The Chairman. The gentleman yields back. I am now pleased
to recognize, for 5 minutes, Ranking Member Scott.
Mr. David Scott of Georgia. Thank you very much. And, Mr.
Chairman, I want to thank you for letting our Democratic
witness Mr. Gackle go first. We are proud to hear from a farmer
on this issue, and such great remarks, but thank you for
letting my Democratic colleague go first.
And, Mr. Tom, I want to just agree with you. You said some
profound words. You said the world is watching us today on this
very strategic national security issue. And I thank you for
that statement, and indeed they are.
I have learned so much from so many of my colleagues, but
none more than Congressman McGovern on this whole food issue.
He is a national world leader on food security and hunger, and
I am telling you, this is a national issue, and I hope that if
there is one thing that goes from this hearing, it is that we
are putting this issue at the front of the list. People all
over the world are watching us. We are the most powerful nation
in the world. Yet, as Mr. McGovern has said over and over, we
have beds of hunger. Our children, our veterans, people going
hungry, needing food, and then we have these threats.
I am not putting any sugar coating on it. I believe there
are foreign interests out there who are looking at our nation
and trying to find weaknesses wherever they are going. And the
one area we must not and cannot get weak in is providing the
American people with food and keeping this as our number one
trade issue for agriculture and our farmers. And I so
appreciate each of you coming forward with this.
And, Mr. Chairman, once again, I just thank you for putting
this hearing together because it is timely.
Now, let me just ask a couple of questions here. President
Gackle, in your testimony you discuss that the 2018 trade war
led to Brazil--and I mentioned in my remarks--capturing
additional market share in China and other parts of the world.
Now, there has been some discussion of imposing a 60 percent
tariff--Trump, a presidential candidate, has mentioned that--on
Chinese products. So I want to ask you, President Gackle, what
impact do you think that would have on U.S. soybean production?
Mr. Gackle. Thank you, Ranking Member Scott. ASA strongly
believes that any type of additional tariffs from the U.S.
would be bad not just for agriculture in the U.S., but a lot of
other businesses as well. It would just lead to--again, knowing
that there is a balance and that practices in China that need
to be addressed--but that type of step or that level of tariff
or any level of tariff--in 2018, the level was 25 percent, I
believe, if that number is right. I mean, we saw almost an
immediate drop in the market price for soybeans in particular,
close to a $2 drop in just a short time after those tariffs
were announced and then the retaliation from China. So if we
are learning anything from history and from the experience we
had in 2018, you can expect something similar or even more
detrimental when it comes to a price loss for U.S. farmers and
soybean producers.
Mr. David Scott of Georgia. Thank you. And, Ambassador Tom,
you note in your testimony that intellectual property theft is
one of the primary threats posed by China. Given that China
seems unwilling to adhere to WTO rules, what, in your opinion,
are some concrete steps that we in Congress can take to protect
U.S. agriculture technology?
Mr. Tom. Certainly. Thank you for that question. There have
been major steps made throughout the industry. We heard of an
example earlier today about potential theft on data systems.
Farmers use extensively much more data today, whether it is the
constellation of satellites that are operating their tractors,
to communicating data algorithms, to the computers in the
tractor, to the seeding. These all have been compromised. They
have been stolen. And it probably continues yet today.
And then I look at the intellectual property on the seed.
It is one of the biggest advantages we have ever had. But I
know this. The Chinese who didn't have that intellectual
property in the past have it now. So we will see increased
competition. Because of U.S. innovation, we will see increases
in yields in China, probably ten percent on corn here very
soon, displacing more U.S. commodity sales, probably see some
of the same in soybeans.
So the concrete steps we need to take are far-reaching,
much deeper than what we are doing today. We need to be asking
ourselves what aren't we considering? We need to be bringing
the best professionals that understand these data and
cybersecurity threats because if we don't, they are going to
continue to out-game us along the way. But again, we need to
make sure we invest in research and development to stay ahead
of them and make sure we protect those resources. They spend
nearly over $10.4 billion a year on research. We are only maybe
\1/10\ of that in the public-sector. So we need to make sure we
shore up that research and development. If not, we are going to
suffer the economic consequences and potential food security
around the world.
I can tell you in my time with the World Food Programme,
working with them, we were feeding nearly 150 million people a
day around the world at a cost upwards of nearly 2 years ago
$14 billion. That can't continue. But we know one thing. When
people aren't food-secure, they migrate, they get caught up in
human trafficking, and worst-case scenario, they get caught in
terrorist activities.
So, as I said, food security is our national security. We
need to focus on that.
Mr. David Scott of Georgia. Thank you very much. And thank
you for that extra minute, Mr. Chairman.
The Chairman. You bet. I appreciate the gentleman.
I am now pleased to recognize Mr. Kelly for 5 minutes of
questioning.
Mr. Kelly. Thank you, Mr. Chairman. And I want to
recognize--I have two young and aspiring farmers or ranchers
here today, Avery and Aubrey Moore from Laurel, Mississippi,
and I offer special congratulations to Avery on her position as
Vice President of the West Jones FFA chapter.
It is important that we recognize our young and aspiring
farmers, and so I really just want to thank them for being here
and being interested enough in agriculture to come sit in this
hearing.
I echo what you say, Ambassador Tom. Food security is
national security, and the last few years have demonstrated the
need for strong domestic supply chains to ensure American
farmers have continued access to critical products such as
fertilizer and pesticides. In addition to serving on this
Committee, I am a Member of the House Armed Services and the
Intelligence Committee. I promise you, I value the security on
this--food security is national security--as much as I do on
the Armed Services and the intelligence community.
As a result, I am very concerned about the national
security implications stemming from our increasing dependence
on the People's Republic of China for the primary ingredients
in some commonly used pesticides. One of the factors driving
the dependency on the PRC is public policy that encourages the
offshoring of these critical tools for agricultural production.
For any witnesses on the panel today, do you share my
concern about American agriculture's reliance upon China for
many of our crop protection tools? Are there steps we can take
to encourage us to produce these tools here and reduce our
dependency on China and other adversarial countries?
Mr. Tom. Certainly, I would be glad to address that. So,
research shows and USDA numbers show that nearly 70 percent of
our critical crop care products come from global resources,
most of that from China. These are products that, as I said,
protect our plants from weeds, insects, and diseases. We have
offshored them. We have to ask that question first. Why are
they offshored? I would say it is because of the excessive
regulatory burden we have here in the United States. We need
reasonable and durable regulatory systems to function to make
sure that we can have these plants functioning either here or
with one of our friends and allies around the world.
It takes time to bring this back. These critical components
that we use to produce crops and feed our livestock and take
care of our livestock, you are not going to do it overnight. It
would probably take you 10 years to bring the capital back here
and build the facilities and hire the people to get this done.
It is going to take time, but we have to start now. And this
why I say we need a national agriculture strategy to support
food security in the United States and our economy. If we can't
bring these resources back, we will be very, very vulnerable in
the future.
Mr. Kelly. I want to thank--and I am going to ask another
question, but I agree. We are one of the most giving nations in
the world, and I think sometimes people don't understand we
don't just feed our nation, we feed the world. And we are
indiscriminate about not just feeding ourselves, but feeding
others. And some of our competitors are only worried about
their populations and no other populations.
For any of the witnesses, do you know if there exists a
centralized strategy by the Chinese Communist Party to increase
U.S. reliance on Chinese-produced fruits and vegetables? And if
you do, do you know the extent to which China is subsidizing
these ongoing threats to our food supply?
Mr. Tom. I have nothing to add on the fruits and
vegetables. What I will say is this, and I should have gone
further on a discussion on the pesticides or the crop care
products. Right now, it is estimated that because of the
declining economy in China, that they are accelerating their
production of crop care products and potentially could be
dumping those on the market, obviously, subsidizing them. So
that is one of the risks that I see.
In terms of fruits and vegetables, I have no knowledge of
that.
Mr. Daly. Thank you, Congressman. Those are excellent
questions. Unfortunately, I really don't know on the fruits and
vegetable side. I do know that China, where it wants to focus
resources will subsidize it.
I will say and just add, in terms of inputs to our
agricultural dependencies, if you look at some of the vitamins
that are necessary for our livestock, whether that be A or B or
D or E, I mean, we have dependency on China, 70 percent to 90
percent. And that sourcing has just happened over time.
Gradually, U.S. companies and businesses have seen an advantage
cost-wise to move there, but we have seen what that causes in
terms of our supply chains and dependencies and
vulnerabilities.
So as the Ambassador relayed, we need to find ways to make
a thorough examination of our supply chain vulnerabilities,
determine where we need to address matters and prioritize them,
and then find the resources to do it. Obviously, funding is
always difficult, but there are ways to do things without
having the funding to make sure you prioritize in the cyber
realm, in agriculture, what FBI is doing in terms of focusing
on ag versus other portions. So I think just creating that real
thorough analysis--and I know the U.S. Department of
Agriculture and you all are doing that oversight to get them
focused on those vulnerabilities, especially where it concerns
our food supply.
Mr. Kelly. I thank the witnesses, and my time has expired,
Mr. Chairman, and I yield back.
The Chairman. I thank the gentleman.
I am now pleased to recognize my friend from Massachusetts,
Mr. McGovern, for 5 minutes.
Mr. McGovern. Well, thank you very much, Mr. Chairman. I
want to thank our witnesses. Thank you for your excellent
testimony. And I think it is always important to talk about how
important food security is to national security.
There is a lot of attention in this Congress given to
China, and legitimately so, I mean, the security threats that
have posed this issue, the impact on our food security, and a
whole range of things. But sometimes I wonder how serious we
are about really addressing those challenges. I mean, last
week, we did a bill to ban TikTok because we are concerned
about the privacy of our data, but we did nothing to address
the security of our data on all these other social media
platforms, which China could use a data broker to purchase and
get that same information. And, when we talk about--and even on
today's topic, I want to make sure that what we are doing is,
we are really actually doing something that is meaningful, that
will actually protect our land and protect our food supply.
I was the co-chair of the Tom Lantos Human Rights
Commission for many years, and for 4 years, I was the chair of
the Congressional Executive Commission on China. And I have
authored the Uyghur Forced Labor Prevention Act (Pub. L. 117-
78) and Tibetan Policy and Support Act (Pub. L. 116-260).* I
know what it means to act when we have serious disagreements
with the Chinese Government. Both those bills became law.
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* Editor's note: H.R. 4331, Tibetan Policy and Support Act of 2019
was incorporated into Pub. L. 116-260, Consolidated Appropriations Act,
2021 at Division FF--Other Matter, Title III--Foreign Relations and
Department of State Provisions, Subtitle E--Tibetan Policy and Support
Act of 2020.
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And I also recognize at the same time that we have a trade
relationship with China, and that is important. And we want to
make clear that we don't want to seek a wider conflict. So, I
feel like I have a little bit of a leg to stand on when I
question kind of the seriousness of much of what we do here.
Mr. Daly, I am just kind of venting. I am not going to ask
a question, but I want to say I appreciated the thoughtfulness
of your testimony and the expertise you bring to this topic.
But in your written testimony, you mentioned the 2013
acquisition of Smithfield Foods by what is now called the WH
Group, a Chinese company, that, as Chairman Gallagher noted in
his testimony, has ties to the PRC Government. And Smithfield
now controls about \1/4\ of all U.S. hog production, and it
exports a significant quantity of pork to China, tightening our
domestic supply. And I think it is appropriate for this
Committee to carefully consider what impact that has on U.S.
food security.
Which is why it sounds to me that we have--some of my
friends on the other side, led by some on this Committee who
talk tough on China, are carrying the water for Smithfield.
Many people listening may be familiar with California's
Proposition 12, which is a farm animal welfare law that outlaws
the most inhumane confinement of pigs in California. 2022
polling shows that 80 percent of U.S. voters favor a law like
Proposition 12 in their state. I am from Massachusetts. In
Massachusetts, we have a similar law known as Question 3.
Now, pork producers, led by Smithfield, were unhappy with
the new standards and went to the Supreme Court last year. And
they lost. And they lost. So now they have come to Congress to
overturn the will of California and Massachusetts and dozens of
other states that have followed suit. We have this bill called
the EATS Act (H.R. 4417/S. 2019, Ending Agricultural Trade
Suppression Act), which is the latest attempt to overturn
states' rights to set their own animal cruelty standards. And
now, just last week, I heard our Chairman tell a news outlet
that he wants a fix to Proposition 12 in the farm bill. We just
heard the Governor of South Dakota talk about states' rights
and how in South Dakota she wants a state CFIUS plan. And
nobody objected to that, so if nobody is objecting to a state
CFIUS process, why would you object to a state putting controls
on animal cruelty and, again, really, at the insistence of this
Chinese-owned company?
To my colleagues, I think it is kind of hypocritical to
talk tough about when it comes to the influence of the Chinese
Government and our food system while actively helping some of
the entities that they are supposedly concerned about. So you
can't just care about food security when it is politically
useful or suits the business interest that you may be beholden
to. It has to be all the time.
And I just want to add one other thing based on what
Congresswoman Slotkin said. I want to make another point about
foreign farmland ownership, which is getting a lot of attention
today. I am open and certainly willing to work with my
colleagues on limiting investment of foreign governments in
U.S. farmland, but we have to be very careful that those
prohibitions do not target people in this country based on
their national origin or perceived national origin.
And without objection, I would like to submit into the
record a May 2023 article in Just Security by Edgar Chen
entitled, With New ``Alien Land Laws'' Asian Immigrants Are
Once Again Targeted by Real Estate Bans.
So I will just close by saying, there was a time in our
history where we excluded people from land ownership based on
prejudice and unfounded suspicions of disloyalty. I hope we
don't go back to that.
And again, I thank you all very much for your very
informative testimony. Thank you, Mr. Chairman, for your
indulgence.
The Chairman. Without objection, we will enter that into
the record.
[The article referred to is located on p. 131.]
The Chairman. The gentleman's time has expired.
I will remind you, though, that this is about ties to the
Chinese Communist Party. As I said in my opening statement,
this not targeting individuals of any ethnic origin.
I am now pleased to recognize actually Mr. Finstad for 5
minutes.
Mr. Finstad. Thank you, Chairman Thompson and Ranking
Member Scott, for holding this important hearing today, and
thank you to our witnesses for joining us.
Mr. Gackle, I want to say thank you. I am a fourth-
generation corn and soybean farmer from southern Minnesota
raising the fifth, and it makes me very happy to know we have
someone like you at the helm of the American Soybean
Association leading our efforts, fighting for our commodities,
and, quite frankly, fighting for our families and the future of
our families. Nothing is going to make my life more complete
than watching my fifth generation take over our farm. And that
is not for me. That is for grandma and grandpa and great
grandma and grandpa, and you are helping that happen, so thank
you.
And this issue is so important to that. So I want to talk a
little bit about my perspective and hopefully hear from you. So
I understand the importance of the threats that we are faced
with here with the Chinese Communist Party and what it really
does to farm country. And it is time for us to take this
seriously. We must work swiftly to move, I guess, differently
and more effectively of getting most of our eggs out of the
basket of China
And the best way to describe this, I will just say, I mean,
look at what we went through a few years back when we were
struggling to find the computer chips that were needed to start
our new F-150s in farm country, our new John Deere tractors.
And I tell people quite often, I am like, now think if that was
eggs, bacon, turkey, if we were that reliant from a food
security standpoint in regards to, quite frankly, folks that
might not like us tomorrow and how really that shows the
importance of the American farmer and how we have to continue
to protect and fight for our way of life.
So with that said, there is a lot of ways I think that we
can maybe unwind this, but, Mr. Ambassador, as you know, the
White House's 2023 National Cybersecurity Strategy and the
director of National Intelligence Annual Threat Assessment both
emphasized that the People's Republic of China is the most
advanced, active, and persistent cyber threat to the United
States. Specifically, an increase in cyber attacks targeting
the American agriculture and food sector highlights a serious
threat to our ag economy.
As a critical infrastructure sector, do you believe that
the food and agriculture sector is adequately prepared for, and
possesses the ability to respond to, a major cyber attack
against our key suppliers in the ag industry?
Mr. Tom. No, we are not. I know we have taken major steps
to protect this from a private-sector perspective. I appreciate
any involvement that the government can be on this. I know
there is an institute at Purdue University called the Krach
Institute that works on a lot of this because we need to make
sure we can manage RFP and hold it close, but we are not doing
enough yet today.
And I add this. If we really think that we are going to see
less digital agriculture in the future, we are wrong. It is
going to continue to accelerate at a very rapid rate. The
velocity will be essential.
Mr. Finstad. Yes, thank you for that Ambassador.
And just in my short tenure running the farm, my father
retired when the tractor started driving itself. My 15 year old
son plants corn till 3:00 in the morning because of that
technology. That technology is an amazing advancement in our
farm, but it also poses a potential new threat that we haven't
dealt with before.
Along these lines, Mr. Daly, in January, I introduced the
Farm and Food Cybersecurity Act of 2024 (H.R. 7062) with
Congresswoman Slotkin, which would direct the Secretary of
Agriculture to conduct a biannual study on cyber threats and
vulnerabilities within the ag and food sector and conduct an
annual cross-sector crisis simulation exercise. Due to the
wide-ranging national and economic security threat that China
poses to this sector, coordination between Federal agencies and
sharing timely actionable threat information with private
industry is more critical now than ever.
From your perspective, how well is the government sharing
threat intelligence with the industry? And do you believe USDA
can play an elevated role in helping the ag industry prepare
for future threats?
Mr. Daly. Thank you, Congressman. Excellent question. I
want to commend you on that legislation. I apologize. Thank
you, Congressman, for that question. It is an excellent
question. I want to commend you on the legislation you
proposed. It is critical. Understanding the cybersecurity
threats that are part of our agricultural community, our
ability to produce is direly needed.
Look, at my time in government, the intelligence-sharing
that I saw happened a lot with defense contractors and also
within the banking community, so they were industries that sort
of had the benefit of that intelligence-sharing. But if you
look in terms of that intelligence-sharing, that cyber
awareness in terms of the agricultural community and with the
Department of Agriculture, it has been lacking, and your bill
is extremely necessary to get it on the right track. I know the
Department of Agriculture has just stood up an information-
sharing division, and they are taking measures to improve that
intelligence. But given China's capabilities--and FBI Director
Wray relayed this in terms of their ability to shut off our
critical infrastructure, water, power that affect our farmers
and ranchers and producers, we need a full assessment. So your
bill goes exceptionally toward that direction.
Mr. Finstad. Thank you, Mr. Chairman. My time is up. I
yield back.
The Chairman. The gentleman yields back.
I am now pleased to recognize the gentleman from New York,
Mr. Langworthy, for 5 minutes.
Mr. Langworthy. Thank you very much, Mr. Chairman, and I
appreciate all the witnesses for being here today.
I represent western New York in the southern tier counties
of New York State along the Pennsylvania line, and I am deeply
concerned about the unrealistic plan proposed by our Governor
to reduce economy-wide greenhouse gas emissions in New York by
40 percent by 2030 and no less than 85 percent by 2050. This
timeline simply isn't feasible for many industries in rural
upstate New York. But what is particularly alarming in his plan
is our Governor's aggressive push towards electrification in
our agriculture sector, an agenda that I believe could have
very serious consequences.
As you are all aware, diesel fuel plays a crucial role in
powering the tractors, combines, and other equipment that are
essential to our farmers. Farming is a round-the-clock
endeavor, as my colleagues have said, and requiring our farmers
to rely on more heavily electric charging vehicles ignores the
operational realities of farming and the inconvenience of
having to park equipment for hours and hours on end to charge.
And with all that said, I raise these concerns because it
is important to recognize China's significant role in this
sector, particularly the mineral and battery supply chains, as
these are crucial components for all EV technology. If we start
pushing an all-electrification agenda at the state and Federal
levels, we are not only hurting our farmers, we are also
inadvertently contributing to China's influence and control of
our entire economy. I see this as a lose-lose scenario for our
farmers, for all of agriculture, and, frankly, for our national
security.
And with that, Mr. Gackle, could you discuss the
feasibility and potential impacts of implementing an aggressive
electrification agenda like the one New York State is
contemplating, how that would impact your members? And
additionally, could you also address whether pursuing such an
agenda in the U.S. ag sector might lead to increased dependency
on Chinese supply chains, and what that would mean to our
national security?
Mr. Gackle. Thank you, Congressman, very good questions and
points. I will speak from my farmer and producer and grower
perspective in rural North Dakota. There is a time and a place
for electrification and electric vehicles, and that is going to
probably be more widely adopted on the coasts, larger urban
areas. But for me as a farmer and as a producer in the middle
of North Dakota, from the trucking to the tractors, the
combines, rail, what we rely on to move product from our farms
to our elevators to our markets, those types of industries will
probably be later adopters when it comes to electrification.
So what we have to offer in that space as farmers, as ASA,
the significant addition that we provide to the liquid fuels
market when it comes to renewable diesel and biofuels. And that
just--again, it is another testament of what the U.S. farmer
can produce. It is an example of where we are trying to
diversify markets and diversify domestic demand, so not so
reliant on foreign markets, even while we tried to expand
those. But again, just an example there of what the American
farmer is doing to transition this time period in that
transportation fleet.
And then the risk of relying on China for the
infrastructure or the materials for further electric vehicle
adoption, like any input, anything we rely on from foreign
markets, there is always additional risk there if you are not
able to produce it domestically.
Mr. Langworthy. Very good. Thank you.
Mr. Daly, I would like to open this question up to you as
well. We often hear that saying food security is national
security, and I am deeply concerned that continuing to rely on
China for these critical minerals puts us at a significant
risk.
Mr. Daly, could you also address whether pursuing an
electrification agenda in the U.S. ag sector might lead to
increased dependency on Chinese supply chains, thus
compromising national security?
Mr. Daly. Thank you, Congressman. That is an excellent
question. Currently, we are in a large deficit in this
particular technology, especially given battery technology that
China effectively dominates right now. So if we don't get our
policy right, it creates a serious dependency that creates a
real vulnerability in our agricultural production. That is why
we need to focus on it. And I know there is a concerted focus
on building out America's capabilities in this respect, but we
just have to put the resources to it.
Mr. Langworthy. Very good. And I know you may have touched
on this already, Mr. Daly, but could you reiterate some of the
national security concerns regarding Chinese acquisitions of
agricultural and other land holdings near our military bases?
Mr. Daly. Sure, absolutely. Again, thank you, Congressman,
for that excellent question. As this Committee is well aware,
the Fufeng transaction that happened in North Dakota was a
serious indication of what China can do in terms of what it
wants to do in terms of its placement. In my experience in
CFIUS and in CFIUS transactions, there has been a number of
significant Chinese acquisitions where they have gone to
acquire land or farmland that is near a military facility, Top
Gun facilities.
A number of transactions occurred in Nevada, under the
label of a gold mine, that actually was meant to observe our
nuclear facilities and capabilities, as well as in Oregon, the
Ralls transaction involving a wind farm. Wind farm towers can
have devices put in there to see what we are doing. And the
facility they were looking at that would have given site to, I
mean, that was a critical facility to the United States in
terms of what we are doing in defense of Taiwan.
So they are strategic, they are smart, they have studied
us, and they will continue to do so, so we need to remain
vigilant in terms of where our resources go.
Mr. Langworthy. Thank you very much, and I yield back. Mr.
Chairman.
The Chairman. The gentleman's time has expired. I am
pleased to recognize the gentleman from California, Mr. Costa,
for 5 minutes.
Mr. Costa. Thank you very much, Mr. Chairman, for holding
this hearing, Chairman Thompson and Ranking Member Scott. I
think it is timely for a lot of reasons that I think we are all
aware of.
Members of this Committee have gotten used to me saying, as
a third-generation farmer from California, that food is a
national security issue. I get frustrated, along with many of
my colleagues on this Committee that too often the majority of
Americans don't look at food being a national security issue
because we do it so well, with less than four percent of our
nation's population directly involved, but it is. And I think
it is important that this Committee focus on the danger that
China poses to America in terms of its impact on American
agriculture and therefore put food on America's dinner table
every night.
Let me just kind of give you my thoughts, and then I have a
couple of questions I want to ask. I really think that the best
strategy for this--because China is an adversary, they are a
competitor, and they are a vast market, and so regardless of
what Administration is in office, they have that challenge.
This is an adversary. Let's make no mistake about it.
Number two, we compete against one another, and I would
argue they don't compete fairly. They don't play by the same
rules under the WTO, and they are engaged in the theft of
technology and other types of efforts, but yet, they are a vast
market. And so how you balance those three factors for any
Administration is a problem.
The Bush Administration and then followed by the Obama
Administration tried an effort that I thought had merit. That
was the Trans-Pacific Partnership where you engaged other
nearby countries to leverage China. I think that is far better
than a tariffs war that ultimately the last President got
engaged in. And why? Well, everybody has leverage on a tariff
war, and they just keep upping the ante, but if you want to
really have an opportunity to deal with this market, if you
want to have an opportunity to deal with the factors of
competition and realizing that this is an adversary, I think
the TTP was a far better strategy.
Yes, the Market Access Program is helpful to our American
farmers and processors, and it is oversubscribed, and I have
legislation that would double the funding for that. Whether or
not that can come to pass with our challenges with the farm
bill remains to be seen.
So let me just ask you, Mr. Daly, for starters, your
testimony focused on China and their engagement on the
agricultural supply chain. The pandemic, I think we really
understood that our supply chain is in need of assistance at
every level and especially in agriculture. With biotechnology
and plant breeding tools and other potential to help producers
meet challenges by reducing greenhouse gases and emissions and
foster resilience to climate change in the agricultural supply
chain, what are your thoughts? I mean, because too often I
think China is a bad actor. They are opaque. They are
politically driven in their regulatory system, and it limits
innovative technologies, and their theft of American
technology. And I don't even want to start with artificial
intelligence and the problems with algorithms. But besides
purchasing United States ag land--and we heard testimony in the
earlier part of the hearing--how do you create a fair, level
playing field in a minute or less?
Mr. Daly. Yes, sir. Thank you, Congressman. I will.
Mr. Costa. We have a time problem.
Mr. Daly. It is difficult, and it is multifaceted, and you
just have to take it sector by sector, issue by issue in terms
of making it a level playing field with China in terms of--we
have to, A, be smart in terms of what we address in China----
Mr. Costa. You acknowledge it is not a level playing field?
Mr. Daly. It is not a level playing field, absolutely. The
Chinese are a state-driven economy. They subsidize where they
want to subsidize, and they will destroy markets and our U.S.
production capabilities where they want.
Mr. Costa. Do you think the supply chain issues--and for
the rest of you, we passed the bipartisan $1.2 trillion
investment in infrastructure in the last Congress, and I think
when we look at our ports and harbors and we look at our supply
chains, California's dairy industry is very dependent upon
those feed trains coming in every week to California. But the
whole essence of the supply chain and food development
production value-added, that we invest some of that
infrastructure in our infrastructure?
Mr. Daly. Yes, I think a number of bills that were passed
by Congress in terms of bringing up and strengthening our
infrastructure, absolutely critical. There is a lot we have to
do in terms of our capabilities there.
Mr. Costa. Mr. Chairman, my time has expired, but I don't
know if any of these other witnesses care to comment about how
we use--to improve our food supply chain and dealing with the
competition of China.
Mr. Tom. Well, I think it is clear in the United States the
reason we are a dominant power in food systems is because of
our natural resources. We have a large concentration of highly
productive soils. We have 14,800 miles of navigable waterways,
much more than any other nation, Germany or China, and we need
to leverage those resources to be competitive in a world space
on selling our commodities and crops and food around the world.
When I look at that infrastructure, then I look at our
dams, our locks, our ports. They are aging. And I know the
infrastructure bill was supposed to make an impact there, but
if you look at the civil society engineers association, they
come out with reports that we really get a D rating on our
infrastructure.
Mr. Costa. Well, currently, but, I mean, we just provided
the funding. We are now ambitiously trying to do just what you
say. We are doing it in California. We are rehabilitating a lot
of aging infrastructure and water. I don't know if you care to
comment. My time has expired.
Mr. Gackle. Just quickly if there is time, Mr. Chairman,
just to say the ag community and producers and specifically ASA
are actively involved in promoting and advocating for
investments in infrastructure, whether it is ports or rail or
rivers or dams. The Water Resources Development Act that
Congress reauthorized is another important tool to help farmers
and to make sure we have the necessary infrastructure to move
our product and move it efficiently and sustainably.
Mr. Costa. Thank you, Mr. Chairman.
The Chairman. The gentleman's time has expired.
I have been notified that we are in the middle of a vote
series. Three votes have been called about 10 minutes ago, so
we are going to go to one more question, and then we are going
to recess. And we will be returning immediately after the third
vote.
And so I am pleased to recognize the gentleman from South
Dakota, Mr. Johnson, for 5 minutes.
Mr. Johnson. Thank you, Mr. Chairman. I will start with Mr.
Gackle, and I will note that I am on the Select Committee on
the Chinese Communist Party that is led by Mr. Krishnamoorthi
and Mr. Gallagher, who we heard from earlier. And I have gotten
a little bit of a reputation, Mr. Chairman, on that committee
for talking about soybeans all the time because it is really
hard to overstate the role of soybeans in this relationship
between China and the United States.
And, Mr. Gackle, that is why I was so pleased that you
talked about soybeans, as I think you said, the prime casualty
of the 2018 trade war. In that environment, we know how
important diversifying our markets are. I want to be polite to
Ambassador Tai because she is brilliant and hardworking. I
think it is fair to charitably say that the trade agenda, at
least with regard to new trade deals, has been pretty lukewarm
for this Administration.
If you all we are going to look at market access, are there
specific markets that you think are ready to pop and that would
reduce the amount of leverage that China has over our nation
and over soybean growers?
Mr. Gackle. Thank you Congressman, very good questions, and
I am glad you asked them because there is a lot of work that we
are doing in that area. It is important to remember we are
involved in 112 different countries, 112 different markets.
When I say we, it is U.S. soy. It is not just ASA. It is other
soy partners that we work with, making those investments,
trying to find new and emerging markets. We have a program
within American Soybean Association, WISHH, the World
Initiative for Soy and Human Health. It is a very important
program, and it partners with farmer-invested dollars through
the checkoff----
Mr. Johnson. But what markets are ready to take that next
leap?
Mr. Gackle. Sure.
I think, South Asia, Indonesia, Japan, Korea, there are
places there. I think North Africa and Europe, there is some
potential there. There are some regulatory issues with getting
more into Europe, but they are a big buyer. Mexico is a big
buyer, so there are opportunities in different places, and that
is long-term. It takes a long time to build a market, so in the
short-term, to replace the scale of China, just very difficult,
but, be assured, we are working with as many countries----
Mr. Johnson. Well, and let's be honest, 60 percent of South
Dakota's soybeans go to Asia.
Mr. Gackle. Right.
Mr. Johnson. China is overwhelmingly the purchaser of
those. Of course, replacing the markets, we are all in on the
joke. You are not going to replace that market. But I do think
if you reduce the concentration, then that does help make sure
that we are not at such a power asymmetry.
Mr. Gackle. Yes.
Mr. Johnson. Ambassador Tom, feed in here. What are your
thoughts?
Mr. Tom. Certainly. So, in terms of new markets, I agree.
The Southeast Asia market is a market we need to look to. We
need to look at some of the places in the northern part of
South America. Colombia is a good trading partner. We have some
real problems with Mexico right now. I hope we get those
resolved sooner than later.
Mr. Johnson. Yes.
Mr. Tom. And I will say this as well. There is quite a bit
of work going on in Africa. I agree. We have to diversify our
customer base. I think we are already on the road to losing
more of our market share into China. We have to be aware of
that. I don't know if we can get in front of it. We need to do
what we can to retain that trade, but we cannot sacrifice our
own national security and our food security in our own country,
so we have to make sure we stay on top of that.
Mr. Johnson. Well, and I would just note, Ambassador, you
are exactly right. And we should all be underlining the
importance of American soft power. When we talk about the
global south, when we talk about Southeast Asia and Africa, we
cannot allow unfettered Chinese leadership in those areas.
People, they understand the almost a deal with the devil they
are making in the Belt and Road Initiative or in other Chinese
deals. They are looking for American leadership, and
unfortunately, too often, America is receding back into
ourselves a little bit. I am sure you have seen the same
numbers I have, Mr. Ambassador. In public opinion surveys in
Africa, more respondents will say they view China as the leader
of the world than America. That is a major problem.
I interrupted, sir. Other thoughts on that topic?
Mr. Tom. Yes, in terms of Africa, yes, we give--actually,
we put more money into Africa than China does, and we don't ask
anything in return.
Mr. Johnson. Yes.
Mr. Tom. China will always go in and do something, whether
the World Bank came in and gave a loan to a certain particular
nation, they default on that loan, China comes in and creates a
death spiral on it. Then they end up getting mineral resources
and other resources that the country has in turn and taking on
that loan, too, at a very big discount. So we do have a threat
of them continuing to ask for something every time they go to a
nation. We ask for nothing.
Mr. Johnson. Thank you very much. I wish I had another 5
minutes, but my time is running low, Mr. Chairman, and I would
yield.
The Chairman. The gentleman yields back.
The Committee stands in recess until immediately after
casting the third vote in this series.
[Recess.]
The Chairman. All right. The Committee will reconvene. My
appreciation, and, quite frankly, I am thankful for your
tolerance with the recess that we did for the three-vote
series.
And now I am pleased to recognize the gentlelady from
Connecticut, Congresswoman Hayes, for 5 minutes.
Mrs. Hayes. Thank you, Mr. Chairman.
Over the past few decades, China has significantly
broadened its economic and political influence, especially in
the agricultural sector. The Belt and Road Initiative is a
massive China-led infrastructure project that aims to stretch
around the globe. The project has expanded to Africa, Oceania,
and Latin America in the decades since its inception.
According to the American Enterprise Institute, China
global investment tracker, China has invested nearly $77
billion in foreign agricultural products between 2013 and 2023.
Currently, 783 million people across the globe are facing
chronic hunger and growing more and more dependent on the
agricultural structures developed by China.
Ambassador Tom, during your time with the United Nations
agencies, you saw firsthand the importance of global food
security. Why is it important for the United States rather than
China to lead the world in solving global food security?
Mr. Tom. When I look at participation--first of all, I
served the State Department, the United States of America, and
the President of the United States. I didn't work for the World
Food Programme, but I did have oversight over them.
To answer your question, I understand why the Chinese are
doing what they want to do to improve their food security. I
mean, I think they have been through the last century a couple
famines that have affected. And we have seen where famines can
turn governments around. There was the French Revolution, and
one happened in Russia, obviously, and many others. But the
reality is they are going to continue to invest, and they want
to make sure that they capture as much U.S. innovation to
accomplish their goals as they can, and they don't want to pay
for it.
Mrs. Hayes. So what are some best practices that we can
employ to build trusting relationships with other countries?
Mr. Tom. I think what we have to do is, first of all, I
believe we need to diversify our trading partners. That is one
thing we need to do. Best practices would also include making
sure that we have the Foreign Agricultural Service at the USDA
representing all of our agricultural commodities and products,
travel the world and make sure that we continue to increase
exports of our products here.
Mrs. Hayes. Thank you. Our leadership at the international
level depends on our relationships with our allies and those
who look to us for guidance. I have long been a supporter of
programs like Food for Progress to support U.S. commodities and
developing democracies who are working to build their
agricultural sectors. If these programs and collaborations with
developing countries were underfunded, can we expect China to
step into that role?
Mr. Tom. No, they will not. If you want look to at funding
from China in food security issues, in one hand, they will tell
you they are the second largest economy in the world, on the
other hand, they will say we are a developing economy; we can't
contribute to solving world hunger. The U.S. pays anywhere from
40 to 60 percent of the World Food Programme budget, which,
like I said, over a year ago was around $14 billion. If we can
do anything, it is we need to create resilience and capacity in
food systems, but it needs to be driven by the private-sector,
not the U.N. organizations. The private-sector holds the IP,
the knowledge, the capacity financially, and the ability to
improve food systems, and that is where we really need to
support growth in food systems.
Mrs. Hayes. Thank you. I listened to the last panel and
this panel as well, and I think one thing is clear. We have to
discuss food policy as part of any national security
conversation. Anyone who has watched this Committee for more
than 30 seconds know that hunger, food security, feeding
programs, those are issues that are near and dear to me, and
they are not just about charitable responses. It literally is
national security. So I thank you all for being here today.
Mr. Chairman, I yield back.
The Chairman. The gentlelady yields back.
I am now pleased to recognize the gentlelady from Illinois,
Mrs. Miller, for 5 minutes.
Mrs. Miller of Illinois. Thank you, Mr. Chairman. Thank you
all for being here today. I am so glad to see that this topic
is getting the attention that it deserves.
So last year at the beginning of Congress, the first bill I
introduced was to ban China and our adversaries from purchasing
U.S. farmland. I am extremely concerned about the loss of
production agriculture in the United States. We are losing
fertile farmland to solar panels because of the green bad deal,
and our adversaries are buying up our farm ground. As a farmer
myself, it is extremely important to me that we are preserving
the family farm for the next generation and not letting China
buy our farmland or covering it with solar panels.
Ambassador Tom, I know you are concerned with China's
growing influence in Africa, especially in their agriculture
industry. Can you talk more about how you see this as a threat
to the U.S. food security?
Mr. Tom. Yes, I see it as a threat in a number of ways.
Obviously, we want to restrict as much Chinese ownership of our
land as we can. We need to make sure that--there are many ways
that they can have the ownership of this land through different
structures that hides the identity of who actually is involved
in that process, so we need to do a better job there. I am not
sure USDA has the resources today--maybe they do--to accomplish
that.
But to your point, we have lost 150 million acres of arable
farmland in the United States since the early 1980s, 150
million. Today, we are using losing at the rate of almost 1,800
acres an hour.
Mrs. Miller of Illinois. Wow.
Mr. Tom. It has accelerated during the stimulus bills that
came out.
But I also look at this. I look at how much land the
Federal Government has control of as well, so we need to make
sure that American farmers still have access to the land that
we need to have to produce the food, fiber, and energy not only
for the United States, but for the world.
Mrs. Miller of Illinois. Absolutely. And I want to say that
I am here to represent food production and to defend our
ability to feed ourselves. Do you think this poses a similar
threat to our energy sector as China's actions in Africa also
allows them to monopolize critical mineral production?
Mr. Tom. I have seen it all across Africa. A year ago, I
was in Sudan, and we saw the Wagner Group. We saw China. I have
traveled extensively throughout Africa, and that theme
continued everywhere I went. And the conditions people were
working in, the mining of materials, I think they control like
65, 70 percent of those critical minerals, and of course, take
them back to China, process them, and then sell them to the
United States for solar panels to take away farmland in the
United States. We just lost 600 acres this last winter to solar
panels. It has got to stop.
Mrs. Miller of Illinois. Absolutely.
Mr. Tom. The crops we were producing, we are sinking as
much carbon as those solar panels are probably going to produce
in terms of changing the climate. So we need to pay attention.
Mrs. Miller of Illinois. I also have a bill to prohibit
solar panels from going on Class A and Class B farm ground
(H.R. 4257, No Solar Panels on Fertile Farmland Act of 2023).
Do you think that the push for, quote, ``more green energy'' is
making us more reliant on China since we need critical minerals
to produce solar panels?
Mr. Tom. There is no question that that is all a part of
it. The thing is, I think what we need to look at is what are
the costs to implement these policies to bring green energy to
the United States? It comes at a large cost to obviously
construct solar panel fields, the wind turbines, all these
different things. And I am all about saving the environment. I
am all about doing what we can to protect that world we live in
today. But the reality is, not only are we going to pay for
this through incentives to put these solar farms in, but at the
same time, that energy is going to be much more expensive. So
whether it is energy or food, these climate initiatives are
going to be inflationary to food costs and energy costs, and it
will affect those that can least afford it the most.
Mrs. Miller of Illinois. Yes, and everything goes back to
energy. China's human rights record is terrible. We don't need
to do things to strengthen them. And we all know that they are
opening a coal-fired plant every week, while we are being
driven to these policies that make energy unaffordable and
unreliable, and then not only that, taking our productive farm
ground out of production. This is a critical national security
issue, and we cannot let China take control of our farm ground
or our energy sector. Thank you so much.
Mr. Tom. Thank you.
The Chairman. The gentlelady yields back.
I am now pleased to recognize Ms. Adams for 5 minutes.
Ms. Adams. Thank you, Chairman Thompson, and also to the
Ranking Member. To our witnesses, thank you very much, for both
panels actually. We had an earlier panel.
I do want to get clear on one thing because I worry that we
are getting our timelines wrong. The tenor of today's
testimonies seem to suggest that China's entry into the U.S.
farmland market was the beginning of agricultural consolidation
and small farm exclusion. However, decades of corporate
concentration in the food system are missing from the
conversation. A brittle, bottlenecked food supply was the norm
even before China came into the picture.
For example, Mr. Tom mentioned that the world's biggest
meat packer, JBS, a Brazilian company, and the cyberattack it
faced--which was done by Russia, by the way--and it halted
slaughterhouse activity here with severe ramifications across
the supply chain. A more distributed and diverse supply chain
would be much less vulnerable to such attacks.
We have also heard a lot today about Smithfield's takeover
by China, as if it wasn't already the world's largest pork
producer when it was an American company. This is in addition
to what Governor Noem raised earlier about chemical fertilizer
and processing companies being bought up. And Mr. Gallagher
mentioned China's owning of Syngenta as creating an untenable
dependency.
It is interesting to me that it is a burdensome regulatory
environment that Mr. Tom identifies as a source of China's
attempts to build its dominance when 100 years of poorly
enforced antitrust laws or a lack of regulation has
concentrated our food system so much that it has now become
most vulnerable to foreign threats.
And so, having said that, my first question for the panel,
if you could briefly respond, is do you believe that that
market concentration or vertical integration is a threat to
national security? Each of you.
Mr. Tom. I will start out, I guess. I am a family farmer. I
am seventh generation. Our family has been in this country ten
generations. We have been farmers ever since. And, yes, we have
grown. We have been successful. We have invested. We have taken
risk. Sometimes, not always the best risk. We have failed. But
at the end of the day, we are a family farm. Are we larger?
Yes, but it is because we took those risks, and we were
successful. We also worked hard. So yes, consolidation has
taken place, but there is plenty of room for all size of
farmers in United States. That is what I like. I started with
nothing. I came into the family farm, I grew my own acres, I
bought my own equipment, I took the risk, I took out bank
loans, I took out a Farm Service Agency loan to buy my first
farm. But we have grown over time.
Ms. Adams. Okay.
Mr. Tom. Farming requires a lot of capital, and it requires
a lot of people, but it also requires a lot of investment and
education to make sure you are a viable enterprise.
Ms. Adams. Thank you. Gentlemen? Yes, sir.
Mr. Gackle. Thank you for the question. It is very complex
and complicated, and I agree with Mr. Tom, that there is going
to be all sizes of farms, relatively speaking, when it comes to
consolidation. They will probably be winners and losers to
that, but rural America--and it is a little bit different than
it is in North Dakota than it is in Indiana, of course. But, to
the extent that consolidation leads to further loss of certain
size farms in different parts of the country, that could be
something that would cause some concern. But I think you are
right. Our ag system is going to require all sizes and all
places more than likely.
Ms. Adams. Thank you. Would you like to comment, sir?
Mr. Daly. I agree with the gentlemen here. Both being
farmers, they know on the ground the importance of this issue
that you raise and how it should be balanced and approached.
Ms. Adams. Okay. Let me move on real quickly. There are
valid concerns about speculative land ownership driving up
farmland prices in a way that it is already forbidding people
in this country who want to own land or to farm from doing so,
mainly Black, indigenous, and other farmers of color and new
and beginning farmers. And so I have a Justice for Black
Farmers Act of 2023 (H.R. 1167) that would require the
Secretary of Agriculture to conduct annual reporting about
corporate land investment and ownership.
So would you say that we have comprehensive tracking of
land ownership in the U.S.? Anybody can answer this. We have 2
seconds.
Mr. Daly. Are we tracking land ownership in the United
States?
Ms. Adams. Yes.
Mr. Daly. Yes. In terms of--I mean, the Department of
Agriculture has a process of tracking sort of farmland
acquisitions and ownership. And obviously, the GAO, per this
Committee's leadership, was instructed to see if they are doing
it right, and there is improvements that have to be made.
Ms. Adams. Thank you very much. I am out of time. Mr.
Chairman, I yield back.
The Chairman. The gentlelady yields back.
I now recognize the gentleman from Tennessee, Mr. Rose, for
5 minutes.
Mr. Rose. Thank you, Mr. Chairman, and I thank Ranking
Member Scott, and thank you to our witnesses for your time and
indulgence with our schedule today.
I will go ahead and dive right in. Ranking Member
Krishnamoorthi's written testimony stated that agricultural
technology is a prime target of intellectual property theft
because American technology and farming are the best and most
productive in the world. Ambassador Tom, can you elaborate on
specific examples that you are aware of where there have been
intellectual property theft attempts or successes by China in
the agricultural sector?
Mr. Tom. Well, certainly. I think in the world we live in
today, whether it is your banking, whether it is your Amazon
account, or whatever it may be, we have constantly got to be
altering and modifying and improving our systems to protect our
data and our intellectual property. And when I look at--I will
give you an example. As I stated in my opening testimony, we
have had seed stolen. They will continue to find out new ways
to do it. I think we need to get more creative in trying to
understand how they are doing this.
But when I look at what we are doing on the farm today, the
level of data that we produce on a farm to increase
productivity, make sure we lessen our carbon footprint, make
sure that we use less fuel, less fertilizer, less seed,
everything we need to do, those are proprietary algorithms. And
with China's investment now in IP, in the seeds, and our access
to fertilizer chemistry, they are going to continue to try.
But, they want to get hold of our IP of how we produce it on
our farm to improve productivity.
One example--I will give you this. When I first arrived in
Rome, I went to a diplomatic event. The Chinese Ambassador came
up to me with a piece of paper, and he said, do you recognize
these fields? And I said, yes, I sure do. Those are my fields
back in Indiana. He goes, I just wanted to ask. That was a shot
across the bow. That really woke me up to understand that they
have access to more we than we think.
Mr. Rose. And, Ambassador, looking ahead, what long-term
investments can the U.S. foster or policies can we adopt to
maintain our edge in agricultural technology and mitigate the
threat of Chinese dominance in this critical sector of the
economy?
Mr. Tom. Yes, it is like I said in my one comment earlier,
China is spending about $10.2-$10.4 billion a year in research
and development. Today, we leave most of that up to the
private-sector, which is good, but I think we need to see more
collaboration between the university system and extension, and
we need to invest more in research and development between the
private and public and our universities and our land-grants, to
make sure we remain competitive. If we don't, we are going to
see increased productivity in China that is going to supplant
our markets around the world.
Mr. Rose. Thank you. Shift gears, Mr. Daly, in your written
testimony, you mentioned that China restricts nearly all
foreign investment into its agricultural sector unless
companies incorporate in and share data with China. Can you
elaborate on how this lack of reciprocity and market access
disadvantages American agricultural companies, and how a policy
of reciprocity could help level the playing field?
Mr. Daly. Thank you, Congressman, for that question. It is
very important. Yes, I think we have to really consider a
policy of reciprocity in terms of what actions China does, in
terms of U.S. investments in its country, and what we should do
on the counter side on this side of the aisle. And I think it
is smart engagement with China to honestly be able to engage
them and say, ``Look, you have these policies that restrict our
investors and our capabilities, so we are just putting those
measures in place on this side.'' So I think it is a smart
policy that should pervade the agricultural space as well.
Mr. Rose. Sure, and finally, Mr. Gackle, in the time
remaining, I mean, obviously, you recognize that the target is
kind of squarely on soybean producers in this country in terms
of being kind of caught between the motions of what we do and
what China does. And we talked before that we restarted--as the
soybean industry thinks in the U.S.--as you think about the
challenges from China, if you had one takeaway for us today
about what we need to be thinking about, what would that be?
Mr. Gackle. To do just one in 15 seconds, I think the
important thing to recognize--and I mentioned it in my oral
comments and in conversations here today--but we are working
hard to diversify and find new markets, we as U.S. soy, and
that work will continue on, but it takes time. It takes years.
It takes decades to build those new relationships. And the
scale of China being what it is and just the demand there for
U.S. soy, if they don't get it from us, they will get it
somewhere else.
Mr. Rose. Thank you, and my time has expired. Thank you for
your indulgence, Mr. Chairman.
The Chairman. The gentleman's time has expired. I now
recognize the gentlelady from Virginia, Ms. Spanberger, for 5
minutes.
Ms. Spanberger. Thank you, Mr. Chairman, and thank you,
gentlemen, for joining us today.
I am a former CIA case officer, and as such, I do
understand the threats posed by the Chinese Communist Party's
aggressive influence campaigns, as well as its attempts to
target U.S. national security interests through seemingly
innocuous transactions. And as the only Virginian on the
Agriculture Committee, I am committed to protecting our
Commonwealth's farms and farm families from our adversaries.
As you all well know, the Chinese Communist Party's
attempts to control American farmland go beyond mere
investment. They represent a strategic maneuver to gain
leverage over critical aspects of our economy and food
production, and this control can lead to compromised
agricultural practices, exploitation of natural resources, and
unfair competition against American farmers.
That is why I was proud to lead the bipartisan Protecting
America's Agricultural Land from Foreign Harm Act of 2023 (H.R.
3357). The bill recognizes the threats posed not just by the
Chinese Communist Party, but also by Russia, Iran, and North
Korea. Buying up American farmland can be a tool for eroding
our nation's food security, economic security, and national
security, and we need to take steps to push back against these
efforts.
If there is time permitting, I have a couple questions
about CFIUS, but Mr. Gackle, I would like to begin with you. As
a Virginian, I represent many, many soybean farmers. One of
Virginia's top agricultural exports is soybeans, and just last
week, I was speaking with a producer who mentioned that while
he sells the bulk of his soybeans to China, it concerns him,
the shifts in the global soy market, and he is like so many
other Virginia producers, still impacted by the shifts in the
market that occurred because of the trade wars initiated some
years ago.
So you have mentioned how maintaining trade relationships
with China is important for the success of America's soybean
industry, and I would first ask, in response to my colleague's
question, you were talking about diversification,
diversification of markets. Do you have any suggestions for how
Congress could help American soy producers as they seek to gain
access to diverse markets?
Mr. Gackle. Yes, thank you for the question. A few examples
in Congressional action and things that we have been advocating
for, for a long time--and I mentioned it earlier in a couple of
the other Q&A's and in my both written and oral testimony--but
funding through the farm bill, as Congress continues to
consider passing the reauthorization of the farm bill, funding
in the trade and market expansion space is very important. I
have had several meetings--many of our growers were here last
week on the Hill and may have met with you as well----
Ms. Spanberger. That is right.
Mr. Gackle.--and met with many of you in advocating for
increased money in the MAP and FMD programs that, as I
mentioned earlier, has been stagnant for several years, the
level of funding there, so doubling of Market Access Program
funds and Foreign Market Development, increasing in those funds
as well, just critical in finding those new markets and
providing some long-term certainty for the availability of
funds.
Ms. Spanberger. Yes.
Mr. Gackle. They are oversubscribed which has been
mentioned earlier, so there is certainly demand. I think soy
and other commodities show pretty consistently that there is a
great return on investment with those dollars as well, bringing
back to the farm, so I think that would be one area that
Congress could look at ensuring some more certainty.
Ms. Spanberger. And for some of my colleagues who might not
have met with any of your member producers who were on the Hill
last week, and certainly, my conversations were excellent to
this topic, could you just talk through a little bit about why
that funding matters? Would you say that it is as much as you
and your fellow producers endeavor to produce the best product
that you can, having the support of the U.S. Government and
helping to market, establish new markets, make clear the value
of that American product are all things that that you all--you
are producing the product, but that boost is something that is
of value to you. Is that a fair assessment? And would you add
to that?
Mr. Gackle. I think it is, yes. Yes, for sure. And I think
what it demonstrates to our foreign buyers and markets outside
of China, but to the new markets we are trying to develop, is
we have a unique public-private partnership here in the U.S. to
invest farmer dollars through the check-off, with FMD dollars,
and again, showing that tremendous return on investment when
those programs are combined.
Ms. Spanberger. And particularly, when you are looking at
the challenges and the risks that soybean farmers have faced
over the past couple of years, in the final time, is there
anything that you want to make sure that Members of this
Committee understand as we head into kind of finalizing this
farm bill?
Mr. Gackle. Say the last part again, the final----
Ms. Spanberger. As we head into finalizing this farm bill.
Mr. Gackle. Okay, yes. Thank you for the question. Farmers,
like most businesses, are trying to reduce risk, manage risk,
provide some certainty to their operations, their family farms,
their businesses. And I think short-term extensions of the
existing farm bill provide some certainty but not the level of
certainty that is needed over time. So a full reauthorization
sooner rather than later in this calendar year in this Congress
would be helpful.
Ms. Spanberger. I think on that we are all aligned. And I
yield back, Mr. Chairman. Thank you. Thank you, sir.
The Chairman. I thank the gentlelady.
I am now pleased to recognize Mr. Baird from Indiana for 5
minutes.
Mr. Baird. Thank you, Mr. Chairman. And I really appreciate
all you witnesses being here. We always learn something that is
very useful for decision-making purposes as we talk about the
farm bill. So I am going to start with another Hoosier that has
quite a presence in the State of Indiana. And so, Mr.
Ambassador, you referenced how we need to expand our markets
into other markets. And you certainly have a tremendous
knowledge in that area. So can you expand on that, what other
countries and so on that we might be interested in?
Mr. Tom. Yes, I mean, I think USDA is now starting to get
out. I have heard of a number of trade missions that have taken
place over the past 6 months into Africa to discover if there
are some opportunities. It all comes down to funding. Do they
have the money to buy the basic raw ingredients, whether it is
a commodity of soybean, corn, wheat, flour, rice, whatever it
may be? Do they have the money to buy it? And I think that is
the biggest thing that has to be developed there.
But I come back home and I say, what can we do here in the
United States of America to find more value-add opportunities
for the crops we produce? Because we are going to continue to
grow yields, hopefully, and as we do that--and if we lose some
markets or we have some diminishing markets because of other
places like Brazil and Argentina coming on and supplying China,
we better find a way to use up this crop. I mean, I think
biofuels have been very good for the industry, have been good
for the environment and good for our economy, but we need to
continue to look further. I know sustainable aviation fuel
seems to be slowed down a little bit, but at the end of the
day, we need these products. We need these opportunities to
make sure that we have a vibrant economy. But again, value-add
is what we need to be doing.
I really don't want to export a kernel of corn or a bean. I
want to add some value to that before it leaves the shore of
the United States because it creates jobs and creates
employment.
Mr. Baird. Absolutely. I couldn't agree with you more. I
have said quite often because agriculture is my background, but
this country does such a wonderful job in quality of product,
and then we have the logistics to be able to get it to anywhere
in the world, and I think that is a real asset and a marketing
tool for us, too, as well as what you just said. And what you
said was extremely important.
But I want to switch over now to Mr. Gackle. Technology,
science, and research is kind of my background, and I am a
strong advocate of that. And now China is trying to take over
the world. And I go back to the time when I was at Purdue, and
I know we went down to Brazil to show those folks how to raise
soybeans for what was called humanitarian reasons. And so then
I remember a professor coming back, and I asked him how that
was going, and he said, extremely well--he called me Jimmy--but
he says extremely well because he said, the only problem is
those soybean fields have armed guards around them, so we
really didn't do much to help the humanitarian efforts in that
area. What we did do, though, is we taught them how to raise
the soybeans, and then they went on the world market.
So I guess I am just really asking what your thoughts are
on how much we should invest in research, how important
technology is going to be to improving our productivity.
Mr. Gackle. Thank you, Congressman, for the question. It
fits in well here. And I will just start off by saying
technology and adoption of new technologies on our farms, and
on the farm I come from in North Dakota, but farms across the
country just more and more important and being efficient and
reliable producers and financially sustainable in the long run
to have those technologies and those tools. The information
that we are able to gather as growers to help us make better
decisions each year as we are planting a new crop and
harvesting a different crop. The information we get back from
that technology is just essential in making those decisions.
And then when it comes to just operating our operations
efficiently and reducing the reliance on inputs, we talk about,
well, if we are too reliant on foreign production of chemicals
and fertilizers and seeds and anything else, farmers, we are
pretty good--not pretty, very strong consideration in what it
is costing--the cost of production for our crops. And so these
types of things--and there is certainly concerns around data
privacy and use of that data and who does it belong to. Just it
is farmer, so we really want to make sure that we protect that
as well.
Mr. Baird. I got one last question for you. We talk about
precision agriculture. Do you have one of those planters that
you can plant 10 or 11 miles an hour and still get----
Mr. Gackle. Well, sir, that is a great question. You would
be interested to come to my part in North Dakota and know that
even if I did, I probably couldn't use it because we have some
other obstacles in the way.
Mr. Baird. I hear you. Thank you very much. I yield back.
The Chairman. The gentleman yields back.
I am now pleased to recognize the gentlelady from Ohio,
Congresswoman Brown, for 5 minutes.
Ms. Brown. Thank you, Mr. Chairman.
One thing we know to be true on this Committee is that food
security is national security. As a Member of the Select
Committee on Strategic Competition with the Chinese Communist
Party, I know there is bipartisan concern and consensus on
addressing the CCP's entanglement in our agriculture industry.
The Select Committee heard firsthand testimony on the CCP's
efforts to unfairly steal agriculture technology and products,
including genetically modified seeds. American innovative
technology and intellectual property is not up for grabs, and
the CCP needs to engage honestly with the world's global food
and farm economy.
At the same time, the CCP is attempting to monopolize the
global agriculture supply chain, putting the U.S. and our
allies at a disadvantage. The food agriculture sector is one of
16 designated critical infrastructure sectors in the U.S. That
is partly why I introduced the bipartisan Critical Supply
Chains Commission Act (H.R. 4279) to examine and identify gaps
in our supply chain and reduce our reliance on any outside
nation to provide the critical materials we need, including
agricultural products.
So, Mr. Daly, the United States has been losing its ability
to manufacture agricultural inputs, including vitamins, animal
feed, and pesticides. Can you talk a little bit about why we
are seeing this, and what are some of the things that we can do
to address this?
Mr. Daly. Yes, I think in terms of why we are seeing it, I
just think the evolution of where the industry went in terms of
pricing is why things moved to China as it did in terms of
vitamins and whatnot, but it has created an incredible
dependence, as you well know, Congresswoman. And so in the
vitamin space, 80 to 90 percent of production happens in China.
So we need to move that back, and I think your bill is
exceptional in what it wants to do, take a look at these supply
chains, see where our vulnerabilities are, and then figure out
solutions to them. And the solutions are a focus on resources,
moving government resources in the right direction, and then
ensuring that we are either putting it here in the United
States or putting it in a friend-shoring situation where we can
depend on the supply.
Ms. Brown. Thank you so much. And I would like to continue
with you or Ambassador Tom with the next question, which is
what recommendations do you have to protect American
intellectual property, specifically in the agriculture space?
Mr. Daly. I can start with and then go to the Ambassador. I
think the resources need to be put there. As I said earlier
today, there was a lot of intelligence sharing that has
happened for a long period of time with the Defense Department,
industries that work with the Defense Department, and also our
banking industry had a lot of intelligence-sharing with the
U.S. Government, and I saw that in the Treasury. I think that
intelligence-sharing resource has to go to the Agriculture
Department now. I know they have stood up a new entity that is
going to be doing more sharing of intelligence. There are
obviously logistical issues with sharing it in terms of sources
and whatnot.
But I think as the Department of Agriculture gets more
familiar with that back-and-forth with industry and trust, we
will be able to build a system where we can have more
responsive engagement with industry and address the national
security matters.
Ms. Brown. Ambassador?
Mr. Tom. My response to that would be that I have never
seen any service or activity that can't be done better by the
private-sector than the government, and so I believe it is up
to the private-sector to work to make sure that we can protect
this intellectual property. I certainly welcome any support we
can get from the Federal Government or state governments, but
the reality is, it is up to us to work hard to make sure that
we are protecting this IP, whether it is data, whether it is
genetics, whether it is chemistries. I want the private-sector
to work on this because I think they are best positioned and
best able to meet that need.
Ms. Brown. Thank you both. It is abundantly clear that our
national security is dependent upon a safe, resilient food
system. I look forward to continuing to work on these important
issues with my colleagues, and with that, Mr. Chairman, I yield
my remaining time.
The Chairman. The gentlelady yields back. I now recognize
Mr. Feenstra for 5 minutes.
Mr. Feenstra. Thank you, Chairman Thompson, and thank you
to the witnesses for being here day. This is a topic that we
really need to address, and I am so grateful that you are here.
I want to play off Mr. Baird and what he said when it comes
to intellectual property and what is going on. And I am from
Iowa, probably the district that has the most corn and soybeans
growing anywhere in the nation. Our land sells for about 30,000
an acre, at least it did several miles from my house a couple
months ago.
One shocking story from my state--and Representative
Gallagher noted this--that a person was spotted in a field in
Iowa digging up hybrid corn seeds and eventually found out that
they were sending these corn seeds back to China. This PRC
national was later arrested and admitted that he was involved
in a long conspiracy to steal trade secrets from our two major
U.S. seed companies. And you think about it, it can cost nearly
$100 million to have these new hybrids come about. I mean, it
takes time and years, and here, they are trying to steal them.
Mr. Gackle, can you talk about--obviously, we know the
dangers, right? We know China poses this risk, but how can we--
and it is so difficult. How can we prevent some of this IP
theft?
Mr. Gackle. Well, as the group has been discussing today
and those of us amongst the table, I think there is quite a bit
unanimity here on some of those steps that can be taken. The
American Soybean Association and I personally as a farmer
recognize how complex and difficult these issues are. But you
are correct; the solutions are hard to find. I gave an example
of public-private partnership when it came to investing in new
markets. I think it could be similar on this side of issues as
well when it comes to data protection and IP and other actions
that are viewed negatively from China. How can the public-
sector and the private-sector, whether it is seed companies,
universities, government, find ways to address those complex
issues and bring some solutions forward? I mean, for me as a
farmer, it does me no good either for those situations to be
possible or occur, so looking for solutions from our side as
growers as well.
Mr. Feenstra. I agree, Mr. Gackle. I mean, it is a
partnership, private-public from our universities to our
companies, you name it. But it is very worrisome to see what is
happening. And could you expound on that, Mr. Daly, just a
little bit? I mean, what are trends that you are seeing in this
area?
Mr. Daly. So expounding on it a little bit, I think what is
informative is some of the service I had. I remember when I was
at the National Security Council and dealing with trade
matters, and we would get intelligence that would come from our
intelligence agencies on trade issues that were going on with
our counterparts, and it was really lacking. They just didn't
have the experience. The intelligence agencies didn't have the
experience to be able to go in and focus on that kind of
intelligence. Obviously, it was mixed in with defense and other
matters.
So I think, over time, they got good at it. So I think it
is a matter of applying, as you have done here, with a focus on
it----
Mr. Feenstra. That is right.
Mr. Daly.--for our intelligence folks, whether that is at
Justice, FBI, or NSA, focusing that resource on what is needed
here to address these IP thefts and guard against the taking
that has happened.
Mr. Feenstra. Yes. I agree. I want to pivot just a little
bit to you, Ambassador Tom. In my district we grow a lot of
corn, and we have a lot of pork. And when China has six percent
of the pork and beef markets and then a tremendous amount of
our soybeans and corn go to China, this becomes a bit of a
problem.
You mentioned Africa a while ago, that we have to
diversify. We all understand we have to diversify. Our biggest
problem with going into Africa is the supply chain
infrastructure. Can you elaborate on that a little bit? I mean,
I think of our dairy. I think of our pork industry, our cattle
industry. You need refrigeration if we are going to go into
Africa and other countries. And as you noted that it is really
their next step on the food chain of what they want to buy. Can
you talk just a little bit about that, Ambassador, of what are
the obstacles of us getting into some of these countries?
Mr. Tom. Yes, first, I will start out by saying that your
point about the livestock and the amount of exports that we
have, whether it is beef, pork, or poultry, mainly pork and
beef, though, that is going into China, we have seen
exponential growth in those two areas. And, I mean, the U.S.
producers benefited from that and continue to benefit from
that. But again, they are trying to replace us on the pork side
at least.
Mr. Feenstra. That is right.
Mr. Tom. When I look at Africa, I look at infrastructure.
Yes, there is no cold supply chain.
Mr. Feenstra. No.
Mr. Tom. We have seen very little investment in many, many
countries across Africa. I was just in Sudan, as I said, about
a year ago. They are building some toll roads, private
companies are and everything else, but the reality is once you
get into the interior of the country, whether it is there,
Tanzania, Niger, Burkina Faso, there is no infrastructure.
Mr. Feenstra. No, exactly right.
Mr. Tom. There is no infrastructure, and this where, what
we were supposed to be doing at the Food and Agriculture
Organization is creating resilience and capacity in food
systems, but it hasn't happened.
Mr. Feenstra. No, no, no. And I just want to quick note
this. I have the FRIDGE Act of 2023 (H.R. 4612, Fortifying
Refrigeration Infrastructure and Developing Global Exports Act
of 2023) that sort of goes down this path that we can use some
of these dollars from different export things that we have, FMD
and so forth.
But with that, I yield back.
The Chairman. The gentleman's time has expired.
I am now pleased to recognize the gentlelady from Oregon,
Ms. Salinas, for 5 minutes.
Ms. Salinas. Thank you, Mr. Chairman, and thank you to the
panelists for being here today.
As we think about the impact of China on the
competitiveness of U.S. farmers, I think it is also important
that we remember that our nation's agricultural economy doesn't
really stop just in our fields. In fact, our nation's food and
beverage industry is among America's largest domestic
manufacturing sectors, and that includes food processing and
canned food staples that millions of Americans rely on every
day.
I am proud that my home State of Oregon plays an important
role in this industry, being a critical supplier of canned
fruits in particular. This industry definitely sees the impact
of China as well. The China Canned Food Industry Association
proudly touts record-breaking growth for Chinese exports to the
United States, threatening thousands of U.S. food manufacturing
jobs and economic activity in states all across the country,
obviously, including Oregon.
Further, consumers may not even be aware the canned goods
they are purchasing are produced in China. In some instances,
American-grown canned goods are mixed in with Chinese-grown
products and sold under the same label, making it difficult for
consumers to know what and the sources of their purchases.
And this question is for the whole panel. What policy steps
would you suggest to bolster U.S. farmers, reward manufacturers
who rely on American-grown and processed ingredients, and
ensure consumers know where the food they eat is actually
grown?
Mr. Tom. Well, we know there has always been a lot of
country-of-origin labeling that has taken place to really
understand, but we are not going to say that the Chinese play
by fair rules.
Ms. Salinas. Right.
Mr. Tom. Let's face it, it doesn't happen. In terms of some
of the food processing, yes, I understand your concerns. I was
recently in Alaska, spoke at a conference up there, and the
amount of fish that is being shipped out of Alaska for further
processing in China and then back to the United States is
substantial. And you ask yourself, why can't we do it here at
home? What is the headwind that is stopping us from doing that?
So whether it is fish, whether it is soybeans, whether it
is some other protein product, we need to figure out how we can
create the value-add opportunities here at home, creating the
jobs for the U.S. citizens.
Ms. Salinas. Thank you. Mr. Daly?
Mr. Daly. Yes, I absolutely concur with what the Ambassador
had to say here, obviously, labeling issues, tracking exports,
tracking imports of what China is doing, and putting a focus on
that. Obviously, there are resources at the Department of
Commerce and USTR to be able to identify these issues and work
with the Department of Agriculture to make sure we are ensuring
that China is not cheating on this matter and that we can build
resources to produce it here.
Ms. Salinas. Thank you. Mr. Gackle, did you have anything
to add?
Mr. Gackle. Yes, thank you. Just briefly, and very good
question. I will maybe give a specific example of back home in
North Dakota and talk about value-added and soybean, U.S. soy,
American Soybean Association is working very hard on finding
new domestic uses for what we grow. Knowing that, as was
mentioned earlier, we are not going to stop growing soybeans,
and we are getting more efficient and better at growing a big
crop. So finding those new uses and new demand in North Dakota,
we have one new soybean crush plant that has come online, so
there is opportunity there for the oil and the renewable
diesel.
But a side product of that and not a small side product, a
big byproduct of that is the new meal opportunities that we are
going to have. And when Ambassador Tom talks about value-added
and those types of opportunities, with the new meal that may be
available through additional crush plants throughout the
country, I think just a great opportunity there to add value to
our domestic ag value chain.
Ms. Salinas. Thank you. So obviously, China is notorious
for its violations of international labor standards, including
in the ag sector. For instance, in 2021, the U.S. banned
imports of cotton and tomatoes produced in the Xinjiang
Province due to strong evidence of forced labor practices.
Beyond their labor practices, China, as we have heard
today, also engages in IP theft, cyber attacks in order to
steal data, and have increased their ownership of foreign
agricultural land, including here in the U.S. However, as a
Member of the Congressional Executive Committee on China, I am
focused on both calling out and combating China's bad behavior,
while also acknowledging that our trade relationship is
critical to the American economy, particularly the ag sector.
In 2022, for instance, Oregon exported over $300 million of
agricultural products to China. I also consistently hear from
constituents about the importance of the Market Access and
Foreign Market Development Programs, and the importance of
exports to our overall ag economy cannot be understated.
So again, for the whole panel, we, as Members of Congress,
think about our trade relationship with China. How can we
balance the hard economic realities that our constituents face
while also combating the Chinese Government's egregious
behavior?
Mr. Gackle. I see time is running short, but quickly, if
there are targeted ways to address those situations to try and
diminish the negative ramifications that come back on U.S.
producers, I don't have any exact recommendations on what those
would be, but maybe just a bit more strategic when it comes to
the policies trying to approach those, certainly important, and
real concerns about the situation in certain places in China,
but targeted and more strategic, but I am sure others have
better detail on that.
Ms. Salinas. Thank you.
Mr. Daly. Yes, quickly, strategic surgical actions in trade
relations. Obviously, sometimes when you go with big actions,
you have big responses, but if you do them surgically,
according to U.S. laws or building out on the right laws, it is
understandable by the counterpart, and usually you don't have a
big splash.
Mr. Tom. The only thing I will add is it has just been a
few years ago that we had a trade imbalance with China. They
had over $500 billion worth of sales in the United States, and
we only had $350 billion to China. We have to find a way to
figure that out, how we can increase our sales to China or find
other sources for some of the products we are buying from China
today. We have to balance it.
Ms. Salinas. That is right. Thank you all. I yield back.
The Chairman. The gentlelady's time has expired.
I now recognize the gentleman from Missouri, Mr. Alford,
for 5 minutes.
Mr. Alford. Thank you, Mr. Chairman, and thank you to our
witnesses for being here today, really appreciate that.
I don't have to tell you that China has its tentacles in
everything we do. They are poisoning the minds of our young
people with TikTok. They are poisoning their bodies, wiping out
almost an entire generation of young people, killing 100,000 of
our fellow citizens each year through Fentanyl.
I also sit on the House Armed Services Committee, and I
represent two very distinguished bases, including Fort Leonard
Wood, but also Whiteman Air Force Base, home of the B-2 Stealth
Bomber and soon to be home of the B-21. We are concentrating on
being an effective deterrent against the CCP and the PLA.
There are some generals who are openly saying that we could
be at war with China by 2027. That is 3 years. We are trying to
get ready for any potential conflict. I believe that we have to
do everything we can to keep our country safe from China's
influence and espionage, and agriculture is a critical,
critical part of the conversation. Our food security is
national security. We have to be prepared for what could be
coming.
In 2022, the last report showed China owned 395,000 acres
in the United States of America, and yet you cannot go there
and buy land. Recently, we introduced the American Land and
Property Protection Act (H.R. 7246) to protect Americans and
our land from ownership by foreign adversary nations including
China, Iran, Russia, Venezuela, North Korea, and Cuba. They
shouldn't even be able to buy an outhouse in the United States
of America as far as I am concerned.
So Mr. Daly, why is it important that we protect our
property here in America from the Chinese Communist Party that
wants to replace us as a world power?
Mr. Daly. Thank you, Mr. Congressman, an excellent
question. It is a point-of-the-spear question in terms of what
we are dealing and having to address in terms of the Chinese
Communist Party and how they have effectuated recent laws over
the last couple years that have effectively weaponized private
Chinese companies and put their private citizens under
obligations to report and do what the state wants. So that
becomes the issue before this Committee and you as leaders of
this country. What should we allow, given that China has pretty
much put in place a system and laws that make and weaponize
their companies and put their individual citizens in a position
they have to do what the state asks them to do?
Mr. Alford. Well, I think it is time to circle the wagons.
Look, we can halfway do this. Our Governor had an Executive
Order last year prohibiting any land sales within 10 miles of a
military base. I mean, that is a good start, but I am of the
firm belief Chinese Communists should not be able to buy
property in America, case closed. And it may hurt us on trade.
I know, sir, Ambassador, you just mentioned that we need to
increase our trade with China. This may hurt our trade, but we
have to protect America.
Mr. Gackle, what contingency plans--say we are at war with
China over Taiwan in the next 4 to 5 years. What contingency
plan do soybean producers have to protect the investments and
our producers here in America?
Mr. Gackle. Thank you for the question, Congressman. And I
provided some highlights earlier in oral and written testimony.
We learned from the 2018 tariffs and retaliatory actions from
China just how much that type of situation can affect our
bottom line on the farm. And, as I mentioned before, looking to
diversify and grow new markets, understanding that there are
risks there when you rely so heavily on one particular market
or country. The scale of China being so large makes that risk
even greater, and so I think that is why you are seeing more
farmer dollars invested in finding these new markets, finding
new exports.
And as I talked about as another contingency is just more
domestic demand and more domestic uses for what we are growing
here. But again, we may continue to outproduce that demand even
if we find new on-takers for renewable diesel or the meal that
I talked about, so we are going to have to do both.
Mr. Alford. Well, I just want to close. I appreciate you
being here. This is a very serious matter, and I think most
Americans are asleep when it comes to the threat from Communist
China, and I am here to tell you now, the big bad wolf is at
the door, and we better make sure that our house is made of
brick and not straw or it is going to get blown in, and it is
not going to be a pretty picture.
Thank you so much for being here, and I yield back.
The Chairman. The gentleman yields back.
I am now pleased to recognize the gentleman from North
Carolina, Mr. Davis, for 5 minutes.
Mr. Davis of North Carolina. Thank you so much, Mr.
Chairman, and to the witnesses who are here today. Thank you so
much for being with us today.
As other Members have highlighted today, agriculture is a
very trade-dependent industry, and China is a top trading
partner. How would you prioritize the most practical safeguards
that can be put into place that will allow the U.S. agriculture
community to export to China and not have markets and prices
manipulated by their government or trade wars causing farmers
to be the ones bearing the brunt of decisions? I am just trying
to prioritize.
Mr. Tom. Yes, when I think about, you are from the State of
North Carolina, a major, major pork producer.
Mr. Davis of North Carolina. That is right.
Mr. Tom. I think whether it is pork, or whether it is beef,
or whether it is the grains we produce on our farms back in the
Midwest, there is no doubt we know our government conducts
wargames to understand what happens when China inevitably takes
back Taiwan. We need to do the same as producers, as an
industry, to make sure how do we react? How do we prepare
before this actually happens? Because it is going to happen. He
has made comments that it is going to happen. So let's prepare
now. Let's not wait for it.
In terms of prioritization, again, we have to continue to
grow our sales around the world, diversify, continue to sell to
China, but again, I think it is time we balanced that trade-
out.
Mr. Daly. Yes, I agree with the Ambassador. There are
already a number of companies, major U.S. companies that are
consulting with experts and technicians to understand what the
ramifications are if we have a hot war issue with China in
terms of their processes of sales globally, in terms of how
their supply chains deal with it as well. So I think companies
are going that way, and I think the government needs itself in
the ag space to really focus in on this. And I think Members
here today and yourself have made this a big focus in terms of
what should be the priorities, and I think this is an exercise
where the Agriculture Department has to work with industry and
you all to make sure those priorities are in line with U.S.
national and economic security and food security.
Mr. Gackle. Maybe to touch on something just a little
separate, but in line with those things, so looking at
profitability for farmers and what we are trying to manage as
risk, I think a priority area--it is something we haven't
talked about much--is getting the policy right in D.C., whether
it is here in Congress or through the Administration, on
incentives for further domestic growth, incentives for
sustainable aviation fuel. That is one idea we haven't talked
much about but getting that policy right as it is getting
developed and trying to get off the ground could be a
potentially huge market there for U.S. producers. And then
maybe in the regulatory as well, trying to find ways to ease
the regulatory burden on producers and streamlining, whether it
is EPA issues or other Federal agencies when it comes to
regulatory types of issues. But getting that policy right as
well provides a little more predictability and certainty for
U.S. producers.
Mr. Davis of North Carolina. Okay. Thank you. U.S.
agriculture is the cream of the crop when it comes to
productivity, innovation, and producing agriculture further
ahead into the 21st century using new technology. China is not
only interested in these innovations, but in the past,
operatives have been caught trying to smuggle them out of the
country. My question here, is there any way to evaluate or
ensure that our investments in emerging agriculture technology
are not being exploited by China for their own advantage?
Mr. Daly. Thank you, Congressman. That is a great question,
and it is right on the forefront. We have to be vigilant in
terms of having our intelligence agencies work with the
Department of Agriculture to give and provide that intelligence
information that is going to be able to spot, identify where
the threat is going to emanate and be able to capture it before
it occurs, so that is a big part of this equation.
The second part of this equation is I think making sure we
get our cybersecurity systems in line with the agricultural
producers. That means making sure we get a wrap on the
technologies that are out there. Internet-of-Things
technologies that China is controlling the market on, we need
to make sure we friend-shore that or produce it here in the
United States.
Mr. Tom. A nation's power is usually predicated upon four
key pillars. One is diplomatic presence around the world to get
involved in any other country that we need to be involved with
before a crisis happens, two is economic, three is military,
but fourth is informational. And I think we need to make sure
that we are tapping in and collaborating across agencies, USDA,
CIA, FBI, everybody, that we are having the best information to
make sure we understand what is going on and what China is
doing behind the scenes that we are not monitoring today.
It is one thing as an agriculture industry, we tend to
trust everybody. Farmers are the best at helping somebody when
their barn blows down. They go together, and they don't worry
about getting any financial support to do that. They go
together and work. We trust people. We do things together. But
I think we have let our guard down in guarding our intellectual
property. Now it has got to come up, and we need any support we
can get from you. Thank you.
Mr. Davis of North Carolina. Well, thank you so much. It
sounds easy. We have a lot of work ahead of us. Thank you so
much, Mr. Chairman. I yield back.
Mr. LaMalfa [presiding.] Thank you, gentlemen. Now, I am
going to recognize myself for 5 minutes. I just happened to
jump in the right spot at the right time. Isn't that slick? But
it is correct according to the roster. Don't get mad, guys.
So thank you. Thank you to our panelists. I apologize for
being in and out of the room. There are three committees at the
same time today.
So let me jump to Ambassador Tom. And, again, forgive me if
this is redundant from previous questioning here, but one I
have is that we saw over 10 years ago one of the largest
Chinese acquisitions of an American company was Smithfield. It
really brought the focus of China and what it means as really a
danger to American agriculture and to the American food supply
as more and more of this proliferates. And really little has
been done to put the brakes on that.
So with the Chinese Government's plan to buy up more and
more farmland, not just for the sake of farmland, but we see a
lot with the adjacent lands to many of our military bases and
other important installations. So bring that into focus on what
that means for our U.S. producers if facilities such as
processing plants are more and more owned by Chinese or other
outside influences like that? What is that going to do to
perhaps harm the ability for them to have a place to take their
product and have it processed and marketed for them through the
chains that we are kind of used to these days? So, Ambassador?
Mr. Tom. Yes, the comment I would make there as an example,
Smithfield. Granted, producers across the United States are
benefiting from that relationship. They have a place to go with
their pork to be processed, to be moved around the United
States, and be exported. The reality is we have to understand
why the Chinese bought Smithfield Foods. It wasn't necessarily
for the production capacity as it was for the intellectual
property.
We know that every pork producer in China was--every family
had two pigs out back, and they fed them their swill and the
leftovers and excess, but that is when they got African swine
fever that occurred across the nation, and so they knew that
they need to consolidate, be more structured in a manner, make
sure they brought in the latest science to protect their pork
herd, but, more importantly, their own food security. So again,
the only way they could get this was to acquire a company like
Smithfield to acquire their intellectual property.
Mr. LaMalfa. Thank you. I appreciate that.
I want to shift to Mr. Daly in my remaining time here. With
the Chinese cartel work going on so much in the drug culture
and have so much of it going on in northern California, almost
uncontrolled, the locals seem almost powerless and short on
resources to battle against the vast proliferation of Chinese
cartel marijuana growth. And you should see it, the vast
numbers of greenhouses that have been put up on, in a lot of
cases right now it is private property, which makes it a
different enforcement. In different areas, it has been on
Federal lands, which Federal lands have been slow to be
enforced on with Forest Service or whatever not making the
moves. But when it is owned property, it provides its own
challenges on that.
So we have much organized crime tied to China and
dominating much of the illicit marijuana trade. And it is
horrific for the environment, horrific for local law
enforcement and just a sense of security for the neighbors
there, even so much as the amount of water being carted by
these 4,000 gallon trucks to these growers, without permits,
without county ordinances in their favor, environmental damage.
So these Chinese gangs have been distributing the end
product, but also very dangerous chemicals that are not
available at all to American farmers in the process. So, Mr.
Daly, can you emphasize a little bit what would you tell us
about the international crime effects and overall effect on our
national security, as well as the local quality of life in
communities like this? I am talking about Siskiyou County in
northern California, but there have been other ones in
neighboring Trinity County. Again, that has been more on
Federal lands. Please touch on that, would you?
Mr. Daly. Thank you, Congressman. That is an excellent
point and an obviously a very serious issue that, thankfully,
with your leadership, the U.S. focus gets placed upon it. I
think the resources we have just need to be borne on it.
Obviously, the customs, CBP, in terms of its seeing what is
happening on the borders to be able to address that, and then
obviously, getting our Justice Department to make sure that
they prioritize this issue in terms of going after these
cartels are two possible ways you can draw focus on that in
your role as Congressman. Thank you.
Mr. LaMalfa. Yes, there has been either inaction,
disinterest, or reluctance by Federal and state agencies to
really come in and enforce hard on this when it is violating
local laws, local ordinances.
Well, I need to yield. So with that, I would like to now
recognize the Hawaiian from Hawaii for 5 minutes.
Ms. Tokuda. Thank you, Mr. Chairman. As the only Asian
American Member of the House Agriculture Committee and as a
Member of the Congressional Asian Pacific American Caucus, I
want to remind my colleagues on this Committee that words
matter. And even as we deliberate, we must consider the
unintended consequences and impacts of our words and policy
decisions on our Asian American community.
I also serve on the House Armed Services Committee, and my
district is on the frontlines of defense in the Indo-Pacific,
so I deeply understand the risks with the CCP and the threat it
has to global security, national security. That being said,
irresponsible and inflammatory rhetoric will encourage and
invite xenophobic and discrimination against Chinese Americans
and those to be perceived to be Chinese.
Governor Noem said that we have become a country addicted
to being offended by each other, but there are too many
examples in the recent past of rhetoric leading to violence
against Asian Americans. One has only to remember Vincent Chin,
a Chinese American from Michigan who was murdered at the height
of the anti-Japanese sentiment in this country because of his
perceived race. Congress passed the COVID-19 Hate Crimes Act
(Pub. L. 117-13) in 2021 because of the dramatic increases in
anti-Asian hate crimes and violence during the COVID-19
pandemic. The way we discuss this policy will and has
consequences.
It is also important to remember that alien land laws are
rooted in racism. The enactment of the Chinese Exclusion Act
(Pub. L. 47-126, An act to execute certain treaty stipulations
relating to Chinese.) and official state policies were designed
to prevent Chinese individuals from owning land and property.
During World War II, Japanese immigrants and Japanese
Americans, including my great grandfather, were incarcerated en
masse because of their race. They were also subjected to
exclusionary alien land laws in different states and were
forced to sell their properties during incarceration.
I am glad that Ranking Member Krishnamoorthi highlighted
the importance of the cure not being worse than the disease. We
must not stand for laws that discriminate based on ethnicity
and nationality.
Before proposing broad bans that could have significant
impacts on Asian Americans, on our immigrants, there is a lot
more we can do to invest in data collection and reporting on
foreign ownership of land, including agricultural land. And I
appreciate your indulgence and patience. I know you have gone
through various rounds of these types of questions. I am not
saying that we should not have this discussion, but let's make
sure that the policies passed by this Committee are grounded in
fact, not fear.
I welcome my colleagues to work with me and my colleagues
on CAPAC to come together on policies that will combat the CCP,
while protecting our Chinese American and immigrant
communities. The recently passed appropriations bill will give
the United States Secretary of Agriculture a seat on CFIUS. How
will this impact USDA's ability to monitor Chinese investment
in the United States? And are there any changes to CFIUS that
would help us better address the issue of foreign agriculture
land purchases? To whomever might want to answer that question?
Mr. Daly. Thank you, Congresswoman. Those are excellent
points and should be taken to heart and seriously with everyone
in governance and everyone in a leadership position to make
sure we say and do the right thing. The issue is the state of
China, period.
So in terms of your question and the reporting, having
agriculture there at the table with CFIUS will definitely give
it a focus. Obviously, they are going to build capacity. The
Department of Agriculture, as members of CFIUS, they are going
to build it internally to be able to be more responsive to how
CFIUS thinks, and that is going to give them expertise to be
able to know what they need to do in terms of finding the
information to provide it to CFIUS to be able to address the
investment issues that carry national security problems.
Ms. Tokuda. Anyone else want to answer that?
Okay. All right, if not, the USDA I know has requested
funding to develop a real-time data system that can be accessed
by other U.S. Government agencies and the public. Are there any
particular privacy concerns for such a system that we need to
be thinking about preparing for as well?
Mr. Tom. Could you repeat the question?
Ms. Tokuda. The USDA has requested funding to develop a
real-time data system that can be accessed by other U.S.
Government agencies and the public. Are there any privacy
concerns for such a system? Do we need to build in any kind of
safeguards? Are there issues?
Mr. Tom. Most of that is public anyway, so I don't see any
problem there.
Ms. Tokuda. Okay. All right. I know my time is drawing to a
close, and I did want to get to some research questions. I may
have further questions to enter into the record, Mr. Chairman.
But according to estimates from USDA Economic Research Service,
China's annual public investments in agriculture research
surpassed U.S. investment in this area as of 2008, and China
has continued to move past us in the years that have followed.
What investments in research should we be making in the farm
bill to remain competitive globally? Again, I am on the Armed
Services Committee. If China truly is our pacing threat, not
just on the defense scale, but also on a food production scale,
then what more do we need to be doing since clearly they are
investing and we are not to that level?
Mr. Gackle. Thank you for the question, Congresswoman.
From, again, the producer standpoint and speaking with American
Soybean Association, we are strong advocates for any type of
increased research money, whether it is at the Federal level or
at the state level with our universities and extension offices.
That research, there is a strong history of that research
leading to improved products for me as a grower, increased
confidence that I will be able to produce a crop under
challenging circumstances, whether it is weather or other type
of pests, any type of risk that we are seeing on the farm when
it comes to actually growing a crop. So those dollars, again,
whether Federal or at the state level, very important.
Ms. Tokuda. Thank you. I know my time is up, Mr. Chairman,
but clearly, if they are our pacing threat, then we need to
invest as like to be able to keep up. Thank you.
Mr. LaMalfa. The Hawaiian from Hawaii yields back?
Ms. Tokuda. Yes.
Mr. LaMalfa. Okay. The Kane from Kansas has got 5 minutes.
Mr. Mann. Thank you, Mr. Chairman, and I want to thank
Chairman Thompson for having today's hearing. I appreciate
Governor Noem and our Members of the Chinese Select Committee
being here this morning and thank the three of you for all your
time this afternoon as well.
I represent the big 1st District of Kansas, which is now in
eastern, mostly in central-western Kansas. We are the number
one producer of beef in the country, number one, wheat, number
one, sorghum, a host of other ag products as well. And we see
every side of the supply chain in the big 1st District of
Kansas.
We also know in Kansas that food security is national
security. And I tell people all the time, and to remind the
Committee we are the free country we are for a host of reasons,
one of which is the fact that we have never had to rely on
another country for our food supply, which is why the work of
this Committee is so incredibly important.
This hearing has highlighted the negative impact that
foreign adversaries like China can have on that food and
agriculture chain, and I share those concerns, including
ownership of large tracts of farmland near our military
installations. Any threat to our country has to be taken very
seriously.
I am Chairman of the Subcommittee on Livestock, Dairy, and
Poultry, and I would like to draw a special attention to
China's questionable ambitions with our country's livestock
assets. China has made it clear that it desires America's
protein products and is making substantial investments in both
securing our protein and in emulating America's livestock
genetics overseas.
A question for you, Mr. Daly. Given China's track record of
intellectual property theft, could China also be conducting
espionage operations to acquire the very livestock genetics
that American ranchers have spent decades developing, rather
than researching it and developing it themselves? And if so,
what should we think about in Congress to do about that?
Mr. Daly. That is an excellent question, Congressman, and
thank you for it. I absolutely do think this is something that
China would do. There is a reason why the Committee on Foreign
Investment, one of the national security priorities was U.S.
biological information, U.S. person biological information. And
if that is something China is gathering for its intelligence,
it certainly--because food security for China is imperative to
their survival, it is certainly something they are going to do.
In terms of how we guard against it, I think just being
vigilant on seeing where they are putting their resources and
where they are trying to steal that information.
Mr. Mann. Yes, I agree. And I appreciate what you said,
Ambassador Tom. Agriculture is very trusting. Our family farms,
I can't imagine taking a piece of baling wire from my neighbor,
much less stealing somebody's intellectual property, right?
That is just how we operate. But we cannot forget that that is
not what we see from other actors in the global markets that we
participate in.
Trade is key, and we have to continue to foster non-Chinese
markets to add resiliency, I believe, to the global export
markets for our ag producers. MAP and FMD, Market Access
Program and Foreign Market Development, critical components to
that. I have been an advocate of seeing us work towards
doubling dollars we are spending on MAP and FMD.
A question for you, Mr. Gackle. How can programs like MAP
and FMD, in your view, help develop trade relationships with
American allies and grow ag exports, particularly at a time
when China remains such a large threat and when the Biden
Administration has not been pursuing new free trade agreements?
Mr. Gackle. Thank you, Congressman. Thank you for the
question. I will start by saying that there is a strong track
record and history of how those programs have worked in the
past and the relationships that we have been able to build, 112
markets around the world is what I mentioned earlier in my both
written and oral testimony. And the return on investment, I
have said this before, too, but just to make the point again,
these are not just MAP and FMD Federal Government dollars,
taxpayer dollars. These are also farmer-invested dollars
through our check-off programs, whether it is soybeans or other
commodity groups. So farmers are demonstrating their
willingness to participate in these programs by investing their
own dollars, and we are seeing a tremendous return on those
check-off dollars when it comes back to the farm and return on
investment there.
So, again, we have a history of showing how those
relationships are built, and that takes time to build those
relationships and establish them, and we just want to continue
to be a reliable partner with those markets that we are working
in.
Mr. Mann. Yes, incredibly important as we think about how
we counteract China.
And last, for you, Ambassador Tom, I know we don't have
much time here, but, we have seen China's domestic ag
production grow certainly 530 percent since the year 2000. How
does China's increase in ag production impact our ag and food
security in our country?
Mr. Tom. Well, obviously, it displaces our market, right? I
mean, I think we have seen nearly a 500+ percent increase in
productivity across China over the past decade. There is no
doubt that comes from a lot of U.S. innovation that has been
stolen from us, so we have lost that competitive edge. And I
have no reason to believe that they won't continue to grow at a
very rapid rate now since they have a lot of our technology
already. Whether it is the digital side, or whether it is
intellectual property on the genetic side or on the chemistry
side, they are going to continue to grow that. So, again, Xi
Jinping wants to be a food-secure nation to feed his 1.4
billion people, and we need to be prepared to do what we can to
grow our trade around the world.
I want to say one final thing, the BRICs, when Xi Jinping
and Vladimir Putin walked out of the Kremlin a year ago in
January, they said, who would have thought we would have had
control of the world so quickly going our direction? I think we
need to take notice because the BRICs are trying to supplant
the United States, and we are not aware of everything that is
going on there.
Mr. Mann. I wholeheartedly agree. Thank you, Mr. Chairman.
I yield back.
The Chairman [presiding.] The gentleman yields back. I now
recognize the gentleman from California, Mr. Duarte, for 5
minutes.
Mr. Duarte. Thank you, Mr. Chairman, and thank you to the
panel.
So I want to echo so much of what we have heard today in
our concerns with China and their competitiveness and their
buying of our natural resources, but at this point, it might be
echo, echo, echo, so I want to touch on a few other related
matters that threaten American working families' food access
and our national food security.
Currently, we are seeing produce crops. There were $4
billion in imports from Mexico in 2000. Today, they are about
20 million tons of produce crops coming in from Mexico. We know
that the avocado industry and other fresh produce industries
are being capitalized by the drug cartels. We know the drug
cartels are enjoying our open border policy, partnering with
China for Fentanyl and other sources. We also know that Mexico
is aligning itself politically, as is a great deal of Central
and South America, with China.
Our produce industry is being recapitalized in Mexico,
currently providing significant imports to American consumers.
I am very concerned that those exports aren't always going to
flow to American consumers, and once our produce industry is
replaced, we will have little to say about it. Am I valid in
that concern? Ambassador, why don't you jump in?
Mr. Tom. Repeat the last part of the question again.
Mr. Duarte. Is America subject to seeing its produce supply
from Mexico diverted to China at any moment China decides they
need that supply?
Mr. Tom. As I witnessed in my time at mission, we see these
BRIC nations line up oftentimes together, and they will do
anything to cut the U.S. out of a supply chain and move in
another direction. Anything they can affect us economically,
they will do it. But it could be a threat. It just depends on
supply chains and getting our cold supply chains.
My biggest risk is what I see in your home State of
California of how you are moving agriculture out, oftentimes,
especially in the vegetable, the permanent crops. It is moving
other places around the world. But my concern about products
coming out of Mexico is are they produced with the chemicals or
the products that are approved in the United States? I am not
sure we track it all as well as we should.
Mr. Duarte. Yes. And the other issue we have is here in the
United States--I mean, we talk about intellectual property
theft and how that hurts American companies in China, but we
are losing intellectual property value here in America. We have
addressed it in this Committee several times with the USDA.
They are just not approving our advanced farm chemistries. We
have companies spending enormous amounts of money developing
new tools for us, and we can't get our own USDA to approve
them. Meanwhile, the patents tick away, and these crop
protection companies lose their incentives to invest in
American farm tools in the future. Am I on track there?
Mr. Tom. If you look on the crop care side, it has been
almost 40 years since we have had new mode of action come into
the marketplace. That just shows how slow it is. It takes 18
years to bring a new chemistry to the market and hundreds of
millions of dollars to get it there. I don't know if it is a
funding issue or a personnel issue----
Mr. Duarte. No, I think it just incompetence and
disinterest in approving farm chemical tools.
Another question, I just came from a Natural Resources
hearing I stepped out to about offshore oil drilling. We are
not exploring oil in America. We are not building our electric
grid. We are focusing trillions towards green energy
boondoggles in my opinion. If you were advising an ag chem
company to put in a major ag chemical or fertilizer plant or a
pharmaceutical for that matter or any kind of chemical
precursors, would you in good conscience advise them to build
that plant in America today, given our energy policies?
Mr. Tom. Well, as a producer, I want them here, but when I
know our energy policy that is under this current
Administration, no.
Mr. Duarte. And this is a 20 year plant, so a friendly
Administration may or may not sway a 20 year investment, maybe
a 50 year investment.
Mr. Tom. Yes, I can't tell you what their investment thesis
is, but I know this. It is very capital-intense to bring these
plants back to the United States. But again, whether it is here
or to our allies, we need to work together to do this.
Mr. Duarte. So as China is growing its carbon economy--we
hear about the coal plants, we know about the oil, we know
about the rest of the world drilling oil--and America is
choosing not to have a carbon economy. Our working families are
struggling. We have cereal companies advertising breakfast
cereal for dinner now. Is our biggest problem China, or our own
policies the biggest problem for American consumers today?
Mr. Tom. Sir, it is our own policies, and whether it is
energy or whether it is food--and what we are doing in the
regulatory environment, what we are trying to do, whether it is
trying to solve climate, as some people say we are doing, or
what we are trying to do in nutrition, this going to affect
those that can least afford it the most. I know we have people
that are coming out trying to sell climate programs to us, they
say, ``Well, they are going to absorb it.'' It gets handed down
to the consumer. Same goes with this energy policy. It is going
to get handed down to the consumer.
Mr. Duarte. So while China's upper middle class is growing,
their disposable income is growing, their purchase power parity
is already bigger than the American working families, they are
not eating our lunch because they are buying our land. They are
eating our lunch because we are feeding it to them.
Thank you very much. I yield back.
The Chairman. The gentleman's time has expired.
I now recognize Mr. Nunn for 5 minutes.
Mr. Nunn. Thank you very much, Mr. Chairman, and I
appreciate this panel hanging with us throughout the day. This
is a very important conversation for all of us.
Look, as a former counterintelligence officer, someone who
has served on the SC as well, I want to say the threat is real,
and it is often overlooked in the ag community. I appreciate
the Chairman putting this together and having a discussion on
the direct impact. I just got off the China Commission, where
we talked about harvesting organs that China is trying to sell
around the world. Harvesting our own agriculture and the threat
that that poses is direct, it is real, and it is now.
Mr. Gackle, thank you, first and foremost, for what you do
with the Soybean Association. You are part of a team of
tireless workers who are in the field, producing and providing
for not just America, but the entire country. Iowa, Illinois,
others, we all are part of this team together, and so I am
proud of what we have been able to export with the U.S.
agriculture being soybeans number one in the field for our ag
exports.
The challenge is 60 percent of that is going to China
today. Talk to us a little bit about what we should be doing
here in Congress to help diversify that and ensure that we are
not dependent on a sole customer that could use this in a trade
war against us.
Mr. Gackle. Well, I talked about--thank you for the
question, first of all, appreciate you highlighting that
important part of it as well and what we are doing as U.S.
farmers to supply the world.
But you are right. With that reliance, so much of that
reliance on China, finding these new markets is critical. We
have talked about MAP and FMD. Something I haven't mentioned
yet is the new program from USDA under the Regional Agriculture
Promotion Program, which is looking at markets in new and
developing places, places that aren't traditionally reliant on
MAP and FMD. So soy has applied for grants in that area as
well. I think Congress continuing to value and realize the
return on investment that we get from the MAP and FMD dollars.
Mr. Nunn. Right.
Mr. Gackle. It sounds like a lot of money when we asked for
doubling of Market Access Program and an increase to Foreign
Market Development, but the need is there. The program has
proven throughout the years that there is not enough funds
there to meet the demand. We could always use more in building
those new markets.
So when we look at possible challenges to the China market
depending on policy decisions here in the U.S., it is just
important to keep those resources there and to increase them
and bring that return back to farmers.
Mr. Nunn. And it is not just our markets that we are able
to sell to overseas. We have real competition on the horizon
right now. I mean, when we look at Brazil, which has been
enabled with Chinese investment, they are now the lead producer
of soybeans. This is a threat that we are going to be competing
with others who are subsidizing their market to go after these
same markets. Is that correct?
Mr. Gackle. That is correct, and some may have been to
Brazil. If you have ever had a chance to visit there, you can
just see the tremendous opportunity that they have to continue
to increase their production both through just putting more
acres or hectares into production and adding new land to that,
but also they are increasing their yield. They are spending
money on research as well, which is something we spoke about
earlier. So they are getting better at what they are doing.
There are improvements to their infrastructure, whether it is
highways or ports or rails. So they are making all the
improvements that are going to put them in a better position
around the world, so competing with that is crucial.
Mr. Nunn. I would like to turn to you on the national
security side. Look, we have looked at a number of things in
this Committee today about what we are doing in the State of
Iowa, one, to stop China from buying farmland in the United
States, which was highlighted with my friend Mr. Feenstra here.
We are literally seeing people take the genetic material and
replicate it in China by taking it from a farm field. This is
happening in small businesses across the country.
The Chinese Government, as we learned today, has worked
diligently to start mapping the DNA of humans within their
country. It is fair to say they are coming after agriculture,
whether it is grown in a field or grown in a barn. Would you
agree?
Mr. Daly. I absolutely agree. China is--in the world of
biologics, that is where they know the next round of technology
goes, and especially big data and having artificial
intelligence to pull it together and then innovate or try to
innovate or steal innovation from us and leapfrog us, whether
that is human biology or in the agricultural space.
Mr. Nunn. I am proud that we have been able to work
together on the Protect Small Business and Prevent Illicit
Financing Act (H.R. 5119), which I led, to be able to pass, as
well as what we are doing in the Cybersecurity in Agriculture
Act of 2023 (H.R. 4387). I want to highlight, with your work in
CFIUS, is their advantage from being able to really look at
creating regional agricultural cybersecurity realms in our
land-grant and region schools like Iowa State on areas that can
be really helpful? Because we now know that the top three
sectors under attack--financial services, energy, and ag--the
threat is real.
Mr. Daly. Absolutely. I think the expansion of our
cybersecurity capabilities and knowledge is like imperative,
just--I mean, China has built up in its military and divisions
a cybersecurity warfare division that is constantly going at
U.S. businesses. And given the prioritization of the three
industries you have mentioned, I mean, ag is where they are
going. And they are going to do it, and they are going to put
all the resources into it, and so we have to counter it. And
that partnership that you have talked about, sort of building
out that expertise is imperative.
Mr. Nunn. I really appreciate that. I yield back the
remainder my time. Thank you, gentlemen.
The Chairman. The gentleman's time has expired.
I now recognize the gentleman from Wisconsin, Mr. Van
Orden.
Mr. Van Orden. Thank you, Mr. Chairman.
This is incredibly painful for me to compliment my friend
from California due to his unreasonable advocacy for almond
milk, but I feel that I must at this point. I want to reiterate
his question and Mr. Tom's answer. Due to the Biden
Administration's war on energy, it would not be prudent for
companies to start working on plants to provide nutrients and
pest control agents in the United States right now. I don't
think people quite understand what that means. Mr. Tom, thank
you for pointing that out. We have to stay ahead of China, and
the Biden Administration can't get out of their own way, so
that is incredibly important. I just want to make sure we
didn't skip over that.
So I also want to compliment the Biden Administration for
doing something that is absolutely amazing. They have pulled
off a foreign policy miracle in that they have driven China and
Russia closer together since the death of Stalin. It sounds
like a joke, but I am not being trite. That is exactly what the
Biden Administration has done by their horrible foreign policy
decision-making stuff.
So I just want to ask you a couple of things about beans if
that is okay because they are very important. So we produce a
lot in the 3rd Congressional District of the State of
Wisconsin, and also corn. And I read all you guys' testimony in
detail. Thank you so much for it. And I just have a question
because, in fact, Brazil is eating our lunch because we are
feeding it to them, another good line from Duarte. Today is a
good day for you, Duarte. So we had this huge problem when the
previous Administration did trade sanctions. It was like 27
percent or whatever the heck it was, but we have recovered
since that, right? So now you are selling roughly the same
amount of beans to China that you did before even though Brazil
has increased their capacity.
There are a couple of questions. If we had stuck with it,
would that still be the case, meaning would China finally have
come around and started to work with the United States because
we stood firm for longer than one Administration in your
opinion, sir?
Mr. Gackle. Yes, thank you for the question. And, yes, not
being a foreign policy expert, I might not have all the right
answers here, but I think--so part of the recovery with that
market was the Phase One agreement that the U.S. and China
entered into to get back some of that market.
Mr. Van Orden. Right.
Mr. Gackle. What we are seeing, though, is there is really
no enforcement mechanism to that, unfortunately. So I would say
we haven't seen a full recovery in the China market since 2018.
Mr. Van Orden. Yes.
Mr. Gackle. Appreciate that a lot of it has come back under
that agreement, but some of this what I call long-term damage
to the U.S. reliability, I mean, we have historically been
viewed as reliable suppliers around the world, and part of the
negative part of the 2018 tariff deal that we might not get
back is that full confidence that foreign markets across the
world had in the U.S. as a reliable provider.
Mr. Van Orden. And you know what, you can see that as a
negative or a net positive. I see it as net positive because
the United States needs to be viewed as someone that is going
to stand with democracy and freedom. And Xi Jinping, they have
had multiple famines, as you pointed out, in the last century
and, quite frankly, they don't care. The Soviet Union, they
murdered essentially millions of people by starving them to
death when they did collectivization, so I get it, and the
Great Leap Forward during the Cultural Revolution is what you
are referring to.
So let me ask you this question. Do we, as American
farmers, have more resiliency built into our systems because we
are getting back to where we were? Do we have more resiliency
built into our systems than Brazil has the potential to expand
their capacity? And can we wait China out? China has to feed
their people every day. So do we have the resiliency built into
our systems that if we actually stuck to our guns like
President Trump did and not fold the cards like President Biden
did, if we stood strong, are we going to be able to maintain
our industry?
Mr. Gackle. That is tough to predict, sir. I will start by
saying that farmers across the country absolutely understand
the critical issues that you are talking about here when it
comes to China and China competitiveness and threats posed to
American agriculture.
Mr. Van Orden. Yes.
Mr. Gackle. So that is appreciated by growers. I believe
that is the case, speaking for myself, at least, and I am sure
others. To say that we have the entire resiliency, that--I
mean, one thing I will mention we haven't really talked about,
the outlook for farm income over the next 2 to 5 years is not
great.
Mr. Van Orden. It isn't.
Mr. Gackle. Prices are dropping. The cost of inputs may not
be increasing as fast as ever, but our cost of production is
generally going up, and our profitability is coming down.
Mr. Van Orden. Mr. Gackle, I am sorry, I only have 20
seconds left.
Mr. Gackle. Yes, sorry.
Mr. Van Orden. I appreciate it. And we are not going to get
inputs down until fuel cost goes down because everything is
predicated on diesel fuel. You know that. It has got to get in
the ground, it has got to get out.
One question for you, Mr. Tom. If you could go back in
time, do you think the United States of America should be
feeding Nazi Germany in 1938 before their invasion of Poland in
1939? Should we be providing them with food and aid?
Mr. Tom. Well, bring it up to--you want to talk about China
today on that or----
Mr. Van Orden. Well----
Mr. Tom. You want to talk about Nazi Germany----
Mr. Van Orden. I want to highlight the fact that, right
now, we are essentially feeding Nazi Germany in 1938. And do
you think that is an appropriate use of American resources?
Would it have been then, and is it now with China? Because that
is where we are at with China. We are in 1938.
Mr. Tom. I want to sell as much as----
Mr. Van Orden. They haven't invaded Poland yet, but it is
on the horizon.
Mr. Tom. I want to sell as much as we can. We know the
demand for protein around the world is continuing to grow at a
rapid rate, whether it is India, China, or throughout the
developing world in Africa and the Middle East. The reality is,
we are the best suited to meet that demand, but again, it is
trade for the United States. It is something we can sell, and
we need to bring it back home. But again, we are not going to
maintain that competitive edge unless we start protecting our
own intellectual properly.
Mr. Van Orden. Mr. Tom, I understand. My time has expired.
I just want to tell you that if I had the choice to sell food
and give aid to Hitler 1938, I would not have done so.
With that, I yield back.
The Chairman. The gentleman's time has expired.
I am going to take the liberty here as we close out to
recognize myself for 5 minutes. Votes have been called probably
about 8, 9 minutes ago, so we have a fair amount of time left
on the clock and even after that clock winds up.
So one quick question. Mr. Daly, your testimony highlights
the recent GAO report and the issues USDA faces with AFIDA. You
also mentioned that foreign agriculture land holdings within
the United States have increased 30 percent since 2019. Outside
of the recommendations within the report, can you expand on
other changes Congress should look to, to address the gaps?
Mr. Daly. Thank you, Mr. Chairman. That is a very good
question. I think, in terms of the reporting that is being
done, I think what is interesting to me and what I have seen in
government and in the private-sector in terms of the way China
is doing some of its investments, it is doing it in very
complex ways, either through private equity entities where
there are limited partners versus being general partners. So I
think capturing that complexity of that reporting in terms of
ownership would be very useful and also in terms of land use.
But I think the recommendations of the GAO are useful as a
starting place, but looking at how the Chinese are structuring
that investment and where they are doing it in directions that
can't be caught is important, and where they are declaring
their ownership in the other land categories should be
examined.
The Chairman. Well, before I yield back my time, I would
like to address the gentleman from Massachusetts' comments. We
are all aware of California's oppressive Proposition 12
mandate, as well as similar mandates from states like
Massachusetts. And I am sure you all have also heard me say
that I want a fix for these mandates. While my colleague may
think this is a done deal, the Supreme Court made it abundantly
clear that Congress can and--quite frankly, my reading of the
opinions--should address this. We do have a farm bill that is
coming up here hopefully in the very near future. And because
of the communications that the Supreme Court did in their
opinions, they made it abundantly clear that Congress has the
ability to address the interstate commerce chaos that we have
seen arise since their ruling.
Now, I am a strong supporter of states' rights, and I
acknowledge that sometimes state laws can have limited
extraterritorial effects, but any state or local laws that
control production outside of their jurisdictions are
inherently harmful to interstate commerce. The EATS Act and
similar proposed fixes would not restrict states from creating
laws for their residents. It would just ensure that American
farmers outside of those jurisdictions would continue to be
allowed to produce according to the standards of the state that
they produce in. Any other characterization of what these
proposals would do is false and misleading and is, quite
frankly, a stain on this Committee's work.
And to specifically address the comments related to China,
no one has made any sort of coherent argument explaining how
one state dictating to another how to farm helps out China.
China didn't ask for the help. Farmers have asked for the help.
And while my colleague from Massachusetts was ranting about
China's influence on my decision-making, my staff at that point
were meeting with over 30 American pork producers who all ask
for a Prop 12 fix in order to continue running their family-
owned operations.
I am trying to have serious policy conversations while some
of my colleagues are standing behind a convenient strawman
instead of coming to the table and finding solutions. I have
committed to finding effects and benefits for American
producers and no one else, and I tend to find one.
That concludes my questions and closing statements. Just
thank you so much to our witnesses, just a wealth of
information that you have shared with us. I think it is
insightful. It is helpful, very specific thoughts and
recommendations that we need to be pursuing.
As always, thank you to our staff that really--our personal
office staffs, our Committee staffs that do such great work to
help make sure that we do these types of hearings successfully.
Food security is national security, and food production
acreage and food processing that is influenced through the
purchase or theft of intellectual property, influenced by the
Chinese Communist Government, is a significant risk. There must
be legal consequences that serve as a deterrent and a
preventative measure. And we have heard many really solid
recommendations today that we need to continue to build on.
Safeguards are warranted. Even outside of this Committee, I
am very proud to--within the Education and the Workforce space,
we have proposed a bill, introduced a bill that would create a
pilot for incorporating cybersecurity into career and technical
education. We need people with those skills to be on the
frontline. We talked about the massive data of agriculture, and
those systems need people that are working in the development
and maintenance of those who have great cybersecurity skills.
So there is a broad breadth of solutions here. And certainly
having people with the right skills to do our best to be able
to prevent the stealing of intellectual property, that is just
one small example.
So we need to encourage USDA to aggressively work on--I
believe as well in this space we need to encourage USDA to
aggressively work on new trade agreements in new markets for
our agriculture commodities to manage future risk. We must
strengthen our investment in both agricultural research and,
quite frankly, their trade programs, Foreign Market Development
and our Market Access Program.
We need to encourage, I believe, trade language for USTR to
be able to be equipped with that would do our best to prevent
retaliatory--in the in-trade agreements retaliatory tariffs on
American agriculture commodities because anytime there is a
trade war, the low-hanging fruit so to speak is American
agriculture. I remember first coming here under the Obama
Administration. There was a problem with--I believe it was
Chinese manufactured tires that were creating some type of
accident risk. I don't remember what it was specifically. So we
imposed a tariff on these tires, or the Obama Administration
did, and in response, China put a tariff on our chickens,
ducks, and turkeys.
I think it is immoral that any country, including the
United States, would do retaliatory tariffs on such an
essential thing as food. And we ought to look at language that
somehow we can at least promote within the trade discussions
when--and I will say when--the tariff disputes are completely
only related to agriculture.
So once again to our witnesses here today, thank you so
much for your service, for your expertise, and for joining us
here.
And under the Rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional material and supplementary written responses from
the witnesses to any questions posed by a Member.
This hearing of the Committee on Agriculture is adjourned.
[Whereupon, at 4:18 p.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Report by Hon. Glenn Thompson, a Representative in Congress
from Pennsylvania
Foreign Investments in U.S. Agricultural Land: Enhancing Efforts to
Collect, Track, and Share Key Information Could Better Identify
National Security Risks
January 2024
GAO-24-106337
GAO Highlights
Highlights of GAO-24-106337,[1] a report to
Congressional requesters
---------------------------------------------------------------------------
\[1]\ https://www.gao.gov/products/GAO-24-106337.
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Why GAO Did This Study
USDA estimated that foreign investment in U.S. agricultural land
grew to approximately 40 million acres in 2021. These investments may
have consequences for U.S. national security. For example, there may be
foreign ownership of U.S. agricultural land close to sensitive military
installations.
CFIUS is an interagency committee that reviews certain foreign
transactions to determine potential effects on U.S. national security.
These include foreign investments in U.S. agricultural land. In
addition, USDA's AFIDA statute, enacted in 1978, requires foreign
persons acquiring or transferring agricultural land to file a
disclosure form with USDA.
GAO was asked to review foreign investments in U.S. agricultural
land. This report examines the extent to which (1) USDA shares
information related to foreign investments in U.S. agricultural land
with CFIUS for its national security reviews, and (2) USDA's processes
enable it to collect, track, and report reliable data on foreign
investments in U.S. agricultural land. GAO reviewed laws, regulations,
and agency guidance; analyzed USDA data; and interviewed agency
officials.
What GAO Recommends
GAO is making six recommendations, including that USDA share
detailed and timely AFIDA data with CFIUS agencies, improve the
reliability of AFIDA data, and assess its ability to adopt an online
submission system and public database. USDA generally agreed with our
recommendations.
View GAO-24-106337.[1] For more information,
contact Kimberly Gianopoulos at (202) 512-8612 or
[email protected] or Steve D. Morris at (202) 512-3841 or
[email protected].
What GAO Found
The United States Department of Agriculture (USDA) does not share
timely data on foreign investments in agricultural land collected under
the Agricultural Foreign Investment Disclosure Act of 1978, as amended
(AFIDA). Committee on Foreign Investment in the United States (CFIUS)
agencies, including the Department of Defense (DOD) and the Department
of the Treasury, identify and review transactions that may pose
national security risks, such as the proximity of agricultural land to
a sensitive military base. USDA annually publishes selected AFIDA
information online that CFIUS agencies may use when considering
potential national security risks associated with agricultural land. In
addition, USDA officials said they respond promptly when they receive
requests for information. However, DOD officials noted they need AFIDA
information that is more up-to-date and more specific, and they need to
receive this information more than once a year. USDA has requested
funding to develop a real-time data system that can be accessed by
other U.S. Government agencies and the public. Meanwhile, sharing
current data could help increase visibility into potential national
security risks related to foreign investments in U.S. agricultural
land.
AFIDA Data Are Not Regularly Part of CFIUS Reviews
Legend: Agricultural Foreign Investment Disclosure Act of
1978, as amended = AFIDA, the Committee on Foreign Investment
in the United States = CFIUS.
Source: U.S. Department of Agriculture regulations and
documents and Department of Defense officials; GAO (images). D
GAO-24-106337.
USDA implements AFIDA across field offices and headquarters, but
its processes to collect, track, and report key information are flawed.
USDA collects the required data on paper forms with county or Federal
offices and reviews them for accuracy, according to USDA officials.
However, its processes to do so are unclear and challenging to
implement. For example, USDA's AFIDA handbook provides limited
instructions on how to collect reliable AFIDA information. In addition,
although Congress required USDA to create an online submission process
and public database for AFIDA data by the end of 2025, USDA does not
have plans and timelines to do so, in part because USDA has not
received funding. USDA also does not sufficiently verify and conduct
quality reviews to track the accuracy and completeness of its collected
AFIDA data. GAO's review of AFIDA data current through calendar year
2021 found errors, such as the largest land holding associated with the
People's Republic of China being counted twice. USDA has begun efforts
to identify AFIDA non-compliance through data mining, according to
officials, and has opportunities to expand this practice. But without
improving its internal processes, USDA cannot report reliable
information to Congress or the public about where and how much U.S.
agricultural land is held by foreign persons.
Contents
Letter
Background
CFIUS Review Does Not Regularly Include AFIDA Information Related
to Foreign Investments in Agricultural Land
USDA Implements AFIDA Nationally, but Its Processes to Collect,
Track, and Report Key Information are Flawed
Conclusions
Recommendations for Executive Action
Agencies' Comments and Our Evaluation
Appendix I: Objectives, Scope, and Methodology
Appendix II: Factors to Consider When Determining Whether Submitted
Transactions Pose a National Security Risk
Appendix III: Comments from the Department of Agriculture
Appendix IV: GAO Contact and Staff Acknowledgments
Table 1: List of Illustrative Factors CFIUS and the President May
Consider in Determining Whether a Transaction Notified to the Committee
Poses a National Security Risk
Figures
Figure 1: Examples of U.S. Government Oversight of Foreign
Investment in U.S. Agricultural Land
Figure 2: Overview of Process for Reviewing Transactions Notified
to the Committee on Foreign Investment in the United States (CFIUS)
Figure 3: U.S. Department of Agriculture (USDA) Offices with
Agricultural Foreign Investment Disclosure Act of 1978, As Amended
(AFIDA) Responsibilities
Figure 4: U.S. Department of Agriculture (USDA) Data Collection for
the Agricultural Foreign Investment Disclosure Act of 1978, As Amended
(AFIDA)
Figure 5: U.S. Department of Agriculture Reported Penalties
Assessed from 1998-2021 for Non-Compliance with the Agricultural
Foreign Investment Disclosure Act of 1978, As Amended (AFIDA)
Figure 6: Agricultural Foreign Investment Disclosure Act of 1978,
As Amended (AFIDA) Data Collection for Entities with Multiple Ownership
Tiers
Abbreviations
AFIDA Agricultural Foreign Investment Disclosure Act of 1978, as
amended
CFIUS Committee on Foreign Investment in the United States
DOD Department of Defense
FINSA Foreign Investment and National Security Act of 2007
FIRRMA Foreign Investment Risk Review Modernization Act of 2018
FPAC-BC Farm Production and Conservation Business Center
FSA Farm Service Agency
Treasury Department of the Treasury
USDA U.S. Department of Agriculture
This is a work of the U.S. Government and is not subject to
copyright protection in the United States. The published
product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work
may contain copyrighted images or other material, permission
from the copyright holder may be necessary if you wish to
reproduce this material separately.
[Letter]
January 18, 2024
Congressional Requesters
Foreign ownership and investment in U.S. agricultural land--which
includes farmland, pastures, and forest land--grew to approximately 40
million acres in 2021, a 40 percent increase since 2016, according to
the U.S. Department of Agriculture (USDA).\1\ Members of Congress have
expressed concern that some foreign investment in U.S. agricultural
land, such as land purchased near U.S. military bases or land purchases
that could lead to foreign control of U.S. food supply chains, may have
national security implications. Specifically, in 2022, Members
expressed concern about a U.S. subsidiary of a business from the
People's Republic of China purchasing cropland near Grand Forks Air
Force Base in North Dakota, given the use of sensitive drone technology
at the base.\2\
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\1\ USDA implementing regulations of the Agricultural Foreign
Investment Disclosure Act of 1978, as amended (AFIDA) define
agricultural land as land in the United States used for forestry
production or land used for farming, ranching, or timber production
within the past 5 years that is (1) more than 10 acres in size in the
aggregate, or (2) 10 acres or less in the aggregate producing gross
annual receipts of more than $1,000 from the sale of farm, ranch, or
timber products in total. 7 CFR 781.2(b).
\2\ In September 2022, 51 Members of Congress sent a letter to the
Secretaries of the Departments of Defense, the Treasury, and
Agriculture expressing concerns about this purchase.
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The Committee on Foreign Investment in the United States (CFIUS) is
an interagency committee that reviews certain foreign business
transactions in the United States, including specific foreign
acquisitions of U.S. agricultural land, to determine how transactions
may affect national security. CFIUS is chaired by the Department of the
Treasury and includes eight other departments and offices as voting
members and two agencies as nonvoting, ex officio members. USDA is not
a member, but participates fully as a voting member agency when
Treasury determines that a transaction involves agricultural issues,
according to officials.\3\
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\3\ See 50 U.S.C. 4565(k)(2). Additional voting members include
the Departments of Commerce, Defense, Energy, Homeland Security,
Justice, and State; the Office of the U.S. Trade Representative; and
the Office of Science and Technology Policy. Various other offices also
observe and, as appropriate, participate in CFIUS activities.
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The information collected through the Agricultural Foreign
Investment Disclosure Act of 1978, as amended (AFIDA) is the nation's
most comprehensive source on foreign investments in U.S. agricultural
land, according to USDA officials. AFIDA requires foreign persons
acquiring or transferring agricultural land to report information about
the transaction to USDA.\4\ USDA publishes an annual report of AFIDA
data, including the number of acres owned, by state and county, and the
country of the foreign investor. Government agencies, media, and
academic researchers, among others, use published AFIDA data to track
foreign agricultural investment in the United States. In addition, some
state laws incorporate AFIDA data into measures to monitor and enforce
restrictions on foreign investment in U.S. agricultural land.\5\
However, during a March 2023 Congressional hearing, the Secretary of
Agriculture explained that USDA is reliant on foreign persons to self-
report AFIDA information. The Secretary noted self-reporting is
challenging to enforce because deeds are filed in over 3,000 county
recorder offices. In September 2023, another USDA official noted that
USDA cannot locate AFIDA filings beyond the county level, such as
specific localities, and there is currently no system which tracks
deeds or leases of agricultural land.
---------------------------------------------------------------------------
\4\ Pub. L. No. 95-460, 2(a), 92 Stat.1263, 1263 (codified at 7
U.S.C. 3501(a)).
\5\ For example, both Pennsylvania and South Dakota have laws that
restrict foreign investment in their states' agricultural land. These
laws require their state agricultural departments to review AFIDA
filings and to refer filings suspected of noncompliance to their state
attorney general for investigation. E.g., 68 Pa. Stat. Ann. 45, S.D.
Codified Laws 43-2A-7.
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You asked us to review foreign investment in U.S. agricultural
land. This report examines the extent to which (1) USDA shares
information related to foreign investments in U.S. agricultural land
with CFIUS for its national security reviews, and (2) USDA's processes
enable it to collect, track and report reliable data on foreign
investment in U.S. agricultural land. This report adds to a series of
reports that we have published related to CFIUS processes for reviewing
foreign investments.\6\
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\6\ Among others, we published four related reviews of,
respectively, (1) CFIUS processes related to selected real estate
transactions; (2) DOD's ability, as a member of CFIUS, to address
defense issues; (3) CFIUS processes for reviewing covered transactions
and workload challenges; and (4) DOD's ability to identify whether
foreign encroachment threatens certain defense facilities. See
Committee on Foreign Investment in the United States: Selected
Transactions Involving Real Estate May Share Certain National Security
Risks, but Dispositions Can Vary Due to Case-Specific Factors, GAO-19-
417C (https://www.gao.gov/products/GAO-19-417C) (Washington, D.C.: June
14, 2019); Committee on Foreign Investment in the United States: Action
Needed to Address Evolving National Security Concerns Facing the
Department of Defense, GAO-18-494 (https://www.gao.gov/products/GAO-18-
494) (Washington, D.C.: July 10, 2018); Committee on Foreign Investment
in the United States: Treasury Should Coordinate Assessments of
Resources Needed to Address Increased Workload, GAO-18-249 (https://
www.gao.gov/products/GAO-18-249) (Washington, D.C.: Feb. 14, 2018);
Defense Infrastructure: Risk Assessment Needed to Identify If Foreign
Encroachment Threatens Test and Training Ranges, GAO-15-149 (https://
www.gao.gov/products/GAO-15-149) (Washington, D.C.: Dec. 16, 2014).
---------------------------------------------------------------------------
To address these objectives, we reviewed relevant laws, executive
orders, and regulations. To examine the extent to which USDA shares
information related to foreign investments in U.S. agricultural land
with CFIUS for its national security reviews, we reviewed documents
from the Department of the Treasury (Treasury), USDA, and DOD to
understand (1) CFIUS's process and (2) Treasury's, DOD's, and USDA's
individual processes for reviewing potential national security risks
related to foreign investments and identifying transactions for
potential CFIUS review. We also evaluated information on Treasury's,
DOD's, and USDA's efforts to share information in addition to potential
challenges these agencies have faced in doing so.
To examine USDA's processes to collect, track and report foreign
investments in U.S. agricultural land, we reviewed the Farm Service
Agency's (FSA) AFIDA handbook to learn about AFIDA responsibilities and
guidance for county, state, and headquarters offices.\7\ FSA works in
collaboration with the Farm Production and Conservation Business Center
(FPAC-BC), which was created in 2018, to implement AFIDA. In addition,
we conducted interviews with a non-generalizable sample of three state
offices and three county offices to better understand how FSA state and
county offices were fulfilling their AFIDA responsibilities. Further,
we conducted interviews with USDA officials responsible for managing
AFIDA to get their perspectives on implementing AFIDA and the
associated challenges. Moreover, we assessed the reliability of AFIDA
data by reviewing reported active holdings by foreign persons since
AFIDA started being implemented to the end of 2021--the latest year of
data available from the AFIDA spreadsheet at the time of our review. We
also evaluated AFIDA data against reported summary data in USDA's 2021
AFIDA Annual Report and the presentation of these data in the report.
Appendix I provides more information on our scope and methodology.
---------------------------------------------------------------------------
\7\ USDA, FSA Handbook: Foreign Investment Disclosure, 1-AFIDA
(Washington, D.C., revised Jan. 27, 2006).
---------------------------------------------------------------------------
We conducted this performance audit from October 2022 to January
2024 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background
U.S. Government Oversight of Foreign Investment in U.S. Agricultural
Land
Foreign persons may be subject to U.S. Government oversight from
USDA and CFIUS when they acquire an interest in U.S. agricultural
land.\8\ See figure 1 for an overview of U.S. Government oversight of
foreign investment in U.S. agricultural land.
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\8\ According to AFIDA regulations, a foreign person can be a
foreign individual, legal entity, or government. 7 CFR 781.2(g). In
addition, a domestic legal entity in which at least ten percent is held
directly or indirectly by a foreign individual, legal entity, or
government, is also considered a foreign person. 7 CFR 781.2(k).
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Figure 1: Examples of U.S. Government Oversight of Foreign Investment
in U.S. Agricultural Land
Sources: GAO analysis of 7 CFR Part 781 and 31 CFR Part 802;
GAO (images). D GAO-24-106337.
a According to AFIDA regulations, a foreign person
can be a foreign individual, legal entity, or government. 7 CFR
781.2(g). A foreign interest of 10 percent or more in U.S.
agricultural land requires an AFIDA disclosure. 7 CFR
781.2(g)(4), (k).
CFIUS
CFIUS Legal Authorities
CFIUS is an interagency committee authorized by law to review and
address national security risks arising from certain transactions
involving foreign investment in the United States.\9\ CFIUS reviews
foreign investment transactions in the United States across industries
and sectors, including certain agricultural land transactions, to
determine whether they present a risk to national security.
Transactions within CFIUS's authority to review are generally referred
to as ``covered'' transactions. The Foreign Investment and National
Security Act of 2007 (FINSA) defined these transactions to include
certain mergers, acquisitions, or takeovers by or with any foreign
person that could result in foreign control of any person engaged in
interstate commerce in the United States. FINSA, as amended and
codified, provides several factors to consider when determining whether
a covered transaction posed a national security risk, including whether
the transaction could result in the control of a U.S. business by a
foreign government.\10\ FINSA also enabled the President or CFIUS to
consider other factors as appropriate. These factors could encompass
elements of the agriculture industrial base that have implications for
food security (for a full list of potential factors, see app. II).\11\
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\9\ See 50 U.S.C. 4565.
\10\ See Pub. L. No.110-49, 2, 4 (as amended and codified, in
part, at 50 U.S.C. 4565(a)(7), (b)(1)(B)).
\11\ See Pub. L. No.110-49, 4. See also 50 U.S.C. 4565(f)(11).
On September 15, 2022, the President issued an executive order that
highlights certain national security factors that CFIUS is required to
consider in reviewing investment transactions, including elements of
the agriculture industrial base that have implications for food
security, but does not otherwise change CFIUS's authorities or
jurisdiction. See Exec. Order. No. 14,083, 87 Fed. Reg. 57369 (Sept.
15, 2022).
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CFIUS legal authorities have evolved over time.\12\ The most recent
significant statutory update to CFIUS authority occurred in 2018 with
the enactment of the Foreign Investment Risk Review Modernization Act
of 2018 (FIRRMA).\13\ FIRMMA expanded CFIUS's authority to review
potential national security risks related to U.S. businesses and real
estate transactions.\14\ CFIUS may review voluntary filings by
businesses, including those in the agricultural industry, and
purchases, leases, or concessions of real estate (including
agricultural land) in close proximity to military or other sensitive
U.S. Government facilities.\15\
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\12\ CFIUS was established by Executive Order in 1975 to monitor
the effect of and to coordinate U.S. policy on foreign investment in
the United States. Exec. Order No. 11,858, 40 Fed. Reg. 20263 (May 7,
1975). In 1988, Congress enacted the Exon-Florio amendment adding
section 721 to the Defense Production Act of 1950, which authorized the
President or the President's designee to investigate the effect of
certain foreign acquisitions of U.S. companies on national security and
to suspend or prohibit acquisitions that might threaten to impair
national security. Omnibus Trade and Competitiveness Act of 1988, Pub.
L. No. 100-418, 5021, 102 Stat. 1425 (Aug. 23, 1988). The President
delegated this investigative authority to CFIUS. Exec. Order No.
12,661, 54 Fed. Reg. 779 (Dec. 27, 1988). The Foreign Investment and
National Security Act of 2007 further amended section 721 and formally
established CFIUS in statute. Pub. L. No. 110-49, 3, 121 Stat. 246,
252 (July 26, 2007) (codified as amended at 50 U.S.C. 4565).
\13\ John S. McCain National Defense Authorization Act for Fiscal
Year 2019, Pub. L. No. 115-232, 1701-1728, 132 Stat. 1636, 2173-2208
(Aug. 13, 2018) (codified as amended at 50 U.S.C. 4565).
\14\ ``Covered transactions'' are further defined through
regulations found at 31 CFR part 800 for investments (including
``covered control transactions''), and ``covered real estate
transactions'' are determined through regulations found at 31 CFR part
802. See 31 CFR 800.101 (describing the scope of parts 800 and 802).
31 CFR part 802 may cover agricultural land if a transaction meets the
``covered real estate transaction'' criteria. See 31 CFR 802.212. The
law also provides an exception for certain real estate transactions
involving real estate in ``urbanized areas'' or if it constitutes a
single ``housing unit,'' as defined by the Census Bureau in each case.
See 50 U.S.C. 565(a)(4)(C)(i).
\15\ ``Close proximity'' is defined as the area that extends
outward 1 mile from the boundary of a relevant U.S. Government site. 31
CFR 802.203. Regulation defines ``extended range'' as the area that
extends 99 miles outward from the outer boundary of close proximity of
certain military installations. 31 CFR 802.217. See 31 CFR pt. 802,
app. A (listing relevant military installations and other U.S.
Government sites).
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Informed by the committee's review, the President of the United
States has the authority to suspend or prohibit a transaction that
threatens to impair the national security of the United States.\16\
According to the 2022 CFIUS annual report, five presidential decisions
have been issued since 2013, most recently in 2020.\17\
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\16\ See 50 U.S.C. 4565(d)(1).
\17\ U.S. Department of the Treasury, Committee on Foreign
Investment in the United States, Annual Report to Congress: Report
Period CY 2022 (2022). Accessible at https://home.treasury.gov/policy-
issues/international/the-committee-on-foreign-investment-in-the-united-
states-cfius/cfius-reports-and-tables (accessed on July 30, 2023). Data
do not specify whether these decisions related to agricultural land.
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CFIUS Member and Non-member Roles and Responsibilities
CFIUS's responsibilities include: (1) reviewing transactions, most
of which are voluntarily submitted by businesses, and taking action as
necessary to address any national security risks; (2) monitoring and
enforcing compliance with mitigation measures; and (3) identifying
transactions of concern that have not been submitted to CFIUS for
review, according to officials. The Secretary of the Treasury has
certain operational responsibilities as the chair of CFIUS. According
to Treasury officials, these responsibilities include coordinating
committee operations, helping collect information from parties involved
in a transaction (such as a foreign acquirer and U.S. business involved
in a transaction), and distributing filed information to all member
agencies. Treasury also communicates on the committee's behalf with the
parties, Members of Congress, and the general public. According to DOD
officials that we interviewed, when transactions of concern involve
agricultural land, Treasury, DOD, and USDA are the agencies most
actively involved in identifying and reviewing the transactions for
CFIUS.
CFIUS Submission Requirements
CFIUS is the main authority that reviews national security risks
relating to certain foreign investments, including those in
agricultural land, according to Treasury and DOD officials.\18\ CFIUS
reviews formal written notices (``notices'') that have been submitted
(or ``notified'') to the committee by parties to transactions. Notices
to CFIUS should contain information about the nature of the transaction
and the parties involved. They include voluntary filings by U.S.
businesses, including those in the agricultural industry, and voluntary
filings by foreign investors of real estate (including agricultural
land) in proximity to military or other sensitive locations.\19\
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\18\ In addition to CFIUS, DOD's Military Aviation and Installation
Assurance Siting Clearinghouse aims to protect DOD's mission
capabilities from incompatible energy development by collaborating with
external stakeholders to prevent, minimize, or mitigate adverse impacts
on military training, testing, and readiness. According to DOD
officials, this development could involve domestic or foreign entities.
\19\ See 31 CFR 800. 211 (defining ``covered real estate'' to
include locations within close proximity to identified military
facilities, locations within the extended range of certain military
facilities, and any county or other geographic area identified in
connection with identified installations).
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Mandatory filing requirements do not necessarily extend to CFIUS
transactions involving agricultural land.\20\ Only certain transactions
related to U.S. businesses involved with critical technology, critical
infrastructure, and sensitive personal data require a mandatory CFIUS
filing.\21\
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\20\ See Pub. L. No. 115-232, 1706.
\21\ See 31 CFR 800.401.
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According to CFIUS's 2022 report, apart from certain transactions
that are subject to the mandatory filing requirement authorized under
FIRRMA, parties voluntarily submit declarations or notices of
transactions to CFIUS. However, in general, any CFIUS member agency can
initiate a review of any covered transaction for which no notice was
filed if it determines that the transaction is within the Committee's
jurisdiction and that it may raise national security risks. CFIUS
refers to these as ``non-notified transactions.'' By contrast, notified
transactions include those voluntarily filed in accordance with CFIUS's
formal notice procedures, as well as transactions submitted for review
in abbreviated notifications (``declarations'').\22\ All CFIUS reviews
are confidential and protected by statute from public disclosure.\23\
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\22\ See 31 CFR 00.403, 800.501, 802.401, and 802.501.
\23\ 50 U.S.C. 4565(c).
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CFIUS Process for Reviewing Transactions
CFIUS reviews each transaction individually, focusing on the
aspects of the transaction that could pose a potential national
security risk. See figure 2 for an overview of the steps that comprise
the CFIUS process for reviewing notified transactions.
Figure 2: Overview of Process for Reviewing Transactions Notified to
the Committee on Foreign Investment in the United States
(CFIUS)
Source: GAO analysis of Treasury documents and 50 U.S.C.
4565; GAO (images). D GAO-24-106337.
Note: This process is described in greater detail in 50
U.S.C. 4565(b), (d).
a For each transaction reviewed, the committee
identifies agencies with relevant expertise to act as co-lead
with Treasury to guide the transaction through the CFIUS
process. According to Treasury officials, co-lead agencies may
include agencies that are not members of the committee, but
which can act as members for specific transactions.
Notified transactions. During its initial review--known as a
national security review--CFIUS determines whether the transaction is
covered by its legal authorities and therefore within its jurisdiction.
If the transaction is within its jurisdiction to review, CFIUS assesses
whether it poses risks to national security. The committee generally
also identifies at least one other agency with relevant expertise to
work with Treasury to guide the transaction through the CFIUS
process.\24\ In addition, the Office of the Director of National
Intelligence develops a national security threat assessment.
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\24\ According to Treasury officials, co-lead agencies may include
agencies, such as USDA, that are not standing members of the committee,
but which can act as members for specific transactions because of their
relevant expertise.
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If CFIUS finds that the covered transaction does not present
national security risks or that other provisions of law provide
adequate and appropriate authority to address the risks, CFIUS may end
its review. However, if the potential risks remain unresolved at the
end of the review period or the committee requires additional time,
CFIUS may initiate a national security investigation.
If CFIUS identifies an unresolved national security risk, CFIUS may
work with the transaction parties as appropriate to mitigate the
potential risk. Mitigation may include ensuring that only authorized
persons have access to certain information or facilities. It may also
involve the parties providing the U.S. Government the right to review
certain business decisions and to object if the decisions raise
national security concerns.
CFIUS clears a transaction if it determines during its review or
investigation period that, as appropriate, (1) the transaction does not
pose any unresolved national security risks, (2) any national security
risks are adequately addressed by other laws, or (3) mitigation
measures that CFIUS agreed to or imposed resolve any national security
risks. However, if any national security risks remain unresolved after
the investigation, CFIUS may refer the transaction to the President for
action unless the transaction parties decide to withdraw the filing and
abandon the transaction. The President has the authority to suspend or
prohibit a transaction, including by requiring that the foreign party
divest itself from the U.S. entity.\25\
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\25\ Congress directed that this authority can be invoked only
when, in the President's judgment, no law other than section 721 of the
Defense Production Act of 1950, as amended, and the International
Emergency Economic Powers Act provides adequate and appropriate
authority to protect national security, and when there is credible
evidence that the foreign person acquiring an interest might take
action that threatens to impair the national security. See 50 U.S.C.
4565(d)(4). According to CFIUS, a foreign acquirer may agree to divest
itself of all or part of a U.S. company in lieu of a referral to the
President. Divestment typically occurs through the parties' withdrawing
the notice and abandoning the transaction.
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According to the CFIUS 2022 annual report, CFIUS conducted national
security reviews for 286 notified transactions in 2022. Of those, 285
were filed as investment-related transactions and one was filed as a
real estate-related transaction. CFIUS conducted subsequent national
security investigations on 162 of the 286 notices and concluded action
after adopting mitigation agreements to resolve national security
concerns with respect to 41 notices. In 2022 there were no presidential
decisions issued and CFIUS rejected one notice.
Non-notified transactions. CFIUS used various methods to identify
non-notified transactions in 2022. These included interagency
referrals, tips from the public, media reports, commercial databases,
and Congressional notifications, according to CFIUS's 2022 report. The
report stated that CFIUS identified and formally considered 84 non-
notified transactions, 11 of which resulted in a request to the parties
to file the transaction with CFIUS in 2022.\26\
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\26\ Committee on Foreign Investment in the United States, Annual
Report to Congress: CY 2022.
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If CFIUS believes that a non-notified transaction may be covered
and raise national security considerations, CFIUS may request that the
parties submit relevant information about the transaction and then, if
applicable, file a notice.\27\ However, should the parties decline to
file a notice after CFIUS requests they do so, any CFIUS member agency
may file an agency notice to initiate a review of the transaction.\28\
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\27\ See 31 CFR 800.501, 802.501.
\28\ 50 U.S.C. 4565(b)(1)(D).
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Agricultural Foreign Investment Disclosure Act of 1978, As Amended
(AFIDA)
AFIDA Statute
AFIDA, enacted in 1978, requires foreign persons and legal entities
acquiring or transferring an interest in U.S. agricultural land to
submit a report to USDA containing information on the transaction, the
land, and the parties involved. Under AFIDA as originally enacted, USDA
was charged with determining the effects of these transactions,
particularly on family farms and rural communities. AFIDA also grants
USDA authority to take actions to monitor compliance and to assess
financial penalties for non-filers.
Four months prior to the enactment of AFIDA, we reported that there
was unanimous agreement from government and the private-sector that
there was no reliable data on the amount of foreign-owned U.S.
farmland.\29\ At that time, some surveyed states were concerned that
foreign investment in farmland might drive up farm prices beyond the
reach of residents, result in foreign control over food production and
possibly food prices, or adversely affect small family farms. We
determined the most feasible and simplest approach for collecting these
data was a Federal effort to require foreign landowners to self-report
their investments. However, we reported that the usefulness of such a
system would depend on the completeness of the information collected.
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\29\ GAO, Foreign Ownership of U.S. Farmland: Much Concern, Little
Data, CED-78-132 (Washington, D.C.: June 12, 1978).
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Foreign Persons under AFIDA
According to AFIDA regulations, a foreign person is defined as a
foreign individual, legal entity, or government. In addition, a
domestic entity in which at least ten percent is held directly or
indirectly by a foreign individual, legal entity, or government is also
considered a foreign person. Foreign persons are required to file a
disclosure form with USDA if they acquire, transfer, or hold an
interest in U.S. agricultural land, including leases that are for at
least 10 years.\30\ Foreign persons are not required to file a report
for short-term leases that are for less than 10 years.
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\30\ AFIDA regulations also require filings when foreign held land
use changes from agriculture to non-agriculture. Exemptions from AFIDA
filings include security interests, contingent future interests,
easements for purposes unrelated to agricultural production, and
interests solely in mineral rights. 7 CFR 781.2(c).
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AFIDA Forms
Foreign persons that invest in U.S. agricultural land are required
to file a paper FSA-153 form (also known as the AFIDA form) disclosing
details of the transaction. Specifically, filers are required to
provide information about investors and the land, such as its acreage,
land use, and value. These forms are required for acquisitions,
dispositions, and land use changes.
USDA Roles and Responsibilities
USDA roles and responsibilities related to AFIDA filing are
distributed across USDA's county, state, and Federal offices. AFIDA
forms can be filed with the FSA county office where the agricultural
land is located or USDA headquarters for complex filings. At USDA
headquarters, the Farm Production and Conservation Business Center
(FPAC-BC) is responsible for managing AFIDA, including maintaining the
AFIDA spreadsheet and overseeing USDA's AFIDA policy, according to USDA
officials.\31\ For example, FPAC-BC is responsible for updating the
FSA-153 form and AFIDA guidance. FSA state offices oversee the efforts
of their county offices and provide technical assistance, as needed.
Figure 3 shows the different USDA offices with AFIDA responsibilities.
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\31\ According to USDA officials, the AFIDA Excel spreadsheets
posted online are developed from an AFIDA Microsoft Access database.
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Figure 3: U.S. Department of Agriculture (USDA) Offices with
Agricultural Foreign Investment Disclosure Act of 1978, As
Amended (AFIDA) Responsibilities
Legend: Agricultural Foreign Investment Act of 1978, as
amended = AFIDA; Farm Service Agency = FSA.
Source: U.S. Department of Agriculture documents and
officials; GAO (images). D GAO-24-106337.
AFIDA Reporting
AFIDA originally directed the Secretary of Agriculture to analyze
AFIDA data and issue annual reports until Congress repealed that
requirement in 1998.\32\ However, USDA has continued to issue public
annual reports summarizing AFIDA data. Specifically, the summary data
includes the number of acres owned--by state, county, type of
agricultural land, and country of foreign investor. According to the
2021 report, the most recent report available at the time of our
review, the countries with the largest foreign holdings of U.S.
agricultural land are Canada (approximately 13 million acres or 31.5
percent), the Netherlands (approximately 5 million acres or 11.9
percent), and Italy (approximately 3 million acres or 6.6 percent). In
addition, forest land accounts for nearly half of all reported foreign
holdings, according to the report. Our analysis of AFIDA data found
that 54 percent of foreign holdings are for types of interest other
than direct ownership, such as long-term leases.
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\32\ The Federal Reports Elimination Act of 1998, Pub. L. No. 105-
362, 101(f), 112 Stat. 3280, 3281, repealed section 5 of AFIDA, which
had required USDA to annually report to the President and Congress its
findings and the conclusions of its analysis on the effects of AFIDA
transactions, as well as the effectiveness and efficiency of AFIDA
reporting requirements, Pub. L. No. 95-460, 5, 92 Stat. 1263, 1265-
1266 (1978).
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When analyzing AFIDA data for its annual reports, USDA focuses on
economic outcomes, such as the effect of foreign investments on local
land values. The reports do not include analysis related to national
security risks. AFIDA also requires USDA to transmit copies of the
filings submitted by foreign persons and legal entities to each state
department of agriculture (i.e., state government, not USDA's FSA state
offices) that includes transactions that occurred in their state.
CFIUS Review Does Not Regularly Include AFIDA Information Related to
Foreign Investments in Agricultural Land
CFIUS and Agency Reviews of Agricultural Land Transactions Focus on
Potential National Security Risks
CFIUS
When identifying non-notified transactions for CFIUS's review,
CFIUS and its member agencies focus on transactions that may pose
potential national security risks, such as the proximity to a sensitive
military base, according to Treasury and DOD officials.\33\ In some
cases, CFIUS may also rely on non-members, such as USDA, for relevant
knowledge and expertise. CFIUS reviews each transaction individually,
focusing on the aspects of the transaction that could pose a potential
national security risk. If, during the national security investigation,
CFIUS identifies an unresolved national security risk, it may work with
the parties involved as appropriate to mitigate the potential risk.
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\33\ See, e.g., 50 U.S.C. 4565(a)(4)(B)(ii)(II)(bb)(AA). As
discussed above, non-notified means that a transaction has not been
notified to CFIUS for review.
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CFIUS may choose to initiate a review of a non-notified transaction
that a CFIUS member agency has reason to believe is a covered
transaction and may raise national security concerns. CFIUS used
various methods to identify these non-notified transactions, including
interagency referrals, tips from the public, media reports, commercial
databases, and Congressional notifications, according to the 2022 CFIUS
annual report.\34\ The report states that non-notified transactions
remain among the most complicated that CFIUS considers, and these cases
often require mitigation measures to address national security risks.
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\34\ Committee on Foreign Investment in the United States, Annual
Report to Congress: CY 2022.
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DOD
The national security risks around foreign investments in
agricultural land relate to proximity to certain military
installations, according to DOD officials with CFIUS responsibilities.
CFIUS may review voluntary filings by parties to transactions of
purchases, leases, or concessions of real estate (including
agricultural land) in proximity to military or other sensitive U.S.
Government facilities.\35\
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\35\ See 50 U.S.C. 4565(a)(4)(C), (b)(1)(C).
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DOD has a specific team to identify non-notified transactions that
may warrant a CFIUS review.\36\ This team scans proprietary databases
and publicly reported transactions and determines whether a selected
transaction may be covered under CFIUS authorities and if it may raise
national security risks. According to Treasury and DOD officials, if
both conditions are met, DOD recommends to the committee that CFIUS
request additional information about the transaction and, if warranted,
a filing.
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\36\ In response to our prior work, DOD revised its CFIUS policy to
include additional guidance and responsibilities for identifying non-
notified transactions. See GAO-18-494 (https://www.gao.gov/products/
GAO-18-494).
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In addition, DOD has drafted guidance for foreign investments in
agricultural land in proximity to military installations that may pose
national security risks, according to DOD officials. The Department of
the Air Force has developed the Playbook for Foreign Investment
Assessments Proximate to Military Equities, which was tentatively
scheduled for release in October 2023, to identify and review national
security risks related to foreign investments in agricultural land near
Air Force installations. According to Air Force officials, the playbook
is intended to educate military and civilian stakeholders about the
CFIUS process and help mitigate any potential national security risks
before the CFIUS process begins. It will include guidance for the
Department of Air Force, local municipalities, and buyers and sellers
of land to consider when reviewing potential risks to Air Force
installations from foreign investments in land or businesses near Air
Force installations. In addition, it will include questions about who
is involved in the sale and acquisition of the land; the type and
location of the land; whether the target property location provides a
unique or direct line of sight to a military installation; and specific
sensitivities, vulnerabilities, and potential consequences for the
installation if a foreign adversary were to collect information.
DOD works with stakeholders to help identify sensitive facilities
and installations which may be affected by foreign transactions of
agricultural land. Agricultural land transactions within 100 miles of
certain listed sites are generally considered covered for CFIUS's
review. Since March 2023, DOD's Office of the Secretary of Defense has
coordinated a working group of military services and other
stakeholders. If necessary, this group meets quarterly to discuss
additions to the list of sensitive installations and broader updates to
the regulations addressing CFIUS coverage for real estate transactions.
Effective in September 2023, Treasury, in coordination with DOD,
updated the CFIUS list of military installations to include 242 sites
(from 234 initial sites).\37\ As a result of the working group, DOD
officials have also discussed ways to update and improve CFIUS's
understanding of risks associated with real estate coverage, including
agricultural land. DOD officials said they plan to submit a new list of
covered military installations to Treasury and the other CFIUS members
by the end of 2023. The approval and recognition of these new
installations require a regulatory update. Any changes to the list of
installations should be issued for public comment.
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\37\ Provisions Pertaining to Certain Transactions by Foreign
Persons Involving Real Estate in the United States, 88 Fed. Reg. 57348
(Sept. 22, 2023) (to be codified at 31 CFR pt. 802, app. A).
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DOD also has teams to determine national security risks for
notified transactions undergoing CFIUS review. If DOD determines a risk
exists, DOD officials conduct an analysis of those risks and consider
whether mitigation measures are needed. In addition, officials request
a national security investigation through the CFIUS chair. If DOD
determines a risk does not exist, DOD informs the CFIUS chair of its
determination.
USDA
USDA is not a member of CFIUS, but participates fully as a voting
member agency when Treasury determines that a transaction involves
agricultural issues, according to officials. While USDA reviews CFIUS
notified transactions, there is no requirement in CFIUS law or policy
for USDA to identify CFIUS non-notified transactions independently.
However, USDA's Office of Homeland Security--its office responsible for
coordinating with CFIUS agencies on national security issues--reviews
media and other open source information to identify non-notified cases.
These cases include foreign acquisition of agricultural land, according
to the official that coordinates CFIUS efforts. In addition, according
to officials, USDA reviewed summary information of all CFIUS cases
between October 2022 and May 2023 to identify potential national
security risks related to agricultural land and other agricultural
sectors.\38\ Based on the office's review of these cases, it identified
certain cases for which it requested to be co-lead or otherwise
actively involved in the reviews. USDA has been actively involved in
reviewing all transactions involving agricultural land, according to
Treasury officials.
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\38\ According to USDA officials, they began receiving this
information because the Secretary of Agriculture expressed concern to
the Secretary of the Treasury that USDA was not reviewing all cases
that may consider agricultural interests. In response, Treasury
officials agreed to have a trial period in which USDA reviews all CFIUS
cases. USDA officials were not certain whether USDA would continue this
trial in Fiscal Year 2024. Treasury officials confirmed that USDA
received CFIUS summaries of all cases during this timeframe and said
they value USDA's expertise and view them as an important contributor
to the committee.
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Treasury
Treasury officials noted that since Treasury does not have any
agency-specific involvement related to agricultural land, its approach
to identifying these non-notified transactions are generally limited to
representing CFIUS's interests. The officials said all member agencies
are responsible for protecting national security, and agencies
generally identify transactions related to their agency areas of
interest and expertise. Acting as a voting member, Treasury reviews
transactions for potential national security risks, according to
officials. In addition, as chair, Treasury manages the administrative
process, helps collect information from parties involved in a
transaction, and reviews information submitted by other agencies,
according to officials. Accordingly, Treasury relies on DOD and other
CFIUS members to collect and relay relevant information, including
about non-notified transactions related to foreign investments in
agricultural land. In addition, Treasury relies on non-members like
USDA for any relevant knowledge, if applicable.
Although DOD, USDA, and Treasury officials may pursue and submit
cases to CFIUS regarding foreign investments in agricultural land, all
three agencies track their CFIUS submissions in aggregate, rather than
by type of business or real estate acquired. CFIUS and relevant
agencies are not required by CFIUS law or policy to specifically track
or label transactions related to agricultural land, according to DOD,
USDA, and Treasury officials. About 2,600 covered transactions were
notified to CFIUS in calendar years 2013 through 2022, according to the
CFIUS 2022 annual report.\39\ Officials could not identify how many of
the transactions definitively related to agricultural land.
Nevertheless, DOD officials noted that cases involving foreign
investments in agricultural land represent a small percentage of total
CFIUS transactions.
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\39\ Committee on Foreign Investment in the United States, Annual
Report to Congress--Calendar Year 2022.
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Although officials identified a subset of cases related to
agricultural land and provided us with relevant information on selected
CFIUS-reviewed transactions for calendar years 2013 through 2023, they
told us that these case files may exclude certain relevant
transactions. These case files may also include transactions outside
the scope of this review, such as transactions that deal with foreign
investments in agricultural supply chains or other foreign investments
in agriculture that do not specifically involve the transfer of land,
according to officials.
CFIUS annual reports have provided cumulative and trend information
on the business sectors and subsectors involved in certain covered
transactions, using North American Industry Classification System
(NAICS) codes. Some sectors are potentially relevant to agricultural
land, including the agriculture, forestry, fishing and hunting sector
and the crop production subsector.\40\ However, NAICS codes do not
comprehensively encompass real estate transactions--which may include
covered agricultural land--and the codes are provided by parties to the
transactions.
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\40\ In this report, industry sectors and subsectors are defined
using 2012 and 2017 NAICS codes of the U.S. target company. Whenever
possible, the NAICS code assigned to each U.S. target company is based
upon information provided by the parties. If no NAICS code was
provided, CFIUS determined the most appropriate NAICS code using
publicly available information.
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AFIDA Information Is Not Regularly Shared on a Timely Basis with CFIUS
We found that USDA does not regularly share AFIDA data with CFIUS
agencies on a timely basis to be useful for CFIUS reviews. USDA
releases its annual report online. However, according to DOD officials,
they need to receive AFIDA information more than once a year, and they
need information that is more up-to-date and more specific to help them
identify relevant non-notified transactions and consider potential
national security risks.
DOD officials told us that the information AFIDA requires USDA to
collect, such as names of foreign owners and when the land was
transferred or acquired, could help DOD identify relevant non-notified
transactions for CFIUS to review and would enable the committee to
conduct timely and thorough reviews of such transactions. DOD officials
stated that it is very difficult to identify relevant non-notified
transactions for CFIUS because DOD does not have a single database of
real estate transactions that may potentially involve DOD interests. As
a result, they must search the website of each municipality, rather
than look for this information in one place, according to DOD
officials. Air Force officials also told us that information from AFIDA
disclosures, such as whether a party has filed a disclosure, who filed
it, and when it was filed, could improve CFIUS's ability to identify
cases and investigate the ownership structure of foreign investments.
Treasury officials noted that it would be helpful to have data such as
the identity of the foreign owner, their country of origin, and status
of their U.S. residency or citizenship, as well as more details about
the nature of the transaction.
FPAC-BC, the USDA office responsible for AFIDA data, shares some
AFIDA information with other Federal agencies and the public. For
example, in March 2023, according to USDA officials, FPAC-BC shared a
presentation about AFIDA with DOD officials interested in holdings by
the People's Republic of China. USDA also provided supplemental data
regarding AFIDA holdings in a specific U.S. location and a listing of
all company holdings across the United States. According to USDA
officials, they respond promptly when they receive requests.
USDA provides selected AFIDA information on an annual basis in a
report online, but the information is not specific and is not timely to
be useful for CFIUS reviews. Each year, FPAC-BC publishes a Foreign
Holdings of U.S. Agricultural Land report on its website, based on
selected data collected from FSA-153 forms submitted pursuant to the
AFIDA reporting requirement. The report includes aggregated information
for U.S. states and counties. However, it does not include other
information collected by USDA, such as detailed ownership information,
country affiliations of all foreign investors, and locations of
individual agricultural land transactions. In addition, USDA officials
told us that for calendar year 2023, they have been keeping a real-time
log of AFIDA filing activity for investors from the People's Republic
of China, Russia, Iran, and North Korea. USDA plans to include this
information its 2023 AFIDA Annual Report.\41\
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\41\ In a joint explanatory statement outlining committee
priorities for the Consolidated Appropriations Act, 2022, Pub. L. No.
117-103, 136 Stat. 49, Congress directed USDA to submit a report
regarding data on foreign-owned agricultural land trends including land
owned, or partially owned, by the Governments of China, Russia, Iran,
or North Korea over the past decade and projections for the next decade
based on previous trends, and the potential impacts on the American
agricultural sector, food security, and rural economies. H. Comm. Print
47-047, 117th Cong.
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Further, in June 2023, FPAC-BC posted AFIDA transaction data for
calendar years 2010 through 2021 on its website.\42\ In contrast to the
annual Foreign Holdings of U.S. Agricultural Land report, these data
include transaction-level data. For example, they include some
information collected on the FSA-153 forms, such as the primary
investor in the transaction (the person or legal entity that holds the
deed or lease).\43\ However, the primary investor may be one of
multiple ownership tiers. That is, the primary investor may be owned by
one or more other entities, each of which may also be owned by multiple
entities. AFIDA data only include the first ownership tier; they do not
include ownership information for the second and third ownership tiers
beyond the primary investor, which USDA requires foreign persons to
submit.
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\42\ Accessible at https://www.fsa.usda.gov/programs-and-services/
economic-and-policy-analysis/afida/agricultural-foreign-investment-
disclosure-act-afida/index (accessed on January 4, 2024). USDA's most
recent AFIDA annual report was published in December 2023, as of
January 2024.
\43\ Accessible at https://www.fsa.usda.gov/programs-and-services/
economic-and-policy-analysis/afida/agricultural-foreign-investment-
disclosure-act-afida/index (accessed on October 11, 2023).
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In addition, as of November 2023, the USDA office responsible for
AFIDA had not posted AFIDA transaction data for calendar year 2022
online, nor had it shared this information with relevant CFIUS member
agencies. While USDA has posted selected AFIDA data online through
calendar year 2021, USDA officials told us in September 2023 that they
could share these data more regularly through a web-based collaborative
platform, such as SharePoint. USDA has requested funding to develop a
real-time data system that can be accessed by other U.S. Government
agencies and the public.
In January 2024, in reviewing a draft of this product, USDA
officials stated that when their headquarters office receives AFIDA
filings from investors from the People's Republic of China, Russia,
Iran, or North Korea, they share the complete files with DOD and the
Federal Bureau of Investigation. However, they noted that USDA cannot
effectively share data early in the process except through a manual
process of scanning and e-mailing AFIDA forms. Officials emphasized the
need for sufficient funding for an online filing portal to share timely
data with DOD and other agencies.
DOD officials were not aware that USDA had posted the AFIDA
transaction data online. DOD officials that identify non-notified cases
said they have a good working relationship with USDA, and the two
agencies often share referrals of agriculture-related transactions. In
addition, they noted that the online data could provide useful
information for identifying CFIUS cases related to agricultural land
because DOD may not be able to identify these cases otherwise. But
other DOD officials that review notified cases involving agricultural
land told us that CFIUS could not legally review most of the
transactions listed in the online AFIDA data, because CFIUS only has
authority to review applicable real estate cases with proximity to
sensitive military installations after 2019. More up-to-date
information could help CFIUS and DOD more quickly mitigate potential
national security risks associated with agricultural land.
Federal internal control standards state that management should
communicate quality information (1) internally down and across
reporting lines to enable personnel to perform key roles in achieving
objectives, addressing risks, and supporting the internal control
system, and (2) externally through reporting lines so that external
parties can help the entity achieve its objectives and address related
risks.\44\
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\44\ Principles 14 and 15. Standards for Internal Control in the
Federal Government, GAO-14-704G (https://www.gao.gov/products/GAO-14-
704G) (Washington, D.C.: Sept. 10, 2014).
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As we have previously reported, if parties to a covered transaction
do not voluntarily notify CFIUS, and CFIUS does not independently
discover the transaction and initiate a review, potential risks to
national security could go undetected.\45\ By sharing timely and more
detailed AFIDA data, such as when or whether a party has filed a
disclosure or the tiers of ownership beyond the primary investor, USDA
could help CFIUS member agencies reduce the likelihood of missing
potential risks to national security.
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\45\ GAO-18-494 (https://www.gao.gov/products/GAO-18-494).
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USDA Implements AFIDA Nationally, but Its Processes to Collect, Track,
and Report Key Information are Flawed
USDA Implements AFIDA Across Field Offices and Headquarters
USDA's AFIDA data is the most comprehensive source on foreign
investment in U.S. agricultural land, according to USDA officials. As
required by law, foreign persons must report information for
transactions of U.S. agricultural land, including acquisitions,
dispositions (e.g., sales), land use changes, or ownership changes.\46\
Under USDA's current system, this information is submitted via paper
AFIDA forms. The forms may be submitted to Farm Service Agency (FSA)
county offices, or to USDA headquarters for more complex transactions,
such as transactions that span multiple counties. There are over two
thousand FSA county offices in the United States, according to
officials.
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\46\ AFIDA reporting is subject to certain exceptions, including
(1) leaseholds less than 10 years; (2) contingent future interests, and
(3) easements unrelated to agricultural production. See 7 CFR
781.2(c).
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The county and state offices then review the AFIDA forms for
accuracy and completeness, according to USDA officials. If the forms
were submitted to county offices, these offices are directed to review
the forms and send them to USDA headquarters within a day of receiving
them. Once a year, USDA headquarters officials enter selected
information from forms into the AFIDA spreadsheet for its annual
reports. This information includes the number of acres owned, by state
and county, land value, and the country of the foreign investor. In
addition, headquarters sends AFIDA forms to the USDA state office where
the land is located.
According to officials, FSA county and state offices make efforts
to publicize AFIDA requirements. For example, county offices are
directed to display AFIDA information where deeds are registered in
their counties and periodically send letters to local real estate
agencies, real estate attorneys, and mortgage lenders in their counties
to remind them of AFIDA requirements, according to FSA guidance.
In line with USDA policy, FSA state offices oversee county offices,
and, according to officials, provide technical assistance to county
offices as needed, such as answering questions about the AFIDA process.
State offices also are directed to conduct annual compliance checks
with county offices regarding their AFIDA responsibilities. According
to officials, these checks include visits from state district directors
to document whether they are implementing various AFIDA
responsibilities. Figure 4 summarizes USDA's AFIDA data collection.
Figure 4: U.S. Department of Agriculture (USDA) Data Collection for the
Agricultural Foreign Investment Disclosure Act of 1978, As
Amended (AFIDA)
Legend: Agricultural Foreign Investment Disclosure Act of
1978 = AFIDA.
Source: U.S. Department of Agriculture documents and
officials; GAO (images). D GAO-24-106337.
USDA Assesses Few Penalties for AFIDA Non-Compliance
USDA headquarters may assess penalties for foreign persons that do
not comply with AFIDA filing requirements, although fewer penalties
have been assessed in recent years due to lack of staff, according to
USDA. USDA assessed eight penalties for AFIDA late filing or non-filing
between 2012 and 2021, according to the 2021 AFIDA report.
Specifically, USDA assessed five of these penalties between 2012 and
2014, one in 2019, and two in 2021. USDA did not assess any penalties
between 2015 and 2018 or in 2020. See figure 5 for USDA reporting on
penalties assessed since 1998.
Figure 5: U.S. Department of Agriculture Reported Penalties Assessed
from 1998-2021 for Non-Compliance with the Agricultural Foreign
Investment Disclosure Act of 1978, As Amended (AFIDA)
Source: GAO analysis of U.S. Department of Agriculture data;
GAO (images). D GAO-24-106337.
Note: According to officials, 1998 is the first year that
penalty information was electronically stored. Penalty
information from years prior to 1998 were entered into a
handwritten log.
The penalty calculation for late AFIDA forms is \1/10\ of 1 percent
of the value of the land times the number of weeks that the form is
late, up to a statutory maximum of 25 percent of the land's fair market
value. According to USDA, most penalties equal less than one percent of
the value of the land, because the main goals of its AFIDA efforts are
to maximize compliance and not to discourage potential filers from
filing due to fears of large penalties.
USDA's Processes to Collect AFIDA Data Are Unclear and Challenging to
Implement
USDA's AFIDA processes create challenges to collecting AFIDA data.
For example, the AFIDA handbook is the main source of AFIDA guidance
for state and county officials, according to officials. However, the
handbook provides limited instructions on how FSA state and county
offices should collect reliable AFIDA information, and lacks guidance
on how to verify information on AFIDA forms. In addition, USDA's
current paper-based submission process hinders its ability to track
investments.
FSA's AFIDA Handbook Provides Limited Instruction on Collecting
Reliable Information
FSA's AFIDA handbook assigns responsibilities to various FSA
offices on collecting AFIDA information, but provides limited
instructions for how to fulfill these responsibilities. According to
FSA officials, the handbook is the main source of AFIDA guidance for
state and county officials. In 2007, FSA found deficiencies with its
county offices' efforts to collect AFIDA data. Specifically, FSA said
it had reviewed AFIDA forms and reported deficiencies both in accuracy
of reported information and reviews of agricultural land ownership
changes. In the corresponding notice sent to FSA state and county
offices that year, FSA reiterated the handbook responsibilities for
reviewing forms and land ownership changes.
FPAC-BC officials, now responsible for AFIDA, said they plan to
update the AFIDA handbook, form, and regulations. The handbook was last
updated in 2006; the regulations were last updated in 1995.\47\
According to officials, as of August 2023, a working group has finished
the revised form, which will be posted in the Federal Register along
with an explanation after receiving internal clearance. Officials told
us they are updating the types of AFIDA information the forms collect
to better reflect different kinds of foreign investment and uses of
agricultural land. For example, officials said they were planning to
capture more information about lease agreements by having these filers
indicate if they will use the land for wind or solar energy
production.\48\ USDA's 2021 annual report attributed recent increases
in foreign holdings of pastureland and farmland mostly to long-term
leases by foreign-owned wind companies. In addition, our analysis of
AFIDA data from AFIDA's implementation through 2021 found that
approximately \2/3\ of the filings are legal entities with ``wind,''
``solar,'' or ``energy'' in their names.
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\47\ FSA was originally responsible for managing AFIDA and
overseeing USDA's AFIDA policy, but FPAC-BC became responsible for
AFIDA in 2018 due to an administrative policy decision, according to
officials.
\48\ In addition, officials noted that they hope to use the new
information captured on the forms to better understand the impacts of
foreign investment on farmers and rural communities.
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While the handbook lists common errors that may occur when filling
out an AFIDA form, it does not address how officials should review
forms for misleading, inaccurate, or false information. For example,
the handbook says the name on the AFIDA form should be the
titleholder's, not the shareholder's, but it does not provide guidance
for verifying that information, such as reviewing the deed. In
addition, the handbook explains what type of information from
additional foreign persons with an interest in the land must be
reported, but not how to determine if the submitted information is
accurate or missing foreign persons.
------------------------------------------------------------------------
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Training
The U.S. Department of Agriculture (USDA) provides training to state
and county officials on Agricultural Foreign Investment Disclosure Act
of 1978, as amended (AFIDA) filing requirements and the handbook only
upon request, according to officials. In 2023, headquarters officials
said they shared a presentation about AFIDA with Farm Service Agency
(FSA) state executive directors and provided training to FSA staff in
Hawaii, New Jersey, and Tennessee. According to officials, USDA will
prepare a training program for state and county officials after the
form and handbook are updated.
------------------------------------------------------------------------
Source: USDA. D GAO-24-106337.
The handbook directs headquarters and county offices to review
submitted AFIDA forms and obtain any needed data to correct missing or
erroneous information. However, FSA does not provide specific
instructions in the handbook or elsewhere on how to review forms for
substantive errors.
Under Federal internal control standards, management should design
control activities to achieve objectives and respond to risks, such as
clearly documenting internal controls in management directives,
administrative policies, or operating manuals.\49\ USDA is in the
process of updating the AFIDA handbook. However, without specific
guidance in the handbook about reviewing the accuracy of forms and
identifying missing information, USDA may not be properly equipping its
thousands of county officials to identify misleading, inaccurate, or
false information associated with AFIDA filers.
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\49\ Principle 10, GAO-14-704G (https://www.gao.gov/products/GAO-
14-704G). USDA implements the Green Book in USDA Departmental
Regulation 1110-002, Management's Responsibility for Internal Control
(Washington D.C., March 5, 2021): ``Under and assistant secretaries,
agency and staff office heads will establish and maintain a system of
internal control based on GAO's Green Book ensuring adequate controls
for program and administrative operations, reporting, and compliance
are in place.''
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USDA's Efforts to Develop an Online AFIDA Data Submission System Face
Key Challenges
USDA has been directed to update its paper-based submission
process, which currently hinders its ability to track foreign
investments in agricultural land. The Consolidated Appropriations Act,
2023 requires USDA to adopt an online submission process and public
database by the end of 2025.\50\ USDA has taken some steps to update
its process for online submission. However, it has not developed
timelines for creating an online submission process, despite having
plans to create this process. In addition, USDA has not developed
timelines or plans for creating a public database because, according to
officials, they have not received sufficient funding to do so.
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\50\ Pub. L. No. 117-328, div. A, tit. VII, 773, 136 Stat. 4459,
4509 (2022). As of November 2023, the proposed Agriculture, Rural
Development, Food and Drug Administration, and Related Agencies
Appropriations Act, 2024, being considered by the House of
Representatives, contains the same provision. H.R. 4368, 747, 118th
Cong. (reported in the House (June 27, 2023).
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At USDA headquarters, FPAC-BC is responsible for AFIDA and
maintains a standalone AFIDA spreadsheet using Microsoft Access. The
spreadsheet includes the name of the primary investor associated with
the AFIDA filing, the county and state where the land is located, the
acreage and value of the land, and the country associated with the
largest percentage of the land's foreign investors, among other
information. Headquarters officials said they only input information
that they need to populate their AFIDA annual reports, which includes
summary information about current holdings of agricultural land by the
primary foreign investors. They do not input certain information
collected with the forms. For example, they do not include legal
descriptions because these descriptions may be pages long and difficult
to interpret. In addition, they do not include additional foreign
persons beyond the primary investor (i.e., other ownership tiers or
complex legal entities).
The Consolidated Appropriations Act, 2023 requires USDA to create
(1) an AFIDA online submission process to allow foreign persons to file
online and (2) a public database that includes information from all
prior year disclosures by the end of 2025. FPAC-BC officials are
planning to work jointly with FSA to develop the online submission
process. Officials said the agency requested $10 million over a 5 year
period to create an online submission process that would allow a public
database to be created that would include disclosures submitted after
the process is in place. Ultimately, USDA put forward a request for $1
million for AFIDA, which was included in the agency's final budget for
Fiscal Year 2024. According to officials, USDA is deliberating how to
use this funding. For example, officials told us that before developing
the online submission process, they must first consider the types of
data they want to capture from the updated form and how the data could
help USDA gather additional information. USDA officials told us that as
of September 2023, they are still in the initial stages of the
clearance process, and the form has not yet been approved internally.
USDA officials estimate the agency would need approximately $25
million to create a public database that includes all historical
disclosures. First, officials said the agency would need a tool that
could scan and digitize all files from 1978--when AFIDA was first
enacted--until the launch of the tool. Staff would then need to
determine the relevant information for scanning, account for
differences between files over the years, scan the physical files, and
ensure the data were being captured appropriately. Officials said they
do not currently have plans to fulfill the public database requirement
to include all past disclosures but that their plans will be determined
based on the amount of funding received.
To meet the Appropriations Act's public database requirement in the
interim, in June 2023, headquarters posted selected transaction data
from the AFIDA spreadsheet to USDA's website. These transaction data
include reported holdings that were active as of the end of each
calendar year for 2010 to 2021. These data do not include holdings that
were sold prior to 2010 and are inactive. Records of reported sales and
land use changes are not included for any year in these data. Moving
forward, officials plan to store information collected through the
online submission process in a searchable and retrievable format.
However, USDA has not yet determined how it will transition and
update AFIDA from a paper-based to an online submission process.
Officials said it is difficult to modernize AFIDA information
technology without additional funding and that there is no timeline for
the creation of the new AFIDA online submission process. In September
2023, USDA officials told Congress they have not done more because the
effort was not funded. In response, Members of Congress requested that
USDA report their specific funding needs to meet these requirements.
Under Federal standards for internal control, an entity should
formulate plans to achieve its objectives.\51\ Without timelines and
plans for the development and completion of its online submission
process and public database, USDA's ability to fulfill these
requirements will be impaired. In addition, details about USDA's plans
to meet the requirements of the Consolidated Appropriations Act, 2023
timelines and plans, or its inability to do so, would help Congress
understand if USDA is on track to meet the requirements or if
additional legislative action is needed.
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\51\ Principle 2, GAO-14-704G (https://www.gao.gov/products/GAO-14-
704G).
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USDA's AFIDA Tracking Processes Lack Data Verification and Key
Information, Resulting in Errors and Omissions
USDA does not sufficiently verify and conduct quality reviews to
track the accuracy and completeness of its collected AFIDA data in the
AFIDA spreadsheet and AFIDA forms. USDA has begun efforts to identify
AFIDA non-filers, but USDA does not know the overall extent of AFIDA
non-filing, according to officials. The flaws in these processes hinder
USDA's ability to accurately track and represent where and how much
agricultural land is foreign-held.
USDA's AFIDA Spreadsheet Contains Errors and Lacks Quality Reviews
Prior to publishing its AFIDA annual report, headquarters officials
said they perform data checks. Specifically, officials said they check
for certain errors, such as duplicate, missing, or invalid data
entries. However, we identified data entry errors in the AFIDA
spreadsheet and issues with form completeness in a review of a selected
non-generalizable sample of 19 AFIDA forms, including:
AFIDA forms were not correctly or completely filled out. For
example, some of the AFIDA forms we reviewed did not identify
any foreign persons, and the AFIDA spreadsheet does not
identify the affiliated country of the foreign person for 918
of 43,000 holdings. According to officials, USDA reaches out to
filers with no foreign persons listed but sometimes does not
get a response. Officials said they may need to assess
penalties for some of these filers. In addition, some owners'
records had different foreign countries associated with them
across records.
Duplicate entries of land holdings. For example, the largest
land holding associated with the People's Republic of China, at
over 27,000 acres, is duplicated in both the AFIDA spreadsheet
and the most recent FSA annual report. The duplicate occurred
when the ownership changed and the old record was not removed.
Missing or invalid values, such as the number ``13'' used
for the month of the acquisition and a negative number used for
an acreage amount.
We shared examples of these errors with USDA officials, who
confirmed the errors and, as of July 2023, said they were making
efforts to correct them. For example, officials said they are following
up with AFIDA filers if the agricultural land has a current value that
is missing, zero, or less than $100 in the AFIDA spreadsheet, or for
transactions in which the amount filers paid to acquire the land is
less than the current value.
According to officials, most of the errors we identified occurred
during data entry. AFIDA data entry errors often occur because
headquarters staff manually enters information from AFIDA forms into a
spreadsheet without sufficient internal controls to prevent or identify
these errors. USDA officials said they cannot prevent multiple users
from accessing the AFIDA spreadsheet at the same time, so they
coordinate access internally to prevent duplicate entries. According to
officials, one official created the current spreadsheet in 2016 without
specifically obligated funding, and it is an improvement over the
previous system.
Officials said they are aware of obsolete records in the AFIDA
spreadsheet because foreign persons may not have self-reported when
they ceased to have an interest in the land, as required. In addition,
according to officials, as of September 2023, new additional data
checks have been added, such as ensuring the range of the month of
acquisition is between ``1'' and ``12.'' However, according to
officials, the current spreadsheet does not have other internal
controls to prevent improper values from being entered. A key principle
of Federal internal control is to design activities for the information
system.\52\ Agencies should have controls in their information systems
to ensure validity, completeness, and accuracy of data entered. In
addition, Federal internal controls state management should ensure it
has manual control activities, such as that officials reviewing paper
AFIDA forms collect all required information from filers.\53\ Without
improving its verification and monitoring of collected AFIDA data, such
as reviewing and validating information throughout the AFIDA data
collection process, USDA cannot verify it is accurately capturing
information, nor can it ensure the effectiveness of its data controls.
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\52\ Principle 11, GAO-14-704G (https://www.gao.gov/products/GAO-
14-704G).
\53\ Principle 10, GAO-14-704G (https://www.gao.gov/products/GAO-
14-704G).
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Data Mining Has Identified Some Non-Filers, and Additional Efforts
Could Produce More Results
USDA has made some efforts to identify non-filers, but expanding
these efforts could identify even more suspected non-filers. During our
review we discussed with USDA officials performing a data matching
exercise between FSA program data and AFIDA data to identify foreign
persons that should have filed an AFIDA disclosure. As a result, USDA
began a data mining pilot using FSA program data to identify potential
AFIDA non-filers that own land in Washington State, and who have
previously submitted information to FSA. The pilot identified 135
foreign landowners that, according to officials, are likely non-filers
and need to complete an AFIDA filing. Prior to the pilot, USDA data
accounted for 1,243 foreign holdings of agricultural land in Washington
State. Headquarters officials said they sent the 135 newly identified
landowners letters about AFIDA requirements. According to headquarters
officials, as of September 2023, they have expanded the data mining
effort nationally. Officials said they plan to conduct this data-mining
effort periodically.
------------------------------------------------------------------------
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Farm Numbers
Certain Farm Service Agency (FSA) data sources, such as farm
ownership records and program data, use FSA farm numbers and not legal
descriptions to identify land. Officials said that requiring
Agricultural Foreign Investment Disclosure Act of 1978, as amended
(AFIDA) filers to obtain a unique identifier, such as an FSA farm
number, would help the U.S. Department of Agriculture (USDA) connect
AFIDA data with its other data and more easily identify the location of
the land. In addition, an FSA official said requiring farm numbers
could also incorporate annual reporting and verification requirements
into AFIDA that FSA uses for farm programs. USDA does not have the
authority to require AFIDA filers to obtain farm numbers from USDA,
according to officials.
------------------------------------------------------------------------
Source: USDA. D GAO-24-106337.
According to USDA officials, conducting the data mining project
helped identify potential non-filers they would not have otherwise
identified. However, these efforts only identify individuals already
present in its databases for farm programs.\54\ The analysis will not
identify foreign persons that have not done business with FSA and do
not have a customer record, according to officials. Therefore, the
complete universe of foreign investors in U.S. agricultural land will
remain unknown. For example, since USDA captures and stores select
AFIDA data in a standalone spreadsheet, officials cannot automatically
connect the AFIDA spreadsheet with FSA data, according to officials.
Therefore, after headquarters identified foreign persons in the pilot,
they directed county officials to investigate whether the foreign
persons in their county needed to file.
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\54\ The AFIDA statute grants USDA authority to ``take such actions
as the Secretary considers necessary to monitor compliance . . . and to
determine whether the information contained in any report . . .
accurately and fully reveals the ownership interest of all foreign
persons.'' Pub. L. No. 95-460, 4, 92 Stat. 1263, 1265 (codified at 7
U.S.C. 3503).
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According to officials, AFIDA data does not provide simple
locations of agricultural land. AFIDA data includes legal descriptions
rather than geographic coordinates, which can make it difficult to
locate the land in question. These legal descriptions may be pages long
and difficult to interpret, and are not entered into the AFIDA
spreadsheet, complicating efforts to identify non-filers and the
locations of their property. According to USDA officials, local FSA
staff are aware of the location of the agricultural land using legal
descriptions, but they acknowledge that it would be difficult for those
who are not local to have that geospatial context.
According to USDA guidelines to implement the Information Quality
Act, USDA should validate its data against other information where
practicable.\55\ Without periodic validation of AFIDA data, such as
every 5 years, USDA will be unable to identify certain non-filers and
its AFIDA data will be less complete. This could include comparing
AFIDA data to FSA program data.
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\55\ The Information Quality Act, also known as the Data Quality
Act, directed the Office of Management and Budget (OMB) to issue
guidelines that provide policy and procedural guidance to Federal
agencies for ensuring and maximizing the quality, objectivity, utility,
and integrity of information, including statistical information
disseminated to the public. Consolidated Appropriations Act, 2001, Pub.
L. No. 106-554, app. C, tit. V, 515, 114 Stat. 2763, 2763A-153,
2763A-154 (2000). OMB, published the required guidelines in 2002. OMB,
Guidelines for Ensuring and Maximizing the Quality, Objectivity,
Utility, and Integrity of Information Disseminated by Federal Agencies,
Final Guidelines, 67 Fed. Reg. 8452 (Feb. 22, 2002). In 2019, OMB
published a memorandum to reinforce, clarify, and interpret agency
responsibilities with regard to responsibilities under the Information
Quality Act. OMB, Improving Implementation of the Information Quality
Act, OMB M-19-15 (Apr. 24, 2019). USDA's guidelines implement OMB
guidelines in accordance with the Information Quality Act.
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USDA's AFIDA Reporting Processes Omit Key Information About Ownership
Tiers
As discussed above, USDA reporting does not incorporate the country
of additional foreign persons beyond the primary investor, which may
skew the reporting of holdings by country. Pursuant to the AFIDA
statute and regulations, USDA requires filers to provide the names,
addresses, and countries of origin for up to three ownership tiers, if
applicable.\56\ However, the AFIDA spreadsheet includes only the name
of the filer or the entity the filer represents. This name may be the
primary investor in the transaction (the person or legal entity that
holds the deed or lease). However, because primary investors may be
only one of several ownership tiers, the name listed in AFIDA data may
not be the ultimate beneficiary of the investment. In addition, as
noted above, the primary investor is a ``foreign person'' if a foreign
individual or legal entity has at least ten percent interest in the
investment, even if the primary investor is based in the United States.
Figure 6 illustrates reporting requirements for entities with multiple
ownership tiers.
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\56\ According to officials, AFIDA filings have become increasingly
complex, as filings by large corporations now exceed filings by
individuals. As a result, the ultimate beneficiaries may exist beyond
the third ownership tier and may not be captured in AFIDA disclosures,
unless the filer voluntarily provides that information.
---------------------------------------------------------------------------
Figure 6: Agricultural Foreign Investment Disclosure Act of 1978, As
Amended (AFIDA) Data Collection for Entities with Multiple
Ownership Tiers
Legend: Agricultural Foreign Investment Disclosure Act of
1978 = AFIDA.
Source: AFIDA and U.S. Department of Agriculture regulations,
documents, and officials; GAO (images). D GAO-24-106337.
In the AFIDA spreadsheet and annual reports, USDA assigns a country
to land holdings based on the foreign country associated with the
highest percentage of foreign interest in the land. The spreadsheet and
annual reports do not include secondary countries associated with
foreign persons who hold smaller stakes. For example, a holding in
which the primary investor is from the Cayman Islands with 51 percent
stake and a second-tier owner from Russia with 49 percent stake would
be recorded in the AFIDA spreadsheet as a foreign investment by Cayman
Islands and not reflect the Russian interest. According to headquarters
officials, ownership information from additional foreign persons with
interest in the land is not recorded because it is not currently used
in USDA's AFIDA annual reports. However, without incorporating
ownership information from additional foreign persons, reporting will
not provide users with a comprehensive accounting of submitted
information on foreign investments in agricultural land.
Conclusions
Foreign ownership and investment in U.S. agricultural land--which
includes farmland, pastures, and forest land--has grown since 2016,
according to the U.S. Department of Agriculture (USDA). Recent national
security risks related to foreign investments in U.S. agricultural land
have highlighted the importance of CFIUS's reviews. CFIUS is the main
authority to address the national security ramifications of foreign
investment in the United States, according to Treasury and DOD
officials. However, we found that CFIUS does not currently have regular
and timely access to detailed AFIDA information, the nation's most
comprehensive data on foreign investments in U.S. agricultural land,
according to USDA officials.
Additional targeted information on foreign investments in U.S.
agricultural land could improve DOD's ability to identify potential
investments of concern earlier in the process. As we have previously
reported, if parties to a covered transaction do not voluntarily notify
CFIUS, and CFIUS does not independently discover the transaction and
initiate a review, potential risks to national security may go
undetected. Access to timely AFIDA data, such as whether a party has
filed a disclosure, when it was filed, and ownership information for
the second and third ownership tiers could reduce that risk.
In addition, USDA's current processes to verify and monitor data
have deficiencies. These processes could be improved to ensure more
foreign investors report their holdings and make the data more reliable
and useful. Although AFIDA data are the primary means by which the
United States tracks and monitors foreign investment in its
agricultural land, according to USDA officials, USDA collects AFIDA
data on paper forms, which currently hinders its ability to track these
investments. In addition, USDA has taken some steps to update its
process for online submission but does not have timelines for its
completion. USDA has also made little progress in creating a public
database, which could help the agency address some of these issues.
Congress has passed and the President enacted a requirement for USDA to
adopt an online submission process and public database by 2025.\57\
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\57\ Pub. L. No. 117-328, div. A, tit. VII, 773, 136 Stat. 4459,
4509 (2022). As of November 2023, the proposed Agriculture, Rural
Development, Food and Drug Administration, and Related Agencies
Appropriations Act, 2024, being considered by the House of
Representatives, contains the same provision. H.R. 4368, 747, 118th
Cong. (reported in the House (June 27, 2023).
---------------------------------------------------------------------------
USDA does not regularly review and validate its data to improve its
accuracy and completeness, and it could derive more results with
additional efforts to determine how many foreign persons fail to file
(non-filers). In addition, USDA does not report on key information
related to the ultimate beneficiary of foreign-held agricultural land,
even when that information is collected. Despite the limitations of
AFIDA data, sharing these data could assist CFIUS in its efforts to
identify foreign investments in agricultural land that may pose
national security risks. But without accurate data and transparent
reporting, USDA cannot provide reliable information to CFIUS, Congress,
or the public about where and how much U.S. agricultural land is held
by foreign persons.
Recommendations for Executive Action
We are making a total of six recommendations to USDA:
The Secretary of Agriculture should ensure that the Chief
Operating Officer of FPAC-BC, in coordination with relevant
CFIUS member agencies, establish a process to provide detailed
and timely AFIDA transaction data relevant to foreign
investments in agricultural land to CFIUS member agencies,
including DOD and Treasury. Such information could include
whether a party has filed a disclosure, who filed it, and when
it was filed. (Recommendation 1)
The Secretary of Agriculture should direct the Administrator
of FSA, as FPAC-BC updates the AFIDA handbook, to clarify and
provide specific instructions to headquarters and county
employees for completing AFIDA responsibilities, including
reviewing the accuracy of forms and identifying missing
information. (Recommendation 2)
The Secretary of Agriculture should direct the Chief
Operating Officer of FPAC-BC and the Administrator of FSA to
jointly complete an analysis to determine the extent to which
the agency can satisfy the requirements of the Consolidated
Appropriations Act, 2023 to create an AFIDA online submission
system and public database within its expected budget. If the
analysis shows that the agency would be unable to meet the
requirements of the Consolidated Appropriations Act, 2023, USDA
should report the results to Congress and recommend appropriate
legislative changes. (Recommendation 3)
The Secretary of Agriculture should direct the Chief
Operating Officer of FPAC-BC to improve its verification and
monitoring of collected AFIDA data, such as reviewing and
validating information throughout the AFIDA data collection
process. (Recommendation 4)
The Secretary of Agriculture should direct the Chief
Operating Officer of FPAC-BC, in coordination with the
Administrator of FSA, to continue data mining activities that
compare AFIDA data to FSA program data to identify suspected
non-filers. (Recommendation 5)
The Secretary of Agriculture should direct the Chief
Operating Officer of FPAC-BC to ensure its AFIDA reporting is
complete, such as incorporating country information from
additional foreign persons beyond the primary investor when
available. (Recommendation 6)
Agencies' Comments and Our Evaluat
We provided a draft of this report to DOD, Treasury, and USDA for
review and comment. USDA provided written comments that are reprinted
in appendix III, and summarized below. In its written comments, USDA
agreed with the first five recommendations and partially agreed with
the sixth recommendation. Treasury and DOD communicated by email that
they agree to support USDA in implementing our first recommendation
that USDA should establish a process to provide detailed and timely
AFIDA data to CFIUS member agencies, including Treasury and DOD. USDA
and Treasury provided technical comments, which we incorporated as
appropriate.
In response to our recommendations, USDA outlined actions it plans
to take. USDA said that as of January 2024, AFIDA staff in FPAC-BC are
updating the existing AFIDA handbook. In addition, a December 15, 2023
Federal Register announcement requested public input on proposed
revisions to the FSA-153.
USDA said it has concerns with implementing our sixth
recommendation without additional financial resources to create and
maintain an online filing portal. We acknowledge this concern but stand
by our recommendation, as USDA has options to implement it without
incurring significant additional costs. While including country
information from historical filings would be resource-intensive, USDA
has already planned to put some of these measures in place and could
use that process to ensure it includes all available country
information from future filings. USDA stated that for the 2024 report,
containing data through December 31, 2023, it will provide data on
secondary and higher interests associated with the People's Republic of
China, Russia, Iran, and North Korea. We acknowledge that these data
would be useful. However, USDA does not plan to include country
information beyond the first ownership tier for other countries. This
information is key to a comprehensive picture of foreign investments in
agricultural land. Further, USDA could include the country information
in its reporting using other methods than the time-consuming manual
process that USDA proposed in its comments. For example, USDA could
adjust its process to ensure it includes a table showing landholdings
by country, including the countries of additional foreign persons. That
would allow USDA to provide better information when acreage totals
exceed total foreign interest, because additional foreign persons with
an interest in the same landholding may be associated with more than
one country.
We are sending copies of this report to the appropriate
Congressional committees and the Secretaries of Defense, the Treasury,
Agriculture, and other interested parties. In addition, the report will
be available at no charge on the GAO website at https://www.gao.gov.
If you or your staff have any questions about this report, please
contact Kimberly Gianopoulos at (202) 512-8612 or [email protected]
or Steve D. Morris at (202) 512-3841 or [email protected]. GAO staff who
made key contributions to this report are listed in appendix IV.
Kimberly M. Gianopoulos,
Director, International Affairs and Trade;
Steve D. Morris,
Director, Natural Resources and Environment.
List of Requesters
Hon. Glenn Thompson, Hon. Mike Rogers,
Chairman, Committee on Agriculture, Chairman, Committee on Armed
Services,
House of Representatives House of Representatives
Hon. Jodey C. Arrington, Hon. Virginia Foxx,
Chairman, Committee on the Budget, Chairwoman, Committee on Education
and the Workforce,
House of Representatives House of Representatives
Hon. Cathy McMorris Rodgers, Hon. Michael Guest,
Chair, Committee on Energy and Chairman, Committee on Ethics,
Commerce,
House of Representatives House of Representatives
Hon. Michael McCaul, Hon. Jim Jordan,
Chairman, Committee on Foreign Chairman, Committee on the
Affairs, Judiciary,
House of Representatives House of Representatives
Hon. Bruce Westerman, Hon. James Comer,
Chairman, Committee on Natural Chairman, Committee on Oversight
Resources, and Accountability,
House of Representatives House of Representatives
Hon. Frank D. Lucas, Hon. Roger Williams,
Chairman, Committee on Science, Chairman, Committee on Small
Space, and Technology, Business,
House of Representatives House of Representatives
Hon. Mike Bost, Hon. Jason Smith,
Chairman, Committee on Veterans' Chairman, Committee on Ways and
Affairs, Means,
House of Representatives House of Representatives
Hon. Mike Braun, Hon. Ted Budd,
United States Senate United States Senate
Hon. Robert B. Aderholt, Hon. Rick W. Allen,
House of Representatives House of Representatives
Hon. Brian Babin, Hon. Don Bacon,
House of Representatives House of Representatives
Hon. James R. Baird, Hon. Troy Balderson,
House of Representatives House of Representatives
Hon. Andy Barr, Hon. Cliff Bentz,
House of Representatives House of Representatives
Hon. Jack Bergman, Hon. Stephanie Bice,
House of Representatives House of Representatives
Hon. Andy Biggs, 1Hon. Ken Buck,
House of Representatives House of Representatives
Hon. Tim Burchett, Hon. Ken Calvert,
House of Representatives House of Representatives
Hon. Kat Cammack, Hon. Mike Carey,
House of Representatives House of Representatives
Hon. Jerry L. Carl, Hon. Earl L. ``Buddy'' Carter,
House of Representatives House of Representatives
Hon. Ben Cline, Hon. Michael Cloud,
House of Representatives House of Representatives
Hon. Andrew S. Clyde, Hon. Eric A. ``Rick'' Crawford,
House of Representatives House of Representatives
Hon. Scott DesJarlais, Hon. Mario Diaz-Balart,
House of Representatives House of Representatives
Hon. Byron Donalds, Hon. Jeff Duncan,
House of Representatives House of Representatives
Hon. Neal P. Dunn, Hon. Jake Ellzey,
House of Representatives House of Representatives
Hon. Tom Emmer, Hon. Pat Fallon,
House of Representatives House of Representatives
Hon. Randy Feenstra, Hon. Brad Finstad,
House of Representatives House of Representatives
Hon. Michelle Fischbach, Hon. Brian K. Fitzpatrick,
House of Representatives House of Representatives
Hon. Chuck Fleischmann, Hon. Mike Flood,
House of Representatives House of Representatives
Hon. Mike Garcia, Hon. Carlos A. Gimenez,
House of Representatives House of Representatives
Hon. Scott Franklin, Hon. Russ Fulcher,
House of Representatives House of Representatives
Hon. Jenniffer Gonzalez Colon, Hon. Bob Good,
House of Representatives House of Representatives
Hon. Lance Gooden, Hon. Paul A. Gosar,
House of Representatives House of Representatives
Hon. Marjorie Taylor Greene, Hon. Glenn Grothman,
House of Representatives House of Representatives
Hon. Diana Harshbarger, Hon. Kevin Hern,
House of Representatives House of Representatives
Hon. Clay Higgins, Hon. French Hill,
House of Representatives House of Representatives
Hon. Ashley Hinson, Hon. Richard Hudson,
House of Representatives House of Representatives
Hon. Ronny L. Jackson, Hon. Bill Johnson,
House of Representatives House of Representatives
Hon. Dusty Johnson, Hon. Mike Kelly,
House of Representatives House of Representatives
Hon. Trent Kelly, Hon. David Kustoff,
House of Representatives House of Representatives
Hon. Darin LaHood, Hon. Doug LaMalfa,
House of Representatives House of Representatives
Hon. Doug Lamborn, Hon. Robert E. Latta,
House of Representatives House of Representatives
Hon. Jake LaTurner, Hon. Julia Letlow,
House of Representatives House of Representatives
Hon. Nancy Mace, Hon. Nicole Malliotakis,
House of Representatives House of Representatives
Hon. Tracey Mann, Hon. Brian Mast,
House of Representatives House of Representatives
Hon. Lisa McClain, Hon. Carol D. Miller,
House of Representatives House of Representatives
Hon. Mary E. Miller, Hon. John R. Moolenaar,
House of Representatives House of Representatives
Hon. Alex Mooney, Hon. Barry Moore,
House of Representatives House of Representatives
Hon. Gregory F. Murphy, Hon. Troy E. Nehls,
House of Representatives House of Representatives
Hon. Dan Newhouse, Hon. Ralph Norman,
House of Representatives House of Representatives
Hon. Burgess Owens, Hon. Greg Pence,
House of Representatives House of Representatives
Hon. Scott Perry, Hon. August Pfluger,
House of Representatives House of Representatives
Hon. Guy Reschenthaler, Hon. John W. Rose,
House of Representatives House of Representatives
Hon. Matthew M. Rosendale, Sr., Hon. David Rouzer,
House of Representatives House of Representatives
Hon. Chip Roy, Hon. John H. Rutherford,
House of Representatives House of Representatives
Hon. Maria Elvira Salazar, Hon. Austin Scott,
House of Representatives House of Representatives
Hon. Pete Sessions, Hon. Christopher H. Smith,
House of Representatives House of Representatives
Hon. Lloyd Smucker, Hon. Victoria Spartz,
House of Representatives House of Representatives
Hon. Pete Stauber, Hon. Elise M. Stefanik,
House of Representatives House of Representatives
Hon. David G. Valadao, Hon. Jefferson Van Drew,
House of Representatives House of Representatives
Hon. Beth Van Duyne, Hon. Tim Walberg,
House of Representatives House of Representatives
Hon. Michael Waltz, Hon. Robert J. Wittman,
House of Representatives House of Representatives
Hon. Steve Womack,
House of Representatives
Appendix I: Objectives, Scope, and Methodology
This report examines the extent to which (1) the U.S. Department of
Agriculture (USDA) shares information related to foreign investments in
U.S. agricultural land with the Committee on Foreign Investment in the
United States (CFIUS) for its national security reviews and (2) USDA's
processes enable it to collect, track, and report foreign investments
in U.S. agricultural land.
The Department of the Treasury (Treasury), the Department of
Defense (DOD), and USDA deemed some of the information in our report to
be too sensitive for public disclosure. As a result, this report omits
sensitive information about CFIUS's processes for tracking transactions
and numbers of transactions CFIUS agencies reviewed related to foreign
investments in U.S. agricultural land.
To examine the extent to which USDA shares information related to
foreign investment in U.S. agricultural land with CFIUS for its
national security reviews, we reviewed the Foreign Investment and
National Security Act of 2007 (FINSA),\1\ and the Foreign Investment
Risk Review Modernization Act of 2018 (FIRRMA),\2\ CFIUS regulations
implementing FINSA and FIRRMA,\3\ and relevant executive orders. We
also reviewed the 2021 and 2022 CFIUS annual reports. In addition, we
reviewed interagency communications and agency documents, such as
internal guidance, to understand (1) CFIUS's process and (2)
Treasury's, DOD's, and USDA's individual processes for reviewing
potential national security risks related to foreign investments and
identifying transactions for potential CFIUS review.
---------------------------------------------------------------------------
\1\ Pub. L. No.110-49 2, 121 Stat. 246 (July 26, 2007) (codified
as amended at 50 U.S.C. 4565).
\2\ John S. McCain National Defense Authorization Act for Fiscal
Year 2019, Pub. L. No. 115-232, 1701-1728, 132 Stat. 1636, 2173-2208
(Aug. 13, 2018) (codified as amended at 50 U.S.C. 4565).
\3\ See 31 CFR pts. 800 and 802.
---------------------------------------------------------------------------
We also interviewed officials from Treasury's Office of Investment
Security, USDA's Office of Homeland Security, and DOD's Office of the
Under Secretary of Defense for Acquisition and Sustainment about these
agencies' CFIUS efforts. We interviewed USDA officials from the Farm
Service Agency (FSA) and the Farm Production and Conservation Business
Center (FPAC-BC) about USDA's processes to track and report foreign
investments in U.S. agricultural land pursuant to the Agricultural
Foreign Investment Disclosure Act of 1978, as amended (AFIDA).\4\
---------------------------------------------------------------------------
\4\ Pub. L. No. 95-460, 92 Stat. 1263 (codified as amended at 7
U.S.C. 3501-3508).
---------------------------------------------------------------------------
In addition, we evaluated information from interviews and documents
to evaluate efforts amongst these agencies to share information in
addition to potential challenges these agencies have faced in doing so.
We determined that the internal control principle related to quality
information was significant to this objective.\5\ We evaluated
information from interviews and documents to determine whether the
three agencies communicated the necessary quality information through
reporting lines so that external parties can help the entity achieve
its objectives and address related risks to achieve the entities'
objectives. In addition, we evaluated information from interviews and
documents to determine whether USDA FPAC-BC communicated the necessary
quality information internally down and across reporting lines to
enable personnel to perform key roles in achieving objectives,
addressing risks, and supporting the internal control system.
---------------------------------------------------------------------------
\5\ Standards for Internal Control in the Federal Government, GAO-
14-704G (https://www.gao.gov/products/GAO-14-704G) (Washington, D.C.:
Sept. 10, 2014).
---------------------------------------------------------------------------
To examine USDA's processes to track and report foreign investments
in U.S. agricultural land, we reviewed AFIDA,\6\ USDA's implementing
regulations,\7\ and AFIDA requirements found in the Consolidated
Appropriations Act, 2023.\8\ We also reviewed the Farm Service Agency's
(FSA) AFIDA handbook to learn about AFIDA responsibilities and guidance
for county, state, and headquarters offices.\9\ We interviewed USDA
headquarters officials from the FSA and FPAC-BC about AFIDA processes,
limitations, and their efforts to create an online submission process
and public database. We also selected and interviewed FSA officials
from a non-generalizable sample of three state offices and three county
offices to better understand how FSA state and county offices were
fulfilling their AFIDA responsibilities. We selected the FSA Grand
Forks County and Val Verde County offices due to media coverage on
potential CFIUS reviews of agricultural land transactions occurring in
those counties. We selected the FSA Antelope County office, because
this county includes the highest number of foreign holdings of
agricultural land, by number of land parcels, according to USDA's AFIDA
holdings data. We selected the three FSA state offices that oversee
those counties--North Dakota, Texas, and Nebraska, respectively.
---------------------------------------------------------------------------
\6\ Pub. L. No. 95-460, 92 Stat. 1263 (codified as amended at 7
U.S.C. 3501-3508).
\7\ 7 CFR pt. 781.
\8\ Pub. L. No. 117-328, div. A, tit. VII, 773, 136 Stat. 4459,
4509 (2022).
\9\ USDA, FSA Handbook: Foreign Investment Disclosure, 1-AFIDA
(Washington D.C., revised Jan. 27, 2006).
---------------------------------------------------------------------------
We evaluated USDA's AFIDA processes using as criteria Standards for
Internal Control in the Federal Government and USDA guidelines to
implement the Information Quality Act.\10\
---------------------------------------------------------------------------
\10\ The Information Quality Act, also known as the Data Quality
Act, directed the Office of Management and Budget (OMB) to issue
guidelines that provide policy and procedural guidance to Federal
agencies for ensuring and maximizing the quality, objectivity, utility,
and integrity of information, including statistical information
disseminated to the public. Consolidated Appropriations Act, 2001, Pub.
L. No. 106-554, app. C, tit. V, 515, 114 Stat. 2763, 2763A-153,
2763A-154 (2000). OMB, published the required guidelines in 2002. OMB,
Guidelines for Ensuring and Maximizing the Quality, Objectivity,
Utility, and Integrity of Information Disseminated by Federal Agencies,
Final Guidelines, 67 Fed. Reg. 8452 (Feb. 22, 2002). In 2019, OMB
published a memorandum to reinforce, clarify, and interpret agency
responsibilities with regard to responsibilities under the Information
Quality Act. OMB, Improving Implementation of the Information Quality
Act, OMB M-19-15 (Apr. 24, 2019). USDA's guidelines implement OMB
guidelines in accordance with the Information Quality Act.
---------------------------------------------------------------------------
We assessed the reliability of AFIDA data by reviewing active
holdings by foreign persons as of the end of 2021--the latest year of
data available from the AFIDA spreadsheet at the time of our review.
These data were spreadsheets generated from USDA's Microsoft Access
AFIDA database. According to officials, these data were used to
populate USDA's 2021 AFIDA annual report and represent current foreign
investments of U.S. agricultural land, including investments that were
made prior to 2021. As such, these data do not include investments that
were divested. We also reviewed agency documents and interviewed FPAC-
BC headquarters officials about entry and maintenance of the AFIDA
spreadsheet, including controls in the spreadsheet and checks done
prior to using the AFIDA spreadsheet to populate USDA's AFIDA annual
reports. We electronically tested for missing data, outliers, and
obvious errors. We also evaluated AFIDA data against reported summary
data in USDA's 2021 AFIDA Annual Report and the presentation of these
data in the report. Based on errors we identified and recent
transactions covered by the media, we selected and requested a non-
generalizable sample of 20 AFIDA forms, which are source documents used
to populate AFIDA data, to review for errors and completeness.
According to USDA officials, the data for two of the AFIDA forms were
included in one form; therefore, we reviewed 19 AFIDA forms. We also
reviewed the data submitted on these forms that USDA does not enter
into the AFIDA spreadsheet, such as additional ownership tiers and
legal descriptions. We shared inconsistencies we identified with USDA,
and USDA confirmed the presence of errors. We determined that the data
were not sufficiently reliable to show the amount of foreign investment
in U.S. agricultural land and we only include data in this report for
contextual purposes or to show examples of data errors. We make
recommendations to address the reliability of AFIDA data.
The performance audit upon which this report is based was conducted
from October 2022 to January 2024 in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Appendix II: Factors to Consider When Determining Whether Submitted
Transactions Pose a National Security Risk
Table 1: List of Illustrative Factors CFIUS and the President May
Consider in Determining Whether a Transaction Notified to the Committee
Poses a National Security Risk
------------------------------------------------------------------------
-------------------------------------------------------------------------
The potential effects of the transaction on the domestic
production needed for projected national defense requirements.
The potential effects of the transaction on the capability
and capacity of domestic industries to meet national defense
requirements, including the availability of human resources,
products, technology, materials, and other supplies and services.
The potential effects of the transaction on a foreign
person's control of domestic industries and commercial activity as
it affects the capability and capacity of the United States to meet
the requirements of national security.
The potential effects of the transaction on U.S.
international technological leadership in areas affecting U.S.
national security.
The potential national security-related effects on U.S.
critical technologies.
The potential effects on the long-term projection of U.S.
requirements for sources of energy and other critical resources and
material.
The potential national security-related effects of the
transaction on U.S. critical infrastructure, including critical
physical infrastructure such as major energy assets.
The potential effects of the transaction on the sales of
military goods, equipment, or technology to countries that present
concerns related to terrorism; missile proliferation; chemical,
biological, or nuclear weapons proliferation; or regional military
threats.
The potential that the transaction presents for
transshipment or diversion of technologies with military
applications, including the relevant country's export control
system.
Whether the transaction could result in the control of a
U.S. business by a foreign government or by an entity controlled by
or acting on behalf of a foreign government.
The relevant foreign country's record of adherence to
nonproliferation control regimes and record of cooperating with
U.S. counterterrorism efforts.
Other factors that the President or the committee may
determine to be appropriate, generally or in connection with a
specific review or investigation.
------------------------------------------------------------------------
Source: 50 U.S.C. 4565(f). See also Department of the Treasury: Office
of Investment Security; Guidance Concerning the National Security
Review Conducted by the Committee on Foreign Investment in the United
States, 73 Fed. Reg. 74567 (Dec. 8, 2008) (detailing the illustrative
list of factors in section 721(f) of the Defense Production Act of
1950, as amended and codified at 50 U.S.C. 4565(f)). D GAO-24-
106337.
Appendix III: Comments from the Department of Agriculture
January 4, 2024
Steve D. Morris,
Director
Natural Resources and Environment
Government Accountability Office
Washington, D.C.
Dear Mr. Morris:
The U.S. Department of Agriculture (USDA) Farm Service Agency (FSA)
appreciates the opportunity to respond to the U.S. Government
Accountability Office (GAO) draft report GAO-24-106337, ``Foreign
Investments in U.S. Agricultural Land: Enhancing Efforts to Collect,
Track, and Share Key Information Could Help Better Identify National
Security Risks,'' received December 4, 2023. The report examines USDA
processes associated with the Agricultural Foreign Investment
Disclosure Act (AFIDA) and linkages with the Committee on Foreign
Investment in the United States (CFIUS).
The items below address the six GAO recommendations. USDA has
provided comments on specific items in the GAO report in separate
correspondence to GAO.
Responses to GAO Recommendations:
Recommendation 1--The Secretary of Agriculture should ensure that
the Administrator of FPAC-BC, in coordination with relevant CFIUS
member agencies, establish a process to provide detailed and timely
AFIDA transaction data relevant to foreign investments in agricultural
land to CFIUS member agencies including DOD and Treasury. Such
information could include whether a party has filed a disclosure, who
filed it, and when it was filed.
Response 1--USDA agrees with this recommendation. The Department
has procedures in place for ensuring that AFIDA transactions are
flagged for CFIUS review and that our CFIUS partners are aware of
agricultural interests. When an FSA-153 filing from a Chinese, Russian,
North Korean, or Iranian investor is received by AFIDA staff at USDA
headquarters, the entire FSA-153 filing is sent to counterparts in the
Department of Defense and the FBI. The filing is also shared with
USDA's Office of Homeland Security. Without an appropriation of funding
sufficient for development and maintenance of an online filing portal,
it will be difficult to provide more real-time filings except through
the manual process (scanning and e-mailing) described earlier in this
paragraph. If funding becomes available for a filing portal, the Farm
Production and Conservation-Business Center (FPAC-BC) will work to
ensure that our interagency partners have access to more real-time
data, either directly through the portal or through weekly or monthly
FSA-153 filing summaries.
Recommendation 2--The Secretary of Agriculture should direct the
Administrator of FSA, as FPAC-BC updates the AFIDA handbook, to clarify
and provide specific instructions to headquarters and county employees
for completing AFIDA responsibilities, including reviewing the accuracy
of forms and identifying missing information.
Response 2--USDA agrees with this recommendation. AFIDA staff in
FPAC-BC are currently working on updating the existing 1-AFIDA
handbook. In addition, a Federal Register announcement posted on
Friday, December 15, 2023, requests public input on proposed revisions
to the FSA-153 (AFIDA reporting) form, plus feedback on specific issues
associated with both the existing and proposed form. After responses
are received from the public and a revised, updated FSA-153 form is
cleared through the Executive Branch process, USDA will make necessary
revisions to the 1-AFIDA handbook and provide complete instructions to
AFIDA filers and headquarters/county employees who work on AFIDA.
Recommendation 3--The Secretary of Agriculture should direct the
Administrators of FPAC-BC and FSA to jointly complete an analysis to
determine the extent to which the agency can satisfy the requirements
of the Consolidated Appropriations Act, 2023 to create an AFIDA online
submission system and public database within its expected budget. If
the analysis shows that the agency would be unable to meet the
requirements of the Consolidated Appropriations Act, 2023, USDA should
report the results to Congress and recommend appropriate legislative
changes.
Response 3--USDA agrees with this recommendation and has
communicated to Congress the urgent need for funding on multiple
occasions over the past year. In addition, and in the absence of
funding, USDA has communicated to the Senate and House Agriculture
Committees and the Senate and House Agricultural Appropriations
Committees, as well as GAO, our efforts to modernize AFIDA in line with
the Consolidated Appropriations Act, 2023. In June 2023, Excel
spreadsheets for each year from 2010 to 2021 containing the detailed
data underlying the annual reports to Congress were posted on the FSA
website; this effort was what could be done given the absence of
funding in the Consolidated Appropriations Act, 2023. In addition, we
developed a proposed, revised FSA-153 (AFIDA filing) form, which was
posted in the Federal Register on Friday, December 15, 2023. This
announcement requests public comment to ensure that we are capturing
the most appropriate data and is a first step in online portal
development. Should funding be provided for an online filing portal to
be created and maintained, USDA needs to ensure that we are capturing
the best possible data--including more information on leaseholds and
the impacts of foreign investment on U.S. farms and rural communities.
The Federal Register document asks for input on these items, as well as
other information. Beyond revising and updating the FSA-153 form, we
have communicated to Congress that we cannot make progress on IT
development until funding is provided for IT system creation and
additional IT staffing.
Recommendation 4--The Secretary of Agriculture should direct the
Administrator of FPAC-BC to improve its verification and monitoring of
collected AFIDA data, such as reviewing and validating information
throughout the AFIDA data collection process.
Response 4--USDA agrees with this recommendation. In late September
2023, AFIDA staff met with Performance, Accountability, and Risk (PAR)
staff, also in the FPAC-BC, to discuss the review and validation of
AFIDA data. Going forward, PAR staff will focus on three ``buckets'' of
potential AFIDA data errors: (1) data entry errors from the hard copy
FSA-153 forms to the existing Access database; (2) errors made by
filers that are not caught by AFIDA staff; and (3) stale data in the
AFIDA database that do not match current property tax records. In
addition to spot checks, PAR will recommend internal control actions
that may be undertaken to add additional rigor to AFIDA processes. PAR
staff plan to begin this work in earnest in early 2024.
Recommendation 5--The Secretary of Agriculture should direct the
Administrator of FPAC-BC, in coordination with the Administrator of
FSA, to continue pursuing data monitoring activities that compare AFIDA
data to FSA program data to identify suspected non-filers.
Response 5--USDA agrees with this recommendation. In the fall of
2023, the FPAC-BC matched FSA farm program data identifying those
flagged as non-U.S. citizens and non-permanent residents with those who
are AFIDA filers. For landowners who appear to need to file, but for
which we have no FSA-153 form on file, local FSA offices took steps to
reconcile individual situations (for example, those who became
permanent residents or who were deceased). For those situations where
local FSA staff could provide no insights, FPAC-BC headquarters staff
sent a letter informing the recipient of AFIDA filing requirements. We
have heard back from very few people (or companies) that were
contacted. Most letter recipients have very small acreage (10-20
acres). It is possible that many letter recipients discerned that they
could face a large penalty (up to 25 percent of the fair market value
of the land) and decided to not respond, thinking that the U.S.
Government is not going to pursue them for such small acreage. It is
also possible that low-resourced producers may not be able to fully
respond to the letter. Given the low response rate, and that few new
foreign persons are likely to emerge from this process on a year-to-
year basis, we intend to engage in this process periodically (but not
annually).
Recommendation 6--The Secretary of Agriculture should direct the
Administrator of FPAC-BC to ensure its AFIDA reporting is clear and
complete, such as incorporating country information from additional
foreign persons beyond the primary investor when available.
Response 6--USDA has concerns with this recommendation without
additional financial resources and personnel to create and maintain an
online filing portal. For the 2024 report, containing data through
December 31, 2023, we will provide data on secondary and higher
interests associated with Chinese, Russian, Iranian, and North Korean
interests. This would apply only to new filings received in 2023 as
developing these data back to 1978 would require manually reviewing all
historical paper FSA-153 filings and manually entering all Chinese,
Russian, Iranian, and North Korean data for any tier reported by
investors from those countries. A manual check of this scope is
infeasible without additional financial resources and personnel.
However, doing so for the four high-priority countries is manageable
for new filings starting in 2023 and going forward. Note that, to
develop detailed acreage data with secondary (and higher) interests in
mind, USDA would have to weight the acreage data by country for each
filing (or else the final report would over-report acreage). With a
manual process, this would be very time consuming and likely prone to
error. To accurately capture secondary and higher interests for all
countries, we would need an online filing portal with the burden placed
on the filer to accurately develop this information.
Sincerely,
Gloria Montano Greene,
Deputy Under Secretary,
Farm Production and Conservation.
Appendix IV: GAO Contact and Staff Acknowledgments
GAO Contacts
Kimberly Gianopoulos, (202) 512-8612, or [email protected]
Steve Morris, (202) 512-3841, or [email protected]
Staff Acknowledgments
In addition to the contact named above, Christina Werth (Assistant
Director), Thomas Cook (Assistant Director), Jaime Allentuck (Analyst
in Charge), Brian Hackney (Senior Analyst), Cory Ryncarz (Analyst),
Larissa Barrett, John Bornmann, Kevin Bray, Neil Doherty, Bahareh
Etemadian, Grace Lui, Terry Richardson, and Miranda Riemer made key
contributions to this report. Other contributors to this report include
Ming Chen, Steven Flint, Jeff Isaacs, Heather Miller, Ben Moser, and
Meghan Perez.
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______
Submitted Article by Hon. James P. McGovern, a Representative in
Congress from Massachusetts
[https://www.justsecurity.org/86722/with-new-alien-land-laws-asian-
immigrants-are-once-again-targeted-by-real-estate-bans/]
With New ``Alien Land Laws'' Asian Immigrants Are Once Again Targeted
by Real Estate Bans
By Edgar Chen \1\
---------------------------------------------------------------------------
\1\ https://www.justsecurity.org/author/chenedgar/.
May 26, 2023
Florida Gov. Ron DeSantis speaks during a press conference
held at the Florida National Guard Robert A. Ballard Armory on
June 07, 2021 in Miami, Florida, announcing the signing of two
bills including SB 264. (Photo by Joe Raedle/Getty Images).
In Congress and in statehouses throughout the United States,
lawmakers continue to introduce legislation \2\ designed to bar
citizens of foreign adversaries from being able to purchase real
property. Ostensibly aimed at preventing a short list of enemy
governments from controlling the American food supply or spying on
military facilities, these laws' most cited rationale is fear of
Chinese Communist Party (CCP) influence on American soil. Sponsors
argue that such legislation would safeguard agricultural land, defense,
and critical infrastructure from malign foreign influence. However,
much of the legislation introduced so far extends well beyond this
ambit, restricting even those with no discernable ties to the CCP or
other organs of Chinese state power.
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\2\ https://advancingjustice-aajc.quorum.us/advancingjustice-
aajc.landlawresources.
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These bills--which are opposed by groups including the National
Asian Pacific American Bar Association,\3\ where I previously served as
Policy Director and continue to advise--raise significant concerns
regarding the balancing of national security equities against civil
liberties, Federal preemption grounds, and present a host of unintended
consequences with the potential to harm the economies of affected
states. Opponents of these bills \4\ have described such legislation as
a revival of unconstitutional anti-Asian land laws--a class of law once
called ``alien land laws''--and an ongoing threat to the civil rights
of all Asian Americans, regardless of ethnic background.
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\3\ https://www.napaba.org/page/
preemption_of_real_property_discrimination_act.
\4\ https://www.asiantexansforjustice.org/sb-147.
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Did You Say ``Asians'' or ``Agents''?
On May 8, 2023, Florida Governor Ron DeSantis signed into law SB
264,\5\ which bars ``foreign principals''--defined as government
officials, members of political parties, and anyone domiciled in
certain countries of concern (China, Russia, Iran, North Korea, Syria,
Venezuela, and Cuba) from purchasing any agricultural land or any
property within 10 miles of a military installation or critical
infrastructure. The law also specifically bars any Chinese foreign
principals from purchasing any real estate whatsoever in the state,
with limited exceptions for residential property by those lawfully
present in the United States. Upon enactment, DeSantis proclaimed,\6\
``I'm proud to sign this legislation to stop the purchase of our
farmland and land near our military bases and critical infrastructure
by Chinese agents.''
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\5\ https://laws.flrules.org/2023/33.
\6\ https://www.flgov.com/2023/05/08/governor-ron-desantis-cracks-
down-on-communist-china/.
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The legislation, however, far exceeds the purchase of strategically
important land by ``Chinese agents.'' With few exceptions, anyone
domiciled \7\ in China--regardless of non-affiliation with the CCP--is
barred from purchasing real estate in Florida. Unlike Russians or
Syrians, Chinese citizens are singled out and prohibited from
purchasing non-residential property, even land nowhere near a military
base. There are carveouts for dual U.S. citizens and green card
holders, but other lawfully present Chinese nationals face further
restrictions. Violations could result in forfeiture and criminal
penalties.
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\7\ https://www.floridabar.org/the-florida-bar-journal/domicile-
planning-dont-take-it-for-granted/.
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If part of the intent of the Florida legislation is to thwart the
viability of adversarial authoritarian regimes, the law's blanket
prohibition on real estate acquisition by any member of any political
party from the named countries works against this. While potentially
deterring single party regimes such as China and North Korea from
investing in Florida, SB 264's terms would also place restrictions on
Venezuelan opposition leader Juan Guiado \8\ (who was recently spotted
in Miami) and Russian dissident Alexei Navalny.
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\8\ https://www.reuters.com/world/americas/venezuelas-guaido-
arrives-miami-after-surprise-colombia-visit-2023-04-25/.
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Florida is not alone in ramping up legislation to ban Chinese
residents and others from purchasing real estate. Sponsors from both
parties, including in California \9\ and New York \10\ have introduced
drafts, and bills have advanced quickly in Texas,\11\ Louisiana,\12\
South Carolina,\13\ and Alabama \14\ presenting many of the same
scoping problems. For example, SB 91 in Louisiana prohibits the leasing
of immovable property to any citizen of China within 50 miles of a
military facility, unless they hold a green card. Thus, lawfully
admitted Chinese citizens present on student or employment visas
studying or working at Louisiana State University would not be able to
even rent an apartment in Baton Rouge, which houses an armed forces
reserve center.\15\ Louisiana's House companion bill, HB 537 now
contains exceptions for residential property, but would still restrict
sales or leases of commercial property to foreign investors. While the
latest version also does not apply to ``lawfully present'' immigrants,
a prior draft only excepted valid visa holders, which would have barred
most refugees, asylees, and asylum seekers, all of whom are authorized
to live and work in the United States, from renting business space.
(Refugees often enter the country using State Department issued
transportation letters or boarding foils, which are not technically
visas, and asylees are authorized to live and work in the United States
by immigration judges or the Department of Homeland Security, not
generally through visas). Legislation may prevent many of these
vulnerable persons, like the 63 Chinese Christians who fled religious
persecution in China \16\ or others escaping political oppression in
Russia, Iran, Cuba, and Venezuela, from establishing roots.
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\9\ https://www.capradio.org/articles/2023/04/26/california-bill-
could-ban-foreign-investors-from-buying-state-farmland/.
\10\ https://assembly.state.ny.us/mem/Angelo-Santabarbara/story/
105616.
\11\ https://capitol.texas.gov/tlodocs/88R/billtext/html/
SB00147I.htm.
\12\ https://legis.la.gov/legis/ViewDocument.aspx?d=1317999.
\13\ https://www.scstatehouse.gov/sess125_2023-2024/prever/
576_20230324.htm.
\14\ https://www.legislature.state.al.us/pdf/SearchableInstruments/
2023RS/HB379-eng.pdf.
\15\ https://geauxguard.la.gov/la-soldiers-marines-celebrate-new-
armed-forces-center/.
\16\ https://apnews.com/article/china-house-church-thailand-texas-
e8f193fa733d279176ef845f42
a0bb35.
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Unintended Economic Pitfalls
When first introduced, HB 537 banned any person or entity ``subject
to the jurisdiction of a foreign adversary'' from purchasing or leasing
real estate. This would have potentially swept up anyone who does
business in, resides in, has assets in, or even visits one of the named
countries. For example, foreign-based energy companies operating in
Louisiana, who may have subsidiaries, stakes in joint ventures, or
other interests in countries such as Russia or Venezuela, could
technically be ``subject to the[ir] jurisdiction'' and would not be
allowed to purchase or lease office space in the state under the
introduced version.
In an amended draft, the language was changed to ``connected with a
foreign adversary.'' However, the definition of ``connected with a
foreign adversary'' included persons ``contracted by'' foreign states.
While U.S. and other energy companies have largely exited Russia \17\
due to its attack on Ukraine, others remain in the Caspian pipeline
consortium with Russia.\18\ Furthermore, U.S.-based and foreign oil and
gas companies like Chevron still maintain significant operations\19\ in
places such as Venezuela. While this provision was later amended, it
illustrates the risk for business actors.
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\17\ https://www.reuters.com/business/energy/halliburton-suspends-
future-business-russia-2022-03-18/.
\18\ https://www.reuters.com/article/cpc-oil/update-1-caspian-
pipeline-consortium-resumes-oil-exports-from-black-sea-terminal-
idUKL1N36H0IJ).
\19\ https://www.chevron.com/worldwide/venezuela).
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The Florida law bars entities, whether state owned or not, that are
headquartered or incorporated under the laws of foreign adversaries
from purchasing farmland or land near critical infrastructure. This
calls into question whether Miami's billion dollar Brickell City Centre
project,\20\ led by Hong Kong based Swire, would violate the new law.
Smithfield Foods, the world's largest pork producer,\21\ and the AMC
Theatres, the world's largest theatre chain,\22\ are also both owned by
Chinese investors.
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\20\ https://www.swireproperties.com/en/portfolio/current-
developments/brickell-city-centre/.
\21\ https://www.wsj.com/articles/smithfield-foods-ceo-defends-
pork-producers-chinese-ownership-a78827da.
\22\ https://www.amctheatres.com/corporate/about.
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Origin Story One: Concerns Over Large Scale Land Transactions in Texas
and North Dakota
While the downing of a Chinese spy balloon in March 2023
underscored the ongoing espionage threat posed by China, two erstwhile
land transactions in Texas and North Dakota have been widely cited as
the impetus for the raft of anti-Chinese land laws.
In 2016, Chinese billionaire entrepreneur Sun Guangxin began
purchasing nearly 140,000 acres of land in southern Texas to build a
wind farm that would feed directly into the state's electrical grid.
The transaction raised eyebrows due to Sun's ties to the CCP and his
former military service with the People's Liberation Army (PLA). In
2020, the proposal was vetted by the Federal interagency Committee on
Foreign Investment in the United States (CFIUS),\23\ which is comprised
of representatives from 16 U.S. departments and agencies, including
Treasury, Justice, Commerce, Defense, Energy, and Homeland Security.
CFIUS is tasked with reviewing, and if appropriate, blocking \24\
certain covered commercial transactions that could jeopardize national
security. (CFIUS jurisdiction was expanded by the Foreign Investment
Risk Review Modernization Act of 2018 (FIRRMA) \25\ to include real
estate transactions located in proximity to sensitive governmental
facilities.\26\)
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\23\ https://home.treasury.gov/policy-issues/international/the-
committee-on-foreign-investment-in-the-united-states-cfius.
\24\ https://www.justsecurity.org/85836/how-lawmakers-hope-to-
sidestep-existing-national-security-reviews-to-target-foreign-
investment/.
\25\ https://www.congress.gov/115/plaws/publ232/PLAW-
115publ232.pdf.
\26\ https://home.treasury.gov/system/files/206/Summary-of-
FIRRMA.pdf.
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The Trump Administration, through CFIUS, ultimately declined to
block \27\ the transaction even though the project was located within
50 miles of Laughlin Air Force Base,\28\ the largest training facility
for Air Force pilots in the country. In response, in June 2021, Texas
Governor Greg Abbott signed the Lonestar Infrastructure Protection
Act\29\ (LSIPA) which barred Chinese, North Korean, and Russian
companies from entering into agreements affecting infrastructure,
effectively killing the project.\30\
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\27\ https://foreignpolicy.com/2020/06/25/texas-chinese-wind-farm-
national-security-espionage-electrical-grid/.
\28\ https://www.laughlin.af.mil/.
\29\ https://capitol.texas.gov/BillLookup/
History.aspx?LegSess=87R&Bill=SB2116.
\30\ https://www.forbes.com/sites/johnhyatt/2021/08/09/why-a-
secretive-chinese-billionaire-bought-140000-acres-of-land-in-texas/
?sh=75e8f15c78c3.
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Similarly, in North Dakota, Chinese investment in a corn mill,
originally welcomed \31\ as an economic boon, was scuttled after
concerns were raised that the 370 acre farm, located near the Grand
Forks Air Force Base, could be a staging ground for espionage, and a
threat to the American food supply. Plans by the Chinese Fufeng Group
to build the mill were also reviewed by CFIUS, which in December 2022
declined to exercise jurisdiction \32\ after determining that
``greenfield'' investments were not covered transactions,\33\ which
generally require a foreign entity to take over control of a U.S.
business, and that the nearby base was not on a designated list of
particularly sensitive facilities. The decision was criticized \34\ by
the North Dakota's senators, who requested an opinion by the Air Force
\35\ which later claimed that the Fufeng project ``presents a
significant threat to national security.'' Senator Marco Rubio, Vice
Chair of the Senate Select Committee on Intelligence, blasted
CFIUS,\36\ calling the transaction ``dangerous and dumb.'' The fate of
the project was sealed when the Grand Forks City Council voted to
terminate the deal \37\ in the wake of the Air Force letter.
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\31\ https://www.nytimes.com/2022/07/17/us/grand-forks-north-
dakota-fufeng-china.html.
\32\ https://www.mayerbrown.com/en/perspectives-events/
publications/2023/01/cfius-determines-it-has-no-jurisdiction-over-
fufeng-groups-north-dakota-corn-mill-project.
\33\ https://www.law.cornell.edu/cfr/text/31/800.301.
\34\ https://www.hoeven.senate.gov/news/news-releases/hoeven-
cramer-air-force-provides-official-position-on-fufeng-project-in-grand-
forks.
\35\ https://www.hoeven.senate.gov/imo/media/doc/USAIRFORCE-FUFENG-
LETTER-HOEVEN.pdf.
\36\ https://www.rubio.senate.gov/public/index.cfm/2022/12/rubio-
slams-cfius-s-refusal-to-take-action-regarding-fufeng-farmland-
purchase.
\37\ https://www.grandforksherald.com/news/local/city-ends-
standstill-terminating-development-agreement-with-fufeng.
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On May 5, 2023, the Treasury Department, seemingly in response to
the outcry over the Fufeng and Texas windfarm controversies, issued a
notice of proposed rulemaking \38\ to add the Grand Forks and Laughlin
Air Force Bases and six other military installations to the list of
facilities that would be covered under the real estate provisions of
CFIUS.
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\38\ https://www.federalregister.gov/documents/2023/05/05/2023-
09259/provisions-pertaining-to-certain-transactions-by-foreign-persons-
involving-real-estate-in-the-united.
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Proposed Legislation Is Disproportionate to the Perceived Threat
When SB 264 passed in Florida, the state's agriculture commissioner
hailed its enactment, stating ``food security is national security.''
\39\ Similarly, HB 379 was introduced in Alabama in order to ``protect
our agricultural interests and military facilities.'' \40\ Despite
legislators' focus on protecting the American farmland, the U.S.
Department of Agriculture (USDA) reported \41\ that, as of December
2020, Chinese investors held slightly less than one percent of foreign-
held agricultural acreage, well behind Canada which held the largest
amount at 32% or 12.4 million acres and investors from the Netherlands,
Italy, United Kingdom, and Germany, who collectively held 12 million
acres or 31 percent of foreign-owned land. In total, foreign investors
reported holding interests in nearly 37.6 million acres (2.9 percent)
of all privately held farmland and 1.7 percent of all land in the
United States. Chinese owners held only 352,140 acres.
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\39\ https://www.morningagclips.com/simpson-applauds-legislature-
for-passing-sb-264/.
\40\ https://www.facebook.com/repscottstadthagen/.
\41\ https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/
EPAS/PDF/2020_afida_an-
nual_report.pdf.
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According to the National Agricultural Law Center,\42\ at least 21
states have already enacted legislation to limit foreign ownership of
farmland, with states such as Iowa \43\ having near absolute
restrictions on the books since the 1970s. Since 1978, the USDA has
required that foreign ownership of agricultural land be registered with
the agency pursuant to the Agricultural Foreign Investment Disclosure
Act.
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\42\ https://nationalaglawcenter.org/foreign-investments-in-ag/.
\43\ https://www.legis.iowa.gov/docs/code/9I.pdf.
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Much of the current legislation goes far beyond farmland. The
Florida law prevents any Chinese citizen domiciled in China (except for
U.S. citizens or green card holders) from purchasing any real estate,
anywhere in the state, irrespective of whether the property has any
agricultural or strategic value. For certain Chinese visa holders and
asylees already in the United States, there are exceptions to purchase
a single residence, but the property is limited to 2 acres and cannot
be within 5 miles of any military installation, potentially ruling out
much of Tampa Bay, home to U.S. CENTCOM,\44\ and MacDill AFB; \45\ and
preventing many lawfully admitted Chinese residents from buying a condo
in downtown Miami, given the two Coast Guard stations located there.
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\44\ https://www.centcom.mil/.
\45\ https://www.macdill.af.mil/.
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In Alabama, before a last minute Senate amendment re-focused HB 379
on governments and government officials, the bill restricted those
domiciled in China from buying within a 10 mile radius of a military
base or any ``critical infrastructure,'' which is defined to include
any airport, refinery, electric plant, or wastewater treatment
facility. So, for example, a Chinese citizen enrolled at the University
of Alabama on a student visa would not have been able to buy a condo in
Tuscaloosa, which has two water treatment plants within 5 miles of the
campus, and those on employment-based visas couldn't have purchased a
home in Birmingham, Huntsville (home to the state's largest Asian
American population), or in Montgomery, home to Maxwell Air Force Base.
Constitutional Challenges and the Potential for Discriminatory
Enforcement
If the legislation is an excessive response to legitimate policy
concerns, what are its real goals? Critics of anti-Chinese real estate
legislation have argued that such laws violate the Constitution's Equal
Protection clause of the 14th amendment as they single out persons for
adverse treatment based on national origin and would not survive strict
scrutiny, and that provisions of these laws would violate the Fair
Housing Act,\46\ which bars discrimination in any transactions related
to residential housing. Indeed, just this week, a group of Chinese
citizens who lawfully reside in Florida, sued \47\ the state alleging
violations of both.
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\46\ https://www.justice.gov/crt/fair-housing-act-2.
\47\ https://www.aclu.org/documents/complaint-shen-v-simpson.
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Lawmakers around the country have defended against allegations that
their bills are unconstitutional, discriminatory, or promote anti-Asian
racism, in part, by pointing to Federal determinations of adversarial
nations. For example, Alabama's HB 379 originally targeted only Chinese
citizens, but a Senate amendment changed the bill to instead blacklist
officials from a list of ``foreign countries of concern'' (China,
Russia, North Korea, and Iran), and others on the Treasury Department's
OFAC \48\ sanctions list. Legislation introduced in South Carolina \49\
and Louisiana \50\ is tethered to 15 CFR 7.4,\51\ which lists foreign
governments or foreign non-government persons that have ``engaged in a
long-term pattern or serious instances of conduct significantly adverse
to the national security of the United States'' as determined by the
Secretary of Commerce.
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\48\ https://ofac.treasury.gov/.
\49\ https://www.scstatehouse.gov/sess125_2023-2024/prever/
576_20230324.htm.
\50\ https://www.legis.la.gov/legis/ViewDocument.aspx?d=1322395.
\51\ https://www.ecfr.gov/current/title-15/subtitle-A/part-7/
subpart-A/section-7.4.
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While the ``People's Republic of China'' is not explicitly listed
in the text of either the Louisiana Senate or South Carolina bills,
lead sponsors have specifically cited to stopping China \52\ as the
primary motivation. New Jersey's Doug Steinhardt introduced a bill that
would bar any foreign government or person \53\ from buying
agricultural land in the Garden State, without naming names, but
declared his legislative intent \54\ to ``stop the Chinese Communist
Party from establishing strategic control over sprawling tract of our
farmland.'' When DeSantis signed SB 264, he made no mention of Russian
oligarchs purchasing condos in Miami,\55\ but instead issued a press
released headlined, ``Stop CCP Influence.'' \56\
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\52\ https://apnews.com/article/south-carolina-foreign-land-
ownership-158e23561036f15505775
f9a81251ae5.
\53\ https://apnews.com/article/south-carolina-foreign-land-
ownership-158e23561036f15505775
f9a81251ae5.
\54\ https://www.senatenj.com/index.php/steinhardt/editorial-we-
cant-let-china-buy-up-new-jersey-farmland/59523.
\55\ https://www.nbcnews.com/business/real-estate/russian-money-
flows-us-real-estate-rcna17723.
\56\ https://www.flgov.com/wp-content/uploads/2023/05/Stop-CCP-
Influence-2023.pdf.
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By contrast, Utah's HB 186,\57\ signed into law in March 2023, also
does not explicitly mention ``China,'' but appears more narrowly
tailored to barring real estate purchases by ``restricted foreign
entities'' rather than individuals. A ``restricted foreign entity'' is
defined as ``a company that the United States Secretary of Defense is
required to identify and report as a military company'' under section
1260H of the National Defense Authorization Act of 2021.\58\ This list
is limited to companies known to be operating in the United States, and
that are owned or controlled by the PLA, are Chinese defense
contractors, or are tech companies that receive funding through the
Chinese military apparatus.
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\57\ https://le.utah.gov/ 2023/bills/static/HB0186.html.
\58\ https://www.congress.gov/116/plaws/publ283/PLAW-
116publ283.pdf.
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What remains to be seen, even with facially neutral legislation, is
how such laws will be enforced, including whether Asian Americans of
any heritage may face additional unwarranted scrutiny in real estate
transactions by sellers, realtors, lenders, or others seeking to comply
with the laws, based on impermissible factors such as names or
appearance. At a Louisiana house committee hearing,\59\ the sponsor of
HB 537 explained that if there was ``reasonable suspicion'' that a
buyer could be connected to a foreign adversary, that should trigger
additional scrutiny and ``investigation''--but would that suspicion be
precipitated merely by a purchaser being Chinese-American? Or even
Asian American? The potential for untoward, unjustified scrutiny based
on perceived race or national origin would have devastating
consequences for innocent Asian Americans seeking the American dream.
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\59\ https://house.louisiana.gov/H_Video/
VideoArchivePlayer?v=house/2023/may/0515_23_CL.
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An Ounce of Preemption
As discussed above, the Federal CFIUS process already scrutinizes
transactions, including of real estate, that could jeopardize national
security. The CFIUS regime raises questions as to whether state laws
purporting to protect military facilities and combat the influence of
foreign adversaries named by the Federal Government may be preempted by
Federal equities under the Constitution's Supremacy clause.\60\ The
Supreme Court has already ruled that Federal power supersedes state
attempts to legislate in traditional areas of Federal domain: foreign
relations and immigration.
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\60\ https://constitution.congress.gov/browse/essay/artVI-C2-1/
ALDE_00013395/.
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A state law may be preempted by a Federal statute that contains an
express preemption provision, or when states attempt to exercise
jurisdiction in areas where the Federal authority is exclusive, such as
foreign relations, or when state laws conflict with, or stand as an
obstacle to Federal interests. In Arizona v. United States,\61\ the
Supreme Court struck down several provisions of Arizona's SB 1070,
which among other things, made it a state crime for non-citizens to
fail to register with the Federal Government and to work without
authorization--both of which the Court found to be matters within the
exclusive jurisdiction of the Federal Government. When Massachusetts
attempted to impose its own sanctions regime against Burma by barring
state entities from buying goods or services from companies doing
business with Burma, the Supreme Court struck down that law \62\ on
Federal preemption grounds, as an obstacle to the President's authority
both to conduct diplomacy as the commander-in-chief saw fit, and to
deploy the Federal sanctions regime with discretion in furtherance of
the Administration's foreign policy preferences. Furthermore, the Court
noted that the Massachusetts law conflicted with the Federal regime as
its scope differed from Federal sanctions, and ``penalized individuals
and conduct that Congress excluded.''
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\61\ https://www.oyez.org/cases/2011/11-182.
\62\ https://www.oyez.org/cases/1999/99-474.
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Professor Kristen Eichensehr has argued \63\ that CFIUS would
preempt state laws such as the LSIPA, used to undo the Texas windfarm
project. Eichensehr noted that the Texas infrastructure law could be
preempted as it imposes restrictions in the name of national security
that differ from Federal law, which, under CFIUS, allows a review of
individual transactions, not a blanket ban, and that CFIUS allows
parties to negotiate and mitigate risk whereas the LSIPA does not
provide any flexibilities.
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\63\ https://harvardnsj.org/wp-content/uploads/2022/01/HNSJ-Vol-13-
Eichensehr-CFIUSPre-
emption.pdf.
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From a policy standpoint, a patchwork of state laws purporting to
protect Federal facilities and enjoin foreign governments may undermine
the Federal executive's ability to conduct foreign policy with one
voice. Additionally, how would states (or realtors or lenders wary
about facilitating barred transactions) identify specific national
security risks or individuals who may be actual agents of foreign
adversaries? While CFIUS relies on the investigative and analytical
power of multiple Federal agencies, including the Department of Defense
and the intelligence community,\64\ states do not possess such tools.
Notably the LSIPA's list of barred countries that pose a threat to
infrastructure is not based on a Federal source, but is determined by
the governor of Texas.
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\64\ https://www.dni.gov/files/documents/ICD/ICD_11-CFIUS-09-04-22-
REDACTED.pdf.
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Federal Responses
In response to this torrent of state bills, Congressional Asian
Pacific American Caucus (CAPAC) Chair Representative Judy Chu and CAPAC
Housing Task Force Chair Representative Al Green yesterday introduced
\65\ the Preemption of Real Property Discrimination Act to preempt
discriminatory state laws, which Chu previously noted \66\ ``harken
back to nativist anti-Asian alien land laws in the 19th and 20th
centuries after Chinese immigrants first arrived here, and later, a
xenophobic suspicion of Japanese Americans during World War II that
also led to their blanket incarceration.''
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\65\ https://capac-chu.house.gov/press-release/capac-leaders-
introduce-federal-legislation-preempt-discriminatory-state-land-laws.
\66\ https://capac-chu.house.gov/press-release/capac-chair-
statement-florida-law-banning-chinese-nationals-purchasing-land.
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It is not just states, however, but her Congressional colleagues
who are attempting to legislate in this area: several bills in Congress
would also bar foreign governments and citizens from purchasing
property in the United States. On the Senate side, S. 1136, the ``Not
One More Inch or Acre Act'' \67\ introduced by Senators Tom Cotton and
Katie Britt, would bar any citizen of China, or any entity subject to
Chinese jurisdiction, from purchasing real property in the United
States, with the notable exception of refugees or those granted asylum,
who have typically been barred under various state legislation.
Representative Chip Roy has sponsored H.R. 344, the ``Securing
America's Land for Foreign Interference Act,'' \68\ which would direct
the President to take necessary actions to prevent the purchase of land
by CCP members or entities under the control or influence of the CCP.
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\67\ https://www.congress.gov/bill/118th-congress/senate-bill/1136/
text.
\68\ https://www.congress.gov/bill/118th-congress/house-bill/344/
text.
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Origin Story Two: Restrictions on Asians Owning Land Have Been Part and
Parcel of American History
Unfortunately, the United States has seen this movie before.
Authors on Just Security wrote last year \69\ about the pattern of
anti-Asian discrimination and purported facial neutrality under the
pretext of national security legislation on the 80th anniversary of
Executive Order 9066, which targeted Japanese-Americans and Japanese
nationals in the United States during World War II. While that may be
the most famous example of anti-Asian discrimination in the United
States, it is only one of many.
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\69\ https://www.justsecurity.org/80290/introduction-to-just-
securitys-series-on-executive-order-9066-80-years-after-signing/.
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Florida's newly-enacted ban on Chinese purchasers of real estate is
an ironic twist to a saga that only 5 years ago, saw it become the last
state in the union to strike discriminatory ``alien land laws'' from
its books. In 2018, Florida voters finally removed language \70\ that
had been enshrined in the constitution since 1926 which read, ``all
natural persons . . . are equal before the law and have inalienable
rights, among which are the right to enjoy and defend life and liberty,
to pursue happiness, . . . and to acquire, possess and protect property
except that the ownership, inheritance, disposition and possession of
real property by aliens ineligible for citizenship may be regulated or
prohibited by law'' (emphasis added).
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\70\ https://www.napaba.org/page/2018_repealFLlandlaw.
---------------------------------------------------------------------------
The term ``aliens ineligible for citizenship'' was, as late
property law Professor Keith Aoki wrote, ``a disingenuous euphemism to
disguise the fact that the targets of such laws were first-generation
Japanese immigrants.'' Indeed, in 1922, the Supreme Court ruled in
Ozawa v. U.S.\71\ that naturalization was ``limited to free white
persons and aliens of African nativity,'' leaving immigrants of Asian
descent unable to gain citizenship. Historically, American immigration
statutes had predominantly targeted Asians for exclusion--from the
enactment of the earliest laws such as the Page Act of 1875 (barring
Chinese women from entry) and Chinese Exclusion Act of 1882.
---------------------------------------------------------------------------
\71\ https://supreme.justia.com/cases/federal/us/260/178/.
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California enacted its first alien land law in 1913, and then in
1920 added further limitations on lease-holding. Similar laws were
passed \72\ in Washington, Oregon, Idaho, Montana, Arizona, New Mexico,
Texas, Kansas, Louisiana, Missouri, and Minnesota, Wyoming, and
Florida. The rationale for these laws, in addition to suppressing
economic competition, was, according to Aoki, the perceived threat of
Japan's growing industrial strength, its imperial military aspirations,
and the projection onto Japanese immigrants of an image of disloyalty
as a ``fifth column . . . waiting to be activated at the emperor's
command.''
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\72\ https://amhistory.si.edu/perfectunion/resources/history.html.
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California's alien land law was overturned in 1952 by its state
Supreme Court, which held in Sei Fuji v. State of California \73\ that
it violated the 14th amendment and was:
---------------------------------------------------------------------------
\73\ https://casetext.com/case/sei-fujii-v-state-of-california.
obviously designed and administered as an instrument for
effectuating racial discrimination, and the most searching
examination discloses no circumstances justifying
classification on that basis. There is nothing to indicate that
those alien residents who are racially ineligible for
citizenship possess characteristics which are dangerous to the
legitimate interests of the state, or that they, as a class,
might use the land for purposes injurious to public morals,
---------------------------------------------------------------------------
safety or welfare.
This ruling followed on the heels of the U.S. Supreme Court's 1948
decision in Oyama v. California \74\ which held that California's alien
land laws abridged the 14th amendment rights of U.S. citizens of
Japanese descent.
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\74\ https://supreme.justia.com/cases/federal/us/332/633/.
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Prognosis
Conventional wisdom holds that it is the CCP that is in the
business of taking away people's property rights. As the nation heads
into a presidential election year, fear mongering by state legislators
may continue and more anti-China messaging bills may be introduced and
passed barring Chinese and others from buying homes. With the Asian
American community having just experienced a rise in hate crimes and
bias-motivated incidents in the wake of false scapegoating over
COVID,\75\ the deluge of anti-China legislation exacerbates long held
perceptions of Asian Americans as perpetual foreigners, who hold
loyalty to their ancestral homelands rather than the United States.
---------------------------------------------------------------------------
\75\ https://www.advancingjustice-aajc.org/sites/default/files/
2021-04/Anti-Asian Hate Reporter One-Pager.pdf.
---------------------------------------------------------------------------
These laws on their face may make superficial efforts to
distinguish between persons of Chinese ancestry and the CCP, but they
also equate all Chinese denizens with foreign agents, and imply they
pose national security threats regardless of lack of party or state
affiliation. In a country where a Chinese American like Vincent Chin
\76\ was murdered by disgruntled autoworkers who believed he was
Japanese, or Sikh Americans were targeted after 9/11, technical
distinctions will not allay concerns of racial profiling. Still,
grassroots efforts \77\ to mitigate harms and narrow scoping do appear
to be working in some places. In the United States, unlike in China,
the people can--and should--actually do something about problematic
laws by apprising legislators of the economic, reputational, and
constitutional perils of these bills.
---------------------------------------------------------------------------
\76\ https://www.pbs.org/newshour/nation/40-years-after-vincent-
chins-death-activists-work-to-keep-legacy-from-fading.
\77\ https://www.statesman.com/story/news/politics/politifact/2023/
01/30/senate-bill-147-protest-texas-china-iran-north-korea-russia/
69847738007/.
---------------------------------------------------------------------------
______
Submitted Questions
Response from Josh Gackle, President, American Soybean Association
Questions Submitted by Hon. Derrick Van Orden a Representative in
Congress from Wisconsin
Question 1. China is stealing our technology and trade secrets. How
do you think we can remain a leader in the global production and supply
of food while protecting our intellectual property and national
security?
Answer. While I do not have specific recommendations, ASA supports
resolution of issues with China regarding national security and
intellectual property rights. ASA supports engagement of the U.S.
Government, seed industry and national and international organizations
to ensure consistent global application of soybean technologies'
intellectual property rights, which are essential to the growth and
development of the soybean industry.
Question 2. What strategies do you think we can adopt to become
less reliant on China and diversify our agriculture export markets?
Answer. Diversification of export markets for U.S. agriculture is
one of ASA's top priorities. For decades, U.S. soy has worked to open
and develop markets and now actively works in 112 markets around the
world.
Regarding China, the issue is diversification of scale. No other
market in the world can come close to matching the sheer demand China
has for soybeans. One in three rows of soybeans grown in the U.S. is
destined for the Chinese market. China imports more soybeans than the
rest of the world combined.
While ASA continues to urge the Administration to reengage in
traditional bilateral and multilateral free trade agreements, Congress
can assist in market diversification efforts by increasing the
investment in USDA's Market Access Program (MAP) and Foreign Market
Development (FMD) program. The long-term success of U.S. soy abroad
would not be possible without these programs, and the resources
provided through USDA are vital in assisting farmers with promoting
agricultural products on a global stage and expanding and diversifying
export opportunities. Utilizing MAP and FMD, ASA has leveraged funds
received to increase market access, address technical barriers to entry
and create on-the-ground capacity and demand for U.S. soy.
These programs have been very successful and great potential
remains. Unfortunately, investment in MAP and FMD have remained mostly
unchanged, even as the number of cooperators to these programs has
increased. FMD has been funded at the same level--$34.5 million
annually--since the 2002 Farm Bill, and MAP funding has been level at
$200 million since 2006. As we look toward the next farm bill, ASA
strongly supports efforts to double funding to $400 million for MAP and
$69 million for FMD. This is a strong strategy to help U.S. agriculture
become less reliant upon China and cultivate new export markets.
Question 3. Rural WI communities are concerned with foreign
investment in U.S. agriculture-related business. How can we ensure that
capital is reinvested in local communities and that these foreign-owned
companies adhere to fair business practices?
Answer. This question is outside the purview of the American
Soybean Association and my role as a farmer.
Question 4. Are we tracking land purchases from one foreign owner
to another?
Answer. This question is outside the purview of the American
Soybean Association and my role as a farmer.
Question 5. Is USDA tracking the amount of agriculture incentives
going to foreign land investors?
Answer. This question is outside the purview of the American
Soybean Association and my role as a farmer.
Questions Submitted by Hon. Nikki Budzinski, a Representative in
Congress from Illinois
Question 1. Unfortunately, we are all too familiar with the
statistics showing the downward trend in U.S. public agricultural R&D
funding over the past 2 decades. This disturbing trend occurs at the
same time other nations, including China, have rapidly increased their
investments in public ag R&D. We know that China spends more than $10
billion annually on agricultural R&D, more than twice what the U.S. is
investing. China has also filed twice as many agricultural
biotechnology patents as the U.S. When we consider new innovations in
ag engineering, biotech, and AI, from both an economic and national
security perspective, these next generation innovations must originate
in the U.S. Can any of the panelists speak to the concerns and
potential vulnerabilities the Unites States is facing given our
underinvestment in public ag R&D and how legislation like the farm bill
can address the growing gap in ag R&D funding?
Answer. Federally funded agricultural research is critical to the
success of U.S. agriculture. In addition to the farm bill providing an
opportunity to address research policy needs, the appropriations
process provides an annual avenue to address resource needs, including
funding for programs like the Agriculture Advanced Research and
Development Authority (AgARDA), Agriculture and Food Research
Initiative (AFRI), the National Institute for Food and Agriculture
(NIFA), and Agricultural Research Service (ARS). AFRI and AgARDA both
have faced cuts to their budgets in recent years. The ARS budget has
increased, but only by 1% which is not enough to compete with China's
investment. AFRI provides research that keeps growers competitive by
finding solutions to adapt to climate change, improve nutrition in
food, and create new technological innovations. AgARDA also funds
projects that develop new technology, similar to the work of DARPA for
the defense industry. ARS develops and maintains long-term databases
that provide information for ag research as well as conducting its own
work to support food production. Each of these as well as other
programs provide U.S. growers with vital research that increases their
productivity on the farm.
Question 2. The inflation-adjusted value of China's agricultural
production has soared in the last few decades, increasing more than 530
percent since 2000 according to data reported by the UN's Food and
Agriculture Organization. Over the same period, China's agricultural
land area actually decreased slightly, down by less than 0.5 percent.
What factors would you attribute these gains to? How does China's
increase in agricultural production potentially impact U.S. agriculture
and food security?
Answer. Technological advancements, research, and government
policies can impact productivity. Farmers in the U.S. have been able to
produce more with less for the last several decades. Input use has gone
down, including land use and labor, while total production has soared
according to USDA's Economic Research Service. Some of the same factors
making U.S. farmers more productive may also be present in China.
It is not expected that China will be able to produce enough food
and agricultural products to meet its own needs, however. Instead, it
will continue to rely on trade partners, such as the U.S. and Brazil,
to supply needs.
Questions Submitted by Hon. Eric Sorensen, a Representative in Congress
from Illinois
Question 1. How has the increase in the importation of used cooking
oil from China negatively impacted domestic soybean oil prices?
Answer. Biomass-based diesel capacity grew from 3.3 billion gallons
beginning in 2021 to 5.9 billion gallons at the end of 2023 and is
slated to continue to grow. At the same time, used cooking oil imports
increased from 300 million pounds in 2021 to over 3 billion pounds in
2023. While biofuel growth is helping to spur expansion in the domestic
soybean crush industry to produce soybean oil, the pronounced growth of
imported used cooking oil as an available feedstock is concerning.
In its Renewable Volume Obligation rule, EPA sets blending levels
on assumed feedstock availability, not biofuel capacity. Therefore,
when imports exceed EPA expectations, domestic feedstocks are pushed
out by a corresponding amount over time. To put this in perspective,
used cooking oil and tallow imports in 2023 were large enough to
produce over 600 million gallons of renewable diesel, whereas the EPA
assumed that 649 million gallons of renewable diesel would either be
imported or made from imported feedstocks. Add to this the 240 million
gallons of canola oil imports and 360 million gallons of renewable
diesel imports in the same year, and EPA's estimates were exceeded by
about 550 million equivalent gallons of renewable diesel. Thus, it can
be assumed that almost 550 million renewable diesel gallons worth of
domestic feedstocks were displaced by imports.
Question 2. Would limitations on foreign feedstocks from generating
Renewable Identification Numbers or receiving credits in the Biodiesel
Blenders Credit or the upcoming Clean Fuel Production Credit provide
support to the industry?
Answer. Unlike the Biodiesel Blenders Credit, the Clean Fuel
Production Credit will prohibit imported biofuels from being eligible,
which ASA supports. However, this does not address concerns with
foreign feedstocks for biofuel production domestically. ASA supports a
diverse feedstock portfolio for biomass-based diesel but believes that
since the mission of the RFS is to promote U.S. energy independence and
reduce dependence on imports, priority should be placed on domestic
feedstocks. Limitations on foreign feedstock imports could also raise
other questions, including potential World Trade Organization
challenges. However, ASA supports stricter and more robust mechanisms
for enforcement of chain of custody requirements which could
theoretically crack down on potential mislabeled used cooking oil if it
is indeed being imported.
Question 3. What can be changed in the Renewable Fuel Standard to
specifically support domestic feedstocks that are being used to produce
advanced biofuels?
Answer. First and foremost, supporting increased volumes in the
annual Renewable Volume Obligation that are consistent with production
and consumption indicators is critical for the entire biofuel industry.
Looking specifically at used cooking oil, policies like the Low Carbon
Fuel Standard programs and new Federal tax credits are incentivizing
used cooking oil due to its lower carbon intensity score. At the same
time, there is no standard definition of used cooking oil. EPA does
require that biofuel producers maintain chain of custody data for every
gallon of used cooking oil, both domestic and imported. However, EPA
does not audit the chain of custody (which must be kept by the fuel
producer) until an enforcement action has been initiated, which is
after the RIN has been generated. Stricter and more robust mechanisms
for enforcement could theoretically crack down on potential mislabeled
used cooking oil if it is indeed being imported.
Question Submitted by Hon. Salud O. Carbajal, a Representative in
Congress from California
Question. In your testimony, you mention how the 2018 trade war
drastically impacted the Soybean industry along with other agricultural
commodities. Those commodities that were impacted include many of the
specialty crops grown in my district on the Central Coast of California
such as wine grapes, tree nuts, and berries. I have heard consistently
from growers in my district about the impacts of the retaliatory
tariffs including financial losses and restrictions on opportunities
for growth in foreign markets.
Can you elaborate on how a renewed trade war could impact the U.S.
agriculture industry domestically and what Congress can do to help
support our growers and protect them from future trade wars?
Answer. As highlighted in my written testimony, the impact of the
2018 trade war was severe for both farmers and exporters. USDA's
Economic Research Service (ERS) estimated the impact of retaliatory
tariffs on U.S. agriculture, including Section 301 tariffs and Section
232 tariffs on steel and aluminum: The ERS estimate showed a 76%
reduction in the value of U.S. exports to China from 2017 to 2018. ERS
also estimated the trade war cost U.S. agriculture over $27 billion.
Soybeans accounted for 71% of the annualized losses. Furthermore, the
trade war led to the rise of Brazil as U.S. soy's largest competitor--
not just in China, but in export markets around the world.
If the past is prologue, another trade war could lead to a loss of
markets and a decrease in prices--much like we saw in 2018. At the same
time, input costs for farmers, including seed, fertilizer, and
pesticides, remain high. Coupling an already-troubling farm income
forecast with impacts from a trade war could indeed be severe for
farmers.
In my written testimony, I shared three policy recommendations for
Congress. Those recommendations include:
1. Reject legislative attempts to repeal or modify China's Permanent
Normal Trade Relations (PNTR) status.
2. Pass a comprehensive farm bill this year that meets the needs of
U.S. agriculture.
2. Exercise Congressional oversight authority to urge the
Administration to reengage in negotiations for bilateral
and multilateral free trade agreements (FTA).
Response from Nova J. Daly, Senior Public Policy Advisor, Wiley Rein
LLP; former Deputy Assistant Secretary for Investment Security,
U.S. Department of the Treasury
Questions Submitted by Hon. Derrick Van Orden a Representative in
Congress from Wisconsin
Question 1. China is stealing our technology and trade secrets. How
do you think we can remain a leader in the global production and supply
of food while protecting our intellectual property and national
security?
Answer. Thank you Representative Van Orden for this important
question. I concur, and as I relayed in my written testimony, there is
clear evidence that Chinese entities have stolen U.S. agricultural
technology and trade secrets (e.g., seed technology). To remain a
leader in the global production and supply of food and protect our
intellectual property as well as national security, it may be prudent
to consider undertaking certain actions, such as:
Address Supply Chain Risks
The United States House of Representatives Committee on Agriculture
(Committee) has done good work and should continue to heighten its
focus on supply chain resilience by addressing critical vulnerabilities
in the U.S. agricultural supply chain. Reshoring certain sectors of the
U.S. agricultural supply chain has already been identified by the
Committee as an important priority. Notably, under the American Rescue
Plan Act of 2021, the Secretary of Agriculture was tasked with creating
grant programs that would invest in American agricultural supply chain
resiliency. The goals and funding for such programs are worth
examining. Chinese market control over IoT devices, certain pesticides
and herbicides, and certain animal feed and vitamins poses a
potentially serious risk to the U.S. agricultural market and its supply
chains.
Incentivize R&D
Central to innovation and leadership is strength in research and
development (R&D). The United States appears to be falling behind in
agriculture R&D. According to the U.S. Department of Agriculture's
(USDA) Economic Research Service, public R&D spending in the United
States dropped 30% from 2002 to 2019. Increasing public-private R&D
funding in areas such as crop and seed technologies, among others, can
help ensure that U.S. farmers and their technologies are cutting-edge
and in a stronger position to compete with producers internationally.
Incentivizing R&D can help address potential choke-point
vulnerabilities in our supply chains, including for items noted above.
Address Unwarranted Acquisitions
As noted in my testimony, the People's Republic of China (PRC) has
dedicated substantial resources toward the acquisition of large-scale
agricultural assets. This PRC effort extends beyond farmland to include
resources throughout the agricultural supply chain, including mills,
logistics companies, and numerous agricultural companies with
significant intellectual property assets. To address these matters
domestically, it is critical for the USDA to ensure that the reporting
of foreign agricultural land acquisitions is thorough and timely. The
USDA, with the Members of the Committee on Foreign Investment in the
United States (CFIUS), should assist with all cases that impact U.S.
agriculture, including acquisitions of companies that produce, store,
and/or process technology, data, or information used in agricultural
supply chains. Lastly, CFIUS should be provided with a broader scope of
authority to address certain land holdings in urban areas and
discretion to address acquisitions near sensitive military and other
facilities, including critical infrastructure.
Question 2. What strategies do you think we can adopt to become
less reliant on China and diversify our agriculture export markets?
Answer. Thank you Representative Van Orden for this question. It is
critical that U.S. agricultural producers remain strong and expand
production and export market opportunities, including becoming less
reliant on markets in China or any one country. Toward that end, I note
certain recommendations made in November 2023 by a group of U.S.
agricultural associations to the members of the President's Export
Counsel.
Some of the groups' recommendations include:
Increasing collaboration on diversifying the U.S.
agricultural supply chain by diversifying sourcing and/or
incentivizing cost-effective U.S. production of ingredients
such as fertilizers, vitamins, and chemicals to maintain U.S.
agricultural production;
Establishing a robust agricultural trade agenda, including
by expanding domestic trade promotion programs, recommitting to
comprehensive trade agreements where possible, and eliminating
tariff and non-tariff trade barriers; and
Enforcing existing trade agreements.
See National Association of State Departments of Agriculture,
Coalition Letter on President's Export Council's Agricultural Trade
Proposal, https://www.nasda.org/coalition-letter-on-presidents-export-
councils-agricultural-trade-proposal/ (see attachment 1).
Toward this end, fellow panelist Josh Gackle noted programs
administered by the USDA, such as the Market Access Program and the
Foreign Market Development program, which assist farmers with promoting
agricultural products on a global stage and expanding and diversifying
export opportunities.
Question 3. Rural WI communities are concerned with foreign
investment in U.S. agriculture-related business. How can we ensure that
capital is reinvested in local communities and that these foreign-owned
companies adhere to fair business practices?
Answer. Thank you Representative Van Orden for this important
question. The concerns of rural Wisconsin communities regarding certain
foreign investments in U.S. agricultural-related businesses are well-
founded and must be addressed. Ensuring that foreign entities engage in
fair business practices is crucial. Noting that most foreign U.S.
agriculture-related holdings are made by investors from allied nations,
one would expect that such investors would realize that capital
reinvestments into the local communities--where they have production--
would strengthen the value of their own investments and build broader
community support for their businesses.
That said, agricultural investments by entities from non-allied
countries, should be subject to a higher degree of scrutiny. As you and
other Members of the Committee have noted, ``agriculture and food
security are key to national security.'' Wisconsin law currently has
restrictions on foreign land ownership. The law limits land owned by
non-allied nation actors where the United States does not have a
treaty. Additional measures can be taken on the Federal level to
address the concerns of Wisconsin communities.
For the purposes of greater disclosure of foreign land holdings and
other purposes, one notable bill is the ``AFIDA Improvements Act of
2024'' (H.R. 7131). Other bills, such as the ``No American Land for the
Chinese Communist Party Act'' (H.R. 8693), could also be useful in
thwarting unwarranted land acquisitions that raise national and food
security concerns. Lastly, oversight of the Grain Inspection, Packers &
Stockyards Administration in their role in regulating and enforcing
competitive conditions in the grain and livestock industry could be
another important action.
I note that often, foreign companies considering making U.S.
investments may reach out to Federal, state, and local officials
seeking incentives in exchange for bringing business into the
community. Considerations can be made on whether the investor plans to
employ members of local communities, participate in community
initiatives, and address any transportation or healthcare
infrastructures utilized by its employees as well as reducing reliance
on non-allied foreign supply chains.
Question 4. Are we tracking land purchases from one foreign owner
to another?
Answer. Thank you Representative Van Orden for this question. As
you may know, the Agricultural Foreign Investment Disclosure Act
(AFIDA) regulations require that foreign persons and entities who
acquire, transfer, or hold any interest other than a security interest
in agricultural land to submit a completed FSA-153 to the USDA no later
than 90 calendar days after the date of the acquisition or transfer.
This requirement must be met when one foreign owner transfers such
ownership to another.
As noted in its January 2024 U.S. Government Accountability Office
(GAO) report (Foreign Investments in U.S. Agricultural Land: Enhancing
Efforts to Collect, Track, and Share Key Information Could Better
Identify National Security Risks),\1\ the GAO recommends that USDA
enhance its efforts to collect, track, and share key information on
foreign investments in U.S. agricultural land to better identify
national security risks. In addition to the recommendations made by the
GAO, Congress may wish to consider addressing potential gaps in such
reporting requirements, such as requiring reporting of complex
ownership structures and investment intentions, among other changes.
Further, recently introduced legislation would improve foreign
investment tracking, including modernizing the AFIDA handbook,
requiring USDA to meet specific implementation benchmarks for an online
AFIDA submission system and public database, and require reporting by
foreign persons with a minority stake in an agricultural land asset,
including through ownership tiers or shell companies.
---------------------------------------------------------------------------
\1\ Editor's note: the referenced report was also submitted by Mr.
Thompson, and is located on p. 101.
Question 5. Is USDA tracking the amount of agriculture incentives
going to foreign land investors?
Answer. Thank you Representative Van Orden for this question. While
AFIDA does require the disclosure of foreign investments in U.S.
agriculture, I am not aware of any program under the USDA that is
tracking the amount of agriculture incentives going to foreign land
investors. However, foreign land investors may be eligible for several
U.S. agricultural incentive programs such as direct payments, crop
insurance benefits, disaster assistance, and various conservation
programs.
Question Submitted by Hon. Yadira Caraveo, a Representative in Congress
from Colorado
Question. From conversations with Colorado farmers, I hear that the
lack of public USDA data on farms, to avoid disclosing sensitive
information, means we may know very little about certain operations in
the state, particularly for industries like our hog farms. But we do
know that the Chinese-owned Smithfield is the largest pork producer in
the U.S.
Additionally, users of the USDA's Agricultural Foreign Investment
Disclosure Act (AFIDA) data have noted inaccuracies and underreporting
under current disclosure requirements. We have seen recommendations
from the GAO on how to improve deficiencies in foreign ownership data
and Congressional efforts to solve these issues.
Colorado farmers have told me they also support proposals for
expanded reporting that includes more granular data on long-term
leases, data to assess the impacts of foreign investment on agriculture
producers and rural communities, and even geospatial information.
There are real national security concerns on foreign investments
from the CCP in U.S. agricultural land, and it is vital we have
accurate data and transparency on this issue.
Mr. Daly, what do you believe Congress and the USDA should focus on
to increase data accuracy and transparency to better understand and
respond to our concerns on foreign investments in U.S. agriculture?
Answer. Thank you Representative Caraveo for this important
question. Clearly, as the U.S. Government Accountability Office (GAO)
found in its January 2024 report: Foreign Investments in U.S.
Agricultural Land: Enhancing Efforts to Collect, Track, and Share Key
Information Could Better Identify National Security Risks, there are
improvements that the U.S. Department of Agriculture (USDA) can
undertake in order to collect, track, and share data on foreign
investments in U.S. agricultural land. The GAO report provided several
useful recommendations including development of a real-time data
systems. Further, now that the USDA has been legislatively included in
the processes of the Committee on Foreign Investments in the United
States (CFIUS), the USDA should consider taking on a more proactive
position where it concerns the collection of such data and analysis of
foreign investments that may raise national security concerns. Issues
raised by your farmers, including gaining more granular data on long-
term leases, data to assess the impacts of foreign investment on
agriculture producers and rural communities, and even geospatial
information should all be implemented.
I also take note of the oversight role of Congress. Along with your
efforts, there are multiple bills under consideration that would
heighten and focus additional resources on the analysis and approval of
agricultural and broader real estate transactions by certain foreign
entities that can raise national security considerations. Some bills
would require mandatory notifications of certain real estate
transactions, and some would outright block certain deals. I would also
note that the Farm Transitions Act includes a provision that would
require the Commission on Farm Transitions to study the impact of
leasing and ownership trends by foreign persons or entities.
Additionally, as noted in my testimony, Congress should address
potential gaps in reporting requirements, including reporting complex
ownership structures and investment intentions, among other changes.
Question Submitted by Hon. Nikki Budzinski, a Representative in
Congress from Illinois
Question. According to estimates from USDA's Economic Research
Service, China's annual public investment on agricultural research
surpassed U.S. investment in this area as of 2008, and China has
continued to move past us in the years that have followed. Based on
your experience, how important has this surge in China's research
investment been in stimulating recent growth in their agricultural
sector? What are the implications for U.S. national security and
economic competitiveness from China's surge in investment in
agricultural research and innovation?
Answer. Thank you Representative Budzinski for this important
question. As you noted, China's public investments in agricultural-
related research and development have exceeded, those of the United
States for many years. China and President Xi Jinping have, for many
years, been focused on China's food security and self-sufficiency.
While I am not an expert on the correlation between China's increases
in agricultural research and their agricultural sector growth, based on
reporting, it appears that such research funding increases have led to
notable growth. See Iowa State University, World Spending on
Agricultural Research and Development, https://
agpolicyreview.card.iastate.edu/winter-2023/world-spending-
agricultural-research-and-development (see attachment 2).
Regarding your second question, there certainly are implications to
U.S. national security and economic competitiveness resulting from
China's surge in domestic and international investment in agricultural
research and innovation. Limited domestic farmland availability,
combined with China's diligent pursuit of food security, correlate to
its expansion of overseas farmland investments and advancements in
agricultural technologies. See Foreign Policy, China's Farmland is in
Serious Trouble: Local governments are desperate to balance the books
with land sales, https://foreignpolicy.com/2023/02/27/china-xi-
agriculture-tax/ (see attachment 3). To address the food security
challenges China has faced, it has (along with increased spending on
research) acquired important agricultural businesses with operations in
the United States, such as Syngenta and Smithfield. China's investments
extend beyond farmland to include resources throughout the agricultural
supply chain, including mills, logistics companies, and numerous other
agricultural entities with significant intellectual property assets.
Also, as noted in my testimony, we have seen agricultural IP theft in
items such as seeds. Such theft creates vulnerabilities for the United
States as they impact the ability of U.S. companies to fund continued
improvements in agricultural R&D.
Broadly speaking, as China builds and diversifies its agricultural
production and capabilities and technologies, domestically and
globally, it can create economic vulnerabilities for U.S. producers and
innovators. Also, where China's growth creates supply chain
vulnerabilities in U.S. agricultural production and innovative
technologies, such vulnerabilities can be exploited and used for
coercive purposes where and when needed. It is important that the
United States assist U.S. companies and their innovations and consider
where additional public agricultural research funding is needed.
Question Submitted by Hon. Salud O. Carbajal, a Representative in
Congress from California
Question. Apart from sitting on the House Agriculture Committee, I
also sit on the House Armed Services Committee. In that role, I have
collaborated with a group of my colleagues on legislation calling for
the Protection of U.S. farmland and preventing foreign adversaries from
exploiting U.S. land near national security sites.
It is no secret that land purchased by China near military bases is
a national security concern. China isn't going anywhere so we need to
develop solutions for the long-term.
In your opinion, what are the potential implications of China's
continued growth and pursuit of self-sufficiency for the global
economic landscape if it were to remain unchecked?
Answer. Thank you Representative Carbajal for this important
question and the legislative action you have taken to address
unwarranted Chinese agricultural acquisitions in the United States. As
you are aware, China and President Xi Jinping have been focused on
China's food security and self-sufficiency. Based on reports, it
appears that China's ability to gain full self-sufficiency is a long
way off. To compensate for this issue, China has invested in
agricultural assets outside of the country, including in land in Africa
and agricultural companies with operations globally and in the United
States, such as Syngenta and Smithfield. Further, China has increased
its research and development of agricultural technologies in terms of
seed production as well as machinery. These efforts, combined with
outright theft of IP technology, raise significant U.S. national
security considerations. China's actions will be increasingly
disruptive to the global economic landscape and to U.S. long-term
growth and productivity if left unchecked and/or unaddressed. See U.S.-
China Economic and Security Review Commission, China's Interests in
U.S. Agriculture: Augmenting Food Security through Investment Abroad,
https://www.uscc.gov/sites/default/files/2022-05/
Chinas_Interests_in_U.S._Agriculture.pdf (see attachment 4).
The broader hope has always been for China to become a responsible
global player, but that has not been the case in multiple instances,
including those involving agriculture-related technology. If China
continues to act in ways contrary to U.S. national and economic
security, its actions will likely only increase tensions between our
two nations.
attachment 1
November 27, 2023
President's Export Council,
International Trade Administration,
U.S. Department of Commerce,
Washington, D.C.
Dear Members of The President's Export Council,
We are writing on behalf of the U.S. food and agriculture community
to ask you to support this important President Export Council (PEC)
proposal to bolster American agriculture's global competitive standing
around the world.
Together, the proposal's recommendations provide guidance for the
Administration to expand export markets opportunities for U.S. food and
agriculture, eliminate unwarranted non-tariff barriers, and reinforce
global food security.
U.S. agriculture is foundational to the American economy_reaching
far beyond farms and rural communities to support more than 46 million
jobs across the country.
The U.S. food and agriculture industries contributed $2.61 trillion
in total wages this past year and generated over $8.6 trillion in total
economic output. Key to its economic contributions and its
sustainability, the food and agriculture sector exports about 20
percent of production. In 2022, American food and agriculture exports
totaled nearly $200 billion, providing jobs and economic opportunity
throughout the supply chain in every corner and coast of the country.
Unfortunately, in 2023 we are experiencing a nine percent decline
in the value of U.S. food and agricultural exports, and a 16 percent
decline in volume. The latest forecast by the U.S. Department of
Agriculture for the 2023 marketing year predicts a food and agriculture
trade deficit of $17 billion, a stark contrast to the United States'
historical trade surplus in agricultural exports, averaging $12.5
billion over the past 10 years.
While our two million U.S. farms and ranches are the backbone of
America's food and ag sector, the impact of decreased exports and
resulting economic fallout reverberates throughout the economy. More
than twice as many Americans are manufacturing agricultural products as
are manufacturing cars and trucks, and millions of food scientists,
production workers, logistics experts, truck drivers, and engineers
work in more than 200,000 food manufacturing, processing, and storage
facilities. All in all, our industries are responsible for nearly 20
percent of the United States' economic activity.
In addition to its commercial exports, the United States plays an
indispensable role in feeding millions around the world as the largest
country donor of international food assistance.
With that in mind, we are asking the Council to support this
proposal to bolster America's food and ag industries, and with it, the
U.S. economy at large.
Specifically, this proposal asks PEC to:
1. Increase Collaboration on Diversifying the U.S. Agricultural
Supply Chain by urging the Administration to develop
recommendations to diversify sourcing and/or incentivize
cost effective U.S. production of ingredients such as
fertilizers, vitamins, and chemicals to maintain U.S.
agricultural production.
2. Establish a Robust Agricultural Trade Agenda, comprising of a
package of strategies including expanding domestic trade
promotion programs, recommitting to comprehensive trade
agreements where possible, and eliminating tariff and non-
tariff trade barriers to enhance the ability of American
producers to gain export market access and maintain
competitiveness.
3. Enforce Existing Trade Agreements, including through
strengthening the World Trade Organization dispute
resolution process and enforcing all U.S. free trade
agreements.
4. Lead on International Sustainability and Climate Efforts by
urging the U.S. Government to coalesce around a unified
message on agricultural sustainability that focuses on
voluntary, incentive-based programs to support sustainable
productivity growth; keeps food accessible; supports
climate-smart agricultural practices and provides
additional market opportunities.
American agriculture is a global leader in sustainable production
and innovative practices that enable us to feed a growing world
population. Therefore, the trade barriers and setbacks that we've
experienced this year do not only threaten our economic growth, but
nutritional security around the world. Fortunately, the PEC and U.S.
Government has the infrastructure and resources to tackle these
challenges, and it begins with the proposal that we've laid out above.
Thank you in advance for your consideration of this proposal and
for your leadership on the President's Economic Council. We look
forward to working together to restore U.S. agriculture exports, and
build a stronger, more resilient U.S. agriculture industry and a better
economy for all.
Sincerely,
American Farm Bureau Federation National Cotton Council
American Feed Industry Association National Council of Farmer
Cooperatives
American Seed Trade Association National Grain & Feed Association
American Soybean Association National Milk Producers Federation
Biotechnology Innovation National Oilseed Processors
Organization Association
Corn Refiners Association National Pork Producers Council
Distilled Spirits Council National Sorghum Producers
Farm Credit Council National Turkey Federation
Farmers for Free Trade North American Export Grain
Association
FMI--The Food Industry Association North American Millers' Association
Fresh Produce Association of the Northwest Horticultural Council
Americas
Global Cold Chain Alliance U.S. Apple Association
Leather and Hide Council of America U.S. Dairy Export Council
Meat Import Council of America US Dry Bean Council
Meat Institute U.S. Pea & Lentil Trade Association
National Association of State USA Dry Pea & Lentil Council
Departments of Agriculture
National Association of Wheat USA Rice
Growers
National Corn Growers Association
attachment 2
[https://agpolicyreview.card.iastate.edu/winter-2023/world-spending-
agricultural-research-and-development]
World Spending on Agricultural Research and Development
By Alejandro Plastina [1] and Terry Townsend [2]
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\[1]\ mailto:[email protected].
\[2]\ mailto:[email protected].
In May 2020, the U.S. Department of Agriculture reported that
China, followed by the European Union (EU), the United States, India,
and Brazil spent the most public funds on agricultural research and
development (R&D) (Fuglie and Nelson 2022). U.S. public expenditures on
agricultural R&D were about \1/3\ lower in real terms in 2019 than at
their peak in 2002 when spending, in 2019 dollars, was $7.64 billion
(Fuglie and Nelson 2022). In contrast to the decline in U.S. public
expenditures since 2002, China's public expenditures on agricultural
R&D (deflated by national GDP indexes) rose by a factor of
approximately five in the 2 decades since 2000. EU expenditures rose by
about \1/3\, India's approximately doubled, and Brazil's rose by about
half. The USDA report carries an alarmist tone, suggesting that the
reduction in U.S. public spending on agricultural R&D will lead to a
reduction in competitiveness in agricultural production and lower
social welfare in the long term.
Public R&D vs. value of ag production
Organization for Economic Cooperation and Development (OECD) data
demonstrate the relative size of public-sector expenditures on
agricultural research and development (OECD 2022). Between 2000-2002,
annual average spending on agricultural knowledge and innovation
systems rose about $1 billion (in nominal dollars) per country in the
United States,\1\ India, and Brazil. In contrast, China's public-sector
expenditures on agricultural R&D leapt by a factor of approximately
five, growing from around $1.3 billion per year to $6.6 billion. In
2019-2021, China's annual average public-sector expenditures on
agricultural R&D were larger than in the United States, India, and
Brazil combined (figure 1).
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\1\ U.S. public-sector spending on agricultural research and
development has been declining since the early 2000's. However, U.S.
private-sector spending on agricultural R&D has been climbing, and
total U.S. agricultural R&D spending (public plus private) is probably
still larger than in other countries.
China's public-sector spending on agricultural R&D during 2019-2021
was roughly double the level of U.S. public-sector spending and four to
six times that of India or Brazil. As measured by TFP indexes, U.S.
agricultural productivity declined between 2009 and 2019; however,
India, Brazil, and China's TFPs rose. Accordingly, the United States'
advantage in agricultural productivity is less now than a decade ago.
---------------------------------------------------------------------------
Figure 1. Spending on agricultural knowledge and innovation systems
($U.S./billion), 2000-2002 and 2019-2021.
Source: OECD (2022).
China now has the largest agricultural system in the world by value
of production. As of 2019-2021, China's value of production at the farm
gate was about $1.6 trillion, compared with $400 billion in the United
States and India and about $200 billion in Brazil (figure 2). The
structure of China's farm economy is different from the structures in
the other countries because China does not have an abundance of arable
land. Except for the far-West region Xinjiang, farmers in China operate
relatively small farms producing high-value products such as meat and
vegetables. In contrast, the United States and Brazil have larger
arable areas and much smaller populations and can afford to produce
huge swaths of row crops. India has a population as large as China but
has more arable land and can afford to produce lower value products.
Figure 2. Value of agricultural production at the farm gate ($U.S./
billion).
Source: OECD (2022).
As a share of the value of agricultural production at the farm
gate, Brazil's public-sector expenditures on agricultural R&D were the
largest in 2019-2021 at 0.9%, compared with 0.7% in the United States,
0.4% in China, and 0.3% in India (figure 3). Public sector expenditures
on agricultural R&D declined as a percentage of the value of
agricultural production in all countries between 2000-2002 and 2019-
2021, mainly because the value of production rose.
Figure 3. Spending on agricultural knowledge and innovation systems as
a percent of value production.
Source: OECD (2022).
The role of private R&D
Private-sector spending may offset the United States' lower public
spending on agricultural R&D (Fuglie and Nelson 2022). Between 1970 and
2008, the public-sector funded about half of the agricultural R&D
directly used by U.S. agriculture. However, by 2013, the publicly
funded share fell to 40-45% because real ([inflation]-adjusted) public
agricultural R&D fell by about 20%, while real private R&D spending
increased around 50%. Furthermore, if we exclude private-sector
expenditures on R&D for food manufacturing (figure 4), the average
share of private agriculture input industries R&D increased from 38%
between 1970 and 2010 to 55% between 2011 and 2014.
Figure 4. Real agricultural R&D funding, 1970-2019 ($U.S./billion, 2019
inflation-adjusted).
Source: Fuglie and Nelson (2022).
When we consider private-sector spending, the United States is
probably still the world leader in funding for agricultural R&D.
Beginning in the 1800's, the Federal Government funded most
agricultural research in the United States because private-sector firms
did not have the means and because agricultural research generates
significant externalities with significant public benefit. Over time,
specialized [farms] in the farm machinery, agricultural chemical, crop
seed, and other agricultural input industries grew large enough to make
considerable investments in R&D. Between 1970 and 2013, private-sector
expenditures on agricultural R&D in the United States rose by a factor
of three to about $6 billion, while public spending on agricultural R&D
in the United States grew very little.
As a result, by 2013, private-sector expenditures on agricultural
R&D (not counting food manufacturing R&D spending) accounted for nearly
60% of total agricultural R&D expenditures. Data on private-sector
expenditures on agricultural R&D in the United States are not available
for recent years, but the upward trend apparent between 2008 and 2013
has probably continued. By 2020, it is likely that U.S. private-sector
agricultural R&D spending was between two and three times that of the
public-sector, meaning that total agricultural R&D spending in the
United States was between $15 billion and $20 billion.
In contrast, private-sector expenditures on agricultural research
and development in China are, almost by definition, zero, and private-
sector expenditures on agricultural R&D in the EU, India, and Brazil
are, at best, modest. Accordingly, total U.S. expenditures on R&D
related to agriculture are still the largest in the world, albeit by a
shrinking margin as public expenditures in China, the EU, India, and
Brazil rise.
There is a distinction between public and private agricultural R&D
expenditures, but such expenditures tend to be complementary, rather
than substitutes. Therefore, the fall in U.S. public-sector
agricultural R&D spending and rise in private spending does not
necessarily presage a decline in the growth rate of agricultural
productivity.
Since WWII, improvements in genetics, chemicals, fertilizers,
agricultural machinery, and farm management techniques have transformed
U.S. agriculture. As agricultural productivity has increased, public-
sector research has tended to focus on environmental impacts, animal
welfare, farm worker welfare, farm structure (i.e., farm size,
organization, and management), and other issues of broad public
interest. Meanwhile, privately funded R&D has tended to focus on the
development of marketable inputs and services eligible for patent
protection.
Recent research suggests that over the last 7 decades it has taken
about 20 years for usable technologies to reflect advances in basic
agricultural science (Clancy 2020). Given that agricultural R&D
expenditures by the U.S. private-sector began exceeding public
expenditures only about a decade ago, it may be another decade before
the implications of reduced public-sector spending become apparent.
Total Factor Productivity
Nevertheless, USDA data on total factor productivity (TFP) \2\
suggest that the decline in U.S. public-sector spending on agricultural
R&D may be affecting productivity growth. An index of agricultural TFP
(2015 = 100) peaked in the United States at 106 in 2009 (figure 5). As
of 2019, the U.S. TFP index was 100, meaning that input use efficiency
per unit of output (or output production efficiency per unit of input)
in the United States actually declined by about 6% during the decade
ending in 2019.
---------------------------------------------------------------------------
\2\ Total factor productivity--usually measured as the ratio of
aggregate output to aggregate inputs--is a measure of productive
efficiency.
---------------------------------------------------------------------------
Figure 5. Total factor productivity indexes, 1961-2019.
Notes: This graph does not track relative TFP across
countries, only TFP for each separate country. For each
country, 2015=100.
Source: Fuglie (2015) and Fuglie, Jelliffe, and Morgan
(2022).
In contrast, China, India, and Brazil's TFP indexes increased
between 2009 and 2019, meaning that the agricultural industries of
those countries became more input use efficient (or output production
efficient).
These indexes of TFP cannot be compared from one country to
another. Therefore, we cannot say that as of 2019, India was the most
efficient agricultural producer among the countries shown. However, we
can say that productivity grew faster in India than in China, the
United States, and Brazil during the past decade, rising from an index
value of 81 in 2009 to 115 in 2019. Brazil's TFP index (2015 = 100)
grew from 85 in 2009 to 107 in 2019, and China's rose from 89 to 105
over those same years.
Curiously, productivity growth among the countries shown was the
greatest in India between 2009 and 2019. Spending on agricultural
knowledge and innovation systems during 2000-2002 and 2019-2021 was
lower in India than in China, the United States, and Brazil, both in
absolute dollars and as a percentage of the value of agricultural
production. India's TFP index probably rose faster than those of
Brazil, China, and the United States during the last decade because
India was starting from a smaller base. Nevertheless, India's TFP
growth between 2009 and 2019 is still a significant achievement.
The decline in the U.S. TFP index between 2009 and 2019 might be a
result of reduced public-sector expenditures on agricultural R&D after
2002, as is implied in Fuglie and Nelson (2022). With public-sector
spending on agricultural R&D declining, enhancements to productivity in
the agricultural sector of the U.S. economy are increasingly coming
from private-sector investments, which may not be sufficient to
maintain growth in U.S. agricultural input use efficiency.
However, the reduction in productivity could also reflect that a
rising proportion of U.S. public-sector spending on agricultural R&D is
oriented toward welfare and environmental issues, rather than
traditional productivity-enhancing topics like soil science and
breeding. Therefore, the decline in U.S. agricultural input use
efficiency after 2009 could reflect not just a decline in public-sector
R&D spending but also a shift in spending to topics that, while
important, have little impact on traditional measures of productivity.
The reduction in the U.S. TFP index could also derive from factors
unrelated to agricultural R&D spending. Reduced productivity could
reflect reduced investments in agricultural infrastructure in response
to better opportunities for the use of capital in other segments of the
U.S. economy such as cell phones, electric cars, or space tourism.
Regardless of what caused the decline in U.S. TFP after 2009, it is
self-evident that more investment on agricultural R&D would result in
more input use efficiency, other things equal. Therefore, while the
reduction in U.S. public-sector spending on agricultural R&D since 2002
may not in-and-of itself be a cause of a decline in agricultural
productivity, it nevertheless is a subject that warrants more study.
Conclusions
U.S. public-sector spending on agricultural research and
development has been declining since the early 2000's. However, U.S.
private-sector spending on agricultural R&D has been climbing, and
total U.S. agricultural R&D spending (public plus private) is probably
still larger than in other countries.
China's public-sector spending on agricultural R&D during 2019-2021
was roughly double the level of U.S. public-sector spending and four to
six times that of India or Brazil. As measured by TFP indexes, U.S.
agricultural productivity declined between 2009 and 2019; however,
India, Brazil, and China's TFPs rose. Accordingly, the United States'
advantage in agricultural productivity is less now than a decade ago.
It is not clear what caused the decline in U.S. TFP between 2009
and 2019. Most likely, a multitude of factors including a reduction in
public expenditures on agricultural R&D and a shift in public-sector
spending away from topics having a bearing on input use efficiency
toward welfare and environmental issues caused the decline.
References
Clancy, M. 2020. ``How Long Does It Take to go from Science to
Technology?'' New Things Under the Sun, November 24, 2020. Available
at: https://mattsclancy.substack.com/p/how-long-does-it-take-to-go-
from#details.
Fuglie, K.O. 2015. ``Accounting for Growth in Global Agriculture,''
Bio-based and Applied Economics 4(3): 221-54.
Fuglie, K., J. Jelliffe, and S. Morgan. 2022. ``International
Agricultural Productivity.'' U.S. Department of Agriculture Economic
Research Service. Available at: https://www.ers.usda.gov/data-products/
international-agricultural-productivity/.
Fuglie, K., and K.P. Nelson. 2022. ``Agricultural and Food Research
and Development Expenditures in the United States.'' U.S. Department of
Agriculture Economic Research Service. Available at: https://
www.ers.usda.gov/data-products/agricultural-and-food-research-and-
development-expenditures-in-the-united-states/.
Organization for Economic Cooperation and Development (OECD). 2022.
``Agricultural Policy Monitoring and Evaluation 2022: Reforming
Agricultural Policies for Climate Change Mitigation.'' Available at:
https://doi.org/10.1787/7f4542bf-en.
Suggested Citation
Plastina, A. and T. Townsend. 2023. ``World Spending on Agricultural
Research and Development.'' Agricultural Policy Review, Winter 2023.
Center for Agricultural and Rural Development, Iowa State University.
Available at www.card.iastate.edu/ag_policy_review/article/?a=152.
attachment 3
[https://foreignpolicy.com/2023/02/27/china-xi-agriculture-tax/]
China's Farmland Is in Serious Trouble
Local governments are desperate to balance the books with land sales.
By Zongyuan Zoe Liu,\1\ a columnist at Foreign Policy and the
Maurice R. Greenberg Fellow for China Studies at the Council on
Foreign Relations.
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\1\ https://foreignpolicy.com/author/zongyuan-zoe-liu/.
This aerial photo taken on September 26, 2022 shows an image
welcoming the 20th Communist Party Congress, created by growing
red sorghum, in a field in Hangzhou, in China's eastern
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Zhejiang province. STR/AFP via Getty Images
Former U.S. President Ronald Reagan offered his ``lesson number one
about America'' in his farewell address to the nation: \2\ ``All great
change in America begins at the dinner table.'' The same is true in
China. One of the first steps of the Maoist revolution was forced
collective dining,\3\ but reform and opening up of the country
revolutionized Chinese households' dinner options with an array of
diverse delicacies from Dutch cheese and Norwegian salmon to Mexican
avocados and Rainier cherries.
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\2\ https://www.reaganfoundation.org/ronald-reagan/reagan-quotes-
speeches/farewell-address-to-the-nation-3/.
\3\ https://www.atlasobscura.com/articles/peoples-commune-canteens-
china.
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Tang Renjian,\4\ China's minister of agriculture and rural affairs,
accounted that, every day, China's 1.4 billion people consume a
staggering 700,000 tons of grain, 98,000 tons of edible oil, 1.92
million tons of vegetables, and 230,000 tons of meat. The leaders of
the Chinese Communist Party (CCP) understand that ``to the emperor, the
people is heaven; to the people, food is heaven,'' as the traditional
saying goes, and they have prioritized food security as a prerequisite
to maintaining power, especially after the calamitous famines of the
Maoist era. For decades, coupons were necessary to buy any food--a
system not fully ended until 1995,\5\ although largely dead in the
cities by the mid-1980s. Despite China's emergence as the world's
factory,\6\ the country's No. 1 central document, the first policy
statement issued by the top authorities each year, has centered on food
security and the three issues of agriculture, the countryside, and
farmers since 2004.\7\
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\4\ https://www.sohu.com/a/528199780_121123704.
\5\ https://www.china-briefing.com/news/757/.
\6\ https://www.economist.com/finance-and-economics/2021/09/08/
china-is-the-worlds-factory-more-than-ever.
\7\ http://english.www.gov.cn/policies/latestreleases/202302/13/
content_WS63ea2efcc6d0a7577
29e6b4b.html.
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This year is no exception, as the Central Committee of the CCP and
the State Council jointly released \8\ the highly anticipated No. 1
document for 2023 on Feb. 13. The document, which carries enormous
weight, sets forth two critical priorities: safeguarding national food
security and protecting farmland. While previous No. 1 documents
touched on these issues between 2004 and 2012, it was not until 2013,
when Xi Jinping assumed leadership, that the annual No. 1 document
established a consistent and resolute focus on food security and
farmland preservation.
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\8\ http://www.gov.cn/zhengce/2023-02/13/content_5741370.htm.
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The 2013 \9\ No. 1 document marked Xi's first policy statement as
China's top leader and laid out his roadmap for enhancing China's food
security. At its core was ensuring China's national food supply to
strengthen food self-sufficiency. The document called for a robust
supervision system to improve China's food safety. It also
unprecedentedly urged the need to ``implement the most stringent
farmland protection system and promote the development of high-standard
farmland.''
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\9\ http://www.cirs.tsinghua.edu.cn/document/20130912/289_5.html.
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Xi's steadfast prioritization of food security is not misplaced, as
China's political system remains vulnerable to food insecurity. Amid
the COVID-19 pandemic, collective grievances \10\ aggravated by
disruptions in the food supply and lockdown-induced food shortages
sparked a wave of protests \11\ in more than a dozen cities, with
demonstrators demanding, ``We want food, not COVID tests.'' Such public
expressions of dissent have been rare in China since the mass Tiananmen
protests in 1989. Given such alarming circumstances, Xi has underscored
that China's growing dependence on imported food \12\ presents a
national security concern, even though China so far has been able to
feed its 1.4 billion people.
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\10\ https://www.washingtonpost.com/world/2022/09/12/china-covid-
lockdown-xinjiang-food/.
\11\ https://foreignpolicy.com/2022/12/04/china-mass-protests-zero-
covid-xi-demonstrations/.
\12\ https://www.cfr.org/article/china-increasingly-relies-
imported-food-thats-problem.
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Since taking office in 2013, Xi has stressed that ``the rice bowls
of the Chinese people must always be held firmly in our own hand and
filled mainly with Chinese grain.'' His approach \13\ to safeguarding
national food security rests on achieving self-sufficiency by
increasing domestic supply. At the Central Economic Work Conference in
December 2022, Xi reiterated \14\ the importance of bolstering China's
capacity to ensure food security and self-sufficiency.
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\13\ http://www.gov.cn/xinwen/2022-09/22/content_5711153.htm.
\14\ http://www.qstheory.cn/dukan/qs/2023-02/15/c_1129362874.htm.
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Xi is correct to recognize that preserving farmland is an
indispensable factor in the quest to achieve food self-sufficiency.
China has experienced alarming levels of farmland loss and
deterioration in recent years. The most recent land use survey showed
that China's total arable land decreased from 334 million acres in 2013
to 316 \15\ million acres in 2019, a loss of more than five percent in
just 6 years. Shockingly, more than \1/3\ of China's remaining arable
land (660 million mu,\16\ a traditional unit of land measurement in
China and equal to roughly 109 million acres, slightly larger than
Montana) suffers from problems of degradation, acidification, and
salinization.
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\15\ http://www.stats.gov.cn/tjsj/ndsj/2021/indexch.htm.
\16\ https://www.jiemodui.com/N/132449.html.
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The land has been eroding faster in recent years. The annual net
decrease of arable land has risen from about 6 million mu (about
988,421 acres) from 1957 to 1996 to more than 11 million mu (about 1.8
million acres) from 2009 to 2019. This means that between 2009 and
2019, China lost farmland equal to about the size of South Carolina.
China's diminishing farmland is also losing productivity due to over-
cultivation and excess use of fertilizers. China's fertilizer usage in
2018 was 6.4 times \17\ that of 1978, but grain yield in 2018 was only
2.2 times that of 1978.
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\17\ https://news.cctv.com/2022/02/14/
ARTIGlQUZStJhv330DHw1DXZ220214.shtml.
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As in many other countries, such as the United States \18\ and
India,\19\ a major cause for China's farmland deterioration has been
its land-intensive industrialization and urbanization over the past 3
decades. Farmland has been expropriated to meet the strong demand for
land to support the expansion of manufacturing, infrastructure, and
urban development. Competing interests for land use have resulted in
arable land being expropriated for more lucrative development projects.
In the contest for land use among food growers, cash-crop planters, and
property developers, profit maximization often trumps the needs of food
farmers, especially when imported foods are much cheaper than locally
grown options.
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\18\ https://www.yahoo.com/video/us-lost-1-3-million-
180438622.html.
\19\ https://qz.com/flood-and-drought-are-ravaging-indias-
farmlands-1849766266.
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Satellite monitoring data shows that grain planting accounts for
about 70 percent \20\ of China's existing arable land, while the
remainder is used for growing cash crops, gardens, forestry, or left
fallow. Several Chinese researchers, such as scholars \21\ from Anhui
and a team \22\ from China Agricultural University and China's Ministry
of Natural Resources, have independently reached the same conclusion
that by the time China achieves an urbanization rate of 70 percent by
2030, the country is likely to lose about 20 million mu \23\ (about 3.3
million acres) of high-quality arable land.
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\20\ https://news.cctv.com/2022/02/14/
ARTIGlQUZStJhv330DHw1DXZ220214.shtml.
\21\ http://www.tcsae.org/nygcxb/article/abstract/20140401.
\22\ http://www.bulletin.cas.cn/publish_article/2020/5/
20200513.htm.
\23\ https://news.sciencenet.cn/htmlnews/2020/5/439394.shtm.
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In March 2022, the State Administration for Market Regulation and
the Standardization Administration of China jointly issued \24\
``General Rules for Well-Facilitated Farmland Construction,'' which set
quantifiable criteria for high-quality farmland for different Chinese
regions. The Chinese Government aims to develop 1.2 billion mu \25\ of
high-quality farmland (about 198 million acres) by 2030, an area larger
than Texas. The government plans to increase investment in high-
standard farmland to an annual average of 3,000 yuan per mu nationwide,
which requires a yearly investment of at least 75 billion yuan \26\ for
2023-2030. However, current investment significantly falls short at
only 1,458 yuan \27\ per mu, less than half of the target, due to local
government fiscal difficulties and declining central government
subsidies.
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\24\ http://www.jsgg.com.cn/Files/PictureDocument/
20220419160640156833862054.pdf.
\25\ https://www.ndrc.gov.cn/fggz/fzzlgh/gjjzxgh/202111/
P020211102598713060217.pdf.
\26\ https://pdf.dfcfw.com/pdf/
H3_AP202206101571178941_1.pdf?1657450456000.pdf.
\27\ https://pdf.dfcfw.com/pdf/
H3_AP202206101571178941_1.pdf?1657450456000.pdf.
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Yet, however necessary it might be, Xi's prioritization of food
security and farmland protection does not and cannot come for free.
Implementing restrictive farmland protection policies will inevitably
reduce local governments' fiscal capacity because revenue from land-
use-right sales constitutes the majority of local government revenue--
as it has done since fiscal reforms in the 1990s left regular tax
income flowing toward the central government, not local authorities. In
2022, local governments' land-related income fell \28\ for the first
time in 6 years, primarily due to declined revenue from land-use-right
sales.
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\28\ https://www.wsj.com/articles/to-boost-land-sales-local-
chinese-governments-set-up-new-companies-to-buy-plots-11668681002.
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According to China's Ministry of Finance, local government revenue
from land-use-right sales fell from a record high of 8.7 trillion \29\
yuan in 2021 to 6.68 trillion \30\ yuan in 2022, a reduction of 23.3
percent. Given that revenue from land-use-right sales remained as high
as 51.29 percent \31\ of local government revenue, any further decrease
in this revenue source will worsen their fiscal capability to finance
public expenditures, including funding the development of high-quality
farmland urged by Xi.
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\29\ http://finance.china.com.cn/news/20220129/5738839.shtml.
\30\ http://gks.mof.gov.cn/tongjishuju/202301/
t20230130_3864368.htm.
\31\ http://news.szhome.com/380976.html.
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In addition, the massive nationwide spending on COVID controls in
2020-2022, which the BBC \32\ reported to be somewhere between 520
billion yuan and 1.56 trillion yuan, coupled with the decline in local
government revenue, suggests that neither the central authorities nor
local governments will have the fiscal capacity to increase expenditure
on farmland protection without increasing their debt. Allocating money
to finance farmland protection with debt proceeds is particularly
challenging when the government has another more urgent priority:
boosting economic recovery by encouraging Chinese households \33\ to
expand their consumption.\34\
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\32\ https://www.bbc.com/zhongwen/simp/chinese-news-64635752.
\33\ https://www.cfr.org/blog/chinas-covid-19-comeback-rides-
strength-chinese-households.
\34\ https://foreignpolicy.com/2023/02/02/beijing-economy-playbook-
gdp-household-consumption/.
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Stripped of financial resources, local governments are more
incentivized to boost land sales and increase revenue than to abandon
selling farmland, especially when the immediate priority is to jump-
start an economic rebound. To this end, in November 2022, the People's
Bank of China and China's Banking and Insurance Regulatory Commission
jointly issued \35\ a set of 16 measures to revive the country's
distressed property market \36\ and help developers secure financing.
This policy change suggests the party-state is once again betting on
\37\ the property market's recovery to restore growth.
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\35\ http://www.gov.cn/xinwen/2022-11/23/content_5728466.htm.
\36\ https://foreignpolicy.com/2022/07/20/china-mortgage-boycott-
real-estate-crisis/.
\37\ https://foreignpolicy.com/2023/01/10/chinese-communist-party-
property-bubble-real-estate/.
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Over the past 2 years, Chinese private property developers such as
Evergrande and Vanke have pulled back \38\ from aggressive land
purchasing due to stringent restrictions. While this reduced demand
from private property developers should have helped alleviate the
temptation to appropriate farmland for property development, much of
the demand void has been filled by state-owned enterprises and
government-backed developers or companies, such as local government
financing vehicles (LGFVs). LGFVs allow local governments to raise off-
balance-sheet debt through bond issuance to fund long-term
infrastructure investment without increasing their on-the-book leverage
ratio. A report \39\ by Haitong Securities, a Shanghai-based securities
brokerage firm, showed that in 2022 more than 80 percent of the 100
largest land-purchasing companies were state-owned enterprises.
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\38\ https://www.wsj.com/articles/chinas-private-developers-
abstain-from-land-auctions-as-red-lines-draw-blood-11644330780.
\39\ https://www.htsec.com/jfimg/colimg/upload/20230206/
37481675649664054.pdf.
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The share of LGFVs' land purchases in local government land sale
revenue increased to nearly 20 percent in 2022, up from 14.5 percent in
2021, suggesting that LGFVs likely have provided a false revenue source
and exacerbated local governments' off-balance-sheet debt problem.
Similarly, The Wall Street Journal reported \40\ cases in Zhengzhou,
Shenyang, and Suzhou where \1/2\ to \3/4\ of land sold by the city
governments were bought by local government-controlled companies, many
of which were set up just days or weeks after the announcement of the
land auctions. In essence, local authorities are borrowing illicitly to
fund their own revenue, mortgaging their financial and pastoral future
in order to stay afloat. Boosting land sales through government-owned
or government-controlled entities when demand from private developers
is low provides a politically convenient channel for local governments
to raise revenue at limited costs.
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\40\ https://www.wsj.com/articles/to-boost-land-sales-local-
chinese-governments-set-up-new-companies-to-buy-plots-11668681002.
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Investing limited fiscal resources in farmland protection, in
contrast, does not generate immediate political and financial returns,
making it a tough sell for local officials who are under pressure to
deliver a rapid economic recovery. While safeguarding farmland is an
important cause in the long term, and one backed from the top in
Beijing in theory, it costs money from the pockets of local governments
and subsidies from the central authorities. For local officials, the
more pressing challenge consuming their attention and resources is to
restore economic growth.
These cost-benefit calculations mean local officials are likely to
revert to their most familiar playbook of increasing revenue by
expanding land sales and converting farmlands to factories and houses
to accelerate rural industrialization and urbanization. This immediate-
term expansion in land sales implies that China could have an excess
housing supply that may lead to another housing market crash in the
next 5 to 10 years if demand for housing fails to catch up.
Limited domestic farmland availability combined with the pursuit of
food security dictates that China would expand its overseas farmland
investment and advance its strategy of farming out. The 2007 \41\ No. 1
document set farming and agriculture ``going out'' into the rest of the
world as a national strategy for the first time, but the focus back
then was exports. The 2016 \42\ No. 1 document updated guidelines on
international agriculture cooperation, focusing on agricultural
investment and supporting Chinese companies' overseas operations.
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\41\ http://www.moa.gov.cn/ztzl/nyfzhjsn/zyhwj/201208/
t20120823_2864991.htm.
\42\ http://www.agri.cn/V20/SC/jjps/201601/t20160127_5000509.htm.
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According to Land Matrix, a European land-monitoring organization,
Chinese companies have gained control of 6.48 million \43\ hectares (16
million acres) in foreign territories, which is nearly the size of
Ireland. This number dwarfs the combined 1.56 million hectares
controlled by British companies, the 860,000 hectares held by U.S.
companies, and the 420,000 hectares owned by Japanese companies.
Chinese investment in U.S. farmland has already triggered concerns in
Washington, even though China currently only holds less than 1 percent
\44\ of foreign-owned U.S. farmland. Republican lawmakers have already
drafted a bill \45\ to ban Chinese purchases of American farmland,
while in states like Texas measures are even more advanced. China not
only owns farmland in the United States but also in U.S. allies'
territory, such as the United Kingdom,\46\ France,\47\ and
Australia.\48\
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\43\ https://asia.nikkei.com/Spotlight/Datawatch/Chinese-companies-
corralling-land-around-world&cd=1&hl=en&ct=clnk&gl=us.
\44\ https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/
EPAS/PDF/2021_afida_
annual_report_through_12_31_2021.pdf.
\45\ https://newhouse.house.gov/sites/evo-subsites/
newhouse.house.gov/files/evo-media-document/NEWHOU_063_xml.pdf.
\46\ https://www.scmp.com/article/990443/chinese-buy-own-piece-
england.
\47\ https://www.marketplace.org/2016/09/19/chinese-investors-are-
buying-french-farmland/.
\48\ https://www.weeklytimesnow.com.au/agribusiness/decisionag/
china-to-become-biggest-foreign-owner-of-australian-farmland/news-
story/ba27742491380f55568bc3d5ada296cb.
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If China's economic recovery and its continued growth are fueled by
land sales and its property market, Xi's prioritization of food
security means Chinese entities will have to embark on more aggressive
overseas land purchases. While the current theater of U.S.-China
competition has been centered on the chips and semiconductors industry,
a new front may emerge in the form of competition over farmland and
agriculture technology. The party can survive setbacks in the chip war,
but the stakes are much higher in the fight for food security. Failure
on the food security front will threaten the survival of the regime.
Zongyuan Zoe Liu is a columnist at Foreign Policy and the
Maurice R. Greenberg Fellow for China Studies at the Council on
Foreign Relations. Her latest book is Sovereign Funds: How the
Communist Party of China Finances Its Global Ambitions (Harvard
University Press, 2023).
attachment 4
Response from Hon. Kip Tom, Managing Member and Chief Executive
Officer, Tom Farms LLC; former United States Ambassador to the
United Nations Agencies Food and Agriculture
Questions Submitted by Hon. Derrick Van Orden a Representative in
Congress from Wisconsin
Question 1. China is stealing our technology and trade secrets. How
do you think we can remain a leader in the global production and supply
of food while protecting our intellectual property and national
security?
Answer. The U.S. need to accelerate investments in the private- and
public-sector for food and agriculture to counter the investment that
China is making which is 10X the U.S. budgets currently. Next, anyone
in the private- or public-sector needs to amplify their current means
of protecting all intellectual property, trade secrets, data and other
records from any form of theft. It starts at the genetic level to the
farm gate to the processor to the retailer onto the consumer.
Question 2. What strategies do you think we can adopt to become
less reliant on China and diversify our agriculture export markets?
Answer. USDA. Foreign Agricultural Service (FAS) needs to be more
aggressive in promoting U.S. ag products to new global markets. There
will be a day that China could be a net exporter of some commodities
great than today so we need to be proactive in growing our global
customer base. In the meanwhile we could look for new value add
opportunities here in the U.S. to [attract] new [markets] globally and
develop our internal demand further.
Question 3. Rural WI communities are concerned with foreign
investment in U.S. agriculture-related business. How can we ensure that
capital is reinvested in local communities and that these foreign-owned
companies adhere to fair business practices?
Answer. I am not aware of the laws of the State of Wisconsin but
seems like the state legislature should monitor. I will add there are
many good companies that come to the U.S. from allied nations that
invest capital, create jobs and lift up the standard of life in rural
communities. I have seen this first hand in Indiana and the state and
local community thrives with these new investments.
Question 4. Are we tracking land purchases from one foreign owner
to another?
Answer. USDA has been required to collect this information but it
can be complicated with the structures of the [entity] designs that can
be created to disguise a maligned actors investment in land. Today we
are seeing increased interest and purchases in foreign ownership of
U.S. farmland from many places around the world. There is a significant
difference in the reason for purchasing U.S. farmland from a nation
such as China to say for instance an investor from Argentina or the UK.
Question 5. Is USDA tracking the amount of agriculture incentives
going to foreign land investors?
Answer. Most all USDA subsidies go to the operator of the land or
the one that is taking the risk. That is not to say a portion does not
indirectly make it to the foreign land owner. There are however
conservation reserve and other conservation payments that can go
directly to the landowner. USDA should have all of that information.
Again it could be more difficult given the ability to mask the actual
ownership. State and Federal Economic Development Incentives could be a
significant issue that needs monitored also.