[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
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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
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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:
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\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/.
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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.
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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.
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\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\
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\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.
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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\
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\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/.
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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.
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\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.
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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.