    [Senate Hearing 118-642]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-642

                    NATIONAL SECURITY CHALLENGES: OUTPACING
                         CHINA IN EMERGING TECHNOLOGY

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

                                    HEARING

                                   before the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

             EXAMINING NATIONAL SECURITY CHALLENGES REGARDING CHINA
                            AND EMERGING  TECHNOLOGY

                                   __________

                                JANUARY 18, 2024

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban Affairs

                        [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                       Available at: https: //www.govinfo.gov/

                                      ______

                         U.S. GOVERNMENT PUBLISHING OFFICE

    60-365 PDF                   WASHINGTON : 2026

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                           SHERROD BROWN, Ohio, Chair

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director
                   Lila Nieves-Lee, Republican Staff Director

                           Elisha Tuku, Chief Counsel

                      Amber Beck, Republican Chief Counsel

                          Cameron Ricker, Chief Clerk
                          Shelvin Simmons, IT Director
                           Pat Lally, Assistant Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                           THURSDAY, JANUARY 18, 2024

                                                                       Page

    Opening statement of Chair Brown.................................     1
            Prepared statement.......................................    42

    Opening statements, comments, or prepared statements of:
        Senator Scott................................................     3
            Prepared statement.......................................    43

                                   WITNESSES

    Emily Kilcrease, Senior Fellow and Director of the Energy,
      Economics, and Security Program, Center for a New American
      Security.......................................................     5
        Prepared statement...........................................    45
        Responses to written questions of:
            Chair Brown..............................................    96
            Senator Cortez Masto.....................................    98
            Senator Van Hollen.......................................   100
            Senator Warnock..........................................   102
    Jamil N. Jaffer, Founder and Executive Director, National
      Security Institute and NSI Cyber and Tech Center, Antonin
      Scalia Law School at George Mason University...................     6
        Prepared statement...........................................    67
        Responses to written questions of:
            Chair Brown..............................................   105
            Senator Cortez Masto.....................................   106
    Lindsay Gorman, Senior Fellow for Emerging Technologies, The
      Alliance for Securing Democracy at the German Marshall Fund of
      the United States..............................................     8
        Prepared statement...........................................    85
        Responses to written questions of:
            Senator Cortez Masto.....................................   108
            Senator Van Hollen.......................................   108
            Senator Warnock..........................................   108

                                     (iii)

      NATIONAL SECURITY CHALLENGES: OUTPACING CHINA IN EMERGING TECHNOLOGY

                                  ----------

                           THURSDAY, JANUARY 18, 2024

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10 a.m., in room SD-538, Dirksen
    Senate Office Building, Hon. Sherrod Brown, Chair of the
    Committee, presiding.

                OPENING STATEMENT OF CHAIR SHERROD BROWN

        Chair Brown. The Committee will come to order.
        Last week, the Committee heard about the human toll that
    illicit fentanyl takes on our families, our friends, our
    neighbors. Witnesses stressed the need to come together to take
    action to stop the flow of illicit fentanyl from China and
    Mexico. This Committee, the entire Senate, did--just did that--
    did just that last year when Senator Scott's and my bill
    included the FEND Off Fentanyl Act. We were successful together
    in making it a part of the annual defense authorization bill.
    It has not been--become law yet, even though it passed the
    Senate--the bill with our amendment in it passed the Senate, I
    believe, with 90 or 91 votes--because politicians in the
    House--extremists in the House have played politics and kept it
    out of the NDAA.
        The FEND Off Fentanyl Act was not the only Committee
    priority that the House blocked last year. They blocked two
    other important national security amendments in the NDAA, both
    of which received more than 90 votes in the Senate. Ninety-one
    senators voted in favor of an amendment offered by our
    colleagues, Senator Tester--thank you--and Senator Rounds, whom
    I saw earlier this morning, to prevent big investors in China
    from buying up American farmland and food businesses, clearly
    in our national security interest. We cannot allow foreign
    adversaries to buy up farmland in Ohio and around the country.
    It is a threat to our national security. It is a threat to
    rural economies and our way of life. Ninety-one senators also
    voted in favor of an amendment offered by Senators Casey and
    Cornyn, bipartisan amendment to allow us to better monitor U.S.
    companies' investments that fund Chinese--fund Chinese
    development of critical technology, including military
    technology.
        All three of these provisions have broad support, from
    Heritage Action to the Coalition for a Prosperous America. More
    importantly, they have the support--overwhelming support of the
    public. For far too long, our policy around China catered to
    multinational corporations and do not think the House and
    Senate were not part of that. They failed State--they failed--
    that policy failed States like Ohio. In this Committee, we
    worked to change that. We found common ground. It is why all
    three of these bills remain top priorities in this Committee. I
    am committed to working with colleagues to make these
    provisions law.
        Of course, the threats posed by China are many and varied
    and growing. Our work to address national security risk posed
    by the Chinese Government should not end with those three
    provisions. We agree that China poses a real and growing threat
    to our national security. Perhaps nowhere is that risk more
    acute than with the development of advanced technology. China
    has used advanced technology, much of it stolen from the U.S.,
    some of it sent there through corporate outsourcing, to ramp up
    its military modernization and build a mass surveillance State
    that commits deplorable human rights violations, including the
    detention of millions of Uyghurs and Xinjiang.
        Addressing these threats from the Chinese Government and
    improving our domestic capability to compete with China has
    been a top priority of this Committee. Five years ago, we
    updated the laws that govern our export control and inbound
    investment screening programs. Now we must assess whether our
    current authorities and the resources we commit to them match
    the threat we face. Export controls can be used to deny China
    and others access to U.S. technology that they could use to
    undermine our national security. We have made export controls a
    central feature of our national security and our foreign
    policy.
        In addition to assembling a global export control coalition
    in response to Russia's war against Ukraine, the Administration
    has added hundreds of China-based entities to the restricted
    trade list and imposed countrywide controls that restrict
    China's access to advanced semiconductors and tools and
    equipment needed to produce them. It ramped up enforcement
    efforts to safeguard our most sensitive technologies, but as
    Commerce Secretary Raimondo noted, the export control budget of
    the Bureau of Industry and Security is roughly the same as it
    was a decade ago, despite its ever-increasing workload.
        If we agree that export controls are critical to our
    national security, and I think we all do, then that is not good
    enough. We need a China policy for the world we live in today.
    We must prepare for what could come tomorrow. It means we must
    upgrade our economic security authorities and resources,
    accelerate efforts to persuade other countries to join us, and
    enhance our analytical capabilities so that we can better
    understand the effects that our economic security tools have on
    China, on U.S. companies, on companies and partner countries.
        Well, today--we will discuss today with our three witnesses
    how we should rethink and reorient how economic security
    programs are implemented to address the full range of risks
    posed by China. We will examine how we can strengthen these
    authorities and resources to build a stronger, more responsive
    economic security policy. Our country's policies regarding
    China have failed for too long. And they have been written,
    and, historically, we know this--they have been written, aided,
    and abetted by the Senate and the House and Presidents of both
    parties who sold out American workers, pure and simple, to
    increase the profits of multinational corporations, always,
    always, always looking for cheap labor, not to benefit national
    security, not to benefit American workers. This is on--this is
    on everyone that participated in this.
        We know that when companies outsource jobs, they outsource
    innovation. They outsource technological capabilities along
    with it. We live with the consequences. Look at the solar
    industry. Look at semiconductors. We cannot allow China to
    continue to use that technology. In many cases--say it--they
    stole it to enhance its military capabilities. We can agree
    that China is a real growing threat. Countering that threat and
    updating the failed policies of the past will continue to be a
    bipartisan focus of this Committee. I thank Senator Scott for
    that, and I know it will continue. Yeah.

                 OPENING STATEMENT OF SENATOR TIM SCOTT

        Senator Scott. Thank you, Mr. Chairman. Good morning to the
    witnesses. Thank you for being here as well. Thank you, Mr.
    Chairman, for this opportunity to talk about such an important
    topic, but before turning to this hearing, I would like to take
    a moment and draw attention to the recent Iran-backed strikes
    in Iraq.
        Anytime American lives are put at risk, whether it is from
    Iran or their terror proxies like Hamas, we need to have a
    strong response, and that starts with this chamber passing my
    Revoke Iranian Funding Act. Every dollar that goes to Iran from
    this Administration's actions is a dollar that supports terror.
    Thank you.
        America is the land of opportunity and freedom, the
    opportunity to innovate, produce, and execute on individual
    ideas. These principles are what drives our strides in
    technological innovation and our emphasis on entrepreneurship.
    We have the strongest economy in the world, driven by its
    dynamic growth and evolution. We are the global gold standard
    that countries look on with envy. However, American
    exceptionalism is under attack from a country that does not
    want to play by the rules. That country is obviously China. To
    make sure our success does not become the victory of others,
    the U.S. Government must act strategically and with strength in
    protecting opportunities for growth at home and abroad.
        When we look at adversaries like the Chinese Communist
    Party, with their centrally planned economy that actively works
    to distort global markets for its own gain and continuously
    makes overt attempts to oust U.S. from our perch of leadership,
    we do not have to ask the question are they playing by the
    rules because we already know the answer to the question, and
    the answer is emphatically no. But China's approach, with their
    controlled markets, Government interventions, and intellectual
    property theft, is shackled to the openness of others, so we
    must act strategically to ensure that we are safeguarding
    America's treasure: our ability to innovate. We cannot let
    China continue its malign activities, especially in regards to
    using or even stealing American innovation and American
    technologies for nefarious purposes, like advancing its rapidly
    growing military.
        So as we consider American security and prosperity from the
    Banking Committee's jurisdiction, we should look first at our
    economic security tools. We need to examine the authorities
    provided to the executive branch, how they have been used, and
    how they can be improved for maximum effectiveness. However, an
    over application of these tools has the potential to push our
    adversaries closer together and damage the U.S.' and our
    industry's long-term abilities to innovate and generate jobs
    and to generate growth. Therefore, our use of these tools must
    be sharp but tailored.
        Thankfully, we can isolate bad actors through our sanctions
    policies, we can restrict malign investment through our CFIUS
    process, and we can curtail the export of critical goods and
    services to our enemies. These actions are stronger when we
    work together with our allies and stay focused on the true
    problem at hand, but, unfortunately, this Administration has
    yet again taken the wrong approach. This Administration has put
    politics over policy and in some ways, that is playing right
    into the hands of China.
        For example, the Department of Commerce's Bureau of
    Industry and Security, the steward of our export controls, is
    currently engaging in politically motivated attacks against the
    illegal firearms industry, a troubling trend. This
    Administration's regulators try to target lawful businesses
    through the regulatory process that do not fit their political
    narrative. This undercuts the Commerce Department's important
    mission of safeguarding U.S. technology, opening the door for
    distractions that will allow the CCP to take advantage.
        But the Commerce is not the only perpetrator. The
    Department of Treasury's primary focus appears to be on
    pursuing the limits of climate and green energy financing
    policy, and frankly, these objectives only advance China's
    solar and critical mineral energy positions in geopolitical
    affairs. Treasury's time, attention, and taxpayer-provided
    resources will be a much better spent working to ensure our
    sanctions policies on China remain up to date and promoting as
    well as protecting American industry abroad. We need an
    Administration that is focused on countering the real threat--
    China--not one that is more interesting to politics.
        So while I am grateful that we have such an esteemed panel
    before U.S. today, I think it is imperative that we hear
    directly from the Administration as well. That said, I look
    forward to hearing from each of you and your expertise on the
    issues that will help strengthen our economy and strengthen our
    position against China and, importantly, to learning more from
    their perspectives on how we should act and respond to the
    threat.
        Chair Brown. Thank you, Senator Scott. Emily Kilcrease is a
    senior fellow and direct--the director of the Energy,
    Economics, and Security program at the Center for a New
    American Security. Ms. Kilcrease, thank you for joining us.
    Jamil Jaffer is the founder and executive director of the
    National Security Institute and assistant professor of law at
    George Mason University. Welcome. Lindsay Gorman is senior
    fellow for emerging Technologies at the German Marshall Fund's
    Alliance for Security--Securing Democracy. Welcome, Ms. Gorman.
    Thank you all for being here. Ms. Kilcrease, please begin.

    STATEMENT OF EMILY KILCREASE, SENIOR FELLOW AND DIRECTOR OF THE
       ENERGY, ECONOMICS, AND SECURITY PROGRAM, CENTER FOR A NEW
                           AMERICAN SECURITY

        Ms. Kilcrease. Good morning. Chairman Brown, Ranking Member
    Scott, Members of the Committee, it is an honor to be here
    speaking with you today. My comments draw from a large body of
    research that I have conducted on economic security issues at
    the Center for a New American Security, as well as my prior
    experience proudly serving in economic security roles in the
    U.S. Government, and please let me note, I am speaking today in
    my personal capacity.
        As Secretary of State Anthony Blinken has stated, China is
    the only country with both the intent to reshape the
    international order and, increasingly, the economic,
    diplomatic, military, and technological power to do it. The
    China challenge presents unique difficulties compared to prior
    eras of strategic competition given China's deep integration
    with the U.S. and global economies, which creates new types of
    national security risks arising from economic entanglement.
        Russia's brutal invasion of Ukraine and the increasingly
    authoritarian bent of China under Xi Jinping means that U.S.
    policy cannot rely on the deterrent effect of economic ties. It
    must instead focus on mitigating the national security risks
    arising from the economic relationship, prevent China from
    exploiting the open nature of the U.S. market, and anticipate
    future risks that may emerge due to the rapid global advance of
    critical technologies. These are formidable challenges and will
    require the Government to prioritize economic security
    programs, and as Congress considers ways to strengthen the
    capacity of U.S. economic security programs, key themes emerge
    across all of the programs related to strategy, evaluation,
    resources, and international partnerships.
        On strategy, the United States needs, but does not have, an
    economic security strategy, one that is integrated with our
    national security strategy and provides clear direction on how
    the United States will use all of its tools of economic
    statecraft in tandem to protect its economic and security
    interests with respect to China. A clear strategy will also
    facilitate conversations in alignment with key international
    partners. On evaluation, the United States is using economic
    security tools in greater and more clever ways than ever
    before, yet it does not have robust processes to assess whether
    these tools are actually working. It should, and it should
    include a clear-eyed look at the impact of these tools on U.S.
    competitiveness and U.S. alliances.
        On resources, implementing and enforcing a greater scope of
    economic security programs will require resources, and
    importantly, this means not just more money, but more money
    well spent, prioritizing those investments that can add
    efficiency and analytic rigor to the economic security
    programs. On international partnerships, a unilateral approach
    to economic security will not be a durable one as foreign firms
    rush to backfill U.S. technology exports and investments in
    China. China fears a united West, and it is critical that the
    United States leverage its advantage of alliances as it manages
    the strategic relationship with China.
        In addition to these cross-cutting themes, let me share
    brief thoughts on the set of economic security tools that we
    will be talking about today, and I will start with export
    controls. The United States is implementing new and more
    innovative types of export controls, including countrywide
    controls on commercial technologies in response to China's
    military civil fusion strategy and novel extraterritorial
    controls, including the foreign direct product rule.
        As export controls play a more central role in U.S. foreign
    policy, the capacity to enforce these rules while also
    evaluating their effectiveness, and, on top of that, assessing
    the need for additional controls, remains a bureaucratic
    challenge. Implementing new controls in emerging tech areas is
    particularly difficult as technology moves faster than
    Government can adopt policies in response. The budget for
    export controls has remained flat in real terms for over a
    decade. Additional resourcing, which Commerce Secretary
    Raimondo has called for, can enable much-needed investments,
    including related to export enforcement, regular review and
    updating of the Control List, and longer-term efforts to
    strengthen cooperation with international partners.
        Turning to CFIUS, first, I commend Congress for its keen
    focus on resources as part of the 2018 FIRRMA updates to the
    CFIUS process. This focus and attention has enabled CFIUS to
    effectively implement its expanded FIRRMA mandate. As Congress
    considers further updates, I encourage you to consider
    expanding the CFIUS definition of critical technologies to
    allow CFIUS a stronger ability to review transactions involving
    emerging tech areas, and CFIUS--oh, excuse me--Congress can
    also reduce mission creep by CFIUS by passing data security and
    data privacy legislation, issues that consume significant CFIUS
    resources simply because there are no other authorities to deal
    with those concerns.
        Finally, on outbound investment, Congress should establish
    new authorities to regulate U.S. investments in China. An
    outbound investment program should focus on those specific
    transactions that may convey nontechnical industrial know-how
    to China in critical technology sectors with relevance to U.S.
    national security interests. An effective design will include
    mandatory notifications, targeted prohibitions of investments
    in technologies that represent high national security risk,
    entity-based restrictions for particular bad actors, and end-
    use restrictions.
        Thank you for the opportunity to be here today, and I look
    forward to your questions.
        Chair Brown. Thank you, Ms. Kilcrease. Mr. Jaffer, welcome.

     STATEMENT OF JAMIL N. JAFFER, FOUNDER AND EXECUTIVE DIRECTOR,
      NATIONAL SECURITY INSTITUTE AND NSI CYBER AND TECH CENTER,
          ANTONIN SCALIA LAW SCHOOL AT GEORGE MASON UNIVERSITY

        Mr. Jaffer. Thank you, Chairman Brown, Ranking Member
    Scott, and Members of the Committee. I appreciate the
    opportunity to be here to talk about the very real threat, the
    very real national security threat that China poses to our
    country and the connection between that threat and our ability
    to innovate and emerging technologies here in this country. I
    want to thank the Chairman and the Ranking Member for their
    leadership on issues related to China, including your
    leadership on the critical issue of fentanyl crossing our
    Southern border from China that is killing thousands of
    Americans on a yearly basis.
        When it comes to China and emerging technology, the facts
    are this: China has built its economy on stealing American and
    allied intellectual property. Millions and billions of dollars
    in total of American research and development dollars walk out
    the back door to China every year. That research development
    money is critically important to our ability to ultimately
    succeed in the larger economic, political, and military
    conflict with China. We will not win on steel. We will not win
    on population. We will only win if we out innovate China and
    outwork China.
        We can and will and have done this in the past, and we can
    and will do it again, but it requires significant action. It
    requires preventing American companies from transferring
    significant amounts of American technology to China
    inadvertently, whether through theft, forced IP transfers,
    joint ventures, or the like. The Chinese know how to manipulate
    our desired access to their markets in order to get our
    intellectual property. They have done it before. They will do
    it again. We need to work tightly with industry to ensure that
    does not happen.
        At the same time, we need to build capability in this
    country. That means providing the kind of tax and economic
    incentives to our companies to build and innovate here and to
    keep that intellectual property here in this country. It also
    means doing no harm. It means avoiding overregulation. It means
    avoiding selective enforcement of existing laws or modifying
    existing law to target our key innovative--most innovative
    companies in this country. Seventy percent of research
    development dollars in this country are spent by the private
    sector. Seven of the top 10 R&D spenders in this country are
    technology companies, including every single one of the top
    five. Going after our technology companies in an environment of
    competition with China makes little to no sense.
        At the same time, we need to ensure that we are
    incentivizing Americans, American companies, American
    entrepreneurs and investors to invest here. That means ensuring
    that we have the right structures and regulatory procedures in
    place to ensure that investments are free, open, and fair. That
    also means that we need to work with our investors to ensure
    that they do the right thing as well. There is no good reason
    why American investors should be investing in our adversaries'
    technology. They should be investing in American technology. We
    can incentivize that, and they have a benefit, too.
        Our capital allocators in this economy benefit from living
    in a free and open society. They benefit from an economic tax
    system that is the one that this country built. As a result,
    they should already be incentivized to voluntarily work to
    invest in American technology, American defense technology, and
    not in that of the Chinese, the Russians, the Iranians, or the
    North Koreans.
        Ranking Member Scott mentioned what is going on today in
    the Red Sea with the Houthis. He mentioned the ongoing attacks
    by Iran against Americans in Iraq and Syria. We must realize
    that the war in Ukraine, the potential threats against Taiwan,
    and Iran's bad behavior in the Middle East are not unconnected.
    China is working directly with Russia on its war in Ukraine. It
    is working directly with Iran on the provision of missile
    technology. It is working with North Korea on its nuclear
    program. China is at the heart of all of this. As a result, it
    is imperative that in this country we work tightly, hand in
    glove, industry with Government, bringing the right incentives,
    the right opportunities, preventing overregulation, ensuring
    that we work collaboratively to move this country forward.
        One last note. It is critical that we build a STEM-capable
    workforce in this country. That means investing in education
    and basic science research. It also means fundamentally fixing
    our broken immigration system. The idea that we bring thousands
    of foreigners to this country every year, the most brilliant in
    the world, to be educated and receive Ph.D.s in our
    universities and then force them to return home to build their
    companies and invest abroad is ridiculous. The idea that we
    have a system based on a lottery is crazy. We should pick the
    best and the brightest in the world and incentivize them to
    stay here and become part of the American Dream. That is what
    America always has been. It is what we should be in the future.
    It is how we will ultimately beat China economically,
    militarily, and politically.
        Thank you for the opportunity to be here today. I look
    forward to your questions.
        Chair Brown. Thank you, Mr. Jaffer. Ms. Gorman, welcome.

        STATEMENT OF LINDSAY GORMAN, SENIOR FELLOW FOR EMERGING
    TECHNOLOGIES, THE ALLIANCE FOR SECURING DEMOCRACY AT THE GERMAN
                   MARSHALL FUND OF THE UNITED STATES

        Ms. Gorman. Chairman Brown, Ranking Member Scott, and
    Members of the Committee, thank you for the opportunity to
    testify before you today. I come at this issue as a researcher
    leading a team focused on technology and geopolitics at the
    German Marshall Fund, as a former policy professional
    developing allied technology cooperation initiatives, and, in a
    past life, as a scientist in the lab conducting quantum physics
    experiments and building artificial intelligence systems. I
    speak here today in my personal capacity.
        The United States has spent decades investing in,
    inventing, and reinventing new modes of warfare, modernizing
    our military in response to new adversary capabilities and
    threats. In the 1950s, the Pentagon's first offset strategy
    emphasized building up the U.S. nuclear arsenal to offset
    perceived conventional force disadvantages vis-a-vis the Soviet
    Union. When the U.S.S.R. gained nuclear parity in the late
    1970s and early 80s, the second offset strategy bet on
    precision strike and stealth technologies. Recently, a third
    offset strategy sought to reestablish flagging U.S. military
    technological superiority.
        Today, the United States' strongest autocratic rival uses
    tactics in economic, technological, and societal realms that a
    defense-first national security apparatus was not designed to
    counter. In the PRC, we face a competitor who wields its own
    economic power to coerce Nations, businesses, and individuals
    to achieve its technology and national security objectives.
    This multisectoral competition has strained the post-cold war
    view of international relations, in which more economic
    engagement has implied greater political, even democratic
    proximity.
        Much as we have in the past, the United States today must
    reorient and invest in new capabilities and tools to meet this
    threat. A key element of this effort is building out a
    doctrine, toolkit, and alliances for techno-economic
    statecraft. Some of these tools already exist, but many were
    designed for a different era, when their remit was far simpler
    in terms of ensuring that technology items with dual-use
    capability--those that could be used for both military and
    particular weapons of mass destruction, and civilian uses--were
    used for the latter and not the former in countries of concern.
        These dual-use applications often had clear signatures--
    uranium enrichment thresholds, for example--signifying use for
    civilian nuclear power or as weapons-grade nuclear fuel. These
    modes are outdated and unfit for our modern challenges for
    three reasons.
        First, straightforward distinctions and thresholds between
    military and civilian applications of emerging technologies
    rarely exist. The same quantum computer that could
    revolutionize scientific discovery could break the encryption
    that secures our communications with submarines. The same
    synthetic biology processes that could engineer novel cancer
    therapies could also engineer pandemic pathogens, and the same
    computing capacity that fuels large language models can fuel
    drone swarms and mass surveillance. Second, the PRC's strategy
    of civil-military fusion further blurs these lines, making it
    difficult to have any confidence that any civilian use will
    stay a civilian use. And third, many of today's national
    security technology risks simply fall outside the military
    domain, such as human rights abuses, the promotion of
    autocratic values and standards in emerging technologies, and
    strategic dependencies in critical supply chains.
        Outpacing China no longer simply means outrunning the PRC
    but also impeding its capabilities in key force multiplier
    technologies. This will require the United States and its
    allies to control capabilities, not only technologies. In my
    written testimony, I discuss the inputs and considerations for
    controls in AI, biotechnology, and quantum information and
    provide recommendations along three lines. First, significantly
    expand U.S. and allied analytical capacity, including by
    establishing a national technology competitiveness analysis
    center; second, leverage cutting-edge technologies to track and
    control--to track control evaluations and evasions and bolster
    enforcement, from knowledge graphs and link chart analyses to
    data bases of Chinese entities and partnerships; and third,
    build capacity among U.S. allies and partners on novel techno-
    economic statecraft tools and approaches modeled off FIRRMA's
    CFIUS expansion.
        Thank you, and I look forward to your questions.
        Chair Brown. Thank you, Ms. Gorman. I will start with just
    an observation before I turn to Ms. Kilcrease for a question.
    Mr. Jaffer said that, essentially, that we need to incent U.S.
    corporations not to invest in China. These are the same
    corporations that lobbied this Congress 25 and 30 years ago,
    very successfully, because many of my colleagues like to be at
    the beck and call of corporate interests, because labor was too
    expensive in the United States, even too expensive in the
    Southern--the non-union South, and lobbied for first most
    favored Nation status.
        They decided that did not sound very good, so then
    permanent normal trade relations with China. U.S. corporations
    moved jobs overseas, benefited from it. Their bottom line:
    their stockholders benefited. American workers in my State,
    especially in my part of the country, were left behind. Now
    those same companies, we need to incent them not to invest in
    China. I mean, I do not disagree with that, but it is really a
    pretty remarkable irony of history. I will stop there.
        Question for Ms. Kilcrease and Ms. Gorman: Secretary
    Raimondo recently said the export control budget at BIS is
    roughly the same as it was a decade ago--you each mentioned
    that--from responding to China's--with an increasing workload,
    responding to Russia's invasion of Ukraine to new countrywide
    controls and chip exports. Both of you, quickly, if you can,
    two questions. Can you each describe what resources--
    technology, information, personnel--Congress should provide to
    BIS to meet its growing export control mission? What are the
    negative implications of not increasing funding? Start with
    you, Ms. Kilcrease, and you, Ms. Gorman.
        Ms. Kilcrease. Thank you for the question. It is an
    incredibly important one, and I will quickly go through what
    could be a long laundry list on that. But there is a range of
    needs in the Department of Commerce as well as the other export
    control agencies. It is not just Commerce that has
    responsibility for implementing these. The bread-and-butter
    functions of license applications and export control
    enforcement absolutely need additional funding, but one thing I
    talk a lot about in my written statement is that we need to be
    spending these new resources wisely. We need to be really
    investing in the evaluation and analytic capabilities so that
    the Department of Commerce is not just relying on industry
    input but has access to a wide range of unbiased information as
    it is building up its capacity to evaluate and assess whether
    controls are actually working in practice. We do not have that
    capacity. We need that capacity, and it needs to be an unbiased
    kind of independent analytic capability.
        We need to invest in the international engagement function
    so we are not implementing controls unilaterally and we can
    really put in the political elbow grease to make sure we get
    partners and allies on board, and we need to be examining new
    ways of doing technical export control enforcement. I will flag
    some work that my colleague, Tim Fist, has done looking at, for
    example, on chip governance. It is a way to do smarter
    enforcement, not just more enforcement.
        I fear if we do not make these sorts of investments, the
    export control system will continue to be outdated. It will
    continue to be stuck in a kind of a cold war mentality, and it
    will continue to fail to capture the emerging technologies that
    are really at the center of the U.S. China competition.
        Chair Brown. Thank you. Ms. Gorman.
        Ms. Gorman. Yes, I very much agree with Ms. Kilcrease's
    response and would add that on the analytical capacity, part of
    what we are talking about is we do not have the tools to
    understand the downstream economic impacts to United States
    businesses and to China's own capacity development if we
    restrict certain critical technologies today. We need to make--
    be making these decisions based on red team/blue team analyses,
    forecasting projects 5, 10, 20 years into the future, so that
    it is not about just slapping a control on one tiny bit of
    technology but really trying to limit the capabilities of China
    into the future, and we are making smart investments in those
    controls.
        This is what this kind of analytical center should do. We
    should not be leaving it to companies, even to researchers, to
    Members of Congress. We need the best information available.
    That also includes robust data bases that can draw information
    from all sources--from Chinese financial sources, that can
    track when Chinese entities pop up that are subsidiaries. They
    have a strategy now. Once they get put on an Export Control
    List, we see five new companies of a similar name popping up
    doing similar things. We need to be better at automatically
    adding those entities into our Control List and creating data
    bases and leveraging tools, like AI and data science, to be
    tracking those networks of smuggling sanctions evasion and
    these creative ways that China can circumvent our export
    controls. And then last, on the multilateral cooperative----
        Chair Brown. Quickly.
        Ms. Gorman. Yes.
        Chair Brown. Got it. OK. All right. Thank you. The other
    question I want for you, Ms. Kilcrease, I wanted to ask you
    about the Casey-Cornyn issue of outbound investment. Describe
    the regulatory gap that outbound investment authority would
    fill, and, if you can, as quickly as possible, why is it
    important for Congress to enact outbound investment legislation
    if an Executive order already exists?
        Ms. Kilcrease. Yeah. So I do think that there is a growing
    body of evidence that certain U.S. investments in China do
    present national security risks, and there is a gap in the
    authorities to address these. You know, the most common tool
    that people will raise is that of export controls, which
    regulates the transfer of technologies to China and other
    destinations, but the problem is that only captures part of the
    risk. It does not capture nontechnical information or
    industrial know-how that is nonetheless critical for advancing
    a country's capability in a particular technology ecosystem.
        The example that I think is most helpful is to think about
    a semiconductor fab, where when you think about what it takes
    to churn out chips at scale efficiently and on cost-competitive
    terms, that requires complex supply chain management. It
    requires a skilled workforce, the recruiting and retention of
    that sort of skilled workforce. It includes commercial
    strategies that can survive in a cutthroat environment. None of
    that is suitable to be captured under export controls, but it
    is, again, nonetheless critical for how China will build its
    capacity. And it is this exact sort of know-how that flows
    along with an investment, and we do not have a tool to capture
    that currently.
        So clearly, there has been a lot of debate on this,
    including in Congress and in the Administration. Substantively,
    I think the Administration's Executive order is headed in the
    right direction, but, ultimately, it is far better for these
    sorts of programs to be codified by Congress, particularly
    because we have this great example in the FIRRMA process where
    Congress was really able to shape and guide and provide
    appropriate resources to provide a clear legal mandate for what
    they wanted the executive branch to do. So ultimately, I do
    think it is incumbent on Congress to act on this problem.
        Chair Brown. Senator Scott.
        Senator Scott. Thank you, Mr. Chairman, for my 10 minutes,
    and I will start today.
        Chair Brown. Five plus 2 equals 7.
        Senator Scott. Well, in Washington math, that is 10.
        Chair Brown. Oh. Do you write his jokes?
        Senator Scott. He agrees with my jokes. Thank you, Senator
    Tester. He is eating in way at my time, by the way, as well, so
    11 minutes.
        Chair Brown. ----before you----
        Senator Scott. Thank you, sir.
        Chair Brown. ----10 and it is 11.
        [Laughter.]
        Senator Scott. OK. Sorry about that. One of the largest
    pillars in China's campaign of economic coercion is this
    systematic theft of our IP. We have seen it time and again,
    from the corporate world to computing to agriculture, and what
    I find deeply concerning is that we are now seeing it on our
    college campuses, university campuses. I have written several
    letters to the Biden administration on this subject, and,
    thankfully, my amendment on gifts and grants from Chinese
    military firms to our institutions of higher education was
    signed into law in the last year's NDAA. Thankfully, with this
    report now, the Departments of Treasury and Education will be
    required to provide a full accounting of the donations that the
    Chinese military firms are providing to U.S. educational
    institutions, an important first step in the right direction.
        Mr. Jaffer, you are an academic. You are on college
    campuses. Talk to me a little bit about the national security
    threat that China's influence presents on our college campuses.
        Mr. Jaffer. Thank you, Ranking Member Scott. The idea that
    we would allow Chinese influence operations to take place on
    our college campuses through Confucius institutes, through
    research collaborations and the like, is deeply concerning. We
    know that the Chinese Government is engaged in a concerted
    effort to steal intellectual property, not just through cyber
    means, although that is the predominant means by which they do
    it, not just through physical capabilities by putting people in
    American companies and stealing that innovation, but by
    stealing core R&D taking place, basic science research in our
    colleges and universities, and they are doing that through
    these research collaborations.
        Now, there are collaborations that make sense with allied
    Nations. There are collaborations across borders that make tons
    of sense, but collaborating with Chinese researchers who we
    know are influenced and pressured by the Chinese Government on
    a regular basis to steal intellectual property simply makes no
    sense. Taking cash money from Chinese companies who have
    ulterior motives simply makes no sense. No university should do
    it, and I applaud you, Senator Scott, for having outted this
    fact and for calling it out once and again.
        Senator Scott. How do we--if you--if you were in charge,
    how would you help U.S. stop or reduce the amount of activity
    on those college campuses? How much further can we go than just
    the amendment that was a part of the NDAA in spotting it,
    bringing light to it? In addition to that, we have 300,000 or
    so Chinese students on our college campuses. I am not sure how
    many report back to the CCP, but it is a concern to me. I would
    love to hear your thoughts on that as well.
        Mr. Jaffer. Well, look, we always have to be careful to
    not, you know, tar every Chinese student that is here in the
    United States with the brush that they are working with the
    Chinese Government, but we have to recognize the Chinese
    Government is engaged in an active effort to bring students
    here, to bring researchers here, to work with American
    academics here in this country, pay them to transfer
    technology. The Thousand Talents Program and the like are a few
    examples of those.
        Now, in order to ensure that this does not happen when we
    bring students in, bring Chinese nationals in, vetting them--
    frankly, nationals from any country--vetting them well,
    ensuring they are not a national security risk is an important
    part of that immigration process, including for students and
    the like and researchers. At the same time, Federal--
    universities obtain a tremendous amount of Federal grant money.
    They obtain a tremendous amount of Federal financial aid for
    their students. Making those pipelines hard to access if they
    continue to allow their research and development to walk out
    the backdoor to China is a very significant penalty you can
    leverage. Now, I am not saying we should do that. I am saying
    we need to think cautiously about that.
        At the same time, if our universities are allowing this to
    happen and they know it is happening and are not taking action
    to stop it, public and private alike, action can be taken to
    make their lives a lot more difficult.
        Senator Scott. It sounds like a carrot-and-stick approach,
    though. You put ourselves--you put the Nation and the
    universities in a strong position to speak clearly and make
    good decisions with consequences. Without those consequences,
    to me, it seems like there will be--we cannot reinforce good
    behavior if all we are saying is ``please.''
        Mr. Jaffer. That is exactly right, and, you know, it goes
    to universities, it goes to investors alike. All of us have an
    incentive to do the right thing, right, to invest in American
    technology, protect our intellectual property, and ensure
    innovation stays here, right? We should recognize that because
    we live in this system of governance, in this economic system,
    benefiting our adversaries is actually contrary to all of our
    interests, and as a result, universities already have the
    incentive to do the right thing. Investors have the incentive
    to do the right thing. Providing them more incentives, and
    ultimately only reaching for the regulatory stick when you
    absolutely have to is ultimately, I think, the right approach.
        Senator Scott. Thank you.
        Chair Brown. Thank you, Senator Scott. Senator Menendez of
    New Jersey is recognized.
        Senator Menendez. Thank you, Mr. Chairman. Last Congress, I
    introduced the Economic Statecraft for the Twenty-First Century
    Act, a bill that provides a comprehensive plan to confront the
    anticompetitive, predatory nature of China's international
    economic policies. The legislation would allow U.S. to lead to
    our values by strengthening our supply chains with reshoring,
    nearshoring strategies, by achieving our energy-related
    sustainability goals, by fostering cooperation in multilateral
    institutions, by building global resiliency, among other
    things. So my question, Ms. Kilcrease, what effective economic
    tools do we presently have to have the United States be able to
    deal with our China challenge, and what, if any, additional
    authorities do you believe would be beneficial for U.S. in
    terms of leading our economic diplomacy?
        Ms. Kilcrease. Thank you for the question and for your
    leadership in developing economic statecraft strategy. It is
    critically important that as we think about the specific tools,
    we are also thinking about how all of these tools work in
    tandem to achieve our goals, and particularly if we are talking
    about technology leadership, and leadership in particular
    sectors, assessing these tools and how they work together is so
    important.
        You know, I think we have a growing body of tools that are
    effective. Some of our export controls, our investment
    screening, these are mature processes where there is always
    room for improvement, but we have well-established frameworks.
    We also have robust industrial policy at this point in the
    U.S., where we are really trying to implement the run faster
    part of the agenda, trying to invest in our R&D capabilities
    and strengthen our STEM capabilities as well. Ultimately, these
    are all the sorts of efforts that need to move forward in
    tandem.
        But that does not mean that our work is done, of course,
    right? We are talking today about outbound investment as one of
    the key ways to protect our economic security interests. We
    should also be having a conversation around tariff
    restructuring and how that could potentially be used in some
    cases to protect against Chinese unfair trade practices. That
    requires deep analysis, economic analysis of downstream
    impacts, but it is one of the areas where we do have a gap, and
    we need to consider, again, whether that sort of approach would
    advance our interests.
        Senator Menendez. Thank you. I want to talk about our lack
    of outbound investment oversight in sensitive industries that
    has the potential to harm our national security and hamper the
    competitiveness of U.S. industry because of the technical
    prowess, capital, and the unique know-how that access to the
    U.S. capital markets provide. President Biden's Executive order
    in August is a good start, but I fear it may be too limited.
    Ms. Gorman, is the order broad enough to prevent U.S. capital
    and expertise from financing the wide range of critical sectors
    that undermine U.S. national security?
        Ms. Gorman. Thank you for the question. I think the order
    itself, which focuses on AI, semiconductors, and quantum
    information systems exclusively, I think, can be seen, as you
    rightly point out, as a good start. We may in the future want
    to look at similar outbound investments on other critical and
    emerging technology areas, but this depends on where we have
    strategic advantages and also can mirror our other approaches
    to controlling technology outflows. We should not be allowing
    investors to invest in entities that we have determined we
    should not be selling those critical technologies to.
        But I think the outbound order is taking actually somewhat
    of a targeted approach, though when it comes to AI, that is
    going to be one of the hardest issues to get right in terms of
    how broad do we think about what AI is, what is military use,
    what is civilian use. These are not easy questions, but I think
    it is a good start.
        Senator Menendez. Well, with intellectual property theft,
    which remains an acute challenge in our dealings with China,
    and the theft of intellectual property related to cutting-edge
    technologies that could seriously degrade our national security
    and economic competitiveness, I wonder what can we do to expand
    on the President's order and make outbound investment review a
    more effective tool for limiting theft of high-tech secrets
    that are critical to national security?
        Ms. Gorman. It is a good question. I think we can try to
    tie in some strings to our investments. I think expanding our
    enforcement capabilities. The DOJ has certainly prioritized the
    intellectual property theft from China challenge. We need--we
    need more aggressive enforcement there and to be sure that we
    are not giving away the crown jewels of our technology through
    investments, through that transfer of know-how. And I think
    there is a piece of this, too, that involves communicating to
    our investors what our priorities are, incentivizing them to
    make investments in allied partner Nations, not only China, and
    raising awareness from them on what we are really trying to
    guard against.
        Senator Menendez. Thank you. Mr. Jaffer, it is good to see
    you. Mr. Jaffer was the chief counsel for the Republicans on
    the Senate Foreign Relations Committee, and good to see you
    here. Thank you, Mr. Chairman.
        Mr. Jaffer. Thank you, Senator Menendez.
        Chair Brown. Thank you, Senator Menendez. Senator Tillis is
    recognized from North Carolina.
        Senator Tillis. Thank you, Mr. Chairman. Thank you all for
    being here. Mr. Jaffer, I am going to submit a couple of
    questions for the record, but I have tried to explain to
    people--as late as last night, I had a telephone town hall.
    People were concerned about China and Chinese investment in the
    United States, and I tried to explain that some of that is not
    bad. It is a matter of where they are investing, but what I
    also tried to explain is how investment in China, not all
    investment in China is bad. For example, my favorite photo is a
    little girl wearing a Wonder Woman outfit with a Captain
    America shield, and she is Chinese. She is at a Disney park in
    China. Boy, I want as much Chinese investment as we can to
    export our culture to China, to let the Chinese people see what
    is possible in the free world.
        So how do you--how do we strike that balance and not make
    it untenable for American businesses to see a market of middle-
    class Chinese, which is probably shrinking, given some of the
    reducing in size, but it is still about twice our population.
    How do we strike the balance as a matter of public policy?
        Mr. Jaffer. Yeah, it is a great question, Senator Tillis,
    and, you know, it seems sort of obvious, but, you know,
    investing in a tee shirt factory in China is fundamentally
    different than investing in a semiconductor fab. Transferring
    technology for, you know, manufacturing that happens at scale
    of nontechnological capabilities is different than transferring
    manufacturing know-how for critical minerals or processing for
    critical minerals. And so there is a commonsense element to the
    way our investors and our investment community ought to think
    about investment and business in China. You know, we all made
    the mistake in the 90s thinking that China being brought into
    the world--into the--into the, you know----
        Senator Tillis. ----toward a democratic, free market
    framework----
        Mr. Jaffer. Right.
        Senator Tillis. ----that never occurred.
        Mr. Jaffer. We all bought into that, right----
        Senator Tillis. Yeah.
        Mr. Jaffer. ----from President Clinton to Republicans in
    Congress.
        Senator Tillis. I did, too.
        Mr. Jaffer. And we were wrong.
        Senator Tillis. Mm-hmm.
        Mr. Jaffer. China has exploited the--its incentive system.
    It has taken advantage of it. It is playing unfair ball, and
    now it is using that repression that it imposes upon its own
    people and using the free markets to export that repression
    abroad.
        Senator Tillis. And I am wondering, I think, more broadly,
    because what we are really talking about here is making sure
    that China is not successful being the military and economic
    superpower by 2050, and it seems like if we are really going to
    talk about that, obviously we have to incent research and
    development. We have to make sure that the United States
    remains the innovator that it is today. We have to protect our
    intellectual property. We have to do everything we can, but it
    seems like we need to fight on several different levels. It
    seems to me that the Belt and Road Initiative, you got some
    buyers' remorse there, but we really have no alternative.
        So to what extent are we going to Africa and South America,
    going to these countries and creating a different value
    proposition? We do not have to be the lowest cost provider
    because we know that an American investment, an American
    framework in these countries means something more, and all of
    these countries, these leaders get it. So give me an idea. If
    you could wave a wand and be President for the day, what would
    be your global strategy, the multilevel strategy to go after
    China and prevent them from succeeding over the next 25 years?
        Mr. Jaffer. Well, I think, Senator Tillis, the first step
    is we have to be the strongest ally to our friends and the
    fiercest adversary to our foes. Today, our adversaries are not
    afraid of us. They know we are afraid to take action in the
    world, and our allies are not sure we will be there with them.
        Senator Tillis. And so failure. Would you argue that
    failure in Ukraine is the one thing China hopes happens this
    year?
        Mr. Jaffer. Absolutely.
        Senator Tillis. Yeah.
        Mr. Jaffer. Continued attacks by Iran without an--without
    an effective U.S. response makes China happy. North Korea
    launching missiles without us doing anything about it makes
    China happy. These things are not unrelated. China has a hand
    in all of this. They are working collaboratively with all these
    Nations. They recognize that a weak U.S., that either appears
    weak or is actually weak, benefits them.
        Senator Tillis. And do you--I mean, it is topical because
    of discussions we are having here around the supplemental in
    Ukraine funding. Do you believe that Putin will be happy and Xi
    Jinping will be thrilled if we decommit from Ukraine, and then
    what likely will occur there? I mean, do you--do you think it
    is in that order, that China sees more to gain from our lack of
    funding than even Putin?
        Mr. Jaffer. Absolutely, and the way you know that is that
    we saw Xi Jinping stand with Vladimir Putin, and in an aside he
    knew was being captured by the cameras says to Vladimir Putin,
    there are changes of the likes of which the world has not seen
    in 3 decades, and we, Russia and China together, are making
    those changes happen.
        Senator Tillis. And the last thing--I could talk to you for
    more than a day--but the last thing there, the fact that China
    came to the United States, the fact that Xi Jinping came to the
    United States means that he and the economy and the CCP is on
    the ropes, right? And when they are on the ropes, you keep them
    there and you keep them in a corner, and one of the ways you do
    that is to step up and lead. And I think leadership means that
    we provide supplemental funding to Ukraine. Thank you.
        Mr. Jaffer. Totally agree.
        Chair Brown. Senator Tester of Montana is recognized.
        Senator Tester. I want to thank the Chairman and the
    Ranking Member for having this hearing, and I want to agree
    with Senator Tillis' line of questioning, and I appreciate your
    response, and I want to thank all three of you for your
    testimony.
        Leading is something that is really important. We had an
    opportunity to do some things in last year's NDAA. The Ranking
    Member and the Chairman both talked about this. The House
    blocked every damn thing we tried to do, whether it was a FEND
    Off Fentanyl bill that we had a hearing on last week that would
    have held Chinese entities accountable, passed this body by a
    number that we never get numbers like that, in the high--in the
    90s, or whether it was an amendment led by Senator Rounds and
    myself that would have stopped China and foreign adversaries,
    the ones you mentioned, Mr. Jaffer--North Korea, Iran, and
    Russia--from buying farmland, which was also blocked by the
    Republican leadership in the House. I am going to tell you
    obstruction, it does not take anybody with a brain to do
    obstruction, and so if obstructionism is the--is the rule of
    the day, the House is doing it, and they are doing it really
    well to the destruction of this country.
        I am a farmer. Most people understand that food security is
    national security. If you want to screw up a company, screw
    around a country, screw around with their food supply.
    Recently, we just got a word that a Chinese national bought
    200,000 acres of land in Oregon. We did not know about it. That
    means our system does not work. It means self-reporting does
    not work. These folks do not want to self-report, and so we
    have got some work to do here, but, doggonit, this should not
    be a Republican or Democrat or House or Senate. This is the
    United States of America. And so keeping our country safe, not
    allowing China to spy on us, is really, really important.
        There has been a lot of talk about exploiting American
    innovation here today and it is a fact, and we need to make
    sure that we stop that from happening. When the--when the spy
    balloon that went over the United States was shot down, there
    was some--there was some information that was delivered that
    they used some technology that was bought in this country. I
    could ask all three of you this, but I am going to ask Mr.
    Jaffer. Some of this stuff was pretty simple. Some of it was
    more complicated than simple. Is there any way to stop this
    kind of stuff from happening? Is there anything we could do?
    And after he gets done, if other two would like to respond, you
    can.
        Mr. Jaffer. Well, Senator Tester, you know, there is a spot
    of hope in the House. You have Chairman Gallagher and Ranking
    Member Krishnamoorthi, who have done a lot of great bipartisan
    work together on the China Select Committee to move initiatives
    forward. Now, there are challenges with leadership and
    challenges getting, you know, the bipartisan group there
    together in the House, but there are opportunities, I think, to
    work and to get some of this stuff done. I think the Nation is
    waking up to the China threat. You mentioned the sale of
    certain technologies that end up in Chinese equipment.
        Senator Tester. Yeah.
        Mr. Jaffer. You know, it is crazy that American parents buy
    Chinese drones for their children for Christmas, you know?
        Senator Tester. Right.
        Mr. Jaffer. We have got to work to ensure that the American
    people are well educated about this, and by the way, they are.
    You go--I was just in Iowa a few weeks ago, and Iowans are
    worried about what you talk about, the purchase of farmland by
    Chinese corporations.
        Senator Tester. Yep.
        Mr. Jaffer. They are deeply concerned about that, and you
    are exactly right. I think there are opportunities. The
    American people are there. It is now bringing our businesses,
    and our industry, our Government, together with where the
    American people are to say this is not an acceptable situation.
    We cannot function in a world in which American technology goes
    into Chinese spy balloons or Chinese corporations are allowed
    to buy American farmland, or, frankly, land around our
    airports, our military facilities, and the like. It is not
    acceptable. It has to stop.
        Senator Tester. Correct. Anybody else want to respond to
    that? OK.
        Ms. Gorman. Sure. I would--I would just add I think there
    is a reason for optimism, and public engagement can go a long
    way.
        Senator Tester. Yeah.
        Ms. Gorman. One issue that we have tracked extensively, as
    I know many here have as well, is the issue of information
    platforms, such as TikTok, operating in the United States. Four
    years ago, when we raised these concerns, I think we were
    laughed out of the room. What does--who cares about a meme app?
    Who cares about cat videos? This is not a national security
    threat. Today, the most recent Pew Research poll from last year
    found that now, about 6 out of 10 Americans now view TikTok as
    a national security threat. That is public education in action.
        Senator Tester. Yeah.
        Ms. Gorman. And so I think there is promise.
        Senator Tester. OK.
        Ms. Kilcrease. Yeah. I would just add we keep getting
    caught short by these sorts of examples----
        Senator Tester. Yeah.
        Ms. Kilcrease. ----whether it is the spy balloon or TikTok
    or BGI or whatever the specific Chinese company is, and that
    means we have got a blind spot in our analytic capabilities.
        Senator Tester. Yeah.
        Ms. Kilcrease. We do not understand what is happening in
    China's technology ecosystems at the level that we should. And
    so as we think about how to strengthen our tools, you know,
    that is an area we should be prioritizing. Do we have experts
    in the Government who have access to both classified
    information and a wide range of open-source information that
    really know exactly what is happening inside of China's tech
    ecosystem.
        Senator Tester. Really quickly, I am a farmer. Self-driving
    tractors have been around for about 15 years. I finally got to
    a point where I was going to buy a piece of equipment that
    would allow that tractor to drive with me sitting in the cab.
    Every company I called was Chinese, and the people I were
    talking to was in mainland China, and finally I found an
    American company, and you know what he told me? He said--I told
    him what I just told you guys, and he said, yeah, they stole
    our equipment and remanufactured it. We got to do something
    about this, and we got to remove the stupidity that is going on
    over at the House.
        Chair Brown. Thank you, Senator Tester, for--always for
    your wisdom, born and being a real farmer, so thank you.
    Senator Hagerty from Tennessee is recognized.
        Senator Hagerty. Thank you, Chairman Brown. On December 20
    of last year, Gary Peters and I--Senator Gary Peters from
    Michigan and I introduced a bill to prohibit U.S. taxpayer
    dollars from going to companies like BGI that would use this
    funding to gain access to the U.S. market and, importantly,
    gain access to American citizens DNA--DNA data, I should say,
    their genetic data. I want to thank Senator Peters for working
    with me on this. He is prioritizing this bill for this month's
    Committee markup. I look forward to getting this passed to deal
    with this fast-moving threat.
        I think all of you know this, that BGI is the largest
    collector of genetic data in the world. BGI stores this data in
    China's National Gene bank, which is directly managed by BGI,
    and it is owned by the Chinese Government. BGI has analyzed
    some of this data that it has collected using supercomputers
    that are built and operated by the Chinese military. What
    concerns me here is not just the collection, the storage, and
    the analysis of this highly sensitive data. It is also China's
    ability to use this trove of biological data and other life
    sciences data to train advanced dual-use artificial
    intelligence models, perhaps for malign purposes.
        So, Ms. Gorman, I am going to start with you. The question
    has two parts. I have heard from many AI professionals
    regarding the risk of China having access to massive life
    science training data. What, in your opinion, is the greatest
    national security concern regarding BGI's access to this, and
    what could the Chinese Government do with troves of U.S.
    genomic and other life sciences data when you couple it with
    advanced AI models?
        Ms. Gorman. Senator, thank you for the question. Really,
    thank you for your leadership in raising awareness of these
    issues on genetic data and genomic data. I think there are a
    number of maybe doomsday scenarios that experts would point
    to--personalized bio-weapons, for example--that could be
    designed. What I am more concerned about are two things. One,
    that these--DNA information is some of our most sensitive
    information, and we already know that the PRC has an ethnic
    mission to remake its population in favor of its Han Chinese
    population and is committing massive human rights abuses on its
    ethnic Muslim populations, like the Uyghurs. DNA surveillance
    can put that on steroids.
        Senator Hagerty. Mm-hmm.
        Ms. Gorman. Second, there is a competitiveness worry here.
    These technologies are the future. Personalized medicine,
    individualized medicine combining biotechnology and artificial
    intelligence, these are where our future therapies are going to
    come from, and I do not want them to come exclusively from
    China.
        Senator Hagerty. Mm-hmm.
        Ms. Gorman. So I worry that they are amassing these data
    bases, and we--because we will not collect DNA on our own
    citizens, and nor should we, we might fall behind.
        Senator Hagerty. And this is to any of you that want to
    respond to this, but what do you think Congress should do to
    prevent China from gaining access to this type of life sciences
    data that could be used to train dual-use AI models?
        Ms. Kilcrease. You know, I think there are a range of tools
    that Congress could consider. It is worth just emphasizing a
    point that Ms. Gorman made. You know, genomic data is
    particularly sensitive. If somebody steals my password, I can
    change my password. I cannot change my genomics or my genes,
    you know.
        Senator Hagerty. Yeah.
        Ms. Kilcrease. And so we should be looking at a heightened
    level of sensitivity----
        Senator Hagerty. Mm-hmm.
        Ms. Kilcrease. ----and a heightened level of protection
    precisely because of the unique nature of this sort of data. So
    a range of things that we could think about, certainly U.S.
    taxpayer dollars should not be going to support the growth of
    Chinese national----
        Senator Hagerty. Agreed. Yeah.
        Ms. Kilcrease. ----champions in this space, of course. We
    should be thinking about their access to our U.S. domestic
    market. You know, a weak spot in our economic security toolkit
    is Chinese access to the U.S. domestic market. That comes up in
    the ICTS space. It certainly comes up in this space as well.
        Senator Hagerty. Senator Peters and I are trying to get at
    that, yeah.
        Ms. Kilcrease. Exactly. The last point I would add is there
    is a broader conversation about the bulk transfer of any sort
    of sensitive U.S. person's data overseas to foreign
    adversaries. We simply do not have a legal authority that
    allows us to prevent that, and that is a real national security
    risk.
        Senator Hagerty. I think we should take a hard look at
    that. I would like to stay with you, if I might, Ms. Kilcrease.
    I want to shift gears to talk with you about Nippon Steel's
    proposed acquisition of U.S. Steel. You have publicly stated
    that you would be shocked if the deal got blocked. You are a
    former senior staffer at the Committee on Foreign Investment in
    the U.S., CFIUS. Could you walk us through the foreign
    investment review process and explain why you believe the deal
    would be unlikely to be blocked for national security reasons?
        Ms. Kilcrease. Sure, and I will focus my comments really on
    the CFIUS legal framework and how CFIUS typically views risk
    assessments in these sorts of transactions.
        You know, CFIUS, under its mandate from Congress, is laser
    focused on national security risks, but its concept of national
    security can be flexible. It can include economic factors, and
    so for a transaction like this that involves a critical
    component for our defense industrial base, I would expect that
    they would be looking--certainly, first of all, they will--they
    will look at the deal, right? It is a big deal, it is a
    significant deal, so there is an interest to review the deal in
    the first instance.
        But as they are thinking about risk, they will be looking
    at how the transaction would affect domestic production and
    domestic availability of steel, particularly the sorts of steel
    that are important for our national security platforms. They
    may also be looking at the workforce available to support that
    continued production. If there is a problem there, CFIUS has a
    range of authorities it can use to impose mitigation terms on
    the deal. That is typically how CFIUS in past practice has
    addressed those sorts of economic related concerns, to the
    extent that they rise to the level of a national security risk.
        Senator Hagerty. Can you apply them to this instance then?
        Ms. Kilcrease. So with the caveat that I do not have access
    to all of the deal information, you know, my sense is that if
    they did think that the acquisition was likely to lead to these
    negative sorts of impacts on U.S. domestic steel production,
    that it is very possible that there would be a mitigation
    agreement that would be either negotiated with or imposed on
    the companies to address those and to make sure that those are
    not those negative impacts. You know, the comment that I made
    that you quoted that I would be shocked if the deal actually
    got blocked is simply because we typically--CFIUS typically
    does not block those sorts of deals or does not recommend that
    the President block those sorts of deals based on past
    practice. The fact that it is Japan and not China making the
    acquisition, I think, will be relevant in their consideration.
    I think there will be an incentive to, you know, consider the
    alliance aspect in their review as they move forward.
        Senator Hagerty. Thank you. Thanks, Mr. Chairman.
        Chair Brown. Thank you, Senator Hagerty, for exploring
    that. Senator Warren--Warner from Virginia is recognized.
        Senator Warner. Thank you, Mr. Chairman, and thank you for
    having this hearing, and, Ms. Gorman, it is good to see you. I
    will quickly address one of the things you mentioned about
    TikTok. I do think it is a national security concern. I think
    we have--it is remarkable, though, what the power of money buys
    in this town. When we had broad-based bipartisan support on a
    comprehensive approach that would not only take on TikTok, but
    a framework for threatening technology from adversarial
    Nations, it was--almost looked like it was going to be too easy
    at first. We had 26 senators evenly divided, support from the
    Administration, support from lots of industry, to have this
    organized approach so it would not be a one-off. ByteDance then
    dropped $100 million on getting folks from the far left and the
    far right to come out against our approach. They literally
    bought up advertising. Every political tip sheet in D.C. was
    sponsored by--for weeks on end by TikTok. And I think this
    problem has not gone away, and we need to revisit it now more
    than ever as we see TikTok, and, unfortunately, I think the CCP
    play out their agenda using TikTok because it is a news
    delivery model.
        I want to talk a little bit, though, about another area on
    open source. Open source has played a huge role in things like
    software development for years. We have seen it play a role in
    semiconductor architecture, AI models, AI development models.
    It is one of the reasons why I have worked with Senator Kennedy
    on this Committee on a bill, Senate Bill 3554, the Financial
    Artificial Intelligence Risk Reduction Act, that goes after
    some of the challenges around AI in the financial markets where
    I think we have huge, huge vulnerabilities. I want to get the
    plug in on my bill, and I am come back to open source. Now, you
    know, there is a lot of value in open source, but I have been--
    when we look at some of the projects, like the RISC-V
    initiative, how the PRC is using that in the semiconductor area
    to gain information.
        And maybe just go down the aisle, starting with you, Ms.
    Kilcrease. How do we--how do we do--you know, there is value in
    open source, there is a lot of good research going on in open
    source, but how do we better educate American companies that,
    many times through some of these open source projects, we are
    basically giving away the crown jewels for free. I can tell
    you, sitting from the--Chairman in the Intelligence Committee,
    we see China prey upon these open-source opportunities all the
    time. How do we do a better job of getting companies to
    understand that risk? And I will take of--each of you.
        Ms. Kilcrease. Thank you for the question. It is a really
    hot button issue in certainly the chip space and in the AI
    space right now about how to think about open source models.
    You know, it is important to recognize upfront that this is
    exactly the kind of tactic that China would use to circumvent
    ever-increasing levels of controls. If they cannot get the chip
    directly, if they cannot access controlled design technology,
    they will, of course, look for what is available on the open
    market through either licit or illicit means.
        Now, there are benefits to the open source approach, and
    certainly some of the safety researchers will tell you that
    there are some benefits to having the public being able to
    access and test these sorts of open source models. However, it
    really does depend on who is doing that, right? And as we think
    about trying to make these tradeoffs and these balances, I do
    think we need to have a more serious conversation on controls,
    on the release of some of these models, particularly the really
    powerful frontier AI models, where we do not even know what
    those things are capable of yet.
        Senator Warner. Mm-hmm.
        Ms. Kilcrease. And so whether that is putting parameters
    around AI models with a certain computing power, compute
    function, really just trying to put in place some commonsense
    guardrails that maintains a level of openness so we can get
    those innovation and public safety benefits while also making
    sure that those sorts of models do not go to adversary
    countries.
        Senator Warner. Mr. Jaffer.
        Mr. Jaffer. Thanks, Senator. Look, I think there is a
    challenge when you think about putting the kind of restrictions
    on that we are talking about, this idea of open source models
    that have a certain size or certain compute power. We do not
    know what those technologies can do, but we also do not know
    the benefits they can offer us. So I think artificially
    limiting those ahead of time could be a mistake. I think the
    right approach instead is to take a more comprehensive look
    across the board and realize that our system benefits from
    having both open source capabilities out there as well as
    private proprietary software, and that we work best in an
    environment where both operate in parallel, and there are open
    source capabilities that are out there.
        Those tend to be less powerful. You will find the
    proprietary models will likely be more powerful and more
    capable, and, ultimately, because they are able to make more
    money off those, will be able to sell those at higher rates.
    And so you will see more investors, I think, head toward
    proprietary capabilities, but shutting off the open source
    environment, I think, would be a mistake, just like putting
    artificial constraints on models based simply on their compute
    power and the like.
        Senator Warner. ----necessarily shutting off, but I am
    thinking we ought to be going eyes wide open.
        Mr. Jaffer. Absolutely.
        Senator Warner. And I fear sometimes some of the companies
    involved do not recognize that. Ms. Gorman.
        Ms. Gorman. Senator, it is great to see you, too, and I
    agree that heading into this historic election year with the
    TikTok election is disastrous. On the open source question, we
    have to take it back to what are our national security
    objectives, and here, I would actually put forward that we
    should look at the applications. We are going to see
    specialized models that are application-specific large language
    models. Processing text is just but one of these examples. We
    are going to see the large language models for our immune
    system, the large language models for manufacturing data. Which
    of those application areas have a national security sensitivity
    that we do not want that to be open source?
        And I would also add that there is an advantage of open
    source beyond just our innovation advantages, but there is
    actually a strategic advantage, which is that we benefit from
    the fact that GitHub and open-source platforms and software
    engineering, they are written in English. That English is the
    lingua franca of software development, and Chinese engineers
    publish in English. I do not think we should cede that
    advantage, as well, because China is also developing their own
    open-source models and open-source platforms and data bases,
    and that is actually an area for competition as well.
        Senator Warner. Thank you. Thank you, Mr. Chairman.
        Chair Brown. Senator Vance from Ohio is recognized.
        Senator Vance. Thank you, Mr. Chair, and thanks to you and
    Ranking Member Scott for hosting the hearing, and thanks to the
    three of you for being here.
        I want to direct my questioning to Ms. Kilcrease. In
    particular, I want to ask you about a live situation, the
    Nippon Steel acquisition of U.S. Steel and something that I
    know a number of my colleagues from both sides of the aisle
    have expressed some concern about, and I have shared in those
    concerns. In fact, I wrote a letter months ago, worried that
    the U.S. Steel board would entertain foreign bids, even though
    I think it is a bad idea for a host of reasons we can get into.
    But, you know, but one of my concerns here is that the interest
    of foreign bidders in U.S. steel is not primarily about green
    fielding investment into the United States of America. They are
    not expanding steel production domestically, and they are not
    necessarily doing it because they have better access to
    capital. They are doing it primarily as a sort of tariff
    arbitrage. They are effectively buying access to the domestic
    markets in a tariff-free way.
        And, you know, I think that in a--in a world where, first
    of all, we are talking about one of the most protected
    industries, steel, in the world, pretty much every country that
    has a steel industry has significant protections placed on it.
    And we have learned the hard way over the last couple of years
    that America's capacity for manufacturing in some of the most
    critical weapons and other things is actually pretty
    lackluster, given our needs. I worry about what this means for
    our country, and I just want to ask, you know, this question.
    So am I right, Ms. Kilcrease, that the only real tool or the
    only real organization that could review this transaction would
    be CFIUS?
        Ms. Kilcrease. That is right. CFIUS is the one that would
    review this foreign investment consistent with its national
    security mandate.
        Senator Vance. Right.
        Ms. Kilcrease. There may be antitrust as well, but it is
    basically CFIUS----
        Senator Vance. And we are expecting a CFIUS review on this
    particular transaction, correct?
        Ms. Kilcrease. We are, and there have been public
    statements to that effect, yes.
        Senator Vance. Got it.
        Ms. Kilcrease. Yeah.
        Senator Vance. So here's my question.
        Ms. Kilcrease. Mm-hmm.
        Senator Vance. CFIUS is primarily or maybe exclusively a
    national security standard that it applies to reviewing these
    transactions. Can CFIUS consider public interest concerns as
    part of its review?
        Ms. Kilcrease. It cannot. So CFIUS is a national security
    test. It is a broad and flexible concept of national security,
    but if the concern, for example, is whether foreign investors
    are trying to get around tariff structures, it would be unusual
    for CFIUS to take action on that basis. And we probably do not
    want to encourage the bureaucracy to kind of get outside the
    four corners of the legal mandate it has been given by
    Congress.
        Senator Vance. Yeah, I agree with that. I guess part of my
    question is whether the--that we think that the four corners'
    legal mandate here is a little too narrow for what we are
    concerned about and what we are interested in.
        Ms. Kilcrease. Mm-hmm.
        Senator Vance. What do you think--I mean, if we wanted to
    empower our Government to, you know, ensure that we had things
    like sufficient native domestic production of steel, what do
    you think we might--maybe should do here? You know, if you were
    sort of, you know, legislator for a day and we wanted to
    further empower the Congress to protect, and I use that word
    intentionally, the domestic steel industry, what do you think
    we should be doing differently vis-a-vis transactions like this
    one?
        Ms. Kilcrease. So if there was a desire to have authorities
    on more of a public interest test for our foreign investment
    reviews, certainly that would require additional legislation.
    That is a gap. If the policy objective is to protect those
    sorts of domestic industries, apart from distinct national
    security concerns, we do not have a tool to do that today. So
    you would certainly want to consider whether there is a need
    for additional legal authorities as well as considering the
    impacts more broadly on downstream industries and broadly
    across the economy for that sort of proposal.
        Senator Vance. Great. I appreciate that, and, you know,
    maybe my office can follow up on some ideas on that front
    because I do think it is important. And I know just on this
    point, just to pontificate a little bit, there has been some
    concern, some pushback on my view that, you know, you should
    not be worried about Nippon Steel buying U.S. Steel because
    Japan is an ally, and Nippon Steel appears to be a very good
    company. I do not disagree with that. I think it is important
    to sort of point out that the Japanese are--you know, it is a
    great, great people, and they are an important ally.
        They also are fundamentally in the sphere of influence of
    China. You can imagine a scenario where domestic steel needs
    would fall by the wayside when you have an international
    company that owns those--that owns those rights and owns those
    production mandates. So just because they are an ally, I think,
    does not mean we should not be concerned about a foreign
    competitor buying up one of the most important industries, one
    of the most important companies for a very, very critical--not
    just national security, but full American interest company. So
    with that, I will yield, and thanks to the Chairman for giving
    me some time.
        Chair Brown. Thank you, Senator Vance. Senator Cortez Masto
    from Nevada is recognized.
        Senator Cortez Masto. Thank you. Thank you, Chairman, and I
    want to thank the Chairman and Ranking Member for another
    incredible hearing today on an important topic. All three of
    you, thank you, for giving us pause to question where we need
    to move forward and where the gaps are and what is working
    well.
        Let me--and let me, Mr. Jaffer, start with you because I
    could not agree more. We have got to start thinking, we bring
    those jobs back here, we bring the manufacturing, the
    processing back here. Here is an area that, for me, and I am
    from a mining State, the State of Nevada, and I have watched
    China as they have cornered the market on mining, and China
    currently controls about 90 percent of global rare earth
    mineral processing and rare earth magnet manufacturing, and
    that was not just by chance, right?
        Last month, China announced an export ban of rare earth
    extraction and separation technologies. Between this action and
    its recent export ban on other minerals, like graphite,
    gallium, germanium, it is clear China is threatening to
    weaponize areas where it has dominance over critical supply
    chains. For the benefit of the public if they are listening,
    there is not any rare earth mineral mining, except maybe one
    place, and that is Nevada and California. So that is why
    Senator Mullin and I have legislation to strengthen the
    domestic rare earth magnet supply chain and bring that
    extraction, the processing, manufacturing of these critical
    minerals, back here to the U.S. I hope my colleagues join us in
    this legislation.
        But my question to you is, how should the U.S. be thinking
    about our own export controls in light of these moves? We have
    had conversation. What else have we not talked about today?
        Mr. Jaffer. Well, you know, Senator Cortez Masto, I think
    it is critically important the issue you raised, this idea of
    critical minerals, strategic metals, rare earths. The fact that
    we do not have access to those here in the United States, the
    fact that we could get access to it, but our own environmental
    laws, our own--our own willingness to move our policies in the
    direction of making ourselves independent from China on those,
    is part of the problem, and it is not just the actual minerals
    themselves. Even when those minerals come from abroad, we
    cannot process them here because we do not have the
    capabilities. Our environmental laws and other laws make it
    hard for us to do that in the United States. We have got to
    incentivize businesses to engage in both mining extraction and
    processing here in the U.S. if we are going to free ourselves
    from this capability.
        And then going beyond that, I think that what we have to
    realize is that, to your point, this was not a mistake. This
    was not by accident that China ended up with a--with a huge
    portion of the world's capabilities in processing and obtaining
    and extracting minerals. They are making these moves in a range
    of other industries as well, whether it is semiconductors,
    access to data, artificial intelligence and the like, high-
    performance computing, accelerated computing. We need to be--
    recognize that China is strategic. They have a 2030, 2050,
    hundred-year view of the world. We operate, and what makes us
    so innovative is we operate on a every month, every year, every
    quarter view of the world, and that makes U.S. rapid and
    innovative.
        At the same time, we have to recognize that we are
    contending with an adversary that has a generational view of
    the problem. We need to take a generational approach. That
    means working closely with our allies. It is onshoring and ally
    shoring, and recognizing that our allies have a choice to make.
    If Europe is not with us, they do not succeed. They need to
    understand that Europe coming after American companies is a
    huge mistake. It does not benefit us, it does not benefit them,
    and it harms all of us in the long run against China.
        Senator Cortez Masto. And would you agree that China is
    taking advantage of the partisan bickering that is happening in
    Congress right now?
        Mr. Jaffer. One hundred percent. The partisan bickering
    happening in Congress and the partisan bickering happening in
    our country.
        Senator Cortez Masto. Yeah.
        Mr. Jaffer. The fact that we are divided as a Nation on
    issues like Ukraine, on issues like Israel, on issues like
    America's role in the world is a benefit to China. We need to
    get on the same page. It needs to be America leading the world,
    and it needs to happen as soon as possible.
        Senator Cortez Masto. I agree. This is--this is for the
    panel because there is another area, and I so appreciate this
    conversation. It is a challenge for us to, quite honestly, get
    anything done, right? There are some good things that we have
    talked about that we have done. There is more that needs to be
    done. Let me just bring one of them to you and get your
    thoughts on this. This is the idea of privacy.
        So the director of the White House's office of Science and
    Technology Policy said that Federal privacy legislation must
    work in harmonization with Congress' forthcoming legislation to
    create guardrails on artificial intelligent development. We are
    having this conversation about AI. I absolutely agree we need
    guardrails, we need to figure this out, but there is an idea
    that we also have to address privacy, privacy and security.
    Now, I have legislation that I have introduced 4 years ago.
    There is legislation out there my colleagues have introduced on
    privacy and security. Has not passed. We have not moved forward
    as we have watched some States do it. We have watched European
    Union.
        So I guess my question to all of you is, how important is
    it for us not just to address the AI and the challenges we are
    facing there, but also address this idea about privacy and
    privacy data and security? Would you agree that they need to be
    harmonized?
        Ms. Gorman. Yeah.
        Ms. Kilcrease. Absolutely. Oh, sorry. Go ahead.
        Ms. Gorman. No, go ahead.
        Ms. Kilcrease. It is such a huge national security risk.
    You know, as you think about the future that our children are
    growing up in and the lives that they are living online, and
    the fact that that is data that can be scooped up and sold to
    the highest bidder, it is terrifying. It is not in the public
    interest. It should be a high priority for Congress.
        Senator Cortez Masto. Mm-hmm.
        Mr. Jaffer. I think there is a real call to do something on
    privacy. I think the challenge is we need to avoid making the
    mistakes the Europeans made. They passed comprehensive privacy
    legislation. Everyone says we are behind Europe, but the
    reality is that our innovation system functions because we are
    not passing the kind of overweening, over regulatory laws that
    the Europeans are doing. In their privacy laws, they made it
    harder to achieve noble and novel cybersecurity initiatives as
    well. So we have got to make sure we act--we act, you know,
    cognizant of the implications some of these laws might have.
        It is a problem that we have various States doing this. We
    are going to need Federal comprehensive legislation. The
    question is, what does it look like and what does it need to
    do, and what national security interests do we need to account
    for in that, including our ability to collect foreign
    intelligence in the United States, you know, an issue which is
    now before the House and the Senate, expiring here in April,
    critical legislation that we need to pass and get back into
    law.
        Ms. Gorman. Yeah, privacy is a core democratic value. It is
    the bedrock of freedom of expression and assembly. It is a
    travesty that we do not have Federal privacy legislation, and
    it exposes us to other data security risks with some of these
    Chinese ICTS platforms that are exacerbated by our lack of a
    baseline protection of individual data. I would also add in the
    AI conversation, there are technologies that are in development
    that would actually allow us to help preserve some of that
    privacy. I am talking about privacy-preserving AI, privacy-
    enhancing technologies, where with AI, the issue is that the
    best AI models are trained on massive, massive amounts of data,
    and that is inherently, when it is personal data, a potential
    privacy violation. But there are technologies in development
    that would allow us to train these models without compromising
    the privacy of individual data, and I think we need robust
    investment in the advancement of those capabilities as well.
        Senator Cortez Masto. Thank you. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Cortez. Senator Britt of
    Alabama is recognized.
        Senator Britt. Thank you, Mr. Chairman. Thank you to all of
    our witnesses for being here today. Mr. Jaffer, as a former
    staffer to a former staffer, welcome.
        We continue to be reminded of the national security and
    economic implications of the Chinese Communist Party and the
    threat that they pose both to our country and to our future.
    Time and time again, the CCP has shown that they are not
    willing to play by the rules that govern international
    commerce. They have aided and abetted Iran, evading U.S.
    sanctions, and they are actively stealing U.S. technology and
    intellectual property across whole sectors of our economy, from
    artificial intelligence to computing to robotics to biology and
    beyond. In fact, the FBI's economic espionage caseload related
    to China has increased approximately 1,300 percent over the
    last decade. Today, on average, a China-related
    counterintelligence investigation is opened every 10 hours.
        The stakes could not be higher, and we must ask now to
    mitigate the ongoing economic harm happening to hardworking
    American families, Main Street small businesses, budding
    entrepreneurs, and critical industries. To that point, we must
    stop the CCP from buying U.S. land. Not only is this impacting
    the availability of fertile farmland for our agriculture
    community, but the CCP has deliberately compromised national
    security by purchasing land near our military installations. So
    I am proud to have joined Senator Tom Cotton in introducing the
    Not One More Inch or Acre Act, and I continue to urge my
    colleagues to join this effort.
        The U.S. has also--looking at existing tools that protect
    our national security and safeguarding technology innovation
    happening on college campuses and research and development labs
    and facilities across the Nation. We have taken a look and we
    are looking at what the CCP is trying to do to undermine those
    things. The Committee on Foreign Investment in the United
    States, in addition to export controls, classifications and
    security clearances and sanctions, all contribute to the
    firewall protecting American innovation, American IP, and
    American research from the Chinese Communist Party and other
    nefarious actors.
        Mr. Jaffer, I would like to ask you, where are the gaps in
    our current toolbox, and how do we ensure that U.S. security
    capabilities are able to keep up with evolving tactics by--and
    technologies that are being deployed by the Chinese Communist
    Party to steal our cutting-edge, our groundbreaking technology,
    the research and innovation that is happening here in the U.S.?
        Mr. Jaffer. Yeah. Well, Senator Britt, I think there are a
    few things we could do to help staunch the flow of U.S.
    intellectual property out the back door. One, we have got to
    deter effectively the Chinese. That means taking the fight to
    them, right? We have allowed the NSA and our--and our Cyber
    Command to get more aggressive and to lean forward to defend
    forward into adversary networks. More needs to be done there.
    We need broader authorities to allow our Government to push
    back more aggressively. We need to take the policy decisions to
    actually push back against Chinese depredation and the--and the
    efforts that other Nation-State actors, like the Iranians and
    Russians, are doing on our networks as well.
        Second, we also need to ensure that we have the policies
    and procedures in place that allow us to effectively push back
    economically against the Chinese. Today, we use tools like the
    SDN List, the Enemies List. These are not tools that are
    designed for the kind of economic depredation they engage in.
    We have either a sledgehammer on one side or a scalpel on the
    other. Neither works. We need a butcher knife that requires
    action by Congress to give the Administration more tools, and
    then the Administration needs to use those tools and use them
    effectively. Simply designating a group like the Houthis as
    especially designated global terrorists and not using the FTO
    designation is a mistake.
        Senator Britt. Could not agree more.
        Mr. Jaffer. Exactly. And so--and so we need to be more
    aggressive, and it is not just in capabilities and tools. We
    have to use them more aggressively. We have gotten too used to
    only using economic tools. They are not as effective as they
    could be. We need to get more aggressive on that front as well.
        Senator Britt. Listen, while we are talking, I know I only
    have less than a minute. I want to talk a little bit,
    transition a little bit into BRICS. When I am looking at what I
    am--I am seeing, obviously, we have had four more countries. We
    saw four more countries join earlier this month. Over 40
    countries have expressed interest in joining BRICS, and 22 of
    them have formally requested membership. I think this is
    startling and concerning, and I think, America, we need to wake
    up, and I think we need to demand that people withdraw from
    BRICS. And my question to you is, in your opinion, has the U.S.
    adequately examined the consequences and economic concerns and
    potential national security implications of BRICS, and what
    more do we need to be doing to push back on this?
        Mr. Jaffer. We have not done nearly enough, and the reality
    is that we are in something of a cold war today with China,
    right? We have to view the Chinese effort to consolidate its
    influence and authority over Nations in our own hemisphere, as
    well as in Africa and around the globe, as a strategic threat
    to our ability to continue to lead the world. And that comes
    from us being a strong adversary to our foes and a strong ally
    to our friends. Nobody trusts the United States today. They do
    not trust that we are going to be there.
        They saw what we did to our allies with the Kurds under the
    prior Administration. They saw what we did to our allies in
    Afghanistan under the current Administration. They have seen it
    over and over again. They see our adversaries punch at us, with
    Iran, with China, with Russia, and they see U.S. take those
    punches and do little to confront them. Until we demonstrate
    that we are prepared to lead and be a good ally to our friends
    and a real adversary to our foes, nobody is going to come
    alongside us, BRICS will continue to grow, China will continue
    to gain influence, and countries in our own hemisphere will
    switch their recognition from Taiwan to China. It has happened
    twice in the last 6 months.
        Senator Britt. Yep. It is a huge strategic threat.
        Chair Brown. Thank you, Senator.
        Senator Britt. So thank you so much. I appreciate it.
        Chair Brown. Thank you, Senator Britt. Senator Warren from
    Massachusetts is recognized.
        Senator Warren. Thank you, Mr. Chairman. Every time you log
    onto a website, Big Tech companies collect extremely detailed
    data about your spending habits, your physical location, your
    health status, your political beliefs, your religious beliefs,
    and more, and every 30 seconds, Big Tech companies auction off
    that data to the highest bidders here and around the world.
    Now, Americans' data are broadcast in this way 107 trillion
    times--that is trillion with a ``T''--every year. This does not
    just pose a risk to Americans' privacy. It also poses a risk to
    our national security. Reports have found that some buyers of
    our data build huge dossiers of extremely personal information
    about U.S. Government officials and military service members.
    They then turn around and sell that information to companies in
    China and Russia, where the Chinese and Russian Governments can
    access it without our even knowing anything about it.
        Ms. Kilcrease, you have spent years in Government service
    working on issues like data security policy. So when China or
    another foreign Government gets their hands on our data, what
    can they do with it?
        Ms. Kilcrease. Well, nothing good comes out of that
    situation, Senator Warren, so thank you for the question. There
    are a range of national security risks that can arise from the
    unfettered transfer of that sort of information on U.S.
    citizens. To take one example, there has certainly been public
    reporting about Fitbits on U.S. soldiers being used to enable
    the movement of our troops. That is a clear national security
    concern.
        Senator Warren. Uh-huh.
        Ms. Kilcrease. And when you think about the types of
    personal information that is available online and can be
    collected and sold, as you note, you can think about enabling
    blackmail. You can think about enabling cyber exploits. It is
    just a massive counterintelligence concern, essentially, when
    that level of information is for sale on the open market about
    individuals who are in these sensitive positions.
        Senator Warren. But Big Tech tells us that it is helping us
    when they sell or store your data however they want, wherever
    they want, because it will improve your online shopping
    experience, or they claim it will help keep your data safe. In
    reality, the only winners are foreign Governments and the tech
    companies themselves. Harvesting more of your data means you
    get more targeted ads, and Big Tech gets more revenue from
    those ads. And as part of the bargain, foreign Governments, our
    adversaries, get access to compromising information about U.S.
    military and Government personnel and their families.
        Now, Congress and the Biden administration have plans to
    address those risks, and Big Tech companies know this. That is
    why they are hijacking our trade agreements to slip in
    provisions that would prevent policymakers from limiting Big
    Tech's ability to transfer our data wherever they want. Now,
    the Big Tech lobby likes to say, do not worry, Congress could
    still act to protect Americans' data under certain exceptions,
    like, if there is a, ``legitimate policy or national security
    need.''
        Ms. Kilcrease, in theory, the exceptions that Big Tech
    companies want us to rely on would give policymakers some
    ability to override the data provisions that Big Tech slips
    into trade deals, but of the 48 times that countries have
    invoked a public policy exception at the World Trade
    Organization to protect their domestic policies, how many times
    has it actually worked?
        Ms. Kilcrease. You know, I think when those sorts of public
    policy exceptions are raised in the WTO context, not speaking
    for when the U.S. Government raises it because, presumably, we
    are always acting with legitimate public policy and national
    security interests in mind.
        Senator Warren. Uh-huh.
        Ms. Kilcrease. But I understand that the number is fairly
    limited in terms of the ability----
        Senator Warren. Do you happen to know the actual number?
        Ms. Kilcrease. I believe it may be two, ma'am.
        Senator Warren. Two. So twice out of 48 times this
    exception has actually been worked. Just 2 times. I got to say,
    I do not like our chances on using this exception, and the
    national security exception is no more reliable. Trade law
    tribunals have consistently ruled against the U.S.' use of this
    exception. Unaccountable trade tribunals should not decide who
    gets access to information about American soldiers and about
    our national security, and Big Tech companies cannot be allowed
    to co-op trade policy for their own benefit, especially when
    that means continuing to allow the Chinese and Russian
    Governments easy access to personal data about U.S. Government
    officials in our military, putting our national security at
    risk. American data policy should be decided by the American
    people through their representatives right here in Congress,
    not by trade tribunals, not by trade negotiators, and certainly
    not by Big Tech. Thank you, Mr. Chairman.
        Chair Brown. Senator Warner, thanks. Senator Reed of Rhode
    island is recognized.
        Senator Reed. Thank you very much, Mr. Chairman. I thank
    the panel for being here. Ms. Kilcrease, unlike other financial
    institutions, private equity funds and hedge funds are exempt
    from requirements to maintain anti-money laundering programs,
    verify the identities of their customers, and report suspicious
    transactions. Are you concerned that this opacity of the
    private market presents a national security threat?
        Ms. Kilcrease. Absolutely, and thank you for that question.
    I think it has been recognized for quite some time, including
    dating back to at least 2015, that there is a potential
    loophole in our ability to enforce sanctions when it comes to
    these particular pools of money. And as we are increasingly
    imposing larger levels of sanctions, including the historically
    large and unprecedented waves of sanctions that we have imposed
    against Russia in response to its invasion of Ukraine, those
    sorts of bad actors, those sanctioned actors, they are going to
    look for end runs. They are going to look for legal ways to
    continue to access their money. So I do think it is critically
    important that we take a hard look at these sorts of evasion
    routes and these sorts of loopholes to make sure that when we
    impose these sorts of sanctions, they are really biting the way
    we want them to.
        Senator Reed. Well, and there is another aspect, too, and
    that is, particularly when it comes to China and Russia, the
    ability through these private arrangements to conduct
    espionage, to get access to technology or secrets or plans
    because they are part of the enterprise. Is that a concern of
    yours also?
        Ms. Kilcrease. You know, it certainly could be. If they are
    having access to these sorts of investment funds and the funds
    are then investing in U.S. critical technology companies, I
    mean, that is the exact reason why we have CFIUS, is to make
    sure that those sorts of financial transactions cannot be used
    to access sensitive information that would be contrary to U.S.
    National security interests. But what you are raising, of
    course, is a really critical question around whether we have
    visibility into these sorts of transactions and the right
    ability to enforce, and I do think that is an area where we
    need to continue to have a really strong focus to make sure we
    are shutting down all those sorts of loopholes.
        Senator Reed. Speaking of CFIUS, Ms. Gorman, when the last
    reauthorization came about, I included a provision that
    directed the Committee on Foreign Investment in the United
    States, CFIUS, to establish a process to assist partners and
    allies with foreign investment review, basically to collaborate
    with foreign agencies and look closely at what was going on.
    And last May, Assistant Secretary Paul Rosen described how
    CFIUS is working now with more than 20 other countries to pool
    their investigations. Should Congress provide a similar
    statutory mandate to coordinate export control authorities,
    resources, and information sharing with partners and allies?
        Ms. Gorman. Thank you, Senator, for that provision and your
    leadership on that issue, and it has been inordinately
    successful. In the European Union, we have gone from 11 Nations
    having inbound investment screening regimes before the
    provision to now 21 after, and more and more Nations are
    working to set up their own investment screening mechanisms. So
    I think that, yes, that type of provision where Congress
    provides the authorities, the resources, and the coordination
    mechanisms, and, crucially, that--those authorities to share
    some of that sensitive information with our close allies and
    partners would be the next step that is needed in our export
    control frameworks because these controls will shoot us--shoot
    ourselves in the own foot if they are not done multilaterally.
    We have heard from U.S. industry that they want multilateral
    controls, and they have the effect of not actually preventing
    the technologies from getting into the hands of the PRC. So the
    best thing we can do is fully resource, create these
    longstanding mechanisms of collaboration, and I think the
    FIRRMA is a great one to use.
        Senator Reed. Finally, Ms. Kilcrease, we were all very
    excited after being shocked by the Russian invasion of Crimea--
    not Crimea, but Ukraine--when it appeared that our export
    controls and other sanctions were having a tremendous effect on
    the Russian economy, but it appears they have been very
    successful evading those controls, and their economy now is not
    the critical issue. It is weakened, but it is not the critical
    issue. What more must we do to make sure our sanctions are
    effective?
        Ms. Kilcrease. Yeah, it is such an important question.
    Thank you for that. A lot of it comes down to enforcement. We
    just need to pour more resources into making sure that the
    inevitable efforts to get around our sanctions and invade our
    sanctions, that we have got export control officers who are
    robustly looking out for that, but also, we need to be putting
    a lot of diplomatic pressure onto some of these third-party
    countries that are key sources of transshipment. The trade data
    consistently shows that there is just a massive amount of
    particularly Western components going through countries like
    Turkey, like the -Stans through China and getting into Russia
    and ultimately ending up on the battlefield. That is an
    unacceptable outcome. We really need to be putting pressure
    diplomatically on these countries to take action in their own
    jurisdictions to align with the U.S. sanctions approach, or,
    ultimately, we are going to have to take enforcement actions on
    many more companies in those countries to really crack down on
    this sort of evasion.
        Senator Reed. Thank you very much.
        Chair Brown. Thank you, Senator Reed. Senator Van Hollen of
    Maryland is recognized.
        Senator Van Hollen. Thank you, Mr. Chairman. Thank all of
    you for your testimony. It is an important conversation, and,
    of course, the title of the hearing is, ``The Challenge of
    Outpacing China in Emerging Technologies''. And I would say,
    first and foremost, we have got to invest here at home in
    making sure that we remain at the cutting edge. The CHIPS and
    Science act was a big part of that. The chips part of that was
    funded. The science part was authorized and remains unfunded.
    It seems we have really got to invest in those areas,
    everything from AI to quantum computing to other areas. Second,
    I do want to mark in terms of protecting U.S. intellectual
    property, Ben Sasse, former senator, and I teamed up. We
    introduced and we passed legislation entitled, Protecting
    American Intellectual Property Act, which does give the
    executive branch more tools to help companies who are victims
    of intellectual property theft by China or anybody else.
        Third, I want to pick up on the conversation we just had
    with Senator Reed but also to say I do think the Biden
    administration has taken the right approach overall. They
    recognize that we are not going to decouple from economic
    engagement with China, but they also recognize that we have to
    de-risk, and we have to make sure that we de-risk critical
    supply chains, and that we have to work with our partners in
    preventing very high-end technologies that can be used for
    military purposes from getting to China. And as you know, we
    have done that in the area of some very sophisticated chips,
    manufacturing equipment with this trilateral agreement we
    reached with the Netherlands and Japan, and we need to build on
    that. As the Administration says, small garden but tall walls.
    We want to protect sort of our crown jewels and technology, and
    we want to--but to have the tall wall, and I want to pick up on
    the conversation on multilateralism and having cooperation of
    our friends and allies and other advanced economies in this--in
    this effort, and especially with respect to where we are going
    on AI right now because I believe we need--we need a
    multilateral approach. We need an export regime with our
    allies, similar to the CFIUS process, which has grown and
    developed.
        When it comes to AI, Ms. Gorman, as you know, the Europeans
    have moved forward with some regulations. Do you see that--the
    fact that the United States and the European Community are not
    right now on the same page or the same place as creating
    openings for China in terms of trying to set standards for AI
    or to advance their own interests in that area?
        Ms. Gorman. Thank you for the question. I think yes and no.
    I have heard conversations from folks in the community who are
    talking about how China is regulating AI better than the U.S.
    is. I think that is totally wrong. China has staked out a
    position on AI regulation, but it is in its own national
    security interests, promoting its own core socialist values. So
    I think we should strive toward transatlantic alignment on AI
    regulation and AI use. I do not think that means we are going
    to be doing the same thing.
        I like the innovation-forward approach that we have taken
    so far, making smart investments in responsible AI development
    use, privacy protecting technologies in AI, and then agreeing
    on some of the common guardrails and baselines. For example,
    using AI for social scoring and mass surveillance, that is a
    clear no. The U.S. and the EU have both said that. Let us build
    that into our approaches. I am also really worried about the
    threats of AI to our electoral processes when it comes to
    disinformation and deepfakes. I think there are issues that we
    can really agree on and put forward multilateral, democracy-
    forward regulations on AI without having to be completely in
    lockstep with the EU.
        Senator Van Hollen. Yeah. No, I am not suggesting that we
    adopt what the EU has done, but I--it is another area where
    more coordination, it seems to me, could be helpful. In terms
    of protecting high-end chips technology, there has been this
    new sort of open-source RISC-V technology. I do not know if any
    of you are following this story closely, but it is an open
    source, and there is increased reporting that China is actually
    drawing upon some of this open-source technology for their own
    semiconductor development purposes. I do not know if any of you
    can comment on that because as we talk about trying to, you
    know, coordinate among our allies and friends, obviously, if
    there is a back door through open source, that could create
    issues. Ms. Gorman.
        Ms. Gorman. Yeah. I would just say that we have to be smart
    about which initiatives and which technologies we want to
    really try to open source. There was a movement in electronic
    design automation software some years ago to try to create
    open-source repositories for creating these kinds of designs,
    but when we actually looked at the competitive analysis
    landscape, it turns out the U.S. has massive advantages in
    concentration of market share in these EDA software
    technologies. So this is why our lack of an analytical
    capability continues to harm us--because we cannot assess the
    effects of should we build out a robust open-source ecosystem
    in something, or is it going to sacrifice some of the critical
    chokepoints or advantages that we have? And without that
    capacity, I think we are flying blind in a number of these
    areas that are central to our future AI competitiveness.
        Senator Van Hollen. I appreciate that, and I see time is
    out, so I am going to submit a question to all of you for the
    record about how we--the best tools for trying to get more
    multilateral cooperation because, of course, the one tool we
    always have is secondary sanctions, but that is a very blunt
    instrument. So I am going to pose a question to all of you
    about how you--how you balance that, when you would use that
    particular tool.
        Thank you.
        Chair Brown. Thank you, Senator Van Hollen. Senator Smith
    is recognized from her office.
        Senator Smith. Thank you, Chair Brown. Thank you so much to
    our panelists, and I am glad to be joining you from my office
    if not in person. So, Ms. Kilcrease, my question is going to be
    directed to you this morning.
        China's military civil fusion strategy, I think, creates
    some unique obstacles for how to craft and enforce export
    controls for these dual-use technologies because it is
    difficult to figure out the technologies intended end uses and
    end users, and, of course, the rapid pace of innovation and
    technology only makes this harder. So we need robust controls,
    export controls that is critical to our national security so
    that U.S. technologies do not go to unintentionally supporting
    China's military modernization and intelligence collection
    efforts. So could you give us your perspective on this? What
    challenges does China's military civil fusion strategy pose for
    our export control, and what more should we be doing to address
    this challenge?
        Ms. Kilcrease. Thank you for that question. You know,
    historically, our export controls try to make distinctions
    between technology exports that would be for civilian purposes
    and those that would be used for military purposes. I think we
    are increasingly realizing that you cannot make those sorts of
    clear distinctions, and you cannot enforce those distinctions
    when it comes to the Chinese economy based on the structure of
    their economy and their clearly stated military civil fusion
    policies. And so what you have seen in recent years, most
    notably in the October 7 export controls in 2022 released by
    the Biden administration, was a response to that, where instead
    of trying to make these sorts of distinctions, we instead drew
    a line in the sand, and we said technology that exceeds these
    technical thresholds is a de facto national security risk if it
    goes to China, regardless of whether the stated intent is for
    military purposes or for civilian purposes because we just
    cannot tell the difference anymore.
        And I think that is generally the direction of travel that
    we need to consider when it comes to technology exports to
    China. We should not rely on an ability to have full visibility
    into and be able to enforce in that very difficult context
    within the China market. I think that certainly applies for the
    export control conversation. It certainly applies when we are
    talking about the investment security tools as well. We just
    have to be very clear-eyed that we are going to have to take
    these countrywide approaches to imposing controls on these
    technologies that have such clear relevance for our national
    security interests.
        Senator Smith. And do you think that step is sufficient, or
    is there more--what more should we be looking at?
        Ms. Kilcrease. I think it is a good start, but that
    countrywide approach, really, it is limited right now to the
    controls that we implemented with respect to chips AI in
    supercomputing. There is a lot more that we can do. There are
    many more sectors where we should be looking at whether the
    Control Lists are fully adopting that sort of countrywide
    approach in some of the sectors that China itself has
    identified as a priority for them to develop and dominate in
    the global marketplace moving forward. So we really need to
    invest and have a keen focus on that continual process of
    updating the Control Lists, particularly in emerging technology
    areas, to make sure that they are not stuck in the cold war era
    but are really keeping peace today.
        And then, consistent with the themes we have all been
    talking about, do we have the analytic capability to understand
    as we roll out these new and innovative sorts of controls, are
    they working? Are they slowing Chinese indigenous capabilities
    in the way that we want them to?
        Senator Smith. Mm-hmm, and thank you for that, and
    following up on that, and also I think a bit on what Senator
    Van Hollen was asking about, in addition to sort of taking this
    approach with our export controls, what more should we be doing
    to encourage our allies around the world to sort of operate in
    the same way? I mean, if we, for example, bar a U.S. firm from
    exporting technology to China, but they can--you know, they can
    get the same thing from somebody else, we have not accomplished
    that much.
        Ms. Kilcrease. Exactly. It absolutely needs to be a
    multilateral approach, and there is a lot more the U.S. could
    be doing. We currently coordinate controls with key partners
    under the multilateral export control regime process, but there
    are some serious questions about whether that is sufficient or
    fit for purpose. We need to be thinking about how to enhance
    strategic alignment with our allies, who we do not always agree
    with, on how to address the China threat, so that is priority
    number one. Have we convinced them and have we provided the
    analytic and intelligence argument to our allies to convince
    them that they also need to be taking this sort of countrywide,
    broad approach to controls?
        And then from there, we need to be going to our partners
    and allies on a regular basis with a focus on the key producer
    Nations in these key technology areas and saying, this is what
    the U.S. thinks we ought to control. Will you come with us?
    Ultimately, I think ideally what we would like to see is a new
    export control regime that really allows for a focus on
    strategic trade controls and the strategic competition with
    China. There is a lot of skepticism in our key partner
    countries right now on that idea, so we also need to be
    thinking about interim steps that we can take to strengthen
    alignment, but, ultimately, that goal should be a new
    formalized regime process that really allows us to do this in
    lockstep with partners and allies on a regular basis.
        Senator Smith. That is great. OK. Thank you so much, Mr.
    Chair.
        Chair Brown. Thank you, Senator Smith. Senator Warnock of
    Georgia is recognized.
        Senator Warnock. Thank you so much, Chair Brown, for this
    important hearing on our national security and outpacing China.
        Last year, the Congress passed the CHIPS and Science Act.
    It is a piece of legislation I was glad to support and
    champion. It spurs research in several critical technologies,
    including quantum computing, AI, cyber infrastructure, and more
    in our effort to make sure that we remain competitive with
    China and, in fact, have the competitive edge. Georgia, I am
    very proud to say, has been leading the country in our efforts
    to stay globally competitive, using research and development
    funding from the CHIPS and Science Act to pursue cutting-edge
    research in healthcare, agriculture, cybersecurity, and beyond.
        Chips are in everything, and for the fiscal year 2024, in
    spite of our passing this legislation in which the Chips and
    Science Act authorizes over $26 billion in domestic research
    investments, and one could make an argument that we should have
    done more. In fact, the draft appropriations bills only include
    about three-quarters of that amount. So there is a disconnect
    between the seriousness of this issue, the importance of us
    passing that legislation, and where we are right now in terms
    of appropriations.
        Ms. Gorman, as China continues to significantly expand its
    investments in research and development, do you agree that
    supporting domestic research is a matter of national security?
        Ms. Gorman. I do, 100 percent, and I think it is one of the
    top priorities that we should have. The CHIPS and Science Act,
    which was a historic, bipartisan win, reversed decades of
    underfunding in our research and development enterprises that
    have put the United States atop the world, a global leader in
    many of these exact areas you are talking about: AI, quantum
    information. We cannot risk having those advantages fall by the
    wayside, especially when the PRC is moving ahead and trying to
    become the global leader and outrun us.
        These investments are critical, and it should not just be a
    one-time deal. We have called for a process whereby every year,
    every 2 years, maybe every 4 years, we reevaluate what are the
    key technology areas we need to win in the competition, are we
    resourced for it, and how do we leverage the whole of the
    American population, all regions, through innovation hubs and
    tech hubs, toward those goals? This is, I think, almost no
    higher priority.
        Senator Warnock. Well, I agree, and the tech hubs is an
    important provision in that legislation that I have certainly
    supported. But we hear this argument, or this differentiation
    between defense and non-defense in terms of appropriations, and
    if I am hearing you correctly, you would--you would agree that
    investments in agencies, like the National Science Foundation
    and the Department of Energy, are critical to our national
    security, and that the distinction is worse than an academic
    distinction. It is terribly unhelpful.
        Ms. Gorman. Completely. They are--they are critical to our
    future competitiveness, which is at the heart of the strategic
    competition, which is a national security competition with the
    PRC. We can no longer think only in terms of hard power,
    especially when the PRC is playing on so many other playing
    fields. They are weaponizing their economy to coerce businesses
    to give them technology. They are coercing individuals to
    silence them on critical issues that the PRC does not want to
    hear about. This is a full society competition, and so limiting
    ourselves only to this traditional notion of military hard
    power misses a huge swath of the competition space.
        Senator Warnock. Sure. They do not respect these silos in
    terms of appropriations. Now, in addition to this, it seems to
    me that we also need researchers and students from all across
    the country to bring these scientific innovations to life. We
    need all of our brain power, and that is why I authored a
    provision in CHIPS and Science to increase research capacity at
    HBCUs--historically black colleges and universities--and also
    minority-serving institutions. Supporting these institutions is
    not simply about equity and diversity. It, too, I would argue,
    is about national security. If we are going to effectively
    compete with China, we must find and nurture the finest minds
    in our country, and as a proud HBCU graduate, I think I know
    where you can find some of those incredible young people and
    talent.
        Ms. Gorman, what else can Congress do to ensure we are
    identifying and supporting talent, whether that talent comes
    from Georgia Tech, Savannah State, or Spelman College?
        Ms. Gorman. I completely agree. We need--this is--this is a
    tough competition. We need the best and the brightest from
    everywhere across the country. I think what we--Congress can do
    going forward is replicate some of the initiatives that were in
    the CHIPS and Science Act for other critical technology areas,
    creating these types of innovation hubs, creating a focus on
    HBCUs. I saw the Air Force has also partnered with HBCUs in
    technology development and achievement initiatives like that
    across these other emerging technology areas, not just the
    chips manufacturing, which is incredibly important:
    biomanufacturing, quantum information, agriculture, clean
    energy technologies. There is so much more we can do, and all
    our communities are affected, and so we need all of our minds
    working on the problem.
        Senator Warnock. Thank you so much. We certainly need to
    strengthen the pipeline, tap into all of the brain power that
    we have, and I appreciate your perspective.
        Chair Brown. Thank you, Senator Warnock. Senator Fetterman
    from Pennsylvania is recognized.
        Senator Fetterman. Thank you, Mr. Chairman. Thank you,
    Senator. Thank you, Mr. Chairman. Hi. Thank you. It is great to
    always talk about the experts, and my first question is to
    anyone on the panel.
        You know, everyone recognizes the danger of IP theft, and
    China has a well-known history of stealing our intellectual
    property. Do we agree? Almost, you know, the one copy kind of
    county. We need to block China from stealing or using our IP to
    develop and weaponize artificial intelligence. Can anyone on
    the panel describe the gaps that allow China to steal IP, and
    how can we cover those gaps?
        Mr. Jaffer. Sure. Senator Fetterman, a couple of thoughts.
    One, you know, the Chinese have engaged in a decades-long
    effort to steal intellectual property out of American computer
    systems and the like, millions of dollars a year, billions of
    dollars in total. General Alexander, the former director of the
    NSA, called it the greatest transfer of wealth in human
    history, so we have got to push back. We have got to deter,
    both at a Government level and an industry level.
        Today, private industry is not capable of defending itself.
    It simply does not have the capacity or knowledge and know-how
    that the Government has, so we have got to partner tightly
    between industry and Government. And then second, we have got
    to really incentivize our cybersecurity defenders and our
    companies to really protect their own intellectual property.
    They have every incentive today. We can--we can put more money
    and more effort into that by giving them tax incentives and the
    like to better defend their systems.
        Senator Fetterman. Anyone else on that?
        Ms. Gorman. Yeah. I would--I would just add to that that
    the problem also exists in terms of forced technology
    transfers. The allure of the Chinese market remains a
    compelling factor for companies who want to do business and
    sell their products in China. Oftentimes it means they are
    forced to partner with Chinese firms that have an explicit goal
    of buying them out of the market, taking their technology, and
    eventually replacing them. I think the short-term capitalism
    that drives our system is a strategic vulnerability here. We
    are not necessarily looking to our long-term competitiveness
    when we are so focused on quarterly earnings and quarterly
    turnovers.
        Senator Fetterman. I mean, well, this is a hearing, you
    know, really the title is national security and our challenges
    in emerging technology. Would you agree with that, that AI
    would be the single largest, the biggest one, threat or no, or
    what do you think? Anyone.
        Ms. Kilcrease. You know, I think we need to have a holistic
    approach when we are thinking about the technology competition
    with China simply because they are as well, right? They are
    trying to prioritize investments and leadership and domination
    in a range of sectors. AI, of course, is a really important
    one. I am just as worried, candidly, about growing market share
    of China in legacy chip production. That raises a whole host of
    additional national security risks that we have not even
    scratched the surface on in terms of appropriate policy
    responses. So I do think we risk--if we overly focus in one
    area, we are going to have a blind spot in other areas. So it
    needs to be biotech, AI, quantum, chips, a whole host of other
    technologies where China is really making those investments,
    and we need to as well.
        Senator Fetterman. I like that. Any others? I really like
    this--where this is going. Any other----
        Ms. Gorman. Yeah. I would add it is not only the AI threats
    that were, I think--that are in the popular zeitgeist of these
    kind of doomsday scenarios and those AI risks. But I would like
    to see us focus more on, how is China applying AI to all these
    sectors that they have said that they want to lead in? Those
    are where we are going to see, I think, the biggest
    applications of artificial intelligence and the biggest
    industry and societal advancements. And China is very, very
    good at taking a technology developed elsewhere and
    commercializing it and applying it extremely well, and I worry
    that even though the U.S. has an edge on these frontier models,
    large language models, once they hit the Chinese market, that
    they may be able to apply them better than we can. So that is
    what I would be--one of the things on AI that I am quite
    worried about.
        Mr. Jaffer. I also worry, Senator Fetterman, that we not
    overregulate the space, right? If we want to maintain the
    innovation here in the United States and want to ensure that we
    continue to lead on frontier models, putting limitations on how
    those can be utilized and how they might be employed are going
    to be problematic for further investment and further
    development of those models. So the right way to approach it, I
    think, is to encourage and advocate within our industry to
    ensure that there is trust, safety, and security baked into our
    models, that we are auditing them, that we are thinking about
    how they are being utilized, that we are deploying them and
    testing them before we put them out in the world.
        At the same time, artificially limiting them by, you know,
    measuring how many--how many--how much computing power they use
    or how many--how many elements they process, I think, could be
    a mistake and allow China to get the edge. We do not want to
    allow that to happen. We want to make sure that investment and
    that capability stays here in the United States. And then we
    also need to be cognizant of how much data China is acquiring
    and how they use that data to empower their ability to repress
    their own people and to act against the United States.
        So when we look at capabilities like TikTok, people say,
    why worry about cat videos? Exactly. It is not just cat videos.
    It is data about average Americans. The idea that TikTok buys
    ads at DCA and is convincing Americans and American legislators
    through those ads is outrageous. The Metropolitan Washington
    Airport Authority ought to be embarrassed that they are--that
    they are having ads at Union Station and at DCA for TikTok, a
    Chinese Government influenced--media influence operation.
        Senator Fetterman. I wish I had an hour because you guys
    all touched on really critical kinds of issues and where this
    can go or what is possible, but I know we have--unfortunately,
    we have lost our time, but back to you, Mr. Chairman.
        Chair Brown. Thank you, Senator.
        Senator Fetterman. And thank you for the experts.
        Chair Brown. Senator Fetterman, thank you. I know you
    almost always go last, but thank you for always your thoughtful
    questions and response. Thank you to the three witnesses, a
    really, really good hearing, and thank you so much for that.
        For senators who wish to submit questions for the record,
    those questions are due 1 week from today, January 25, please.
    To the witnesses, you have 45 days, if you would, to respond to
    those questions. Thank you again. With that, the hearing is
    adjourned.
        [Whereupon, at 12:05 p.m., the hearing was adjourned.]
        [Prepared statements and responses to written questions
    supplied for the record follow:]
                   PREPARED STATEMENT OF CHAIR SHERROD BROWN
        Last week, this Committee heard about the human toll that illicit
    fentanyl takes on our families, our friends, our neighbors.
        The witnesses stressed the need to come together and taking action
    to stop the flow of illicit fentanyl from China and Mexico.
        This Committee and the entire Senate did just that last year when
    we included the FEND Off Fentanyl Act in the annual defense
    authorization bill. But this hasn't become law yet, because of
    politicians in the House playing politics.
        The FEND Off Fentanyl Act was not the only Committee priority that
    the House blocked last year.
        They also blocked two other important national security amendments
    in the Senate NDAA--both of which received 91 votes in the Senate.
        Ninety-one senators voted in favor of an amendment offered by our
    colleagues Senators Tester and Rounds to prevent big investors in China
    from buying up American farmland and food businesses. We can't allow
    foreign adversaries to buy up farmland in Ohio and around the country.
    It's a threat to our national security, and it's a threat to rural
    economies and our way of life.
        Ninety-one senators also voted in favor of an amendment offered by
    Senators Casey and Cornyn to allow us to better monitor U.S. companies'
    investments that fund Chinese development of critical technology,
    including military technology.
        All three of these provisions have broad support--from Heritage
    Action to the Coalition for a Prosperous America.
        And more importantly, they have the support of the public. For far
    too long, our policy around China catered to multinational
    corporations, and failed States like Ohio. On this Committee we are
    working to change that, and we have found common ground. It's why all
    three of these bills remain top priorities of this Committee.
        I am committed to working with my colleagues to find a path forward
    so that each of these provisions becomes law this year.
        Of course the threats posed by China are many, and varied, and
    growing. Our work to address national security risks posed by the
    Chinese Government cannot and will not end with those three provisions.
        We all agree that China poses a real and growing threat to our
    national security.
        Perhaps nowhere is that risk more acute than with the development
    of advanced technology.
        China has used advanced technology--much of it stolen from the
    U.S., some of it sent there through corporate outsourcing--to ramp up
    its military modernization and build a mass surveillance State that
    commits deplorable human rights violations, including the detention of
    millions of Uighurs in Xinjiang.
        Addressing these threats from the Chinese Government, and improving
    our domestic capability to compete with China, have been a top priority
    of this Committee.
        Five years ago, we updated the laws that govern our export control
    and inbound investment screening programs.
        Now we must assess whether our current authorities--and the
    resources we commit to them--match the threat we face.
        Export controls can be used to deny China and others access to U.S.
    technology that they could use against our national security and
    foreign policy interests.
        This Administration has made export controls a central feature of
    our national security policy.
        In addition to assembling a global export control coalition in
    response to Russia's war against Ukraine, this Administration has added
    hundreds of China-based entities to restricted trade lists. It imposed
    countrywide controls that restrict China's access to advanced
    semiconductors and tools and equipment needed to produce them. And it
    ramped up enforcement efforts to safeguard our most sensitive
    technologies.
        But, as Commerce Secretary Gina Raimondo noted in December, the
    export control budget of the Bureau of Industry and Security is roughly
    the same as it was a decade ago, despite its increasing workload.
        If we agree that export controls are critical to our national
    security, and I think we do, then that isn't good enough.
        We need a China policy for the world we live in today, and we must
    prepare for what could come tomorrow.
        That means we must upgrade our economic security authorities and
    resources, accelerate efforts to persuade other countries to join us,
    and enhance our analytical capabilities, so that we can better
    understand the effects that our economic security tools have on China,
    on U.S. companies, and on companies in partner countries.
        Today we will discuss how we should rethink and reorient how
    economic security programs are implemented to address the full range of
    risks posed by China.
        And we will examine how we can strengthen these authorities and
    resources to build a stronger, more responsive economic security
    policy.
        Our country's policies regarding China have failed for too long.
    They've been written to increase the profits of multinational
    corporations looking for cheap labor--not to benefit our national
    security, and not to benefit American workers.
        And we know that when companies outsource jobs, they outsource
    innovation and technological capabilities along with them. We cannot
    allow China to continue to use that technology--in many cases, steal
    it--to enhance its military capabilities.
        We all agree that China is a real, growing threat.
        Countering that threat, and updating the failed policies of the
    past, will continue to be a bipartisan focus of this Committee.
                                     ______

                    PREPARED STATEMENT OF SENATOR TIM SCOTT
        Thank you, Mr. Chairman. Good morning to the witnesses, thank you
    for being here as well. Thank you Mr. Chairman for this opportunity to
    talk about such an important topic.
        But before turning to this hearing, I'd like to take a moment and
    draw attention to the recent Iran-backed strikes in Iraq.
        Any time American lives are put at risk, whether it's from Iran or
    their terror proxies like Hamas, we need to have a strong response. And
    that starts with this chamber passing my Revoke Iranian Funding Act.
        Every dollar that goes to Iran from this Administration's actions,
    is a dollar that supports terror. Thank you.
        America is the land of opportunity and freedom, the opportunity to
    innovate, produce, and execute on individual ideas.
        These principles are what drives our strides in technological
    innovation, and our emphasis on entrepreneurship.
        We have the strongest economy in the world, driven by its dynamic
    growth and evolution. We are the global gold standard that countries
    look on with envy.
        However, American exceptionalism is under attack from a country
    that doesn't want to play by the rules--that country is obviously
    China.
        To make sure our success does not become the victory of others, the
    United States Government must act strategically and with strength, in
    protecting opportunities for growth at home and abroad.
        When we look at adversaries like the Chinese Communist Party with
    their centrally planned economy that actively works to distort global
    markets for its own gain and continuously makes overt attempts to oust
    us from our perch of leadership.
        We don't' have to ask the question--are they playing by the rules?
        Because we already know the answer to the question, and the answer
    is emphatically no.
        But China's approach--with their controlled markets, Government
    interventions, and intellectual property theft--is shackled to the
    openness of others.
        So, we must act strategically to ensure that we are safeguarding
    America's treasure--our ability to innovate.
        We cannot let China continue its malign activities, especially in
    regards to using, or even stealing, American innovation and American
    technologies for nefarious purposes, like advancing its rapidly growing
    military.
        So, as we consider American security and prosperity from the
    Banking Committee's jurisdiction, we should look first at our economic
    security tools.
        We need to examine the authorities provided to the executive
    branch, how they have been used, and how they can be improved for
    maximize effectiveness.
        However, an over-application of these tools has the potential to
    push our adversaries closer together and damage the U.S. and our
    industries' long-term abilities to innovate and generate jobs and to
    generate growth.
        Therefore, our use of these tools must be sharp but tailored.
        Thankfully, we can isolate bad actors through our sanctions
    policies, we can restrict malign investment through our CFIUS process,
    and we can curtail the export of critical goods and services to our
    enemies.
        These actions are stronger when we work together with our allies
    and stay focused on the true problem at hand.
        But unfortunately, this Administration is yet again, taking the
    wrong approach.
        This Administration has put politics over policy, and in some ways,
    that is playing right into the hands of China.
        For example, the Department of Commerce's Bureau of Industry and
    Security, the steward of our export controls, is currently engaging in
    politically motivated attacks against the legal firearms industry.
        A troubling trend by this Administration's regulators to try to
    target lawful businesses through the regulatory process that don't fit
    their political narrative.
        This undercuts the Commerce Department's important mission of
    safeguarding U.S. technology, opening the door for distractions that
    will allow the CCP to take advantage.
        But Commerce isn't the only perpetrator.
        The Department of Treasury's primary focus appears to be on
    pursuing the limits of climate and green energy financing policy.
        And frankly, these objectives only advance China's solar and
    critical mineral energy positions in geopolitical affairs.
        Treasury's time, attention, and taxpayer-provided resources would
    be much better spent working to ensure our sanctions policies on China
    remain up to date and promoting as well as protecting American industry
    abroad.
        We need an Administration that is focused on countering the real
    threat--China--not one that is more interesting to politics.
        So, while I am grateful that we have such an esteemed panel before
    us today, I think it is imperative we hear directly from the
    Administration as well.
        That said, I look forward to hearing from each of you, and your
    expertise on the issues that will help strengthen our economy, and
    strengthen our position against China.
        And, importantly, to learning more from their perspectives on how
    we should act and respond to the threat.

                     PREPARED STATEMENT OF EMILY KILCREASE
       Senior Fellow and Director of the Energy, Economics, and Security
                  Program, Center for a New American Security
                                January 18, 2024

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     PREPARED STATEMENT OF JAMIL N. JAFFER
      Founder and Executive Director, National Security Institute and NSI
       Cyber and Tech Center, Antonin Scalia Law School at George Mason
                                   University
                                January 18, 2024

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      PREPARED STATEMENT OF LINDSAY GORMAN
      Senior Fellow for Emerging Technologies, The Alliance for Securing
           Democracy at the German Marshall Fund of the United States
                                January 18, 2024

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
                          FROM EMILY KILCREASE

    Q.1. Establishing U.S. supply chains for solar and other
    technologies is essential for American energy security. For
    instance, Chinese-headquartered companies now make up 99
    percent of the world's solar wafer and 80 percent of the
    world's polysilicon production--two core components that make
    up half the value of the solar panel.
        What recommendations do you have to make sure the U.S. is
    taking a whole-of-Government approach to securing clean energy
    supply chains, like solar? How can and should the U.S.
    Government support domestic manufacturing growth to meet our
    energy security and clean energy goals?

    A.1. As \1\ the U.S. Government takes action to address climate
    change, it must do so in a way that strengthens U.S. energy
    security and the resiliency of U.S. energy supply chains. The
    urgent need to address climate change must be balanced with the
    risk of creating a new dependency on China, which is the
    dominant global producer of clean energy technologies. An
    effective U.S. clean energy strategy will spur U.S. clean
    energy innovation and manufacturing, while addressing the
    economic, national security, and human rights concerns
    associated with imports of Chinese clean energy products. The
    United States should:
    ---------------------------------------------------------------------------
         \1\ These responses reflect the personal views of the author
    alone. As a research and policy institution committed to the highest
    standards of organizational, intellectual, and personal integrity, the
    Center for a New American Security (CNAS) maintains strict intellectual
    independence and sole editorial direction and control over its ideas,
    projects, publications, events, and other research activities. CNAS
    does not take institutional positions on policy issues and the content
    of CNAS publications reflects the views of their authors alone. In
    keeping with its mission and values, CNAS does not engage in lobbying
    activity and complies fully with all applicable Federal, State, and
    local laws. CNAS will not engage in any representational activities or
    advocacy on behalf of any entities or interests and, to the extent that
    the Center accepts funding from non-U.S. sources, its activities will
    be limited to bona fide scholastic, academic, and research-related
    activities, consistent with applicable Federal law. The Center publicly
    acknowledges on its website annually all donors who contribute.
    ---------------------------------------------------------------------------
        Invest in innovation and capacity throughout the clean
    energy technology life cycle: The United States has
    historically had a good track record in funding early-stage
    research and development in clean energy technologies, as well
    as using regulatory or other incentives to increase demand for
    clean energy products. \2\ The United States has been less
    successful in strengthening domestic manufacturing capacity,
    leading to a perverse consequence in which U.S. demand for
    clean energy technologies (including demand that is supported
    by U.S. Government policies) can create a surge in imports,
    notably from China. \3\ The Inflation Reduction Act (IRA)
    provides an effective response to this challenge, by creating a
    sustainable foundation for cost-competitive manufacturing of
    critical clean energy technologies domestically. The U.S.
    Government should support strong implementation of the IRA's
    clean energy provisions, while also investing in the skilled
    workforce needed to build a durable clean energy manufacturing
    base in the United States.
    ---------------------------------------------------------------------------
         \2\ Jonas Nahm, ``Reimagine: Clean Energy Technology and U.S.
    Industrial Policy'' (Washington, DC: Center for a New American
    Security, September 7, 2022), https://s3.us-east-1.amazonaws.com/
    files.cnas.org/documents/CNAS-Report-Reimagine-Clean-Energy-Tech-final-
    v2.pdf.
         \3\ Nahm, ``Reimagine: Clean Energy Technology and U.S. Industrial
    Policy''.
    ---------------------------------------------------------------------------
        Establish innovative financing mechanisms: In addition to
    the incentives provided by the IRA, the U.S. Government should
    create additional innovative financing mechanisms to support
    clean energy production domestically, such as the Industrial
    Finance Corporation of the United States (IFCUS). The IFCUS, or
    similar entity, would be a Government-owned corporation,
    governed by an independent board, that would provide debt and
    equity financing to U.S. clean energy companies to support
    domestic manufacturing. Such an entity could focus on
    technologies that are critical to future U.S. energy security
    but that private markets are not incentivized to support. In
    contrast to the IRA, which is built on tax incentives, an IFCUS
    mechanism could ultimately return money to the U.S. Treasury as
    its investments generate a return. \4\
    ---------------------------------------------------------------------------
         \4\ Emily Kilcrease and Emily Jin, ``Rebuild: Toolkit for a New
    American Industrial Policy'', (Washington, DC: Center for a New
    American Security, September 2022), https://s3.us-east-1.amazonaws.com/
    files.cnas.org/documents/Rebuild-OCEA-2022-Final.pdf; Nahm,
    ``Reimagine: Clean Energy Technology and U.S. Industrial Policy''.
    ---------------------------------------------------------------------------
        Build alternative sources of critical minerals supply with
    close partners: Critical minerals are essential to clean energy
    supply chains, and the United States does not currently have
    reliable, diversified supply of these minerals. According to
    the U.S. Department of Energy, over 80 percent of U.S. critical
    minerals supply comes from foreign sources. \5\ Where possible,
    the United States should invest in the responsible extraction
    and processing of critical minerals domestically, including
    through the use of Defense Production Act authorities. \6\
    However, recognizing that domestic supply is unlikely to fully
    meet domestic needs, the United States must also work with
    international partners to bolster supply that can meet their
    collective needs. Congress should support initiatives such as
    the Minerals Security Partnership, in which the United States
    works with close partners (Australia, Canada, Finland, France,
    Germany, Japan, the Republic of Korea, Sweden, the United
    Kingdom, and the European Union) to coordinate efforts to
    strengthen critical mineral supply chains. \7\
    ---------------------------------------------------------------------------
         \5\ ``Developing a Domestic Supply of Critical Minerals and
    Materials'', U.S. Department of Energy, Office of Fossil Energy and
    Carbon Management, February 6, 2024, https://www.energy.gov/fecm/
    articles/developing-domestic-supply-critical-minerals-and-materials#.
         \6\ Joshua Busby, Emily Holland, Morgan Bazilian, and Paul Orszag,
    ``The Defense Production Act's Role in the Clean Energy Transition'',
    Lawfare, July 17, 2023, https://www.lawfaremedia.org/article/the-
    defense-production-act-s-role-in-the-clean-energy.
         \7\ ``Minerals Security Partnership'', U.S. Department of State,
    accessed March 11, 2024, https://www.state.gov/minerals-security-
    partnership/.
    ---------------------------------------------------------------------------
        Adopt a risk-based approach to deployment of Chinese clean
    energy technologies in the United States: Given China's
    dominant role in global clean energy supply chains, the United
    States cannot entirely avoid the use of Chinese technologies if
    it wants to make progress on climate objectives. At the same
    time, not all deployments of Chinese technologies present
    similar risks. U.S. policies should restrict the deployment of
    Chinese technologies in applications that would involve direct
    interconnection with the U.S. grid or otherwise present
    unacceptable risks to the cybersecurity of U.S. critical
    infrastructure. In less sensitive applications, the United
    States must maintain a diverse source of supply, either through
    increased domestic production or through friendshoring
    policies, to avoid creating a dependency on China that would
    present energy security and national security risks.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR CORTEZ MASTO FROM EMILY KILCREASE

    Q.1. In your opinion, how effective are the current dual-use
    export controls and foreign investment screening mechanisms in
    addressing the possibility of U.S. innovation enhancing PLA
    capabilities?

    A.1. The U.S. system for screening foreign investment in the
    United States, as implemented by the Committee on Foreign
    Investment in the United States (CFIUS), is largely effective
    in mitigating the risk that U.S. innovation, transferred via an
    investment, can enhance PLA capabilities. As one indicator,
    Chinese foreign direct investment (FDI) in the United States
    has plummeted in recent years, and unlike FDI from other
    countries, has not rebounded from pandemic-era lows. \1\ CFIUS
    must remain vigilant to ensure the efficacy of its work, and
    certain updates (noted in the answer to the next question) can
    support its efforts to remain ahead of evolving threat
    environments.
    ---------------------------------------------------------------------------
         \1\ Bureau of Economic Analysis International Economic Accounts
    Factsheets, (International Trade and Investment Country Facts--China;
    accessed September 10, 2023), https://apps.bea.gov/international/
    factsheet/factsheet.html#650.
    ---------------------------------------------------------------------------
        The U.S. Government is using dual-use export controls to
    address an increasing array of national security and foreign
    policy concerns. While dual-use export controls were previously
    a more limited mechanism to prevent destabilizing accumulations
    of conventional weapons, they are now being used as a leading
    tool to manage the strategic competition with China, degrade
    Russian military capabilities, and address human rights abuses,
    among other issues. While export controls can be used
    effectively in this broader context, doing so requires a
    significant investment in Government capacity.
        The budget for the Bureau of Industry and Security (BIS),
    the lead agency for administering dual-use export controls, has
    remained flat in real terms for over a decade. Congress should
    increase funding, with a focus on building analytic
    capabilities within BIS, establishing an office charged with
    evaluating the effectiveness of dual-use export controls,
    strengthening international outreach, and bolstering
    enforcement. Additional details are provided in my written
    testimony. \2\
    ---------------------------------------------------------------------------
         \2\ ``U.S. Economic Security Strategy, Authorities, and
    Bureaucratic Capacity'': Hearing Before the U.S. Senate Committee on
    Banking, Housing, and Urban Affairs, 118th Cong. (2024) (statement of
    Emily Kilcrease, Senior Fellow and Director, Energy, Economics, and
    Security Program, CNAS), https://www.banking.senate.gov/imo/media/doc/
    kilcrease-testimony-1-18-24.pdf.
    ---------------------------------------------------------------------------
        It is worth emphasizing the importance of international
    coordination in enhancing the effectiveness of U.S. dual-use
    export controls. The effectiveness of unilateral controls
    erodes over time, as firms from other countries backfill U.S.
    technology. Most worrisome, over time U.S. technology may be
    designed out of international supply chains, harming long-term
    U.S. technology competitiveness. \3\ In addition to considering
    new multilateral regimes (as noted in the answer to a separate
    question from Senator Van Hollen), the United States must have
    robust international outreach functions to coordinate policies
    with key partners and provide technical assistance and
    intelligence support. While U.S. efforts to coordinate with
    Dutch and Japanese counterparts on recent controls on
    semiconductor manufacturing equipment is encouraging, much more
    regular and far-reaching coordination is needed.
    ---------------------------------------------------------------------------
         \3\ Sarah Bauerle Danzman and Emily Kilcrease, ``The Illusion of
    Controls: Unilateral Attempts To Contain China's Technology Ambitions
    Will Fail'', Foreign Affairs, December 30, 2022, https://
    www.foreignaffairs.com/united-states/illusion-controls.
    ---------------------------------------------------------------------------
        Finally, dual-use export controls can be made more
    effective by establishing a set of complementary controls on
    outbound U.S. investment in China. Certain U.S. investments may
    advance indigenous Chinese capabilities in sensitive
    technologies and erode the effectiveness of export controls.
    Congress can act to address this risk by passing legislation to
    establish a targeted set of outbound investment controls
    designed to work in tandem with dual-use export controls to
    protect U.S. innovation and technology leadership in national
    security technologies. \4\
    ---------------------------------------------------------------------------
         \4\ ``Principles and Policy Options for Designing Better
    Investment Barriers'': Hearing Before the U.S. House of Representatives
    Subcommittee on National Security, Illicit Finance, and International
    Financial Institutions of the Committee on Financial Services, 118th
    Cong. (2024), (statement of Emily Kilcrease, Senior Fellow and
    Director, Energy, Economics, and Security Program, CNAS), https://
    docs.house.gov/meetings/BA/BA10/20240130/116767/HHRG-118-BA10-Wstate-
    KilcreaseE-20240130.pdf.

    Q.2. Given your role in drafting CFIUS reform regulations, can
    you elaborate on any specific improvements or gaps in the
    current foreign investment screening process, especially
    ---------------------------------------------------------------------------
    concerning critical technology and sensitive personal data?

    A.2. CFIUS would benefit from an expanded definition of
    ``critical technology.'' Currently, critical technology is
    defined by reference to export control authorities and CFIUS
    does not have the authority to define its own lists of critical
    technology. This approach generally makes sense, as it promotes
    coherence between the two sets of authorities and leverages the
    technical expertise resident in the export control agencies.
    However, in certain instances, CFIUS has a national security
    interest in reviewing foreign investments in U.S. businesses
    that do not make export-controlled technology. One example is
    in the artificial intelligence (AI) space, where the level of
    export controls is relatively low but the potential for
    national security risk, particularly associated with frontier
    AI systems, is growing exponentially. Congress should consider
    providing CFIUS with a limited new authority to define a set of
    ``technologies controlled for investment purposes'' that would
    be an additional category within the definition of ``critical
    technologies'' to address these concerns. Additional technical
    detail is provided in my written testimony. \5\
    ---------------------------------------------------------------------------
         \5\ Kilcrease, ``U.S. Economic Security Strategy, Authorities, and
    Bureaucratic Capacity''.
    ---------------------------------------------------------------------------
        The single most important thing that Congress can do to
    improve CFIUS's work related to sensitive personal data is pass
    comprehensive data security and data privacy legislation. CFIUS
    has a well-established practice of addressing national security
    risks associated with sensitive personal data, as these risks
    arise in the context of a foreign investment. Too often, CFIUS
    must take action to address these risks simply because it is
    the only authority able to do so. This is a drain on CFIUS
    bandwidth and leads to a patchwork approach to data security
    and data privacy. The administration's recent Executive order
    on data security is an important first step in remedying this,
    but Congress must act to address the broader systemic issues
    related to data security and data privacy. \6\
    ---------------------------------------------------------------------------
         \6\ Exec. Order No. 14,117, 89 FR 15421, (February 28, 2024),
    https://www.federalregister.gov/documents/2024/03/01/2024-04573/
    preventing-access-to-americans-bulk-sensitive-personal-data-and-united-
    states-government-related.
    ---------------------------------------------------------------------------
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR VAN HOLLEN FROM EMILY KILCREASE

    Q.1. Ms. Gorman and Ms. Kilcrease, you both testified to the
    importance of collaboration to help strengthen our competition
    strategy, calling for better coordination among Federal
    agencies and for improved multilateral cooperation with our
    partners and allies.
        In what specific ways should we better organize and
    leverage the tools at our disposal to promote multilateral
    cooperation to more effectively advance our competition
    strategy?

    A.1. U.S. competition strategy must involve both defensive and
    proactive components. On the defensive elements, the United
    States should deepen cooperation with key partners on economic
    security policy tools, such as export controls, inbound
    investment screening, outbound investment controls, and data
    security. The guiding principle should be that the United
    States and its partners treat similar commercial transactions
    involving similar national security risks in a similar manner.
    This will strengthen the collective posture of U.S. and partner
    countries relative to strategic competitors, while also
    avoiding the negative impacts on U.S. competitiveness that can
    arise if U.S. partners have more permissive policies.
        Ultimately, the United States should strive towards a
    multilateral regime that aligns U.S. policy on economic
    security tools with that of its partners. Such a mechanism
    would primarily serve as an information-sharing and
    coordination mechanism, with countries responsible for
    implementing agreements in their domestic processes. The
    objectives of the new regime would be to:

        ``Promote international security and common
            security of the member Nations;

        Prevent the destabilizing accumulations of
            conventional or emerging weapons globally and prevent
            the transfer of dual-use technologies for such weapons
            to countries of concern;

        Promote the technological leadership in science,
            technology, engineering, and manufacturing sectors,
            including in foundational and emerging technology
            areas, that are material to national security and
            foreign policy of the member States; and

        Support the protection of human rights and
            democratic institutions.'' \1\
    ---------------------------------------------------------------------------
         \1\ ``Challenging China's Trade Practices: Promoting Interests of
    U.S. Workers, Farmers, Producers, and Innovators'': Hearing Before the
    U.S.-China Economic and Security Review Commission, 117th Cong. (2022),
    (statement of Emily Kilcrease, Senior Fellow and Director, Energy,
    Economics, and Security Program, CNAS), https://s3.us-east-
    1.amazonaws.com/files.cnas.org/backgrounds/documents/CNAS-Emily-
    Kilcrease-USCC-Testimony-04.14.2022-Hearing.pdf.

        In support of these broader objectives, participating
    countries could seek to advance a shared assessment of the
    threat presented by China and other strategic competitors,
    identify technologies that are important to the national
    security of the participating members and that should be
    subject to joint controls (including in the export control or
    investment control context), and align institutional processes
    and policies in each country. It is unlikely that the United
    States or other countries would agree to binding rules on
    issues related to national security, but the coordination,
    information-sharing, and norm-setting functions of a regime as
    outlined here would substantially enhance alignment between the
    United States and key partners on economic security issues.
        U.S. competition policy cannot be only defensive, however.
    The United States must proactively seek to advance U.S.
    competitiveness in global markets. As the United States
    proceeds with a necessary derisking of economic ties with
    China, it must compensate for lost economic opportunity by
    building markets elsewhere. It must do so in a manner that
    reflects new priorities for U.S. trade policy, such as supply
    chain resiliency, economic security, and labor and environment
    protections. The United States should pursue economic security
    agreements to enhance resiliency and integration with key
    partners in critical sectors. \2\ Such agreements could focus
    on aligning economic security and industrial policies,
    enhancing competition and innovation in critical technology
    areas, and strengthening labor, environment, and digital trade
    standards in trading partner countries.
    ---------------------------------------------------------------------------
         \2\ Emily Kilcrease, ``No Winners in This Game: Assessing the U.S.
    Playbook for Sanctioning China'' (Washington, DC:, Center for a New
    American Security, December 1, 2023), 66, https://s3.us-east-
    1.amazonaws.com/files.cnas.org/documents/EES-No-Winners-Final-1.pdf.

    Q.2. While it is preferable to secure multilateral cooperation
    through voluntary participation, under what circumstances
    should the United States use secondary sanctions to achieve our
    ---------------------------------------------------------------------------
    goals?

    A.2. Secondary sanctions are a powerful tool, as they extend
    the reach of U.S. sanctions extraterritorially and cover even
    those transactions that do not involve a U.S. person. \3\ They
    can be an important enforcement tool to address sanctions
    evasion or transshipment through third party countries. For
    example, the threat of secondary sanctions appears anecdotally
    to have had a chilling effect on banks in third party countries
    (e.g., Turkey) that may have been financing shipments of
    critical goods to Russia. \4\ While secondary sanctions are
    largely a U.S. tool, the authorization of these secondary
    sanctions appears to have been well coordinated with the
    coalition of countries imposing sanctions on Russia, enhancing
    the legitimacy and effectiveness of the sanctions effort.
    ---------------------------------------------------------------------------
         \3\ Jason Bartlett and Megan Ophel, ``Sanctions by the Numbers:
    U.S. Secondary Sanctions'' (Washington, DC: Center for a New American
    Security, August 26, 2021), https://www.cnas.org/publications/reports/
    sanctions-by-the-numbers-u-s-secondary-sanctions.
         \4\ Beril Akman, Asli Kandemir, and Firat Kozok, ``Turkish Banks
    Tighten Screws on Russia Over Fear of U.S. Sanctions'', Bloomberg,
    January 17, 2024, https://www.bloomberg.com/news/articles/2024-01-17/
    turkish-banks-tighten-screws-on-russia-over-fear-of-us-sanctions.
    ---------------------------------------------------------------------------
        The United States should exercise caution when considering
    secondary sanctions on close allies. The threat of secondary
    sanctions was politically damaging to the U.S.-European
    relationship, for example, after the United States pulled out
    of the Iran nuclear deal and sought to prevent European
    companies from engaging with Iranian counterparts. \5\ Fears of
    such action were part of the motivation for Europe to develop a
    blocking statute to protect their companies from exposure to
    U.S. sanctions. In future sanctions scenarios involving China,
    secondary sanctions could lead to a divisive wedge between the
    United States and allies at a moment when signaling unity is a
    political imperative. It would also put the United States in an
    uncomfortable enforcement position, as it would need to be
    willing to enforce the secondary sanctions by punishing
    companies from allied countries.
    ---------------------------------------------------------------------------
         \5\ Bartlett and Ophel, ``Sanctions by the Numbers: U.S. Secondary
    Sanctions''.
    ---------------------------------------------------------------------------
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                          FROM EMILY KILCREASE

    Q.1. You have noted that the United States has been relatively
    restrained in levying sanctions on the People's Republic of
    China, specifically stating, ``To date, the United States has
    exercised restraint in using financial sanctions against
    Chinese targets, with notable exceptions related to human
    rights or support for Iran.'' \1\ You also point out that
    ``sanctioning China represents a challenge more complex than
    any other in the modern era of sanctions.'' \2\
    ---------------------------------------------------------------------------
         \1\ Emily Kilcrease, ``No Winners in This Game, Center for New
    American Security'' (Dec. 2023), https://s3.us-east-1.amazonaws.com/
    files.cnas.org/documents/EES-No-Winners-Final-1.pdf at 33.
         \2\ Id.
    ---------------------------------------------------------------------------
        As China continues to posture itself on the side of
    America's adversaries, like Iran and Russia, how can we best
    ensure that our sanctions have the intended effect and deter
    bad behavior?

    A.1. An effective sanctions posture vis-a-vis China will
    require a nuanced mix of strategic restraint paired with
    deliberate efforts to build credibility of the U.S. sanctions
    threat. The United States has few good options when it comes to
    sanctioning China, given the intermingled nature of U.S. and
    Chinese supply chains and the role that China plays as a major
    trading partner with most of the globe. The one area of clear
    sanctions power is in the financial sector, where the United
    States can leverage the essential role of the U.S. dollar in
    global finance to place broad pressure across the Chinese
    economy and to target specific entities. The United States
    should preserve this leverage for times of genuine crisis or
    conflict, as premature efforts to weaponize the U.S. dollar
    would erode the potency of U.S. financial sanctions. \3\
    ---------------------------------------------------------------------------
         \3\ Emily Kilcrease and John Hughes, ``It's Not Time To Hit China
    With Financial Sanctions--Yet'', The Hill, January 16, 2024, https://
    thehill.com/opinion/international/4411407-its-not-time-to-hit-china-
    with-financial-sanctions-yet/.
    ---------------------------------------------------------------------------
        At the same time, the United States must clearly signal its
    ability and willingness to escalate sanctions, including in the
    financial sector, should China cross certain geopolitical
    redlines. Ideally, such signaling would occur in partnership
    with the G7 or other close U.S. partners to demonstrate a
    united resolve to use sanctions tools to deter or respond to
    PRC actions that are against U.S. interests. U.S. credibility
    today is uncertain, as the PRC could assess that the United
    States is unwilling to accept the costs of harsh sanctions or
    that it would be unable to secure support from other
    international partners. These dynamics dangerously undercut the
    deterrent effect that sanctions can have.
        One way to enhance the credibility of the sanctions threat
    is to strengthen the strategic planning process for the use of
    sanctions and other economic tools. While such planning is
    routine in the military community, sanctions policy is too
    often developed in an ad hoc or reactive manner. The economic
    agencies, with support from Congress, should institutionalize a
    sanctions strategic planning process, which can prepare for a
    range of potential future crisis or conflict scenarios and game
    out the geopolitical impact and economic consequences of using
    different sanctions strategies. This work should be done with
    an eye to integrating planning efforts with the military
    community and with international partners. The Government must
    also be constantly assessing the effectiveness of its sanctions
    tools, particularly as new and innovative tools continue to be
    rolled out (e.g., oil price cap, foreign direct product rules).
    While Treasury has an office tasked with assessing the impact
    of financial sanctions, Commerce does not have a comparable
    office for export controls, which are increasingly being used
    to deal with a range of foreign policy and national security
    problems.
        Sanctions credibility also requires strong enforcement of
    those sanctions already in place. The Government has an acute
    need for expanded enforcement resources. As is clear in the
    Russia context, sanctioned States show a remarkable ability to
    adapt and develop sanctions evasion schemes, requiring
    sustained U.S. enforcement actions to maintain the pressure of
    sanctions throughout a protracted conflict.
        Ultimately, the most effective sanctions posture will be
    one that recognizes the clear limits of U.S. sanctions and
    considers sanctions as just one tool that, in tandem with other
    instruments of national power, can be used to advance U.S.
    foreign policy interests. The limits of sanctions heighten the
    need for a more integrated planning process that appropriately
    places sanctions alongside all instruments of national power in
    building integrated deterrence strategies for China.

    Q.2. How can we better target sanctions to maximize their
    impact on decision makers, while minimizing their impact on
    poor communities who have little say over the activities of
    those in power?

    A.2. ``Smart sanctions'' are intended to target specific actors
    within a political system, rather than placing broad, damaging
    pressure across an entire economy. The smarts sanctions
    approach was developed in recognition of the negative effects
    that sanctions can have throughout a country, including on
    those communities with no connection to political elites. In
    theory, a smart sanctions approach would target sanctions to
    those individuals, Government entities, or organizations
    directly in involved in the problematic behavior. In certain
    sanctions contexts, this approach can mitigate unintended
    consequences for the broader population.
        In practice, however, impacts are difficult to contain once
    sanctions reach higher levels of escalation and cover broader
    swathes of the economy. Established financial institutions are
    likely to exit the market in order to avoid exposure to
    sanctions, and sanctions can also result in broad macroeconomic
    effects, such as rampant inflation. \4\ The Department of the
    Treasury has taken an important step to address humanitarian
    concern by establishing an office dedicated to assessing the
    impact of sanctions. Analytic efforts, such as those carried
    out by this office, are important to project potential
    humanitarian impacts, as well as to monitor unanticipated
    effects of the sanctions. Congress should support efforts at
    Treasury and elsewhere in the U.S. Government to anticipate and
    monitor potential humanitarian impacts.
    ---------------------------------------------------------------------------
         \4\ Rice, Tara, and von Peter, Goetz, and Boar, Codruta, ``On the
    Global Retreat of Correspondent Banks'' (BIS Quarterly Review, March
    01, 2020), https://www.bis.org/publ/qtrpdf/r-qt2003g.htm; Esfandyar
    Batmanghelidj and Erica Moret, ``The Hidden Toll of Sanctions: Why
    Washington Must Reckon With the Devastating Inflation Its Policies
    Cause'', Foreign Affairs, January 17, 2022, https://
    www.foreignaffairs.com/articles/world/2022-01-17/hidden-toll-sanctions.
    ---------------------------------------------------------------------------
        Additionally, engagement with the humanitarian community is
    key to understanding and addressing the impact of sanctions on
    marginalized communities. Humanitarian groups regularly report
    that it is difficult to provide humanitarian support within a
    heavily sanctioned jurisdiction. General licenses that
    explicitly permit the provision of humanitarian aid, as well as
    food and medicine, can address part of this problem. For
    example, the United States exempted food and medicine from its
    sanctions and export controls in the Russia case. Policymakers
    must remain in dialogue with humanitarian groups to understand
    the practical constraints that sanctions place on their
    operations as well as humanitarian conditions on the ground.

    Q.3. Given that the People's Republic of China is heavily
    subsidizing its domestic solar manufacturing industry and
    flooding the market with solar panels at lower prices than
    American competitors can offer, \5\ what steps can Congress and
    the Administration take to maximize investment in affordable
    clean energy and incentivize domestic production?
    ---------------------------------------------------------------------------
         \5\ Ana Swanson and Kim Tankersley, ``Flush With Investment, New
    U.S. Factories Face a Familiar Challenge'', The New York Times, January
    15, 2024, https://www.nytimes.com/2024/01/15/business/economy/china-
    electric-cars-chips-solar.html.

    A.3. Investments in domestic manufacturing capacity are
    critical to ensure that the United States has a balanced clean
    energy policy that creates demand for clean energy technologies
    while also ensuring that the supply of these technologies is
    secure and reliable. Incentivizing domestic production can take
    a range of forms, such as the tax incentives included in the
    Inflation Reduction Act (IRA), funding for clean energy supply
    chains provided under Defense Production Act (DPA) authorities,
    or establishment of new financing mechanisms (e.g., the
    Industrial Finance Corporation) to fund projects that are
    under-valued by the private sector. The United States may wish
    to consider trade remedies, such as anti-dumping or
    countervailing duties, to address the nonmarket practices and
    unfair subsidies of the People's Republic of China (PRC).
    However, these remedies have traditionally been slow to deliver
    relief and can result in unintended consequences, such as
    commercial harm to U.S. installers of solar energy who rely on
    lower cost goods from China. \6\
    ---------------------------------------------------------------------------
         \6\ Nichola Groom, ``U.S. Places Tariffs on Some Big Solar
    Companies for Dodging China Duties'', Reuters, August 18, 2023, https:/
    /www.reuters.com/sustainability/us-slaps-tariffs-some-big-solar-
    companies-dodging-china-duties-2023-08-18/.
    ---------------------------------------------------------------------------
        The United States must also ensure that the domestic market
    can support clean energy investments. The United States must
    make investments in a clean energy workforce, building the
    skills necessary for a clean energy economy while ensuring that
    workers benefit from a transition to clean energy technologies.
    \7\ As the climate transition shifts the composition of jobs in
    the economy, the U.S. Government must focus on reskilling and
    retraining workers who may be negatively impacted (e.g.,
    workers at factories making internal combustion engine cars).
    In the electric vehicle space, investments in technology must
    be paired with supporting infrastructure. Early efforts to
    develop national electric vehicle charging infrastructure have
    been slow, which may have negative repercussions for adoption
    and consumer demand. \8\
    ---------------------------------------------------------------------------
         \7\ Jack Ewing, ``Battle Over Electric Vehicles Is Central to Auto
    Strike'', The New York Times, September 16, 2023, https://
    www.nytimes.com/2023/09/16/business/electric-vehicles-uaw-gm-ford-
    stellantis.html.
         \8\ James Bikales, ``Congress Provided $7.5B for Electric Vehicle
    Chargers. Built So Far: Zero''. Politico, December 5, 2023, https://
    www.politico.com/news/2023/12/05/congress-ev-chargers-billions-
    00129996.
    ---------------------------------------------------------------------------
                                    ------

             RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
                          FROM JAMIL N. JAFFER

    Q.1. In previous testimony to the House of Representatives, you
    cited the Export-Import Bank's China and Transformational
    Exports Program as an example of how Federal financing for
    American industry can help ``fill the gap that Chinese economic
    coercion creates.'' Congress directed EXIM to use the CTEP
    program to prioritize financing for American exports in ten
    critical areas, such as artificial intelligence, renewable
    energy and energy storage, wireless communications, and
    semiconductors.
        We have heard that EXIM's ability to provide financing to
    emerging industries is partially constrained because of the
    rules established by Congress for the Bank's default rate.
    While EXIM can provide financing for American exporters in
    emerging industries, the Bank has to be more conservative in
    its lending practices to ensure stability in its default rate.
    If the Bank's traditionally low default rate increases too
    much, the Bank essentially loses the ability to provide any new
    financing--not only making it harder for us to compete with
    China but also limiting our ability to support U.S. exporters,
    including small businesses looking to grow their global market
    share.
        Should our Committee look at how Congress could help EXIM
    provide more financing to American companies that face Chinese
    competition in key sectors?

    A.1. There is no question that there is significant value in
    the Senate Committee on Banking, Housing, and Urban Affairs
    looking at how the Committee--and Congress at large--might be
    able to help the Export-Import Bank of the United States (EXIM)
    provide more financing to American companies that are competing
    with Chinese companies in key sectors, including the ten
    transformational sectors identified in the China and
    Transformational Exports Program (CTEP). Such support is vital
    to allowing U.S. companies to be fully competitive in areas
    such as artificial intelligence, biotechnology, biomedical
    capabilities, wireless communications, renewable energy,
    semiconductors, financial technology, water treatment and
    sanitation, and high-performance computing, as well as
    underlying capabilities like critical minerals mining and
    processing. Ensuring that American companies are not only
    competitive but win these opportunities abroad in in the
    economic and national security interest of our Nation.
        As you know, in September 2023, the EXIM Office of
    Inspector General issued a report which found that ``EXIM's 2
    percent default rate cap, a statutory requirement, is unique
    among OECD [Export Credit Agencies] and discourages staff from
    taking risks and meeting other Congressional Mandates.'' \1\
    Given the critical importance of CTEP, at a minimum, Congress
    ought fully exclude CTEP transactions from the statutory
    default rate calculation where such transactions are approved
    by the EXIM Board of Directors.
    ---------------------------------------------------------------------------
         \1\ See EXIM Office of the Inspector General, ``Comparative
    Analysis of U.S. and OECD Arrangement Export Credit Agencies'', OIG-EV-
    23-04, at 24 (Sept. 29, 2023), available online at https://
    www.oversight.gov/sites/default/files/oig-reports/EIB/EXIM-OIGECA-
    EvaluationOIG-EV-23-04FINAL.pdf.
    ---------------------------------------------------------------------------
        In addition, as you may recall in 2021, the EXIM Advisory
    Committee Chairman, former Congressman Stevan Pearce (R-NM),
    sent EXIM's 2020 Report to the U.S. Congress on Global Export
    Competition to Congress and recommended, with respect to CTEP,
    that ``Congress fully resource this significant new mandate
    which also has national security components'' and that
    ``Congress consider expanding EXIM's authority to support
    defense articles and services and review how foreign ECAs
    support such exports.'' \2\ I support these recommendations. In
    addition, the Committee might review CTEP's current staffing
    and budget and take action to provide the full resources
    necessary to fulfill the CTEP mandate provided by Congress in
    its 2019 reauthorization of EXIM.
    ---------------------------------------------------------------------------
         \2\ See Export-Import Bank of the United States, ``2020 Report to
    the U.S. Congress on Global Export Competition'', at 8-9 (July 2021),
    available online at https://img.exim.gov/s3fs-public/reports/
    competitiveness-reports/2020/EXIM-2020-CompetitivenessReport-Web-Ready-
    Single%20pages.pdf.
    ---------------------------------------------------------------------------
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR CORTEZ MASTO FROM JAMIL N. JAFFER

    Q.1. This week the International Monetary Fund (IMF) released a
    new analysis that examines the potential impacts of AI on the
    global labor market and says that AI will affect almost 40
    percent of global jobs. Do you generally agree with this
    analysis, and if so, how do you think the productivity gains
    from AI compared to the jobs losses from the technology will
    impact the specific competition between the U.S. and China?

    A.1. There is no question that the advent and widescale
    adoption of artificial intelligence will have a significant
    impact on jobs globally, however it remains unclear whether
    this will result in a net gain or loss of jobs and whether the
    productivity gains will outstrip any net loss should there be
    one. \1\ The IMF's analysis itself notes that ``AI will expand
    economies' production frontiers and will lead to reallocations
    between labor and capital while triggering potentially profound
    changes in many jobs and sectors'' and that ``AI [also] offers
    unprecedented opportunities for solving complex problems and
    improving the accuracy of predictions, enhancing decision-
    making, boosting economic growth, and improving lives.'' \2\ At
    the same time, the IMF notes that ``precisely because of its
    vast and flexible applicability in numerous domains, the
    implications for economies and societies are uncertain.'' \3\
    ---------------------------------------------------------------------------
         \1\ See Mauro Cazzinga, et al., ``Gen-AI: Artificial Intelligence
    and the Future of Work'', at 2, International Monetary Fund (Jan. 14,
    2024), available online at https://www.imf.org/en/Publications/Staff-
    Discussion-Notes/Issues/2024/01/14/Gen-AI-Artificial-Intelligence-and-
    the-Future-of-Work-542379?cid=bl-com-SDNEA2024001 (``Artificial
    intelligence (AI) is set to profoundly change the global economy, with
    some commentators seeing it as akin to a new industrial revolution. Its
    consequences for economies and societies remain hard to foresee. This
    is especially evident in the context of labor markets, where AI
    promises to increase productivity while threatening to replace humans
    in some jobs and to complement them in others.'')
         \2\ See id. at 3.
         \3\ Id.
    ---------------------------------------------------------------------------
        Overall, however, the IMG assesses that ``[o]wing to
    capital deepening and a productivity surge, AI adoption is
    expected to boost total income'' and that ``[i]f AI strongly
    complements human labor in certain occupations and the
    productivity gains are sufficiently large, higher growth and
    labor demand could more than compensate for the partial
    replacement of labor tasks by AI, and incomes could increase
    along most of the income distribution.'' \4\
    ---------------------------------------------------------------------------
         \4\ Id. at 2.
    ---------------------------------------------------------------------------
        There is strong evidence from prior revolutions that
    significant advances in technology, systems, and processes
    result in long-term economic gains in societies that are able
    to adopt the new technologies and take advantage of them. \5\
    Given this, there is little doubt in my mind that the United
    States will be net advantaged by the advent of artificial
    intelligence if we are able to maintain or expand our current
    technology lead with respect to China.
    ---------------------------------------------------------------------------
         \5\ See, e.g., Diego Comin and Bart Hobijn, ``An Exploration of
    Technology Diffusion'', at 4, 21-25, Harvard Business School Working
    Paper No. 08-093 (Apr. 2008), available online at https://www.hbs.edu/
    ris/Publication%20Files/08-093--097fb722-e6dd-466d-aa1a-
    29733fa92757.pdf (``The remarkable development records of Japan in the
    second half of the Nineteenth Century and the first half of the
    Twentieth Century and of the, so-called, East Asian Tigers in the
    second half of the Twentieth Century all coincided with a catch-up in
    the range of technologies used with respect to industrialized
    countries. All these development miracles involved a substantial
    reduction of the technology adoption lags in these countries relative
    to those in (other) OECD countries.''); see, also, Darrell M. West,
    ``Technology and the Innovation Economy'', at 1, Center for Technology
    Innovation, Brookings Institution (Oct. 19, 2011), available online at
    https://www.brookings.edu/wp-content/uploads/2016/06/1019-technology-
    innovation-west.pdf (noting that ``[i]nnovation and entrepreneurship
    are crucial for long-term economic development'' and that
    ``[r]esearchers have found a link between technology innovation and
    national economic prosperity''); Noshua Watson, ``How Technology
    Spreads'', The Digest, National Bureau of Economic Research (July
    2001), available online at https://www.nber.org/digest/jul01/how-
    technology-spreads (``The adoption of new technology is essential to
    long-term macroeconomic growth.'').

    Q.2. How do you envision each country's approach to AI
    ---------------------------------------------------------------------------
    expansion may account for different labor market results?

    A.2. It is hard to assess at this time the impact of each
    country's approach to AI expansion on the labor markets. \6\
    The IMF's analysis indicates that ``[t]he impact of AI is also
    likely to differ significantly across countries at different
    levels of development or with different economic structures.''
    \7\ Specifically, the IMF notes that ``[a]dvanced economies,
    with their mature industries and service-driven economies,
    typically have a higher concentration of jobs in sectors that
    require complex cognitive tasks . . . [and] therefore [are]
    both more susceptible to, yet better positioned to benefit
    from, AI innovations.'' \8\ At the same time, the IMF also
    notes that ``emerging market and developing economies, often
    still reliant on manual labor and traditional industries, may
    initially face fewer AI-induced disruptions . . . [but] these
    economies may also miss out on early AI-driven productivity
    gains, given their lack of infrastructure and a skilled
    workforce.'' \9\
    ---------------------------------------------------------------------------
         \6\ Id.
         \7\ See Cazzinga, et al., ``Gen-AI'', supra n. 3, at 4.
         \8\ Id.
         \9\ Id.
    ---------------------------------------------------------------------------
        Regardless, if one accepts the assessment above that the
    U.S. will be net advantaged by broad adoption of AI
    capabilities if it maintains or expands the technological edge
    it currently enjoys, based on the historic productive gains as
    a result of rapid technology adoption, then accelerating AI
    expansion at home is in the economic and national security
    interests of the United States.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR CORTEZ MASTO FROM LINDSAY GORMAN

    Q.1. This week the International Monetary Fund (IMF) released a
    new analysis that examines the potential impacts of AI on the
    global labor market and says that AI will affect almost 40
    percent of global jobs. Do you generally agree with this
    analysis, and if so, how do you think the productivity gains
    from AI compared to the jobs losses from the technology will
    impact the specific competition between the U.S. and China?

    A.1. Response not received in time for publication.

    Q.2. How do you envision each country's approach to AI
    expansion may account for different labor market results?

    A.2. Response not received in time for publication.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                 SENATOR VAN HOLLEN FROM LINDSAY GORMAN

    Q.1. You testified to the importance of collaboration to help
    strengthen our competition strategy, calling for better
    coordination among Federal agencies and for improved
    multilateral cooperation with our partners and allies.
        In what specific ways should we better organize and
    leverage the tools at our disposal to promote multilateral
    cooperation to more effectively advance our competition
    strategy?

    A.1. Response not received in time for publication.

    Q.2. While it is preferable to secure multilateral cooperation
    through voluntary participation, under what circumstances
    should the United States use secondary sanctions to achieve our
    goals?

    A.2. Response not received in time for publication.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                          FROM LINDSAY GORMAN

    Q.1. You have previously noted that the CHIPS and Science Act
    (Pub. L. 117-167) is ``an excellent start in reversing the
    chronic public underfunding of U.S. research and development.''
    \1\ How can the United States leverage our strengths and build
    upon the successes of the CHIPS and Science Act to better
    counter China's current technology investment strategy?
    ---------------------------------------------------------------------------
         \1\ ``Commanding Heights: Ensuring U.S. Leadership in the Critical
    and Emerging Technologies of the 21st Century'', The House Select
    Committee on the Chinese Communist Party (July 26, 2023), Prepared
    Testimony from Lindsay Gorman, https://
    selectcommitteeontheccp.house.gov/committee-activity/hearings/hearing-
    notice-commanding-heights-ensuring-us-leadership-critical-and.

    ---------------------------------------------------------------------------
    A.1. Response not received in time for publication.

    Q.2. The People's Republic of China has spent hundreds of
    billions of dollars building up its solar industry and today,
    it controls more than 80 percent of the share in all the
    manufacturing stages of solar panels. \2\ Given that China is
    heavily subsidizing its domestic solar manufacturing industry
    and flooding the market with solar panels at lower prices than
    American competitors can offer, \3\ what steps can Congress and
    the Administration take to maximize investment in affordable
    clean energy and incentivize domestic production?
    ---------------------------------------------------------------------------
         \2\ Special Report on Solar PV Global Supply Chains, International
    Energy Agency (2022), https://www.iea.org/reports/solar-pv-global-
    supply-chains.
         \3\ Id.

    A.2. Response not received in time for publication.