[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE PRC'S STRATEGIC PORT INVEST-
MENTS IN THE WESTERN HEMISPHERE AND
THE IMPLICATIONS FOR HOMELAND SECURITY,
PART I
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
TRANSPORTATION AND MARITIME
SECURITY
of the
COMMITTEE ON HOMELAND SECURITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 11, 2025
__________
Serial No. 119-3
__________
Printed for the use of the Committee on Homeland Security
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-692 PDF WASHINGTON : 2025
COMMITTEE ON HOMELAND SECURITY
Mark E. Green, MD, Tennessee, Chairman
Michael T. McCaul, Texas, Vice Bennie G. Thompson, Mississippi,
Chair Ranking Member
Clay Higgins, Louisiana Eric Swalwell, California
Michael Guest, Mississippi J. Luis Correa, California
Carlos A. Gimenez, Florida Shri Thanedar, Michigan
August Pfluger, Texas Seth Magaziner, Rhode Island
Andrew R. Garbarino, New York Daniel S. Goldman, New York
Marjorie Taylor Greene, Georgia Delia C. Ramirez, Illinois
Tony Gonzales, Texas Timothy M. Kennedy, New York
Morgan Luttrell, Texas LaMonica McIver, New Jersey
Dale W. Strong, Alabama Julie Johnson, Texas, Vice Ranking
Josh Brecheen, Oklahoma Member
Elijah Crane, Arizona Pablo Jose Hernandez, Puerto Rico
Andrew Ogles, Tennessee Nellie Pou, New Jersey
Sheri Biggs, South Carolina Sylvester Turner, Texas
Gabe Evans, Colorado Vacant
Ryan Mackenzie, Pennsylvania Vacant
Brad Knott, North Carolina
Eric Heighberger, Staff Director
Hope Goins, Minority Staff Director
Sean Corcoran, Chief Clerk
------
SUBCOMMITTEE ON TRANSPORTATION AND MARITIME SECURITY
Carlos A. Gimenez, Florida, Chairman
Andrew R. Garbarino, New York LaMonica McIver, New Jersey,
Elijah Crane, Arizona Ranking Member
Sheri Biggs, South Carolina Timothy M. Kennedy, New York
Mark E. Green, MD, Tennessee (ex Sylvester Turner, Texas
officio) Bennie G. Thompson, Mississippi
(ex officio)
Roland Hernandez, Subcommittee Staff Director
Alex Marston, Minority Subcommittee Staff Director
C O N T E N T S
----------
Page
Statements
The Honorable Carlos A. Gimenez, a Representative in Congress
From the State of Florida, and Chairman, Subcommittee on
Transportation and Maritime Security:
Oral Statement................................................. 1
Prepared Statement............................................. 3
The Honorable LaMonica McIver, a Representative in Congress From
the State of New Jersey, and Ranking Member, Subcommittee on
Transportation and Maritime Security:
Oral Statement................................................. 5
Prepared Statement............................................. 6
The Honorable Bennie G. Thompson, a Representative in Congress
From the State of Mississippi, and Ranking Member, Committee on
Homeland Security:
Prepared Statement............................................. 8
Witnesses
Mr. Isaac B. Kardon, Ph.D., Senior Fellow for China Studies, Asia
Program, Carnegie Endowment for International Peace, Adjunct
Professor, Johns Hopkins SAIS:
Oral Statement................................................. 10
Prepared Statement............................................. 12
Mr. Matthew Kroenig, Vice President and Senior Director,
Scowcroft Center for Strategy and Security, Atlantic Council
and Professor of Government and Foreign Service, Georgetown
University:
Oral Statement................................................. 31
Prepared Statement............................................. 33
Mr. Ryan C. Berg, Director, Americas Program, Center for
Strategic and International Studies:
Oral Statement................................................. 35
Prepared Statement............................................. 37
Mr. Cary Davis, President & CEO, American Association of Port
Authorities (AAPA):
Oral Statement................................................. 44
Prepared Statement............................................. 46
EXAMINING THE PRC'S STRATEGIC PORT IN-
VESTMENTS IN THE WESTERN HEMISPHERE
AND THE IMPLICATIONS FOR HOMELAND
SECURITY, PART I
----------
Tuesday, February 11, 2025
U.S. House of Representatives,
Committee on Homeland Security,
Subcommittee on Transportation and
Maritime Security,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:06 a.m., in
Room 310, Cannon House Office Building, Hon. Carlos Gimenez
[Chairman of the subcommittee] presiding.
Present: Representatives Gimenez, Garbarino, Crane, Biggs,
McIver, Kennedy, and Turner.
Also present: Representatives Nunn, and Hernandez.
Chairman Gimenez. The Committee on Homeland Security
Subcommittee on Transportation and Maritime Security will come
to order. Without objection, the Chair may declare the
subcommittee in recess at any point.
Today's hearings will examine the People's Republic of
China's strategic investments in ports across the Western
Hemisphere, including the United States and near the Panama
Canal, and their broader implications for homeland security.
Without objection, the gentleman from Iowa, Mr. Zach Nunn
and the gentleman from Puerto Rico, Mr. Pablo Jose Hernandez
are permitted to sit with the subcommittee and ask questions of
the witnesses.
I now recognize myself for an opening statement. Good
morning. I want to welcome everyone to the first hearing of the
Subcommittee on Transportation and Maritime Security in the
119th Congress. As we begin this new Congress, it is only
fitting that we turn our attention to one of the most pressing
national security threats facing the United States today: the
People's Republic of China's growing presence in the Western
Hemisphere.
In recent years, the PRC has steadily increased its
footprints in key maritime infrastructure across Latin America
and the Caribbean, gaining leverage over trade routes, and
extending its economic, political, and military influence in
our region.
Today's hearing marks the beginning of a serious effort by
this subcommittee to assess the scope of Beijing's ambitions
and determine what steps must be taken to safeguard the
homeland.
President Trump and senior officials in his administration
have rightly warned about the security risks posed by Beijing's
malign investments and particularly in ports near the Panama
Canal, which has long served as an essential artery for global
commerce and U.S. naval operations.
Last week in his first foreign trip as Secretary of State,
Marco Rubio reinforced that warning during a visit to Panama
where he made clear that the PRC's presence near the canal
poses an unacceptable risk. These concerns are well-founded.
Through state-owned enterprises such as China Merchants
Port Holdings, Hutchison Port Holdings, and China Ocean
Shipping Company, COSCO Shipping, the Chinese Communist party,
the CCP, has secured access to some of the most strategically
significant ports in our region.
Nowhere is this more concerning than at Panama.
Approximately 14 percent of all U.S. seaborne trade moves
through the Panama Canal, with an even more significant 40
percent of U.S. container traffic transiting it annually.
Hutchinson Ports, a subsidiary of Hutchison Port Holdings,
Limited, a Hong Kong-headquartered company with close ties to
the CCP, manages container terminals at 2 of the largest ports
adjacent to the canal. These container terminals are located at
the Port of Balboa on the Pacific side and the Port of
Cristobal on the Atlantic side.
This gives Beijing a strategic position over one of the
world's most important waterways and provides the CCP with an
opportunity to exert influence over commercial shipping, gather
intelligence on American and allied vessel traffic, and
potentially restrict the mobility of our Navy in a time of
crisis.
While Panama has recently announced an audit of Hutchinson
Ports, that is simply not enough. We don't need an audit. We
need action. The United States cannot and will not accept the
scenario where a foreign adversary, one that openly seeks to
undermine our global standing, controls infrastructure critical
to U.S. homeland security, military readiness, and economic
stability.
For more than 2 centuries under the principles of the
Monroe Doctrine, the United States has been the primary
guarantor of stability and security in the Western Hemisphere,
ensuring that trade routes vital to our economic security
remain free from foreign adversarial dominance. Yet today, the
CCP is aggressively working to change that reality.
However, Panama is only part of the larger picture. Across
the hemisphere, the PRC is securing port investment and
critical infrastructure agreements in countries such as Cuba,
Peru, Brazil, and Ecuador, among others.
In communist Cuba, just 90 miles from my home district in
South Florida, the PRC has expanded its economic and signals
intelligence capabilities through facility development
agreements and telecommunications investments. This raises
serious concerns about Beijing's ability to conduct
surveillance against the United States from inside our own
backyard.
In Peru, the PRC is transforming the Port of Chancay into a
major trade hub for its exports to South America. This is more
than an economic project. It strengthens the PRC's malign
economic influence and grip over regional trade and could allow
for dual-use capabilities to support future People Liberations
Army's Navy operations in the Pacific.
The implications of these investments for U.S. homeland
security cannot be ignored.
The PRC's expanding presence in Latin America has also
exacerbated the illicit flow of goods, including precursor
chemicals used to manufacture fentanyl. These chemicals fuel
drug production and trafficking networks run by the cartels to
send deadly narcotics into American communities.
The CCP is complicit in this crisis, which has taken the
lives of thousands, no, not just thousands, hundreds of
thousands of Americans and overwhelmed law enforcement at our
Southwest Border.
Alarmingly, these same PRC state-owned enterprises also
continue to operate in U.S. ports today, which poses grave
intelligence and security risk. A prime example is COSCO
Shipping which the Department of Defense recently placed on its
Section 1260H list of Chinese military companies due to its
ties to the PRC's military, intelligence, and security
apparatus.
Less than a month ago, Federal authorities arrested 9
individuals for their role in a massive smuggling operation
that allegedly funneled nearly $200 million of counterfeit and
illicit goods from the PRC into the United States through the
Ports of Los Angeles and Long Beach.
This is the kind of illicit activity that takes place when
we allow foreign adversaries, including those operating under
the direction of the CCP, to gain access to our Nation's
critical infrastructure.
The message to our partners in the Western Hemisphere must
be clear. If you want to benefit from security cooperation and
economic partnership with the United States, you must distance
yourself from PRC state-owned enterprises. The CCP has no
rightful place in shaping the economic and security landscape
of our region.
I want to thank our witnesses for appearing before the
subcommittee today. I look forward to a productive discussion
on how we can enhance America's security in response to the
PRC's increasing presence and influence in the Western
Hemisphere.
[The statement of Chairman Gimenez follows:]
Statement of Chairman Carlos A. Gimenez
February 11, 2025
Good morning. I want to welcome everyone to the first hearing of
the Subcommittee on Transportation and Maritime Security in the 119th
Congress.
As we begin this new Congress, it is only fitting that we turn our
attention to one of the most pressing national security threats facing
the United States today--the People's Republic of China's (PRC) growing
presence in the Western Hemisphere.
In recent years, the PRC has steadily increased its footprint in
key maritime infrastructure across Latin America and the Caribbean,
gaining leverage over trade routes and extending its economic,
political, and military influence in our region.
Today's hearing marks the beginning of a serious effort by this
subcommittee to assess the scope of Beijing's ambitions and determine
what steps must be taken to safeguard the homeland.
President Trump and senior officials in his administration have
rightly warned about the security risks posed by Beijing's malign
investments, particularly in ports near the Panama Canal, which has
long served as an essential artery for global commerce and U.S. naval
operations.
Last week, in his first foreign trip as Secretary of State, Marco
Rubio reinforced that warning during a visit to Panama, where he made
clear that the PRC's presence near the canal poses an unacceptable
risk. These concerns are well-founded.
Through state-owned enterprises such as China Merchants Port
Holdings, Hutchison Port Holdings, and China Ocean Shipping Company
(COSCO Shipping), the Chinese Communist Party (CCP) has secured access
to some of the most strategically significant ports in our region.
Nowhere is this more concerning than in Panama. Approximately 14
percent of all U.S. seaborne trade moves through the Panama Canal, with
an even more significant 40 percent of U.S. container traffic
transiting it annually.
Hutchinson Ports, a subsidiary of Hutchison Port Holdings Limited,
a Hong Kong-headquartered company with close ties to the CCP, manages
container terminals at two of the largest ports adjacent to the canal.
These container terminals are located at the Port of Balboa on the
Pacific side and the Port of Cristobal on the Atlantic side.
This gives Beijing a strategic position over one of the world's
most important waterways and provides the CCP with the opportunity to
exert influence over commercial shipping, gather intelligence on
American and allied vessel traffic, and potentially restrict the
mobility of our Navy in a time of crises.
And while Panama has recently announced an audit of Hutchison
Ports, that is simply not enough. We do not need an audit. We need
action.
The United States cannot and will not accept a scenario where a
foreign adversary--one that openly seeks to undermine our global
standing--controls infrastructure critical to U.S. homeland security,
military readiness, and economic stability.
For more than 2 centuries, under the principles of the Monroe
Doctrine, the United States has been the primary guarantor of stability
and security in the Western Hemisphere, ensuring that trade routes
vital to our economic security remain free from foreign adversarial
dominance.
Yet today, the CCP is aggressively working to change that reality.
However, Panama is only part of the larger picture. Across the
hemisphere, the PRC is securing port investments and critical
infrastructure agreements in countries such as Cuba, Peru, Brazil, and
Ecuador, among others.
In Communist Cuba, just 90 miles from my home district in South
Florida, the PRC has expanded its economic and signals intelligence
capabilities through facility development agreements and
telecommunications investments. This raises serious concerns about
Beijing's ability to conduct surveillance against the United States
from inside our own backyard.
In Peru, the PRC is transforming the Port of Chancay into a major
trade hub for its exports to South America. This is more than an
economic project. It strengthens the PRC's malign economic influence
and grip over regional trade and could allow for dual-use capabilities
that support future People's Liberation Army Navy operations in the
Pacific.
The implications of these investments for U.S. homeland security
cannot be ignored.
The PRC's expanding presence in Latin America has also exacerbated
the illicit flow of goods, including precursor chemicals used to
manufacture fentanyl.
These chemicals fuel drug production and trafficking networks run
by the cartels that send deadly narcotics into American communities.
The CCP is complicit in this crisis, which has taken the lives of
thousands of Americans and overwhelmed law enforcement at our Southwest
Border.
Alarmingly, these same PRC state-owned enterprises also continue to
operate in U.S. ports today, which poses grave intelligence and
security risks. A prime example is COSCO Shipping, which the Department
of Defense recently placed on its Section 1260H list of ``Chinese
military companies,'' due to its ties to the PRC's military,
intelligence, and security apparatus.
Less than a month ago, Federal authorities arrested 9 individuals
for their role in a massive smuggling operation that allegedly funneled
nearly $200 million of counterfeit and illicit goods from the PRC into
the United States through the Ports of Los Angeles and Long Beach.
This is the kind of illicit activity that takes place when we allow
foreign adversaries, including those operating under the direction of
the CCP, to gain access to our Nation's critical infrastructure.
The message to our partners in the Western Hemisphere must be
clear. If you want to benefit from security cooperation and economic
partnership with the United States, you must distance yourselves from
PRC state-owned enterprises.
The CCP has no rightful place in shaping the economic and security
landscape of our region.
I want to thank our witnesses for appearing before the subcommittee
today.
I look forward to a productive discussion on how we can enhance
America's security in response to the PRC's increasing presence and
influence in the Western Hemisphere.
Chairman Gimenez. I now recognize the Ranking Member, the
gentlewoman from New Jersey, Ms. McIver for her opening
statements.
Mrs. McIver. Good morning. Thank you to our witnesses for
joining us today.
Thank you to our Chairman Gimenez for holding today's
hearings.
I am glad to serve as Ranking Member of this subcommittee
this Congress, and I look forward to working with all of my
colleagues to advance the security of our transportation and
maritime systems.
Before I begin, I want to offer my condolences to the
friends and families of those recently took those to, excuse
me, to the friends and families of those lost in recent
aviation accidents here in Washington, DC, as well as
Philadelphia and Alaska. We must ensure travelers everywhere
can board planes and get to their destination safely and
securely.
Now to the topic at hand, the People's Republic of China
has aggressively pursued investments in ports throughout the
Americas and across the globe. PRC aggression requires a
robust, coordinated response by the United States and our
allies.
Investments by Chinese state-owned companies and terminal
leases at U.S. ports must continue to be reviewed carefully by
the Committee on Foreign Investments in the United States as
they have been to date. PRC investments in ports abroad must be
countered by U.S. foreign aid.
However, scrutinizing PRC investments in our ports only
goes so far if we are at the same time opening the front gates
of our Government to Chinese influence. The PRC poses a threat
to U.S. national security through investments, not just in
ports but in all manner of foreign assets, including their top
puppet Elon Musk.
Since being installed as the de facto president of the
United States, Musk has acted at every turn in the interest of
China and himself at the expense of American people. Musk has
deep ties to China. We do not know the full extent of those
ties because he refuses to follow public financial disclosure,
but we do know that Musk has received hundreds of millions of
dollars in loans from PRC-controlled banks to build factories
in Shanghai, which are central to his business and wealth.
We know that Musk has repeatedly met with senior Chinese
officials and failed to disclose those meetings despite being
required to do so as a U.S. defense contractor. Musk's own DOGE
co-chair Vivek Ramaswamy has said of Musk, ``I have no reason
to think Elon won't jump like a circus monkey when Xi Jinping
calls in the hour of need.''
Since inauguration day, Musk and his affiliates have
inserted themselves at multiple Government agencies and gained
access to Government systems containing America's most
sensitive personal data. Musk has also exported American's
personal data onto unsecured personal servers for unknown
reasons.
One Government contractor responsible for contributing to
intelligence briefings for this Treasury Department called
DOGE's access to the Department's payment system, ``an
unprecedented insider threat risk.''
If my colleagues were as concerned as they profess to be
about the PRC's access to sensitive U.S. critical
infrastructure and data, they would not be OK with handing
their constituents' information over to an unelected
billionaire whose true intentions are unknown.
In addition, the Musk-Trump administration has attempted to
freeze grant spending, including disbursements for the Port
Security Grant Program which U.S. ports rely on to fund
critical security projects.
To make matters worse, Musk and his underlings are killing
or trying to kill USAID, the agency responsible for providing
foreign aid. USAID's foreign investments are vital to advancing
U.S. interests abroad. In fact, USAID's investments are the
best tool the United States has to counter the PRC's influence
on the global stage in general and the PRC's foreign port
investments in particular.
USAID provides these investments for less than 1 percent of
the Federal budget. Elon Musk's net worth has increased by far
more than the entire USAID's budget just since Election Day,
which just goes to show that he cares about his own personal
enrichment and not making the Government more efficient.
Dismantling USAID is illegal. I am going to say that again.
Dismantling USAID is illegal as Congress has authorized,
funded, and mandated its foreign aid programs. But beyond that,
dismantling USAID is just plain dumb. At least it is dumb if
your goal is to advance U.S. interests, which may not be Musk's
goal.
Removing U.S. foreign aid will create a soft power vacuum
that the PRC will happily fill. As one former USAID official
put it, and I quote, ``Halting foreign aid, even just
temporarily, will have obvious predictable results. Children
will die, our national security will erode, America's alliances
will suffer, U.S. partners will be at risk, and America's
enemies will rejoice. The Trump administration has just put
America last while handing a gift to our biggest adversaries,
notably China.''
I agree with my colleagues across the aisle that our ports
need to be secure and that we need to counter the PRC's
influence in the United States and across the globe. I hope my
colleagues would open their eyes and see that this
administration's actions fly directly in the face of those
goals.
I thank the witnesses again for joining us, and I yield
back.
[The statement of Ranking Member McIver follows:]
Statement of Ranking Member LaMonica McIver
February 11, 2025
I am glad to serve as Ranking Member of this subcommittee this
Congress, and I look forward to working with all my colleagues to
advance the security of our transportation and maritime systems.
Before I begin, I want to offer my condolences to the friends and
families of those lost in recent aviation accidents here in Washington,
DC, as well as in Philadelphia and Alaska. We must ensure travelers
everywhere can board planes and get to their destinations safely and
securely.
Now to the topic at hand. The People's Republic of China has
aggressively pursued investments in ports throughout the Americas and
across the globe.
PRC aggression requires a robust, coordinated response by the
United States and our allies.
Investments by Chinese state-owned companies in terminal leases at
U.S. ports must continue to be reviewed carefully by the Committee on
Foreign Investment in the United States, as they have been to date, and
PRC investments in ports abroad must be countered by U.S. foreign aid.
However, scrutinizing PRC investments in our ports only goes so far
if we are, at the same time, opening the front gates of our Government
to Chinese influence.
The PRC poses a threat to U.S. national security through their
investments not just in ports, but in all manner of foreign assets--
including their top puppet, Elon Musk.
Since being installed as the de facto President of the United
States, Musk has acted at every turn in the interests of China and
himself, at the expense of the American people.
Musk has deep ties to China. We do not know the full extent of
those ties because he refuses to file a public financial disclosure--
but we do know that Musk has received hundreds of millions of dollars
in loans from PRC-controlled banks to build factories in Shanghai,
which are central to his businesses and wealth.
And we know that Musk has repeatedly met with senior Chinese
officials and failed to disclose those meetings, despite being required
to do so as a U.S. defense contractor.
Musk's own former DOGE co-chair Vivek Ramaswamy has said of Musk,
``I have no reason to think Elon won't jump like a circus monkey when
Xi Jinping calls in the hour of need.''
Since Inauguration Day, Musk and his unqualified cronies have
inserted themselves at multiple Government agencies and gained access
to Government systems containing Americans' most sensitive personal
data.
Musk has also exported Americans' personal data onto unsecure
personal servers for unknown reasons.
One Government contractor responsible for contributing to
intelligence briefings for the Treasury Department called DOGE's access
to the Department's payment system, ``an unprecedented insider threat
risk.''
If my colleagues were as concerned as they profess to be about the
PRC's access to sensitive U.S. critical infrastructure and data, they
would not be OK with handing their constituents' information over to an
unelected billionaire whose true intentions are unknown.
In addition, the Musk-Trump administration has attempted to freeze
grant spending, including disbursements for the Port Security Grant
Program, which U.S. ports rely on to fund critical security projects.
To make matters worse, Musk and his underlings are trying to kill
USAID, the agency responsible for providing foreign aid. USAID's
foreign investments are vital to advancing U.S. interests abroad.
In fact, USAID's investments are the best tool the United States
has to counter the PRC's influence on the global stage in general--and
the PRC's foreign port investments in particular.
USAID provides these investments for less than 1 percent of the
Federal budget. Elon Musk's net worth has increased by far more than
the entire USAID budget just since Election Day--which just goes to
show that he cares about his own personal enrichment, not making the
Government more efficient.
Dismantling USAID is illegal, as Congress has authorized, funded,
and mandated its foreign aid programs.
But beyond that, dismantling USAID is just plain dumb. At least, it
is dumb if your goal is to advance U.S. interests--which may not be
Musk's goal. Removing U.S. foreign aid will create a ``soft power''
vacuum that the PRC will happily fill.
As one former USAID official put it, ``Halting [foreign aid], even
just temporarily will have obvious, predictable results: Children will
die. Our national security will erode. America's alliances will suffer.
U.S. partners will be at risk. And America's enemies will rejoice . . .
The Trump administration has just put America last, while handing a
gift to our biggest adversaries, notably China.''
I agree with my colleagues across the aisle that our ports need to
be secure, and that we need to counter the PRC's influence in the
United States and across the globe.
I hope my colleagues will open their eyes and see that this
administration's actions fly directly in the face of those goals.
Chairman Gimenez. Thank you to the Ranking Member.
Other Members of the committee are reminded that opening
statements may be submitted for the record.
[The statement of Ranking Member Thompson follows:]
Statement of Ranking Member Bennie G. Thompson
February 11, 2025
This hearing is only our committee's third this Congress, but I am
already beginning to sense a theme: the Republican Majority wants to
hold hearings on real problems, but is turning a blind eye to how the
Trump administration is making those problems much, much worse.
Last week, Republicans convened a hearing on cybersecurity
workforce challenges, while trying to ignore the Trump administration's
brazen attacks on Federal workers.
This week, Republicans are holding a hearing on the People's
Republic of China's growing international presence in the maritime
sector, while trying to ignore the Trump administration's brazen
attacks on U.S. foreign aid, which is essential to combatting the PRC's
influence around the world.
This is like trying to mow the lawn while your house is on fire.
The threats posed by the PRC to U.S. and international ports are
worthy of serious attention.
The PRC has grown increasingly aggressive within the maritime
domain and currently owns or operates more than 40 ports in Mexico,
Central, and South America.
Some of these are deepwater ports with wide-berth docks sufficient
for China's Navy to make port calls for logistics and refueling needs.
The United States and its partners face tremendous challenges in
responding to the PRC's activities--which is even more challenging when
the current administration is undermining those efforts.
On Inauguration Day, President Trump signed an Executive Order
pausing U.S. foreign aid.
Since then, we have seen Elon Musk and his Department of Government
Efficiency minions attempt to shutter the U.S. Agency for International
Development.
Stepping back from the world stage is not the way to counter
China's growing influence.
In fact it will do exactly the opposite, opening the door for China
to fill the void the United States has left.
As we seek to understand why the administration would take these
seemingly incomprehensible actions, we cannot ignore Elon Musk's ties
to China.
Musk's various businesses are deeply entangled with the PRC.
In 2019, Tesla opened the Shanghai Super Factory, built using loans
from PRC state-owned banks.
The PRC has given Tesla special tax breaks and other benefits.
Ever since Musk established business ties with the PRC, he has
acted in China's best interests.
During the December 2024 Government funding negotiations, Musk
inserted himself at the last minute to urge Republicans to reject the
bill they had negotiated.
The bill would have prohibited or required notification of overseas
transactions involving certain Chinese services, as well as an expanded
review of Chinese real estate purchases in the United States.
Republicans followed Musk's orders, and the final version of the
bill dropped those provisions.
In addition, the Department of Defense has been investigating Musk
and SpaceX for failing to disclose meetings with Chinese and Russian
foreign leaders, as required by law.
Now, we see Musk deconstructing the Federal Government from the
inside, in ways the PRC will easily exploit.
The fox is guarding the henhouse, and we do not know his true
intentions.
I hope the Republican Majority will stop willfully ignoring how the
administration is exacerbating the problems for which they claim to
have such grave concerns.
Chairman Gimenez. I am pleased to have a distinguished
panel of witnesses before us today on this critical topic. I
ask that our witnesses to please rise and raise their right
hand. Do you solemnly swear that the testimony you will give
before the Committee on Homeland Security of the U.S. House of
Representatives will be the truth, the whole truth, and nothing
but the truth, so help you God?
Let the record reflect that the witnesses have answered in
the affirmative. Thank you and please have a seat.
[Witnesses sworn.]
Chairman Gimenez. I would now like to formally introduce
our witnesses. Dr. Isaac Kardon is a senior fellow for China
Studies at Carnegie Endowment for International Peace and an
adjunct professor at Johns Hopkins School of Advanced
International Studies. Previously, he was an assistant
professor at the U.S. Naval War Colleges China Maritime Studies
Institute.
Dr. Kardon specializes in China's maritime power, including
its global port development, overseas military basing, and the
international law of the sea. He holds a Ph.D. in government
from Cornell University and an MPhil in modern Chinese studies
from Oxford and a BA in history from Dartmouth.
Dr. Matthew Kroenig is vice president and senior director
of the Scowcroft Center for Strategy and Security at the
Atlantic Council. He specializes in U.S. national security
strategy, strategic competition with China and Russia, and
nuclear deterrence.
Dr. Koenig currently serves as tenured professor at
Georgetown University, and he is also a commissioner on the
Congressional Commission on the Strategic Posture of the United
States. Previously, he served in the Department of Defense and
the intelligence community under the Bush, Obama, and Trump
administrations. He holds a Ph.D. and an MA in political
science from the University of California Berkeley and is a
life member of the Council on Foreign Relations.
Dr. Ryan Berg is director of the Americas Program and head
of the Future of Venezuela's Initiative at the Center for
Strategic and International Studies. Dr. Berg specializes in
U.S.-Latin American relations, strategic competition, defense
policy, and transnational organized crime.
Previously, he was a research fellow at the American
Enterprise Institute and a visiting fellow at Oxford's Changing
Character of War Program. He holds a Ph.D., an MPhil in
political science and an MSC in global governance from Oxford,
as well as a BA in government and theology from Georgetown.
Dr. Cary Davis is the president and chief executive officer
of the American Association of Port Authorities where he also
serves as general counsel.
Prior to the AAPA, Mr. Davis served in the Federal
Government as a Presidential and Congressional appointee for
international trade and security. He holds a J.D. and a
Master's degree from the University of Pennsylvania and a B.S.
from the University of Pittsburgh.
I thank each of our distinguished witnesses for being here
today.
I now recognize Dr. Kardon for 5 minutes to summarize his
opening statement.
STATEMENT OF ISAAC B. KARDON, PH.D., SENIOR FELLOW
FOR CHINA STUDIES, ASIA PROGRAM, CARNEGIE ENDOW-
MENT FOR INTERNATIONAL PEACE, ADJUNCT PROFESSOR,
JOHNS HOPKINS SAIS
Mr. Kardon. Chairman Gimenez, Ranking Member McIver, and
Members of the subcommittee, thank you for this opportunity to
testify on Chinese firms' strategic port investments in the
Western Hemisphere and their implications for homeland
security.
Chinese companies have invested in port terminals in 7
countries in our hemisphere and include 5 terminals in U.S.
ports. Two Chinese state-owned enterprises, COSCO and China
Merchants, along with the private conglomerate Hong Kong-based
CK Hutchison Holdings, are the lead Chinese partner in each of
these investments.
Compared to other regions, Chinese firms maintain a
relatively modest presence in the Americas with investments in
15 ports of 95 total, which represents 16 percent of their
overall global port investments.
In the United States, Chinese firms hold minority stakes in
terminals at the Ports of Los Angeles, Seattle, Houston, and
Miami. At Long Beach, COSCO holds a 51 percent stake at Pier J.
These positions are generally structured as joint ventures with
American firms, which are generally the lead operators. Beyond
our borders, Chinese companies made particularly strategic
investments in Panama, Peru, and Brazil.
Turning to homeland security implications, I assessed 2
primary areas of valid concern. First, the potential for
Chinese military use of these facilities to project power in
the hemisphere, and second, the exposure of critical maritime
infrastructure to certain physical and digital vulnerabilities.
On the military front, Chinese naval presence in our
hemisphere is relatively modest. The People's Liberation Army
Navy has conducted only 39 port calls in the Americas over the
past 27 years. That's out of a total of 413, so about 9
percent, with no reported calls since the year 2018.
While Chinese-operated ports can and do support limited
military operations, observed especially in their regular
missions in the Indian Ocean region, the correlation of forces
in this hemisphere overwhelmingly favors the United States.
For the PLA to mount a direct challenge to America's
exclusive role in hemispheric security would be a risky and
counterproductive deviation from Beijing's clear strategic
imperatives. These will remain anchored in the western Pacific
and focused on controlling Taiwan for the foreseeable future.
The more pressing concerns involve vulnerabilities
introduced by Chinese-made equipment and software embedded in
port systems. Even facilities not owned or operated by Chinese
firms often rely on PRC-made technologies--for example, ship-
to-shore cranes.
Under Beijing's highly-acquisitive data governance regime
and comparatively high levels of control over PRC firms, these
systems enable intelligence collection and surveillance and may
cause delay or disruption to the critical operations of U.S.
maritime transport systems.
Four recommendations follow from these findings. First,
while the presence of Chinese investments and equipment in U.S.
ports present some material risks, indiscriminate force
divestiture would do more harm than good. The focus should be
on implementing stringent and mandatory cybersecurity and other
security screening and developing viable domestic alternatives
to technologies and services currently dominated by PRC firms.
U.S. terminal concessions are less problematic from a national
security standpoint but should also be scrutinized rigorously.
Second, the United States must work closely with the
government of Panama to protect our vital national security
interests that are concentrated at the Panama Canal. This
should include helping attract private capital to take over any
rescinded concessions and to expand and upgrade existing
facilities.
Third, rather than trying to symmetrically match China's
port investments, we should leverage our extensive network of
capable maritime partners in Asia and Europe in particular to
compete collectively.
Finally, Congress should prioritize legislation like the
SHIPS for America bill proposed in the last Congress to
coordinate our national maritime strategy, including creating a
maritime security advisor position to improve strategic
planning and decision making that integrates economic and
national security concerns.
Challenges posed by China's port investments in the
hemisphere are real but manageable with proper attention and
coordinated response.
Thank you for the opportunity to testify and I'll look
forward to your questions.
[The prepared statement of Mr. Kardon follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Gimenez. Thank you, Dr. Kardon.
I now recognize Dr. Kroenig for 5 minutes to summarize his
opening statement.
STATEMENT OF MATTHEW KROENIG, VICE PRESIDENT AND
SENIOR DIRECTOR, SCOWCROFT CENTER FOR STRATEGY
AND SECURITY, ATLANTIC COUNCIL AND PROFESSOR OF
GOVERNMENT AND FOREIGN SERVICE, GEORGETOWN UNI-
VERSITY
Mr. Kroenig. Chairman Gimenez, Ranking Member McIver,
distinguished Members of the committee, thank you for the
opportunity to testify on the important topic of Chinese
strategic port investments in the Western Hemisphere and the
implications for U.S. homeland security.
I want to assist your work by sharing insights gleaned from
my more than 2 decades of experience working on U.S. national
security at the Central Intelligence Agency, Department of
Defense, the Congressional Commission on the Strategic Posture
of the United States, and now as a scholar at Georgetown
University and a vice president at the Atlantic Council.
My message today is simple. China's port investments in the
Western Hemisphere pose a serious national security threat to
the United States and its allies. Washington and regional
states should work together to decouple from Chinese
investments in ports and other areas critical to national
security.
China poses the greatest contemporary threat to U.S.
national security. It's a comprehensive challenge with
economic, technological, diplomatic, ideological, and military
dimensions. Ultimately, the rivalry concerns the future of
global order.
China employees overseas infrastructure investments,
including in the Western Hemisphere, as part of its grand
strategy. Countries in the Western Hemisphere are often
attracted to China's infrastructure investments but they come
at a cost. Through its investments, China cements access to
resources, captures elites, gains leverage over governments,
shifts national policies in its favor, and undermines
democratic norms in transparency and environmental standards.
China's investments in ports, including in Peru and Panama,
pose a number of threats to U.S. homeland security. Chinese-
operated ports are used to facilitate the shipment of fentanyl
precursors to the United States. China exploits the presence of
technology and access to data for an intelligence advantage.
China could restrict or block access to ports threatening
American trade and economic well-being. In the event of a
crisis or war, China could hinder the passage of American naval
vessels undermining American war plans.
China could also use deep water ports to host naval
vessels, enabling the projection of military power into the
Western Hemisphere. As Secretary of State Marco Rubio recently
and correctly stated, ``The status quo is unacceptable.''
There are a number of steps the United States should take
to counter Chinese port investments in the Western Hemisphere
to protect U.S. and allied security. The United States should
encourage countries in the Western Hemisphere to adopt a
derisking approach to China.
Regional governments do not need to choose between the
United States and China. They can continue trade with China in
non-sensitive areas such as agriculture, but U.S. allies and
partners should pursue a hard decoupling with China in areas of
sensitive national security concern such as telecommunications,
advanced technology, ground satellite stations, surveillance
systems, critical minerals, and critical infrastructure,
including ports.
Donald Trump, President Trump has said of the Panama Canal,
``We gave it to Panama and we're taking it back.'' I applaud
the Panamanian government's subsequent decision to forego
renewal of their participation in China's Belt and Road
Initiative, and Panama should use its current audit of
operators in the Panama Canal area as an opportunity to sever
the contracts with Chinese companies and to rebid the contract
to U.S. or allied companies that will better ensure American
and Panamanian interest.
Encouraging regional countries to derisk from China will
often be doing these countries a favor. Many Latin American
countries entered into agreements with China years ago under
previous governments and different geopolitical conditions.
Today these same countries understand that undue Chinese
influence in sensitive sectors is not in their interest, but
they do not have the ability to stand up to China on their own,
pointing to the United States as the bad cop, and help these
countries take necessary steps that would be difficult to take
on their own.
Washington cannot, however, expect regional countries to
trade something for nothing. The United States must provide
credible and affordable alternatives to Chinese infrastructure
investments. To do this, the United States has a number of
advantages. We have a number of ways to incentivize our vibrant
private sector to invest in the region.
The United States has a robust network of allies and
partners we can coordinate, European, Japanese, Australian, and
South Korean efforts to provide aid and alternatives in the
region.
Third, the United States and its allies can compete on
quality when it comes to environmental standards, labor
standards, technical know-how, and so forth.
Finally, as the Trump administration looks to increase
defense spending and debates regional priorities, it should
boost the budget of U.S. Southern Command and increase SOUTHCOM
training and exercises with regional partners.
Appended to this statement is a copy of a strategy to
counter malign Chinese and Russian influence in Latin America
and the Caribbean, an Atlantic Council report I co-authored
last year that explores these issues in greater detail and
provides actionable recommendations.
I'm honored that the Committee on Homeland Security has
invited me to share my views on these challenges, and I look
forward to taking your questions.
[The prepared statement of Dr. Kroenig follows:]
Prepared Statement of Matthew Kroenig
February 11, 2025
Chairman Gimenez, Ranking Member McIver, distinguished Members of
the committee, thank you for the opportunity to testify on the
important topic of Chinese strategic port investments in the Western
Hemisphere and the implications for U.S. homeland security.
I want to assist your work by sharing insights gleaned from my more
than 2 decades of experience working on U.S. national security policy
at the Central Intelligence Agency, Department of Defense, the
Congressional Commission on the Strategic Posture of the United States,
and now as a scholar at Georgetown University, and a vice president at
the Atlantic Council.
My message today is simple: China's port investments in the Western
Hemisphere pose a serious national security threat to the United States
and its allies and partners in the region. Washington and regional
states should work together to decouple from Chinese investments in
ports and other areas critical to national security.
China poses the greatest contemporary threat to U.S. national
security. It is a comprehensive challenge with economic, technological,
diplomatic, ideological, and military dimensions. Ultimately, the
rivalry concerns the leadership of global order.
China employs overseas infrastructure investments, including in the
Western Hemisphere, as part of its grand strategy. Countries in the
Western Hemisphere are often attracted to China's infrastructure
investments, but they come at a cost. Through its investments, China
cements access to resources, captures elites, gains leverage over
governments, shifts national policies in its favor, and undermines
democratic norms, and transparency and environmental standards.
China's investments in ports, including in Peru and Panama, pose a
number of threats to U.S. homeland security. Chinese-operated ports are
used to facilitate the shipment of fentanyl precursors to the United
States. China exploits the presence of technology and access to data
for an intelligence advantage. China could restrict or block access to
ports, threatening American trade and economic well-being. In the event
of a crisis or war, China could hinder the passage of American naval
vessels, undermining American war plans. China could also use deep
water ports to host People's Liberation Army Navy vessels, enabling the
projection of military power into the Western Hemisphere.
As Secretary of State Marco Rubio correctly stated, this status quo
is unacceptable. There are a number of steps the United States should
take to counter Chinese port investments in the Western Hemisphere and
protect U.S. and allied security, freedom, and prosperity.
The United States should encourage countries in the Western
Hemisphere to adopt a de-risking approach to China. Regional
governments do not need to choose between the United States and China.
They can continue lucrative trade with China in non-sensitive domains,
such as agriculture. But U.S. allies and partners should pursue a hard
decoupling with China in areas of sensitive national security concern,
such as: telecommunications, advanced technology, ground satellite
stations, surveillance systems, military and intelligence cooperation,
critical minerals, and critical infrastructure, including ports.
President Donald J. Trump said, ``China is operating the Panama
Canal and we didn't give it to China, we gave it to Panama, and we're
taking it back.''
I applaud the Panamanian government's subsequent decision to forgo
renewal of their participation in China's Belt and Road Initiative
(BRI). Panama should use its current audit of operators in the Panama
Canal area as an opportunity to sever the contracts with Chinese
companies and to re-bid the contract to U.S. or allied companies that
will better ensure American and Panamanian interests.
Pressuring regional countries to de-risk from China will often be
doing these countries a favor. Many Latin American countries entered
into agreements with China years ago under previous governments, in a
different geopolitical environment. Today, these same countries now
understand that undue Chinese influence in sensitive sectors is not in
their interest, but they do not have the ability to stand up to China
on their own. Pointing to American pressure, as the ``bad cop,'' can
help these countries take necessary steps that would be difficult to
take on their own.
Washington cannot, however, expect regional countries to trade
something for nothing.
The United States must provide credible and affordable alternatives
to Chinese infrastructure investments. The U.S. Government cannot
compete with Chinese-subsidized infrastructure investments on price or
scale, but it has a number of other advantages.
First, it should incentivize its vibrant private sector to invest
in the region. Institutions like the International Development Finance
Corporation and the Export-Import Bank should continue their
transformation into instruments to advance American interests in this
new era of great power confrontation.
Second, the United States should leverage its global network of
allies and partners for great power competition in the Global South.
The European Union and U.S. allies in the Indo-Pacific, such as
Australia, Japan, and South Korea, have world-class technology
companies, extensive trade relationships in the Western Hemisphere, and
significant foreign aid programs. To be most effective, however, the
various activities should be brought together in a coordinated fashion,
guided by Washington.
Third, the United States and its allies can compete on quality.
While Chinese investments are often economically attractive, they come
with strings attached. The United States and its free world allies can
outcompete China on free and fair-trade practices, transparency, anti-
corruption, rule of law, technical know-how, and high labor and
environmental standards.
Finally, as the Trump administration looks to increase defense
spending and debates regional priorities, it should boost the budget of
U.S. Southern Command and increase SOUTHCOM training and exercises with
regional partners. In the worst-case scenarios, SOUTHCOM must be
prepared to step in and secure access to ports and open sea lines of
communication.
Appended to this statement is a copy of ``A Strategy to Counter
Malign Chinese and Russian Influence in Latin America and the
Caribbean,'' an Atlantic Council report I co-authored last year that
explores these issues in greater detail and provides actionable
recommendations.*
---------------------------------------------------------------------------
* The report can be found at https://www.atlanticcouncil.org/
content-series/atlantic-council-strategy-paper-series/a-strategy-to-
counter-malign-chinese-and-russian-influence-in-latin-america-and-the-
caribbean/.
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I am honored that the Committee on Homeland Security has invited me
to share my views on these challenges, and I look forward to taking
your questions.
Chairman Gimenez. Thank you, Dr. Kroenig.
I now recognize Dr. Berg for 5 minutes to summarize his
opening statements.
STATEMENT OF RYAN C. BERG, DIRECTOR, AMERICAS PRO-
GRAM, CENTER FOR STRATEGIC AND INTERNATIONAL
STUDIES
Mr. Berg. Chairman Gimenez, Ranking Member McIver,
distinguished Members of the subcommittee, I'm honored to share
my views with you this morning on this critical topic.
Concern about the People's Republic of China advancing in
the construction, operation, and even the ownership of ports is
nothing new. What has changed is the geopolitical and economic
contexts.
The United States has shaken its post-Cold War stupor. The
United States is no longer asleep at the switch as strategic
rivals set down roots in our shared neighborhood. And the
United States is once again exercising its competitive muscles
in geographies unaccustomed to this level of U.S. attention.
According to a recent analysis by the Council on Foreign
Relations, as well as a China activities dashboard maintained
by the Florida International University, almost 130 ports
globally have some degree of PRC ownership or operation.
One distinctive feature stands out. More than half of
China's ports sit on major shipping lanes and strategic choke
points. In the Western Hemisphere this has meant port terminals
in at least 3 locations in Mexico, the Hutchinson Ports at the
strategic approaches of the Panama Canal, the recently-opened
mega port in Chancay Peru, plans for a deep water port in St.
John's Harbor in Antigua, a 90 percent stake in the Port of
Paranagua for China Merchants Port Holding Company in Brazil, a
100 percent stake in the Kingston Freeport Terminal for the
same company, and designs on a port near Punta Arenas in Chile
and near the Drake Passage in Argentina.
The PRC's military-civil fusion strategy creates risks for
both soft commercial espionage and hard security risks in a
potential conflict situation. Beijing's national security law
amounts to a state-mandated espionage while SOUTHCOM has
highlighted several hard security risks and posture statements
to this very Congress, radar and GPS jamming, physical
blockades, and even containerized weapon systems.
Given the importance of ports in general, the activities
and global reach of transnational criminal organizations, there
is also emerging evidence that Chinese-operated and -owned
ports could also be catalyzers of TCO group activities in
illicit markets given the PRC's reliance on opacity as a key
operating principle.
However, not all Chinese ports are the same. China has
hundreds of thousands of state-owned enterprises and the ones
that collaborate with the PLA are mostly well-known and many
are, in fact, blacklisted by our Government. Those SOEs should
be the subject of extra focus and scrutiny,
Mr. Chairman, in my remaining time I'd like to move to some
policy recommendations. First, I think we need to create a
methodology for a spectrum of concern regarding Chinese-owned
and -operated ports. Four criteria would be basic starting
points for me.
First, the location of the port both in terms of the
proximity to the U.S. homeland and its position vis-a-vis key
maritime trade routes; second, the mode of cooperation between
China and Latin American host country; third, the relationship
between the host government and Beijing; and fourth, the
criticality of a particular port to global trade.
The second recommendation, I think we need to consider
leveraging the DFC and other multilateral financial
institutions to launch a port buyback program in cases where
the PRC is the owner. In the cases where the PRC is the port
operator, these institutions may consider supporting a program
to help countries terminate agreements early and entice more
transparent operators to bid on concessions that become
available.
The United States should also stand up a program to reduce
Chinese equipment, both software and hardware, at Western
Hemisphere ports. As I understand it, current U.S. law does not
permit the systems to foreign ports to extricate Huawei
equipment, for example, or ZPMC cranes.
Third, the United States must find a way to make a better
offer in these select and critical areas. Simply put, we need
to up our game in commercial diplomacy. We should grow our
commercial service by 2 to 3 times by recruiting people with a
decade or more of private-sector experience, including with
cross-cultural skills in the regions where they'd be working.
We should bring these individuals in to embassies via direct
non-foreign service officer test and hiring pipeline. We can
use IEFA, I believe, to create the recruiting and on-boarding
process.
We should also establish a global Belt and Road task force
as part of the State Department's China House to identify where
the PRC is bidding on infrastructure projects, critical
minerals projects, ICT networks, and so on. We must make
commercial diplomacy a metric for success in every global south
Ambassador's routine evaluations.
Fourth, I think we need to maintain overhead imagery
collection programs on select PRC ports. The United States
should maintain strong overhead imagery collection on Chinese-
owned and -operated ports in LAC to ensure they do not expand
or quietly but fundamentally alter their nature. This happened
in the United Arab Emirates when we caught the Chinese
expanding to accommodate military vessels, and the PRC was
forced to cease construction.
I think with enthusiasm for China's BRI waning in recent
years and following Panama's courageous decision to end its
participation in the BRI, the United States has opportunities
to advance port infrastructure security.
With that, Mr. Chairman, I yield and look forward to the
committee's questions.
[The prepared statement of Dr. Berg follows:]
Prepared Statement of Ryan C. Berg
Tuesday, February 11, 2025
Chairman Gimenez, Ranking Member McIver, and distinguished Members
of the subcommittee, I am honored to share my views with you on this
important topic. CSIS does not take policy positions, so the views
represented in this testimony are my own and not those of my employer.
In my testimony, I would like to reflect on the soft and hard security
risks of Chinese port activity in the Western Hemisphere, the way PRC
ports are rewiring the region's trade routes, the nexus between Chinese
ports and transnational organized crime, and how we might develop a
methodology for a spectrum of concern regarding Chinese port activity
in Latin America.
``[T]he truth of the matter is that the People's Republic of China is
rapidly filling the vacuum created by the departure of American
military forces from the isthmus [of Panama] . . . Their presence adds
to the danger of using the Colon Free Zone to purchase restricted
technology with dual civilian-military use.''--Dr. Tomas Cabal,
December 7, 1999 at a hearing of the U.S. House Subcommittee on
Domestic and International Monetary Policy.\1\
---------------------------------------------------------------------------
\1\ https://www.washingtonpost.com/wp-srv/WPcap/1999-12/08/008r-
120899-idx.html.
Concern about the Peoples Republic of China (PRC) advancing in the
construction, operation, and even ownership of ports is nothing new.
What has changed is the geopolitical and economic contexts. The United
States has shaken its post-Cold War stupor. Policy makers are no longer
asleep at the switch as strategic rivals set down roots in our shared
neighborhood. And the United States is once again exercising its
competitive impulses in geographies unaccustomed to this level of U.S.
attention.
The rise of Xi Jinping changed everything for competition with the
PRC in the Western Hemisphere. Not only does Xi tend to securitize all
aspects of the U.S.-China competition, but he also hardened the
consensus against the United States as he played to nationalism
domestically. Two thousand fifteen was a watershed year for
competition, as it saw the PRC pass its infamous National Security Law.
In 2020, the PRC absorbed Hong Kong and passed an analogous 2020 Hong
Kong Security Law. This ``changed the equation for Chinese companies
abroad,'' according to a former senior official on the Trump
administration's national security council for the Western
Hemisphere.\2\ In the best of times, distinctions between private and
state-owned firms are matters of degree in a communist regime; however,
these laws require that Chinese and Hong Kong companies gather
information on foreign entities and provide that data upon request to
the Chinese Communist Party--tantamount to state-mandated espionage.
---------------------------------------------------------------------------
\2\ https://www.politico.com/news/2025/02/01/panama-trump-
confrontation-war-00201759.
---------------------------------------------------------------------------
Within this context, growing PRC involvement in maritime ports in
Latin America and the Caribbean (LAC) presents a serious challenge to
U.S. maritime supremacy, freedom of navigation, data security, and
supply chain security.
regional panorama
According to a recent analysis by the Council on Foreign Relations,
almost 130 ports globally have some degree of PRC ownership.\3\ Between
2010 and 2019, Chinese companies ploughed $11 billion into overseas
ports.\4\ In roughly the same time period, the Chinese state subsidized
its shipping companies to the tune of over $130 billion.\5\ Almost half
of the leading container ports outside of China have some Chinese
ownership or operations.\6\ One distinctive feature: more than half of
China's ports tend to sit on major shipping lanes and strategic
chokepoints.\7\
---------------------------------------------------------------------------
\3\ https://www.cfr.org/tracker/china-overseas-ports.
\4\ https://chinapower.csis.org/china-ports-connectivity/
#:?:text=Learn%20more%20about%20-
the%20BRI,ports%20between%202010%20and%202019.
\5\ https://www.csis.org/analysis/hidden-harbors-chinas-state-
backed-shipping-industry.
\6\ https://www.foreignaffairs.com/united-states/chinas-port-power.
\7\ https://muse.jhu.edu/pub/6/article/855437/pdf.
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In the Western Hemisphere, this has meant port terminals in at
least 3 locations in Mexico; the Hutchison Ports in the Panama Canal; a
recently-opened megaport in Chancay, Peru; plans for a deepwater port
in St. John's Harbor, Antigua, and Barbuda; and, designs on a port near
Punta Arenas in Chile and near the Drake Passage in Argentina.
Chinese state-owned enterprises and black-listed companies often
lead the way in construction, operation, and ownership of maritime
ports in LAC. For instance, COSCO Shipping is a state-owned shipping
and services provider that has a 60% ownership stake in the Chancay
megaport in Peru. COSCO will also be the exclusive operator of the
port, thanks to changes it forced into Peruvian law during port
construction. When fully operational, Chancay's 4 berths and massive
capacity will make it the largest port by 20-foot equivalent units
(TEUs) in Latin America.\8\
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\8\ https://globalconnectivities.com/2024/06/the-port-of-chancay-
at-the-centre-of-sino-peruvian-relations/.
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Further south and on the Atlantic Coast, PRC state-owned entity
China Merchants Port Holding Company owns 90% of the Port of Paranagua,
the second-largest port in terms of handling, and also operates it.\9\
In the Panama Canal, Panama Ports Company, a subsidiary of Hong Kong-
based company Hutchison Holdings, has operated 2 ports at the strategic
approaches of the canal--Balboa on the Pacific side and Cristobal on
the Atlantic side--since 1997. Within the Caribbean, China Merchants
Port has also acquired a 100% stake in the Kingston Freeport Terminal
while the PRC has made steady advances on the island of Antigua.
Finally, last November, the opening of the new megaport of Chancay in
Peru drew attention to the PRC's advance in the commercial and
potential military domains in South America.
---------------------------------------------------------------------------
\9\ https://www.reuters.com/article/world/europe/china-merchants-
buys-control-of-brazils-most-profitable-port-idUSKCN1BF03B/.
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military-civil fusion strategy
Beyond the 2015 and 2020 National Security Laws, the strategic and
security concerns of Chinese activity in LAC ports has been exacerbated
by China's military-civil fushion strategy. At its base, military-civil
fushion seeks to build the PRC into an economic, technological, and
military superpower through blending and integrating military and
civil, defense, and commercial, enterprises. In other words, the PRC
has tied its economic development and increasing engagement with the
outside world to its military modernization efforts.\10\ Military-civil
fushion has witnessed the PRC leverage talent in research and
development with military goals.
---------------------------------------------------------------------------
\10\ https://www.csis.org/blogs/trustee-china-hand/chinas-evolving-
conception-civil-military-collaboration.
---------------------------------------------------------------------------
First referenced as a guiding principle in former Chinese leader Hu
Jintao's report to the 17th Party Congress in 2007, military-civil
fushion has evolved from an integration approach to an official PRC
military strategy in 2015.\11\ As a major state strategy, military-
civil fushion sits alongside other key drivers, such as the Made in
China 2025 and Next Generation Artificial Intelligence plans. The
United States Department of State says that military-civil fushion is
applied most vigorously to dual-use and advanced technologies, such as
quantum computing, big data, semiconductors, 5G, advanced nuclear and
aerospace technologies, and artificial intelligence.\12\
---------------------------------------------------------------------------
\11\ https://thediplomat.com/2017/04/chinas-answer-to-the-us-
military-industrial-complex/.
\12\ https://2017-2021.state.gov/military-civil-fusion/.
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Beijing has been known to deploy a range of methods to advance
military-civil fushion, including talent recruitment programs, forced
technology transfer, intelligence gathering, and theft. In 2021, the
United States Department of Defense created a list of ``Chinese
military companies'' operating directly or indirectly in the United
States, which was last updated in early January with 134 companies.\13\
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\13\ https://www.bloomberg.com/news/articles/2025-01-07/us-
blacklist-of-china-s-tech-giants-risks-even-faster-decoupling.
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Furthermore, China's military-civil fushion strategy provides
Beijing with an extensive logistical network to project its naval power
globally.\14\ PRC-operated ports exemplify China's goal of leveraging
economic investment as an anchor to support military engagement. The
PRC's dual-use facilities can support both commercial and military
operations, from enabling military logistics and intelligence gathering
in peacetime, to potentially facilitating naval operations in
wartime.\15\
---------------------------------------------------------------------------
\14\ https://dialogo-americas.com/articles/cosco-shipping-hidden-
force-behind-chinas-navy/.
\15\ https://www.voanews.com/a/us-analysts-beijing-mixing-military-
and-commercial-interests-abroad-/6946010.html.
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what's in a port?
Ports involve much more than meets the eye. There are several
strategic challenges presented by PRC activity in LAC ports:
intelligence gathering and the potential for sabotage and adversarial
military use.\16\
---------------------------------------------------------------------------
\16\ https://www.csis.org/analysis/geopolitics-port-security-
americas.
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Commercial espionage with military implications
Under President Xi Jinping, the PRC has displayed an increasing
interest in ensuring the activities of the private sector and state-
owned companies serve the interests of the state. There are perhaps few
examples that are better than ports, where the PRC is honing an ability
to weaponize some of the world's most sensitive commercial information.
The full extent of the PRC's information-gathering campaign is not
known. The more rocks investigators turn over, however, the more they
seem to find.
Beyond the requirement for Chinese companies operating overseas to
gather and report information on foreign entities, PRC companies
dominate the logistics software often used at ports. LOGINK is a
Chinese logistics software that stores information such as maritime
information, customs information, geolocation, regulatory filings,
trade information, and booking data--in short, a treasure trove of
data.\17\ Given the 2015 National Security law, as one columnist puts
it, ``for Chinese firms, theft of your data is now a legal
requirement.''\18\
---------------------------------------------------------------------------
\17\ https://www.uscc.gov/sites/default/files/2022-09/LOGINK-
Risks_from_Chinas_Pro-
motion_of_a_Global_Logistics_Management_Platform.pdf.
\18\ https://thehill.com/opinion/cybersecurity/532583-for-chinese-
firms-theft-of-your-data-is-now-a-legal-requirement/.
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Even non-PRC ports can present threats if they feature Chinese
equipment to move and scan commercial freight, for instance. In other
words, the PRC can engage in commercial espionage even at those ports
where only its equipment is present. Something as benign as the ZPMC
ship-to-shore cranes moving containers are likely a tool for Chinese
commercial espionage.\19\ In a world where acute supply chain
vulnerabilities are both commercial and defense concerns, Beijing's
capabilities, even short of operating or owning a port, is a huge cause
for concern. As two defense analysts have concluded: ``With virtually
all the world's seaborne goods passing through or near Chinese
infrastructure, Beijing could easily leverage the information it
accesses in order to selectively seize critical goods, such as
medicines; divert or delay military components; or let essential
supplies just sit in storage--no naval deployments needed.''\20\
---------------------------------------------------------------------------
\19\ https://www.wsj.com/politics/national-security/pentagon-sees-
giant-cargo-cranes-as-possible-chinese-spying-tools-887c4ade.
\20\ https://foreignpolicy.com/2023/09/20/china-shipping-maritime-
logistics-lanes-trade-ports-security-espionage-intelligence/.
---------------------------------------------------------------------------
While the PRC is frantically collecting data on foreign ships and
nations, it has blocked its own ships from sharing that data with other
countries.\21\ This mirrors the country's behavior in other commercial
domains: increase others' dependence on it while reducing its own
dependence on others.
---------------------------------------------------------------------------
\21\ https://www.bloomberg.com/news/articles/2021-11-24/china-
blocks-access-to-maritime-shipping-data-ft-reports?sref=3OIZCXOE.
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Beyond commercial espionage concerns, PRC operated and owned ports
are busy rewiring much of LAC's trade routes that will frustrate U.S.
efforts to build safer and more secure supply chains in the future.
Individual PRC ports intend to bolster China's competition in specific
areas, such as ports that have been constructed principally or
primarily to ship raw materials and critical minerals directly to
mainland China.
Hard security risks and potential conflict with PRC
Within the various domains of warfare--land, sea, air, space, cyber
space--port operation and ownership is critical to advancing the PRC's
goals in the sea domain. Ports have long been key to controlling the
world's waters, and control of the world's maritime routes has always
been the key to global power. Sir Walter Raleigh famously said: ``For
whosoever commands the sea commands the trade; whosoever commands the
trade of the world commands the riches of the world, and consequently
the world itself.'' The Chinese are following a well-worn path: the
United Kingdom's rise to global power coincided with the rise of its
naval and maritime power; even more prominently, so did the United
States'.
Chinese-operated and -owned ports host People's Liberation Army
Navy vessels routinely. They also serve to reliably resupply and repair
navy vessels during port calls. According to a global report by the
group Maritime Executive, ``a third of ports in which China made
economic investments have hosted and also resupplied military vessels
of the People's Liberation Army Navy.''\22\ As a rising revisionist
power challenging the current global order, the PRC's maritime strategy
revolves around a seemingly innocuous web of port operations that can
reliably serve multiple uses in multiple contexts. It is imperative to
understand that the PRC does not conceive of ``inter-operability'' in
the same way as the United States; rather, the PRC understands ``inter-
operability'' in terms of reliability in times of crisis. Port
infrastructure is yet another form of under-the-radar, yet novel state
power projection capability.\23\
---------------------------------------------------------------------------
\22\ https://maritime-executive.com/magazine/when-china-shanghais-
your-port.
\23\ https://direct.mit.edu/isec/article-abstract/46/4/9/111175/
Pier-Competitor-China-s-Power-Position-in-
Global?redirectedFrom=fulltext.
---------------------------------------------------------------------------
Southern Command has repeatedly highlighted several other areas of
concern in its yearly posture statements to the U.S. Congress. SOUTHCOM
has noted how PRC port facilities can engage in electronic or cyber
attacks, Global Positioning System jamming, or even physical attacks
from containerized anti-ship weapons systems.\24\ In a contingency
situation, such disruptions could translate to significant
vulnerabilities. For instance, last year, the U.S. House Select
Committee on Strategic Competition between the United States and the
Chinese Communist Party validated the idea that Hutchison's operations
in the Panama Canal could delay military assistance to Taiwan.\25\
---------------------------------------------------------------------------
\24\ https://crsreports.Congress.gov/product/pdf/RL/RL33153/277.
\25\ https://www.scmp.com/news/china/article/3262984/management-
panama-canal-ports-hong-kong-firm-poses-risks-us-house-panel-hears.
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The PRC's maritime network is crucial to its strategy for global
power projection. The United States should not expect the PRC to
develop a similar network of naval bases around the world for power
projection. Instead, Beijing intends to become a ``pier competitor'' by
setting up a string of dual-use ports that can serve as an extensive
international network of infrastructure for People's Liberation Army
vessels.\26\
---------------------------------------------------------------------------
\26\ https://www.foreignaffairs.com/united-states/chinas-port-
power.
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chinese ports and organized crime
Do LAC's criminal organizations prefer PRC-operated and -owned
ports? While the answer to this question is not yet settled, initial
indications demonstrate that LAC's criminal organizations may prefer
Chinese-operated and -owned ports for their opacity and the volume of
transpacific trade they handle. China is often the market for many of
LAC's illicit goods, such as illegal wildlife, gold mining, and timber
trafficking.\27\ The PRC often insists on opacity and lack of
accountability in many of its infrastructure investments in LAC.\28\ As
one scholar summarizes: ``Bribes and corruption, in addition to
coercion, are at the heart of any criminal organization seeking to
exploit transportation or logistics facilities, including ports. This
can involve paying a Customs official to overlook violations or a crane
operator to load a specific container onto a truck driven by someone
associated with a criminal organization, accepting or falsifying bills
of lading, or ensuring that no one questions discrepancies in the
information on manifests.''\29\
---------------------------------------------------------------------------
\27\ https://thehill.com/opinion/4533956-radical-transparency-is-
democracys-secret-weapon-to-counter-china/.
\28\ https://www.foreignaffairs.com/china/how-china-exports-
secrecy.
\29\ https://www.csis.org/analysis/are-chinese-ports-latin-america-
preferred-organized-crime.
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The potential for organized crime to exploit PRC-operated and -
owned ports is made easier when ports are vertically operated and one
company has control over all the functions of the port. In the case of
COSCO Shipping in Chancay, Peru, the state-owned company has control
over activities on the quayside, stacking containers, inspecting
containers, port security, and other functions. Meanwhile, several
investigative NGO's have documented the involvement of Chinese ports in
illegal wildlife trafficking.\30\ Furthermore, illegal, unreported, and
unregulated (IUU) fishing, committed often by the PRC, which has the
largest fishing fleet in the world--a consequence of heavy state
subsidies--often relies on Chinese-operated and -owned ports to ensure
that illegal catch can make it ashore, become layered into legal fish
stocks, and avoid the Agreement on Port state Measures intended to
reduce IUU fishing. Even though China is not a signatory to the
agreement, the document aims to bolster the capacity of developing
countries to inspect cargo and flag catches that are the product of IUU
fishing.\31\ Leveraging Chinese-operated and -owned ports can obviate
the risks involved with IUU fishing. Last, in a detailed, 4-part
investigation for Reuters, journalists uncovered how Chinese-made
fentanyl precursors transit Chinese port terminals in Mexico's Lazaro
Cardenas, Manzanillo, and Ensenada ports. In the investigation,
criminal groups bragged about the ease with which they bribed port
officials and ensured shipments of fentanyl precursors reliably entered
Mexico through Chinese port terminals.\32\
---------------------------------------------------------------------------
\30\ https://earthleagueinternational.org/wp-content/uploads/2024/
04/ELI-Operation-STELLA-MARIS-Investigative-Report-22-April-2024-1.pdf.
\31\ https://foreignpolicy.com/2020/10/30/chinas-hunger-for-
seafood-is-now-latin-americas-problem/.
\32\ https://www.reuters.com/investigates/special-report/drugs-
fentanyl-brokers/.
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toward a spectrum of concern
Not all ports are alike. Chinese activity in LAC ports varies
widely, leading to divergent risks throughout the region. It is
imperative that policy makers ruminate on a set of characteristics that
can rank the threat of individual ports to national security and
American interests. The following 4 criteria offer 1 initial rubric to
evaluate the risks of a given port project and thereby better calibrate
a U.S. response.
The first criterion is location, both in terms of the proximity of
a port to the U.S. mainland and its position vis-a-vis key maritime
trade routes. The closer a port is to the United States, the greater
potential it holds as a hub for intelligence gathering and potentially
as a staging ground for covert action against U.S. interests. For this
reason, PRC-owned and operated ports in Mexico, Central America, and
the Caribbean basin present some of the most important and immediate
challenges. However, proximity to the continental United States is not
the only way in which strategically-located ports can offer China a
possible asymmetric advantage in competition with the United States. By
controlling key maritime choke points, the PRC can exercise influence
on the flow of international trade.\33\ For this reason, the PRC's
presence, through Hutchison Port Holdings' operation of the ports of
Balboa and Cristobal in Panama, has been the subject of much
consternation in recent years. Further south, China has also sought to
make inroads along Cape Horn, which controls the Drake Passage from
Atlantic to Pacific as well as access to Antarctica.\34\
---------------------------------------------------------------------------
\33\ https://porteconomicsmanagement.org/pemp/contents/part1/
interoceanic-passages/main-maritime-shipping-routes/.
\34\ https://americasquarterly.org/article/why-the-u-s-and-china-
suddenly-care-about-a-port-in-southern-chile/.
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The second criterion is the mode of cooperation between China and
the host country. Projects like the Port of Chancay in Peru, where a
Chinese state-owned enterprise not only builds, but maintains an
ownership stake and operational control over the port, should rank
highest in this assessment, followed by ports where a PRC company has
control over day-to-day activity. According to research by the Center
for Strategic and International Studies, there are at least 14 ports in
LAC where Chinese companies have either acquired a port in whole or in
part, or possess a lease granting them operational control. By
contrast, PRC companies have assisted with construction efforts in 18
ports throughout LAC. Contract construction is a less serious form of
influence but nevertheless grants the PRC familiarity with a port and
its infrastructure, as well as the ability to install preferred
equipment and capabilities. This can translate to durable influence,
particularly in the port technology space. For instance, while the
planned expansion of the Colon Container Terminal in Panama by the
Landbridge Group was canceled in 2023, Chinese security cameras
installed as part of the project remain in place to this day.\35\
---------------------------------------------------------------------------
\35\ https://www.csis.org/analysis/paper-tiger-or-pacing-threat.
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A third criterion is the relationship between the host government
and Beijing. In general, the PRC cannot leverage LAC ports for military
purposes without the approval of the host government, limiting the
wartime utility of civilian ports. If, however, a port is located in a
country which already has an adversarial relationship with the United
States, this political hurdle becomes far easier to clear. Thus,
special attention should be paid to port projects in the Western
Hemisphere's 3 consolidated, anti-U.S. dictatorships--Cuba, Nicaragua,
and Venezuela. Chinese companies have already assisted with 3 port
construction projects in Cuba, including the modernization of the port
of Santiago de Cuba, as well as 2 in Venezuela.\36\ The United States
should remain vigilant for any proposed initiatives in these countries
that could offer a permissive environment for the PLAN to operate.
---------------------------------------------------------------------------
\36\ https://www.csis.org/analysis/chinas-intelligence-footprint-
cuba-new-evidence-and-implications-us-security.
---------------------------------------------------------------------------
Finally, the fourth criterion is the criticality of a particular
port to global trade. The more that commerce passes through a given PRC
port facility, the greater potential for information gathering and
influence. In 2023, the ports of Manzanillo and Lazaro Cardenas in
Mexico, operated by Hutchison, ranked third and eighth respectively in
LAC by throughput, while Hutchison's 2 ports along the Panama Canal,
when combined, would fall between fifth and sixth.\37\ The new port of
Chancay currently ranks lower in this standing, but if plans
materialize to expand its capacity to move up to 3.5 million 20-foot
equivalent units (TEUs), these numbers could catapult it to the third-
or fourth-place spot. The more China is able to exercise influence over
major nodes of commerce, the more it helps to rewire global commerce
toward Beijing--and concomitantly, away from the United States. In
times of conflict or crisis, this could also increase China's ability
to maintain access to the raw commodities, particularly minerals and
foodstuffs, it imports from LAC, helping further insulate the PRC from
economic pressure.\38\
---------------------------------------------------------------------------
\37\ https://www.porteconomics.eu/ranking-2023-of-latin-american-
ports-and-container-terminals-the-seesaw-game/.
\38\ https://cimsec.org/to-prepare-for-pacific-war-by-2027-the-
united-states-must-harden-its-southern-flank/.
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recommendations
With enthusiasm for China's BRI waning in recent years, and
following Panama's courageous decision to end its participation in BRI,
the United States has several opportunities to advance maritime
security and port infrastructure security. The United States must find
a way to make a better offer to LAC.\39\
---------------------------------------------------------------------------
\39\ https://www.csis.org/analysis/enabling-better-offer-how-does-
west-counter-belt-and-road.
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Yet, the United States cannot do this alone; it must rely on its
partners and the multilateral financial banks to help ease the burden
of responding to China's growing presence in LAC's port systems.\40\
Countries such as Japan, South Korea, Taiwan, the Netherlands, and
Australia are key partners in this endeavor.
---------------------------------------------------------------------------
\40\ https://www.csis.org/analysis/responding-chinas-growing-
influence-ports-global-south.
---------------------------------------------------------------------------
Conduct a study to review LAC port security.--Similar to the Biden
administration's supply chain review meant to identify vulnerabilities
in key supply chains, a study could identify data the PRC has access to
and the intelligence and surveillance each of its LAC ports permits it.
A mandated study would also force policy makers to develop their own
methodology for a spectrum of concern. Relatedly, a study that
identifies the ports of greatest concern could then recommend law
enforcement cooperation with local authorities to target the potential
criminal use of PRC ports and improve transparency at PRC port
facilities.
Insist on greater transparency in tenders, contracts, and
operations.--The PRC excels at operating in opaque areas. LAC
governments, too, have an incentive to reveal little about PRC port
operations in their countries, and with greater PRC interest, tenders
and contracts often fail to meet high standards. In LAC, the United
States could select 1 or 2 ports to reform and ensure best practices.
If reform is significant enough, Western companies will be more
interested in operating LAC ports. This will require the United States
to be more nimble and aware of opportunities when they present
themselves. For instance, the United States was asleep at the switch
when the Hutchison subsidiary Panama Ports Company received a 25-year
no-bid renewal of its 2 port concessions.\41\ Washington ``literally
zoned out.''\42\ Likewise, the United States failed to help Peru push
back against the PRC regarding the operation and ownership of the
Chancay megaport by Cosco Shipping. The PRC insisted upon these terms
even though the Peruvians found an ``administration error'' that
contravened the country's domestic law.\43\ Rather than help Peru
wiggle out of the contract with legal assistance, the United States
stood by while Peru actively changed its domestic law to permit an
arrangement that was previously illegal.
---------------------------------------------------------------------------
\41\ https://www.csis.org/analysis/key-decision-point-coming-
panama-canal.
\42\ https://www.csis.org/analysis/panama-zoned-out-strategic-
opportunity.
\43\ https://foreignpolicy.com/2024/05/13/peru-learns-to-read-the-
fine-print-in-china-deals/.
---------------------------------------------------------------------------
Maintain overhead imagery collection programs on select PRC
ports.--The United States should maintain strong overhead imagery
collection on Chinese-owned and -operated ports in LAC to ensure they
do not expand or quietly but fundamentally alter their nature. When a
commercial port in the United Arab Emirates was caught expanding to
accommodate military vessels, the PRC was forced to cease constrution.
When this happens, the United States should leverage occasional public
releases of classified intelligence to pressure local governments and
the PRC alike to abide by contract terms.\44\ Imagery collection is
also imperative for fighting organized crime and the nexus of
transnational organized crime to Chinese ports. The appendix at the end
of this document provides one example of how commercial satellite
imagery might be used in such a way.
---------------------------------------------------------------------------
\44\ https://www.wsj.com/articles/us-china-uae-military-
11637274224.
---------------------------------------------------------------------------
Leverage DFC and multilateral financial institutions to launch a
port buyback program.--The United States should leverage the U.S.
International Development Finance Corporation (DFC) and multilateral
financial institutions to engage in port buyback programs where the PRC
is the owner. In the cases where the PRC is the port operator, these
institutions may consider supporting a program to help countries
terminate agreements early and entice more transparent operators to bid
on concessions. This would constitute an offensive equivalent to
leveraging partners to ensure competitive bids against the PRC when LAC
countries announce a bidding process for port construction. Similarly,
short of buying out PRC owners, the United States should stand up a
program to reduce Chinese equipment--both software and hardware--at LAC
ports. Current U.S. law does not permit assistance to foreign ports to
extricate Huawei equipment or ZPMC cranes, for instance. Another
approach could leverage economic incentives to move away from Chinese
equipment at LAC ports that exacerbate U.S. vulnerabilities.\45\
---------------------------------------------------------------------------
\45\ https://foreignpolicy.com/2023/09/20/china-shipping-maritime-
logistics-lanes-trade-ports-security-espionage-intelligence/.
---------------------------------------------------------------------------
Appendix: Selected Imagery of PRC-Owned Ports
The below appendix contains images of relevant PRC port projects in
Panama and Peru obtained by CSIS from Maxar Technologies.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Gimenez. Thank you, Dr. Berg.
I recognize Mr. Davis for 5 minutes to summarize his
opening statements.
STATEMENT OF CARY DAVIS, PRESIDENT & CEO, AMERICAN
ASSOCIATION OF PORT AUTHORITIES (AAPA)
Mr. Davis. Good morning, Chairman Gimenez, Ranking Member
McIver, and distinguished Members of the subcommittee, thank
you for the opportunity he testified today on critical issues
for United States' ports and our national security. Let me just
thank you for your bipartisan efforts to counter fentanyl. My
best friend Sam died from an accidental overdose about 5 years
ago, and I think of him every single day.
As the president and CEO of the American Association of
Port Authorities, the unified voice of the U.S. port industry
for the last 113 years, I'm honored to testify here. According
to a recently-released economic contribution report from former
CBO economists, our ports are responsible for $2.9 trillion in
economic activity and 22 million American jobs, or more than 1
out of every 8 jobs in our Nation's work force.
China is investing in global port infrastructure exactly
because it recognizes the profound economic and geopolitical
advantages that critical trade gateways provide. There's been
concern about Chinese companies at 5 terminals.
As this committee's Majority report highlights, we are
talking about minority stakes in a handful of lease terminals
and all tenants at U.S. ports must comply with laws,
regulations, and oversight from all levels of government.
Everyone knows we want the highest standard of security at our
critical infrastructure.
The funding enacted through the bipartisan infrastructure
law was historic, designating $450 million annually from fiscal
years 2022 to 2026 for the Port Infrastructure Development
Program, or PIDP. This critical funding is oversubscribed by 4
times.
Unfortunately, even at the height of Federal port funding
here in the United States, we lag in comparison to China which
spends well over double the U.S. in port investment. We also
need to increase direct investments such as the Port Security
Grant Program, which is authorized by this committee, however,
it has unfortunately not been fully appropriated to its
authorized level of $400 million in over a decade.
Another way to secure American ports is to manufacture
cargo handling equipment, which China heavily subsidizes. While
it would take years to stand up production lines, near-term
Congress can permit friend-shoring with trusted allies to
ensure U.S. ports have access to secure, reliable, and modern
equipment while reducing reliance on China.
AAPA recently brought American ports, terminal operators,
equipment manufacturers, Government officials, and other
stakeholders literally to the same table to discuss how to make
American-made cargo handling equipment a reality. AAPA is going
to continue leading this discussion when we host another
meeting here in March in Washington, DC, and we invite Members
of this committee to join us.
To incentivize procurement from our allies we can
streamline the waiver process for Build America Buy America
provisions. Last year Members of this subcommittee recommended
these waivers, as well as incentives for domestic
manufacturing. Bravo Zulu, as we say in the maritime industry.
A major hindrance to growth, resilience, and modernization
of ports is tariffs. Tariffs are attacks on American businesses
and households. AAPA believes that expanding our Nation's
presence in ports of allied countries is also critical to
revitalize America's strategic maritime posture. AAPA has
collaborated with the U.S. State Department to set up sister
port partnerships in the Middle East, North Africa, and Latin
America, and we facilitate other work between the U.S.
Government and LATAM and Caribbean ports.
The bottom line today is that the United States continually
regulates Chinese investment in ports. CFIUS is the primary
mechanism for reviewing and mitigating any risks from foreign
ownership or investment on top of our industry's work with many
other Federal agencies.
Our port industry believes the best counter to Chinese
influence, especially at ports in our hemisphere, is strong
leadership by the United States through strategic port
investment. We must strive to keep our port infrastructure
modern and globally competitive.
Chairman Gimenez, Ranking Member McIver, and Members of the
subcommittee, thank you for your time, attention, and
leadership when it comes to U.S. ports. I'm looking forward to
your questions. Thank you very much.
[The prepared statement of Mr. Davis follows:]
Prepared Statement of Cary Davis
Tuesday, February 11, 2025
Chairman Gimenez, Ranking Member McIver, and distinguished Members
of the subcommittee, thank you for the opportunity to testify today on
critical issues for United States ports and our national security.
Before I start, I would like to thank the committee for their
bipartisan efforts to counter the flood of fentanyl, a substance that
took the life of a dear friend of mine, Sam Spitz.
As the president & CEO of the American Association of Port
Authorities (AAPA), the unified voice of the U.S. port industry for the
last 113 years, I am honored to testify here. This is a special moment,
since my former boss, former Congressman Dan Donovan, a man who I
deeply admire, chaired another Homeland Security subcommittee.
According to a recently-released economic contributions report from
former CBO economists, our ports are responsible for $2.89 trillion in
economic activity and 21.8 million American jobs, or more than 1 out of
every 8 jobs in our Nation's workforce.
Further, America's ports make trade possible, and they depend upon
the support of the Federal Government and Congressional committees like
this one. I would like to emphasize today that China is investing in
global port infrastructure because it recognizes the profound economic
and geopolitical advantages that critical trade gateways provide.
The port industry believes that the best counter to growing Chinese
influence, especially at ports in our hemisphere, is strong leadership
by the United States through strategic port infrastructure investment.
Investing in port infrastructure enhances economic growth and national
security. The U.S. Committee on the Marine Transportation System (CMTS)
found that maritime infrastructure investment holds the potential to
produce returns of $2 to $3 for every $1 spent. If we want to counter
Chinese influence at ports and secure a safe and prosperous economic
future, we must provide a strong, attractive alternative through robust
American investment.
We must strive to keep our port infrastructure modern and globally
competitive. The funding enacted through the Bipartisan Infrastructure
Law was historic, designating $450 million annually from fiscal year
2022-2026 for the Port Infrastructure Development Program (PIDP). This
is significantly higher than previous annual funding levels for the
grant program. However, total Federal spending on water transportation
remains around $4.5 billion, while State and local governments
contribute around $6 billion annually to support the sector.
In recent years, AAPA ports also identified $32.03 billion for
landside infrastructure needs, which has continued to rise. Another
example of this disparity in funding is the list of applicants and
grantees for PIDP, a discretionary grant program administered by U.S.
Department of Transportation Maritime Administration that awards grants
on a competitive basis to projects that improve safety, efficiency, and
reliability of the movement of goods surrounding ports. This list shows
that from 2019-2024, our ports requested over $12 billion in funding
from the program, with only about $500 million allocated per year,
meaning for every dollar awarded, ports requested $4.50. That's an
oversubscription rate of more than 4 to 1. Unfortunately, even at the
height of Federal port funding, the United States lags in comparison to
China which (based on publicly available information) spends well over
double the United States in port investment. AAPA is currently
researching this disparity and expects to share more in the coming
months.
We also need to increase direct investments such as the Port
Security Grant Program (PSGP). The PSGP is authorized by this
committee; however, it has unfortunately not been fully appropriated to
its authorized level of $400 million in well over a decade. This
program is how we turn security concerns into actionable investments in
resiliency. Yet, ports typically receive less than half of the Program,
with the balance going to municipal police departments.
Another potential avenue for investment in American ports is
through policies to manufacture and procure cargo handling equipment
(CHE). Currently, China has an outsized market share of the world's
port CHE because their government heavily subsidizes the industry,
allowing them to sell equipment at a much lower rate than competitors.
If Congress wishes to reverse this trend, we recommend implementing
policies such as a qualified tax credit for U.S.-made CHE, which AAPA
supports in collaboration with manufacturers. We recently brought
American ports, terminal operators, equipment manufacturers, Government
officials, and other key stakeholders to the table to discuss how to
make American-made CHE a reality. Our organization will continue
leading this timely discussion when we host another meeting this spring
and encourage Members of this committee to join.
While it would take years to stand up a domestic manufacturing base
for the largest port equipment, in the near term, Congress can
incentivize friend-shoring with trusted allies to ensure that U.S.
ports have access to secure, reliable, and modern equipment, while
reducing reliance on single-source manufacturing. To incentivize
procurement from our allies, we can easily streamline the waiver
process for Build America, Buy American (BABA) provisions, ensuring
that port infrastructure projects can proceed efficiently. Last year,
Members of this subcommittee published a report in conjunction with the
Joint China-Select committee which recommended these BABA waivers and
incentives for domestic manufacturing.
Another major hindrance to the growth, resilience, and
modernization of ports are tariffs. Tariffs are a tax on American
consumers that increase costs for businesses and individuals alike.
They also reduce the efficiencies and wealth gained from trade and
lower overall economic growth. America is a superpower because of free
trade.
For ports specifically, tariffs lower cargo volume and throughput,
which directly impacts a port's ability to raise capital for
modernization, expansion, and employment, while also hampering their
competitiveness in the global marketplace. Additionally, a reduction in
port activity threatens thousands of American jobs tied to maritime
commerce, further straining local and regional economies. A forward-
thinking trade policy that minimizes unnecessary tariffs will ensure
the continued vitality of U.S. ports and support economic prosperity
across multiple industries.
While AAPA only advocates on behalf of U.S. port authorities, we
believe that expanding our Nation's investment in ports of allied
countries is also critical to revitalize America's strategic maritime
posture. Through programs such as the Sister Port Initiative at the
Department of State, we can strengthen economic ties with Latin America
and other regions, ensuring that American businesses benefit from
efficient and cooperative trade. AAPA has collaborated with the State
Department to set up 2 sister port partnerships in the past year to
help foreign ports learn best practices from their American
counterparts, and we look forward to continuing to participate in this
program. We also continue to work closely with Latin American port
authorities to promote shared economic growth and security, reinforcing
U.S. influence in the hemisphere.
Chinese investment in U.S. ports is already closely controlled
through robust regulatory frameworks, ensuring that any foreign
investment in critical infrastructure does not pose national security
threats. The Committee on Foreign Investment in the United States
(CFIUS) is the primary mechanism for reviewing and mitigating any risks
associated with foreign ownership or investment. CFIUS closely examines
each individual investment to evaluate if it aligns with U.S. national
security interests, which is a more precise approach than any blanket
bans. Our current laws provide stringent oversight and protective
measures to prevent exploitation or undue foreign influence.
Finally, the Coast Guard--one of many agencies overseeing and
regulating ports--recently released several relevant regulations
enhancing cybersecurity at ports. These include physical access
safeguards on CHE sourced from China (MARSEC 105.5), restrictions on
the operating systems they can run (Logink, which no U.S. ports use),
and updated cybersecurity requirements (Cybersecurity in the Marine
Transportation System). Additionally, ports are subjected to
duplicative cyber incident reporting requirements, reporting to both
the Coast Guard and CISA (CIRCIA).
While maintaining the highest standard of security, it is important
to recognize that discussions about Chinese investment in U.S. port
terminals are properly contextualized. We are talking about minority
stakes in a handful of individually leased terminals, not entire ports.
A single port often consists of multiple terminals, each with separate
operations and oversight.
Chairman Gimenez, Ranking Member McIver, and Members of the
subcommittee, thank you for your time and attention on our Nation's
ports and maritime industry. America's ports are vital to our national
security, economic stability, and global trade. By making wise
investments and leveraging our existing regulatory safeguards, we can,
together, continue to ensure that our Nation's ports remain
competitive, keep America safe and secure, and realize a more
prosperous and growing future for our Nation and her people.
I look forward to your questions and working with this committee to
advance policies that support America's ports. Thank you.
Chairman Gimenez. Thank you, Mr. Davis, and I am sorry for
your loss. By the way, for those who don't know, if you died of
overdose of fentanyl, 97 percent of the precursor chemicals
that create fentanyl are manufactured in China. Even worse than
that, those precursor chemicals are actually illegal to sell in
China and yet the Chinese Communist Party actually incentivizes
companies to produce them for export.
They have no other use, by the way. It is just for
fentanyl, so it was something done by the Chinese Communist
Party on purpose to kill, basically, American lives.
That is why you know when they asked why I am so, you know,
so hawkish on China and, you know, think they are greatest
threat, this is an example of why I think that they are our
greatest threat. They did it on purpose and for no other reason
for I guess to harm us and also to make money.
I now recognize myself for 5 minutes for opening statements
or for opening questions.
Mr. Kroenig, you mentioned the presence of China and the
Chinese-controlled ports on both sides of the Panama Canal. How
does that pose a threat to the United States?
Mr. Kroenig. Well, I think it poses a number of challenges.
One to the topic we just discussed, China is shipping fentanyl
precursors through the Panama Canal. Second, by operating the
ports there, including with surveillance technology, Chinese
surveillance technology, they're using that to collect
information that's going back to Beijing.
It may not be Classified information but it's sensitive
that China could use to exploit for an intelligence advantage.
China could seek to hinder trade through the canal, which would
have negative economic consequences for America's well-being.
Then----
Chairman Gimenez. How could they do that? How could they
hinder trade? How can they stop it? I mean, the port operators
on both sides do they determine who goes first, who goes
second, et cetera, or how does that work in the Panama Canal?
Mr. Kroenig. Yes. Well, in terms of the specific operations
some of my colleagues may be better able to speak to that, but
halting, disrupting trade in a place like that would not be
very difficult. I think we've seen in other cases where ships
get stuck in, say, the Suez Canal, global trade really takes a
hit.
So I think there are a number of things they could do to
hinder trade, such as putting a ship in the canal and not
letting other ships go through. So there's the economic
dimension.
Then there's the military dimension in the event of a
crisis or war hindering U.S. naval vessels that could make it
more difficult for the United States to project military power
where it needs to go.
Chairman Gimenez. Fair enough.
Dr. Berg, in terms of the presence of China, the ever-
increasing presence of China in infrastructure, especially in
ports, my first question is where were we? Because when I
visited Peru, and I know they have a huge port they just
constructed in Peru, and they are actually putting out an RFP
for a second port down in south Peru and they want us to
participate. They really want us to participate.
Where has the United States been for the last, I guess, 2
to 3 decades down in South America?
Mr. Berg. Chairman, I agree wholeheartedly with your
concern. I think we were looking in other theaters of the world
and we had forgotten, frankly, that security, prosperity,
economic integration, the ability to deter illegal immigration,
and so on, it starts right here at home and in our own
hemisphere.
So, I welcome this administration's focus on the Western
Hemisphere, which seems to me a very intense focus on the
Western Hemisphere. I think it's proper and it's about time
that we spend more time looking into not just our security but
also our commercial diplomacy in this hemisphere.
The problem, Mr. Chairman, is that we're playing from
behind now because we focused on other theaters in the world
for 40 or so years, at least. Especially with ports, Mr.
Chairman, it's far easier to play offense than it is to play
defense to get the U.S. private sector interested, for example,
in the port you've just discussed in Peru than it is to try to
get the Peruvians to wiggle out of this new mega port, for
example at Chancay.
Chairman Gimenez. Yes. Look, one of the things that I found
when I was down in South America is that we were more
interested in ideological diplomacy than in commercial
diplomacy, OK, focus on stuff that really did not advance
American interests at all.
So, Dr. Kardon, when we talk about military use of these
facilities and you haven't seen much, maybe my premise is that
they are going to build all the infrastructure and then they
are going to appear because if they don't--if they start to
appear now then then it, kind-of, you know, kind-of, shakes us
and wakes us up.
But they are building that infrastructure, right, the
ability to somehow then project power into our own hemisphere.
They have the largest Navy in the world right now. They are
building more and more ships, completely outpacing the United
States in terms of other ship production. Their large Blue Navy
ship production completely outpaces us here in the United
States and so is there a threat to that?
They are building the facilities. Will one day all of a
sudden we will see a bunch of, you know, People's Liberation
Army Navy in our own hemisphere, in our own backyard?
Mr. Kardon. Chairman Gimenez, you're absolutely correct
that pretty much any commercial port is intrinsically dual-use,
particularly the modern facilities that Chinese firms are
constructing, owning, and operating in the hemisphere.
But as you also note, there has been relatively minimal PLA
operational activity in this hemisphere. While I agree that
it's possible for them to do it on relatively short notice,
sailing across the Pacific, I think from a strategic standpoint
it's unlikely that Beijing chooses to make this hemisphere the
area where they're trying to match up militarily against the
United States, in at least the near term.
The main reason for that is their overwhelming strategic
focus remains in the western Pacific for its Taiwan
contingencies, but also the South China Sea and East China Sea.
So, while I think it's a reasonable concern and one that ought
to be monitored, I think it's somewhat unlikely that they
attempt to project large amounts of power into this hemisphere.
Chairman Gimenez. I agree with you on short-term. My time
is up and I will just make one final statement is that the
Chinese have a very long-range point of view and that they look
at things 100 years ahead, not like us. We look at things 2
years ahead.
So with that, I will yield, and I recognize the Ranking
Member from, you are from?
Mrs. McIver. New Jersey.
Chairman Gimenez. From New Jersey, OK.
Mrs. McIver. The Garden State. The Garden State.
Chairman Gimenez. The gentlewoman from New Jersey, Mrs.
McIver.
Mrs. McIver. Thank you, Mr. Chairman. On Sunday, Vice
President Vance tweeted that judges aren't allowed to control
the Executive's legitimate power. Then yesterday, a Federal
judge said the White House had disobeyed the plain text of his
direction to release billions of dollars in Federal grants
which Congress appropriated but the administration has tried to
freeze.
Now, I am not sure what they teach at Yale Law School, but
I am an educator myself, and in New Jersey's Tenth we teach
students in elementary school that the Legislative branch
writes the law, the Judiciary branch interprets the law, and
the Executive branch enforces the law. This isn't hard.
If this administration refuses to comply with the court
orders, we will be in a scary situation in this country, not
just because we will face a Constitutional crisis, but also
because Federal grants are critical to our safety and security,
including at our Nation's ports.
DHS administers the Port Security Grant Program, which was
funded at $90 million in 2024, for critical security projects.
The Port of Newark has relied on that funding, as well as
funding from the bipartisan infrastructure law.
Mr. Davis, how important are Federal grants to U.S. port
security and infrastructure? Would any freeze on these grants,
like those attempted by this administration, have any impacts?
Mr. Davis. Thanks for the question, Congresswoman. The
Federal funding for port infrastructure is critical, and I give
all legislators across the spectrum a huge bravo for the
attention that they put on intermodal infrastructure funding
and supply chain resilience through all the various programs at
U.S. DOT, Department of Homeland Security, et cetera, et
cetera. The funding increase has been amazing for
recapitalizing a lot of aging infrastructure at our ports.
Specific to your question, we're monitoring very closely
what's happening with the administration with the caveat that
the President has the prerogative to impose his policy
preferences as he sees fit and within law.
We're, of course, watching very closely to make sure that
any monies that were appropriated, or even more importantly,
obligated, monies that have been obligated already they have to
flow. There's a contractual right in the recipients of these
grants that they get their funding. So, this is something we're
watching very closely.
Mrs. McIver. Thank you. In your opening statement you
talked about how, you know, this Port Security Grant Program
was originally authorized for $400 million in funding but since
has been underfunded. Can you talk a little bit more or
elaborate on what kinds of projects and security upgrades will
ports be able to make with more funding?
Mr. Davis. Thanks for the question, Congresswoman. The
types of projects run a gamut. You can imagine everything from
physical fencing, bollards, camera systems that protect the
gate as we usually call it around the port, to much more
cutting-edge machine learning, AI, defensive measures to
predict, preempt, and respond to cyber threats.
It's well-known that many of our largest gateway ports
receive tens of millions of attempted cyber intrusions per day,
per month, I'm not sure exactly, but tens of millions per month
at least.
So, the types of projects that this critical grant program
funds across the gamut all really important, all really good
for responding to the changing nature of a lot of threats that
the ports are seeing.
Mrs. McIver. Thank you, Mr. Davis, and I too want to offer
my condolences for the loss of your friend. Thank you for
sharing that story with us and those who are watching and those
here.
With that, Mr. Chairman, I yield back.
Chairman Gimenez. Thank you to the Ranking Member.
I recognize the gentleman from New York, Mr. Garbarino.
Mr. Garbarino. Thank you, Chairman. You are from the Sixth
Borough, right, in Florida, New York?
Chairman Gimenez. Yes I actually am.
Mr. Garbarino. OK. Thank you, Chairman.
Mr. Davis, modern port operations rely heavily on digital
logistics, AI-driven cargo tracking, and automated systems,
making them highly dependent on cyber networks and
interconnected technologies. If the People's Republic of China
controlled ports in Latin America or even PRC-affiliated
terminals within U.S. ports were compromised, that could
provide the Chinese Communist Party with the capability to
conduct espionage, manipulate global supply chains, or even
sabotage critical logistics operations in a crisis scenario.
In your assessment, how susceptible are Western Hemisphere
ports to cyber intrusions or sabotage by PRC-affiliated
entities?
Mr. Davis. Thanks for the question, Congressman. It's a
good one, especially it, kind-of, segues nicely to the changing
nature of threats to ports, especially as internet of things,
IOT, more connected equipment at the ports, right?
I don't want to opine too much on what's happening at Latin
American facilities because I think my fellow panelists
probably have a little bit better view, but in the United
States we, of course, take this super seriously.
Whether it's daily interface with Federal agencies, CISA,
U.S. Coast Guard, which is the lead agency for cybersecurity at
seaports, CISA. U.S. Coast Guard.
I personally sit on a DHS Maritime Sector Coordinating
Council where we share threat information across the maritime
supply chain, not even just the ports but talking barge,
carriers, marine terminals. So, we have 4, including the ISAC,
Information Security Analysis Center, where we share
information about threats across all the players in the chain.
Ultimately, I point to the LOGINK example. This was a
Chinese-developed software. I'm not sure of its status in use
at ports around the world, but this is a great success story of
U.S. Government in partnership with industry identifying
something that carried too much risk that we didn't want to
upload or use in our IT and OT at ports.
So we stiff-armed it said we're not going to use this at
U.S. ports. So, I see that as a great success story in terms of
the collaboration with industry and Government.
Mr. Garbarino. So, you think Government is doing a good
enough job right now to reduce this U.S. maritime sector
reliance on PRC manufacturing port equipment? Or do you think
there is more that we can do and does Congress need to act?
Mr. Davis. I think our on-going partnership is strong and
satisfactory, but if we do want to take a further steps to
regain further control over our supply chains and where our
equipment is manufactured, we do support a reshoring program
for large-scale cargo handling equipment, such as cranes and
other cargo handling equipment in ports.
Mr. Garbarino. You talk about the ISAC and information
sharing. Is it pretty free-flowing between private-sector
partners as well as Government? Are you getting good
information, timely information shared by U.S. Coast Guard and
CISA or could that be better?
Mr. Davis. It's pretty good. I'd love to work with you and
your staff to improve it. I've seen how ISAC's work in other
critical infrastructure sectors like banking, health care, et
cetera, and we probably have a bit to go to get to that
robustness.
It's certainly not Government's issue either. We could
share information better just simply among industry, and that's
what the trade association is for as well so I'd love to work
to strengthen it.
Mr. Garbarino. All right. Thank you, Mr. Davis.
Dr. Kroenig, despite the well-documented security risks
associated with the PRC's manufacturing and surveillance
systems, including cameras from Hikvision and network security
systems from Huawei, they remain prevalent in Latin American
ports and logistic hubs. These facilities are critical to U.S.
trade and often handle shipments bound for American ports.
The presence of PRC-controlled surveillance systems raises
concerns over whether China's Communist Party could use this
infrastructure to track U.S.-bound cargo, collect intelligence
on U.S. business operations, or gain insight into regional
military activities.
Do you believe the continued expansion of PRC-affiliated
surveillance technology in Latin American ports presents a
security risk?
Mr. Kroenig. Yes it does present a security risk for all
the reasons that you mentioned, and I'd say even more broadly
if China comes to control the digital infrastructure of the
21st Century in Latin America in the global south, what does
that mean for the future of democracy and human rights in those
regions? What does it mean for their global alliances?
So, I think this is a threat to the United States and that
we should encourage regional allies to derisk from China and to
end cooperation with China and with Huawei and then also to
work to provide them alternatives.
Mr. Garbarino. How do we encourage them to derisk? What can
Congress do?
Mr. Kroenig. Well, I think one is making the case and
making clear that we're not asking them to choose between the
United States and China. There are areas where they can
continue to have productive relations with China, but there are
areas like this where it's in their national security interest
and in our national security interest that they end the
program.
Then the second thing that Congress can do is work to find
alternatives and help the administration to develop a
coordinated plan with allies. If the United States is doing it
on its own that's one thing. If we can do it in partnership
with the Europeans, the Japanese, and others, that's much more
powerful. Provide incentives for the private sector through DFC
and some of the other mechanisms that have been mentioned. So
again, encourage them to derisk and then provide alternatives.
Mr. Garbarino. Thank you. I yield back.
Chairman Gimenez. I thank the gentleman from New York. Yes
I do represent the Sixth Borough and your future home, Miami.
I now recognize and welcome the gentleman from Texas, Mr.
Turner.
Mr. Turner. Thank you, Chairman Gimenez and Ranking Member
McIver. I represent a large portion of Port of Houston and the
ship channel generating millions of jobs, nearly a trillion
dollars in economic activity.
One of the issues that we have been facing are these ship-
to-shore cranes used in many U.S. ports. The Biden
administration announced a $20 billion deal to develop domestic
manufacturing of these cranes. I fully support that and it is
important that that money continues to flow.
But let me ask Mr. Davis, how long do you foresee before we
have enough of these cranes made in the United States to meet
the demands of our seaports in a reliable way?
Mr. Davis. Thanks for the question, Congressman. It's a
great one and really speaks to the thinking several steps
ahead, right? I don't have a great sense. The manufacturers of
these equipment would have a better sense of how long they
could stand up production lines, but my best, most aggressive
estimate is about 2 years hence. That's not from right now.
That's from when, you know, the funding is in place, the
purchase orders are put down, so give or take we're talking a
2-year time line.
That, of course, even if we were able to create a domestic
manufacturing program would take years and years and years to
replace all of these key equipment at the ports. So, they could
start rolling off the line within a couple of years but to
replace the hundreds of cranes that are across the country
would take many years, which is why we stand by the fact that
in the near term using the equipment that we're using now is
the right way to go while also pursuing reshoring.
Mr. Turner. Because most of these type of cranes that are
needed at the Houston ship channel, as we widen and deepen the
port, are made in China. Would you all agree that we need to
make significant investments here to reduce our national
security risk? Either one of you?
Mr. Davis. Agree completely, Congressman. We support the
ability of any of the ports to get the best equipment that's on
the market right now, including Port Houston's on-going crane
purchases and installation.
Mr. Turner. Let me follow up on the Port Security Grant
Program, which we receive, is there anyone who disagrees with
the importance of that security grant program? Anyone who
disagrees with that? OK.
I want to shift to something else because all of you have
indicated the need for the United States to make significant
investments in this area. Under USAID, about $44 billion in
investments are made. Of that amount, about $1.8 billion is
made to the Western Hemisphere in terms of investment.
I would think that by cutting off those investments at
USAID, which helps to counter the PRC's Belt and Road
Initiative in Latin America, that we are enhancing our national
security risk and we are opening the door for the PRC to step
in when we are stepping out, and especially when we are
stepping out without any real notice being given to Latin
America, Panama, you name it across the board, in fact, across
the world.
Do you all see the significance? Anyone? My question is, is
it significant under the USAID program that $1.8 billion has
been given to the Western Hemisphere? Anyone would question
that?
In fact, Mr.--excuse me, actually no one is challenging
that.
Dr. Berg, you indicated that we should ``up our game.'' Can
you elaborate a little bit more on that? What do you mean, more
investments being made in the United States, more investments
being made in the Western Hemisphere?
Mr. Berg. Thanks for the question, Congressman. I think
it's a question occasionally of investments, but it's also a
question, to the Chairman's point, of commercial diplomacy. I
think we need to flip the mindset of some of our diplomats in
the region.
I mentioned a couple ideas where I think we could recruit
more people who have private-sector backgrounds, bring them
into embassies in a fast track way, and also to make it part of
an ambassador's performance evaluation.
With respect to USAID, sir, I think there are ways in which
we can make USAID, and I certainly hope that in the next
iteration of USAID it is more strategic. So for example, this
hearing has focused quite a bit on Panama. We closed our USAID
office under the Obama administration----
Mr. Turner. Yes, but let me just, let me just--and I hate
to cut you off. I hate to cut you off, Dr. Berg, but when we
are making those investments to the Western Hemisphere if we
cut them I think we're sending the wrong signal to the PRC.
They then step in even more.
Thank you, Mr. Chairman.
Chairman Gimenez. I thank the gentlemen from Texas.
I now recognize the gentleman from Arizona, Mr. Crane.
Mr. Crane. Thank you, Mr. Chairman, for holding this
hearing today. I want to take a minute to talk really quickly
about something that Ms. McIver brought up. She was talking
about the influence that China had on Elon Musk.
You know, it is interesting. I didn't hear Ms. McIver or
any of her Democrat colleagues raising these same concerns when
we uncovered that the Biden family received $28 million, $27
million from foreign countries and they tried the exact same
thing with President Trump in the last Congress.
The reason I think it is important to point this out is the
interesting thing between, you know, Elon Musk and President
Biden is Elon Musk actually owns multinational businesses,
SpaceX, Tesla, Neuralink, just to name a few. So, I think it is
important that we make that distinction.
I do think this hearing is important today. You know, when
I look at what Sir Walter Raleigh famously said, he said, ``For
whoever commands the sea commands the trade. Whoever commands
the trade of the world commands the riches of the world and
consequently the world itself.'' So, I am concerned about what
I see China doing in the Western Hemisphere.
I want to start with Mr. Davis real quick. You spoke of the
need for domestic manufacturing or acquiring infrastructure
used in our ports to avoid a reliance on the CCP's equipment
which is used for espionage. Can you go into what countries you
are speaking of, some of our allies that can, you know, provide
some of this equipment for us, sir?
Mr. Davis. Thanks for the question, Congressman. China is
currently not the only place where these ship-to-shore cranes
are sourced or manufactured, although they have a dominant
position in the market. Some of the other companies are either,
who make these equipment, are either headquartered or have
manufacturing facilities in Germany, Austria, Ireland, and I
believe some of the componentry might come from Mexico. So,
that's the state of play in this market.
Just for the record, Congressman, the industry does not see
a current situation or risk where there's any compromise of the
equipment. But if the United States does want to shift toward a
situation where it is making or friend-shoring these equipment,
certainly here at home there are lots of manufacturers here in
the United States that are penciling out what this would look
like, especially if they had financial support from the U.S.
Government. It could also be from any of the other countries
that I mentioned.
Mr. Crane. Thank you. In regards to fiscal conservativism,
I am sure many of you guys know that we are approaching $37
trillion in debt. We are spending about $2 trillion annually
that we don't have, adding to that every single year.
I am looking, and the information that I was able to pull
is that, let's just take the Port of Los Angeles, for example.
In 2024, the Port of Los Angeles generated $684.7 million in
operating revenues. The Port of Seattle, in 2024 the Port of
Seattle generated $1.2 billion in operating revenues.
Now, I realize that these are private. These are privately-
owned companies, correct? Why aren't these private companies
investing a lot of their resources so that the Federal
Government and the taxpayer doesn't come out and have to
subsidize them?
Dr. Kroenig, I am going to give that one to you.
Mr. Kroenig. Oh, I'd say a few things. I completely agree
that the debt and the deficit are major issues and so coming
back to our colleague, Elon Musk, I think his efforts to look
for waste, fraud, and abuse and to find savings makes sense.
Even when it comes to USAID, USAID was set up for strategic
competition during the Cold War to advance American interests.
Then I think it loses its way over time and so I think trying
to restructure U.S. foreign aid to prioritize concrete U.S.
interest and strategic competition makes a lot of sense.
In terms of the decisions made by the companies operating
the ports on the Western Hemisphere, I'm probably not the best
to speak to that. Maybe I'd defer to Mr. Davis or to others.
Mr. Crane. I will let either of you guys take that if you
want.
Mr. Davis. If I may, Congressman?
Mr. Crane. Yes, sir.
Mr. Davis. That all of the port authorities in the United
States are public entities. They're chartered by cities,
counties, States, and many of those revenues go actually to
public coffers. They go into the Treasury to pay for all their
services for the local, urban area, or county or whatever it
may be.
So, I'd love to work with you and your staff on some of the
specifics of those ports, but they're public entities that are
often paying back profits into public Treasury.
Mr. Crane. What percentage, Mr. Davis, are most of them
paying back?
Mr. Davis. Let me get you that number, Congressman.
Mr. Crane. Thank you. I yield back.
Chairman Gimenez. Thank you, gentleman from Arizona.
I now recognize the gentlewoman from South Carolina, Mrs.
Biggs.
Mrs. Biggs. Thank you, Mr. Chairman.
I want to sincerely thank our witnesses for their valuable
contributions to this important hearing today.
So, the United States Coast Guard is essential to securing
maritime trade and enforcing laws that protect our national
security. They safeguard our borders, they ensure the security
of global trade, and they combat illicit activities at sea.
The People's Republic of China's growing control over
strategic maritime choke points, its engagement in illegal
fishing, and the suspected use of commercial shipping for
surveillance and illicit trafficking, all directly threaten
U.S. homeland security.
Because the Coast Guard patrols these critical waterways,
we must evaluate whether they have the resources and the
authority needed to effectively address these threats.
So for Dr. Kardon, how does the PRC's expanding influence
over global shipping routes and strategic ports, including in
Latin America and the Caribbean, impact U.S. homeland security
and the Coast Guard's ability to police illicit trade and
trafficking?
Mr. Kardon. Thank you, Congresswoman Biggs. I believe that
the extraordinary market share of Chinese firms and global
shipping and actually across all the verticals, you know, that
include shipbuilding prominently or investments, of course,
shipping itself, containers, leasing, et cetera, gives China a
strategic advantage in the modern economic system.
We heard the Sir Walter Raleigh quote. I think that
resonates with leaders in Beijing. I for one have studied a lot
of Chinese strategists' writings about the famous American
naval strategist Alfred Thayer Mahan. Also, a leading influence
in understanding sea power is something much broader than just
naval capability.
The naval capability is actually subordinate to the access
to markets and the freedom of maneuver around the world's
oceans. The PRC has systematically invested in those
capabilities. When we think about Chinese maritime power, I
would urge us to think, of course, of their growing Blue Water
Navy, but not exclusively.
In fact, if we look at where they're really, really
differentiated it's areas like shipbuilding and in overall
trade volumes and in its position in global supply chains and
value chains.
So, I do think that this poses a broad strategic threat to
the United States. As I note in my testimony, I think the acute
military threats from it are somewhat overstated, but that's
not to say that it's not a major strategic risk. I think what
I'm urging from the standpoint of legislation and policy is to
really focus on rejuvenating American maritime power.
Over the past 25 years, China has systematically invested
in its maritime power and one could make the argument that the
United States has systematically divested or, sort-of,
accidentally divested from it. So I think that's really the
center of gravity in our strategic competition and warrants
close attention.
Mrs. Biggs. Thank you so much.
My second question this is for Dr. Kroenig. So, given
reports of PRC-affiliated vessels engaging in espionage, the
illegal fishing, and smuggling, is the U.S. Coast Guard
adequately resourced and authorized to confront these threats?
Adding on to that, what additional capabilities or legislative
measures might be necessary that we can help with?
Mr. Kroenig. I think the U.S. Coast Guard and the U.S.
military more broadly is not adequately resourced to deal with
the China challenge.
If we look during the Cold War, the United States spent an
average of 7 percent of GDP on defense. Now, we're spending
something like 3\1/2\ percent of GDP on defense, so historic
lows.
So I think Senator Wicker and some others who have called
for 5 percent defense spending makes a lot of sense and so that
should be investments in the Coast Guard and also investments
in our naval power more broadly.
The United States has really fallen behind here and it has
been U.S. dominance on the high seas that has enabled really
the U.S.-led order since 1945. So, I think this is a major
problem and major investments are needed.
Mrs. Biggs. Thank you so much for your comments, and I
yield back.
Chairman Gimenez. Thank you to the gentlewoman from South
Carolina.
I now recognize the gentleman from Puerto Rico, Mr.
Hernandez.
Mr. Hernandez. Thank you, Chairman.
I support efforts to counter Chinese influence in Latin
America and the Caribbean. To do that we need to strengthen our
own ports in Latin America and the Caribbean, both for economic
development and for public safety reasons.
Ports like the one we have in San Juan are important for
the island's economic development and emergency response
preparedness. Federal investments in infrastructure are
critical for strengthening U.S. port infrastructure that itself
is essential for maintaining our global competitiveness,
particularly with China.
However, infrastructure projects take time and many funded
by the bipartisan infrastructure law and other legislation are
still on their way. These projects are now threatened by the
Federal funding freeze putting our island's economic growth and
emergency response preparedness at risk. In the long run this
could benefit our global competitors like China.
Mr. Davis, in your written testimony you note that U.S.
ports are already subject to Federal oversight mechanisms
designed to ensure that foreign investments in critical
infrastructure do not threaten national security. How would a
Federal directive that freezes funding and hinders these
agencies from carrying out their responsibilities compromise
our national security and reduce our competitiveness on the
global stage?
Mr. Davis. Well, thanks a lot for the question,
Congressman. I think you hit the nail on the head by saying
infrastructure projects take time. From the time that the
potential grant is noticed by the Government to the time it's
awarded, to the time it's permitted, to the time a shovel hits
the ground, you can see how it adds up a lot, which is why the
industry, and I know many industries are very hopeful for a
bipartisan move forward on permitting reform for infrastructure
projects at ports and other critical infrastructure and energy
utilities and the like.
So, that's something we're looking forward to this
Congress. But to answer your question directly, the President
has his prerogative for his policy priorities that he wants for
his administration, no doubt about that, but we come back to if
monies have been obligated it's very clear that the law says
they must flow to the recipients of those grant awards.
So, at the point that the grant is awarded to a recipient
the money has to flow eventually, and that's something we're
monitoring closely.
Mr. Hernandez. Great. I want to switch gears quickly to
emergency preparedness. So, on Saturday evening a 7.6 magnitude
earthquake hit the Caribbean and there was a tsunami advisory
for Puerto Rico and the U.S. Virgin Islands. I think this
tsunami advisory underscores how vulnerable regions like Puerto
Rico and the USVI and the Caribbean, how we depend on strong
modern ports for emergency response and recovery should a
disaster strike.
What could be the specific economic and public safety
impact of the Federal funding freeze on infrastructure
projects, particularly in regions vulnerable to natural
disasters?
Mr. Davis. Congressman, I'd answer the question by saying,
unfortunately, natural disasters are becoming larger, more
frequent, and costly and ports are literally on the front lines
of many of these coastal areas that are susceptible to them. We
estimate that the closure of a port has on the order of $5
million economic impact per day, so that really, you know,
multiply that by 1 week and you start to see the overall toll
of a disaster like that.
Mr. Hernandez. So, would you say that in essence these
Federal funding projects to strengthen our ports'
infrastructure could be seen as a long-term investment rather
than a loss that would represent, you know, having these weak
ports that it would have to close in the case of a natural
disaster?
Mr. Davis. I agree completely, Congressman. The return on
investment is a 3-, 4-, 5X, and I would point folks to the
Association of the Society of Civil Engineers for some of their
work on this on these figures.
Mr. Hernandez. This is a return on investment that will not
only benefit places like Puerto Rico but would also benefit the
United States and its broader ambitions to combat Chinese
influence in the region.
Mr. Davis. No doubt about it. We'll be looking at a
comparative study in coming months about how our trading
competitors spend on their port infrastructure, and I think
it'll open some eyes.
Mr. Hernandez. So, would you agree that this should be
approached in a bipartisan manner, not viewing this just
through the lens of traditional liberal-conservative spending
versus Government cuts angle. It should be seen as something
that concerns our national security, our economic
competitiveness, and it should transcend political
partisanship.
Mr. Davis. Congressman, forgive the corniness. The
containers can be blue, the containers can be red, but shipping
infrastructure is bipartisan.
Mr. Hernandez. Thank you. I yield back the remainder of my
time.
Chairman Gimenez. The gentleman from Puerto Rico yields
back his time.
We are expecting 1 other individual, 1 other Member to
come. It was supposed to be at 11:20 so I will keep the hearing
open until 11:20. Hopefully, he will show up. If not, then we
will close. So, we are in recess for a couple minutes.
[Recess.]
Chairman Gimenez. The subcommittee will come back to order.
I now recognize gentleman from Iowa, Mr. Nunn.
Mr. Nunn. I want to begin by thanking Chairman Gimenez by
starting off us on such an important topic today and allowing
me to join your subcommittee. As we all know, the CCP's global
ambitions are not limited by hemisphere or geopolitical
boundaries.
They are masters of anti-access area denial across all
domains, including that in space and are serving a threat
across not just the Pacific but around our world.
Look, as a 20-year intelligence officer, including on an
airborne operations, I have flown reconnaissance missions along
the PRC's periphery and I have witnessed first-hand how Beijing
operates. The PRC's investments are more than just about
economics. There are tools for power projection, influence, and
strategic positioning.
Right now in Argentina, the Chinese are developing a deep
space station according to CISA. BYD's monopoly of critical
batteries house goes--or the COSCO's deep water port in Peru
and increased arms and weapon sales across China and throughout
South and Central America. These are only a handful of the
projects that they have undertaken, as has been highlighted
today.
In Latin America specifically, Beijing has employed debt
diplomacy, state-controlled enterprises, and political pressure
to expand its foothold. I believe that if the United States
gives our command and control of SOUTHCOM over to the PRC, my
farmers in Iowa, manufacturers across the country, and folks
just here in the United States will not only lack for the
ability to operate there but will be boxed out completely
around the world.
This region contains operations critical to international
trade, shipping, agriculture, and strategic military positions.
So with that, I want to begin by thanking our new Secretary
of State Marco Rubio for his recent visit to the region along
with his commitment to halt the CCP's investment in the region
and offer our friends in the Latin American community an
opportunity to work with the United States for long-term
security throughout the globe.
Today's hearing is a necessary step forward and thank you,
Mr. Chair, for leading the charge on this.
So, I'll first speak to Dr. Ryan Berg. Dr. Berg, you are a
director at CSIS and you have been making a massive
investigation into China's foothold in Latin America. Many of
the host nations view these investments as beneficial to
themselves, either due to economic desperation or a lack of
viable alternatives from the West.
How effectively are the Latin American governments
assessing the long-term threat that China poses to their local
economies?
Mr. Berg. Thanks for the question, Congressman, and it's
wonderful to hear that you're consuming our products. We always
love hearing Members reading CSIS.
Look, I think there's a fundamental problem with some of
the democracies in the hemisphere. If you sign a deal to get
shovels in the ground during your mandate, you might see
shovels get in the ground during your mandate. You may even win
reelection based on the feeling that the country is doing major
infrastructure things with the PRC, but the price to be paid is
later.
So we need to get better with our messaging game, whether
it's debt trap diplomacy or whether it's opportunity costs
associated with some of these deals, to have leaders understand
that there are costs to be paid and they often come 2 or 3
mandates later.
That's the fundamental problem here, Congressman, and too
often the best offer has been the Chinese offer because it's
been the only offer. So, before you entered the hearing I spoke
to a couple of the Chairman's questions as well as my opening
statement about how we need to increase and improve our
commercial diplomacy. I'd be happy to talk to you off-line
about that as well. Thanks.
Mr. Nunn. As you know, we have seen this tragically
throughout history. The Soviets doing it in Cuba and Latin
America. The Chinese are much more insidious in their ability,
both through wolf warrior diplomacy with the long-term tethers
that they hold over these countries who, candidly, are looking
for alternative partners to not be trapped in this situation.
Thank you, Dr. Berg.
Dr. Kroenig, you're the vice president and senior director
at Scowcroft, also incredible work you guys have going on
there. I want to talk about the PRC's growing control over port
infrastructure.
Obviously, the President has made this a top priority in
Panama, but the deep water port investment in this area has an
outsized influence. President Trump and Secretary Rubio both
emphasized the seriousness.
What specifically both diplomatically, economically,
hopefully not militarily, but we did get the right to sail
through, steps can the United States be taking to deter China's
influence and reestablish America's presence in these regions?
Mr. Kroenig. Yes. Well, thank you, Congressman and thank
you also for the nice words about our work at the Scowcroft
Center. So, I think there are a number of things the United
States can do, and I think President Trump has been right to
see this as a major priority and to put pressure on the
Panamanian government.
You know, many of the governments, including the government
in Panama, I don't think want this Chinese influence. Now,
these are agreements that were entered to under previous
governments and so the U.S. pressure is in a way doing them a
favor.
So, as you know, right now they're reviewing some of these
investments, an audit of these contracts. They probably will
find Chinese corruption because that's what China does.
I think that will provide a great opportunity for them to
end that contract and then rebid and American or other Western
companies can win those concessions and I think that would
advance American security and Panamanian security.
Mr. Nunn. I think it is fantastic that not only have the
administration been able to redirect it so that U.S. naval war
vessels who help protect the Western Hemisphere now can sail
through that without paying a massive fee, oftentimes which
goes to subsidize the Chinese, we should also recognize the
Chinese are doing more than just the hard infrastructure
projects. They are deeply embedded into every software,
hardware technology, the actual SCADA and control systems for
these.
So, I want to talk to Mr. Davis here, you also, the
president and CEO of the American Association of the Port
Authorities. The Chinese Communist Party has embedded itself
within our actual U.S. port systems here, the supply chain, the
critical infrastructure, or the software.
This includes through port equipment like ship-to-shore
cranes, which the United States exploited--which could be
exploited for cyber espionage, logistical disruptions, or just
good old-fashioned spying. How do we get around this?
We have seen things like Salt Typhoon in a series of MSS,
the state security out of China, threatening the United States
and very little happening to hold these bad actors accountable,
whether in Latin America or right in Beijing.
Mr. Davis. Thanks for the question, Congressman. I think
there are 3 answers to it. First, it's the port industries
partnership with Government and all the agencies that lead on
cybersecurity or otherwise security measures at the ports,
including U.S. Coast Guard, CISA, and the like.
Similarly within industry, we share threat. Ports share
ports terminals and other maritime players all share threats
amongst each other so that they can identify malicious codes,
spear phishing techniques, et cetera, so that everyone's, kind-
of, on guard and seeing the same thing.
The third is a lot of the much more sophisticated and
technical defensive measures that ports, operators, and
manufacturers take, including replacing some of the electrical
componentry and software of some of the equipment with those by
known parties, some of, some of which are United States
companies.
There are other sorts of measures like that which I'd love
to tell you and your staff about.
Mr. Nunn. We look forward to that. I want to highlight that
the scope----
Chairman Gimenez. The gentleman's times has now expired.
Mr. Nunn. That is right. I yield back to the Chair.
Chairman Gimenez. Well, thank you.
I want to thank the witnesses for their valuable testimony
and the Members for their questions. The Members of the
subcommittee may have some additional questions for the
witnesses and we would ask the witnesses to respond to these in
writing.
Pursuant to committee rule VII(E), the hearing record will
be open for 10 days. Without objection, this subcommittee
stands adjourned.
[Whereupon, at 11:34 a.m., the subcommittee was adjourned.]
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