Transcripts For CSPAN2 Hearing On China And U.S. Economic Policy 20240712

Good morning. This hearing will now come to order. I am pleased to welcome our distinguished panel of Witnesses Today is the economic and security subcommittee. He focuses on the very important topic that i think has a lot of bipartisan interest in. And that is the economic and geostrategic challenge that the rise of china poses for the United States. Much as today, but in the future. China, communist party, Peoples Republic Party of china. Unfair trade practices, intellectual property theft and market manipulation and very prominently in my view, m nonreciprocal treatment. Not just an economic room but in many realms. It has been a force in the Global Economy that undercuts the resiliency and strength of the u. S. Economy. China has been one of the worlds Fastest Growing economies. Averaging close to 10 percent growth from 1979 to 2016. In 2014, china was the Worlds Largest economy and nursing power bases according to the international monetary. I believe there is a strong bipartisan interest, hopefully we will see that today. In establishing a longterm economic United States strategy. With our allies that focuses on reciprocity and intellectual property theft, and ultimately the United States percent effective, not competing the chinese. In may, the white house issued its document called the United States strategic approach to the peoples republic of china. This document stated that the Chinese Communist partys expanding use of economic military power compels the efforts from nationstates across the globe, vital american interests and undermines the sovereignty and dignity of countries and individuals from around the world. This document is part of the Broader National Security strategy. That was issued a couple of years ago by the Trump Administration. And the Defense Strategy issued by the department of defense. These documents although you dont see it in the press, and my view have very strong bipartisan support in the congress from laying out the challenge that a nation faces with regard to china. With a lack right now is implementing this document. Implementing strategies. Critically as it relates to the economic challenge that china poses. So what are hearing intends to do today. Is to start the focus on the implementation and execution of these strategies. As i mentioned these families have broadbased bipartisan support but we are going to need to build bring our government, our societies together for the longterm. Literally, decades. Like we did in the cold war with the soviet union affair going to execute these in a way that protect american interests, our workers, are economic and National Security interests. Im hopeful that that is i the path that we are beginning on. Ete Trump Administration, in the series of speeches from cabinet members of the last few weeks have started to lay out this strategy. E know that the secretary pompeo as we speak is testifying in front of the Senate Foreign relations committee. Informing the congress on this issue which i think is one of the mostos important issues facing the United States, that is our goal and im excited to have Ranking Member markey as my Ranking Member here, i know he feels the same on a lot of the issuese with regard to the challenges that china poses and with that i will turn to the Ranking Member for his Opening Statement. Think you mr. Chairman, thank you so much for this hearing and for your continued partnership on the subcommittee and they want to think our witnesses for their willingness to participate today, as a Ranking Member of the subcommittee in the east asia subcommittee of the Foreign Relations committee, i believe meeting the china challenge should be a bipartisan priority. We must compete against beijing to unfairly choke the Playing Field against American Workers and businesses. Those actions include state support for companies, intellectual property theft as well as increasingly using multilateral institutions to set standards that privilege Chinese Companies and technology, china also uses as vast economic tools to threaten freedom around the world, beijing is alreadyij exploiting the size of its market to coerce american citizens and Business Leaders as well as foreign governments into selfcensorship and protect official Chinese Government messaging. We know china is using experts in foreign insistence including through the bolt and Road Initiative to embed around the world, not only Surveillance Technology but also the value and practices that activate those technologies for authoritarian regression. As we engage in this competition of systems, we must remember the Chinese Government is testing their authoritarian tools, first and foremost on the people of china. I want to p make clear, in todas hearing and otherwise, we are focused on the threats posed excuse me. We are focused on the threats posed by the Chinese Government and environment. While countries around the world look to the United States and International Coalition to push back on the chinese aggression, they know the United States has retreated from our historic support of democracy and human rights as a key pillar of our foreignpolicy. They know that the Trip Administration has abandoned internationalin institutions suh as the World Health Organization while the Chinese Government had only a stepped up their influene campaign, they know this administration unprecedented support for authoritarian over allies. Rather than take a leadership role in Pulling Together Coalition to combat chinese policy objective, this administration has pursued an aggressive wood alone approach that swings between pandering to china including a green light fromro President Trump while uighurs of tension camps to the closing of the chinese consulate in houston without any clear reason orr explanation of whate seek in return, we cannot consider china policy, every policy is a decision from the past three and half years impacts how the rest of the world views the current conflict and i assess these policy decisions, it is clear to me we have failed to rise to this moment. As china stepped up its Propaganda Campaign in the midst of the coronavirus, its hard for the United States to point fingers when her own virus response has been so inadequate, the president in this bookable failure lead a National Response to the Coronavirus Crisis and taxed against science, free speech in the media has left the United States flailing as other countries lead in responding to the pandemic. As china continues to dominate manufacturing and requires companies to bringre on chinese and sheer intellectual property, the United States has cut relevant areas of domestic spending and has not ravaged the governmentces of the for economic development. We should be investing in a research and T Development and Technology Sectors and putting money into education with a particular focus on stem, we should also be utilizing the defense production act with full potential to mobilize the economy during the pandemic. As china engages in a comprehensive campaign to exploit International Institutions for their own purposes, we have retreated even further from the world stage, the when the United States is absent on the world stage, china is only too happy to fill the void. Competition with china is fundamentally about a free society versus authoritarian. You must utilize all the tools at our disposal and make the United States in our economy competitiveng and resilient as e work with democratic countries around the world to push back in a connected way to protect her values that we hold so dear, the challenges are to appoint, the stakes are too high, the United States of lee cannot afford to see leadership. So thank you, mr. Chairman for this important hearing, thank you to all of the witnesses who are participating today and this is clearly a very important subject. Thank you senator markey and i appreciate your partnership on the subcommittee where we had a lot of good hearings and a lot of overall bipartisan agreement on a number of issues, as it relates to china, i noticed the chairman of the Commerce Committee senator wicker is here and i would ask him to give an Opening Statement as well. Thank you very much, mr. Chairman, i appreciate your leadership and there is an ambitious two Panel Hearing this morning and the focus of course is the Chinese Communist party in their predatory economic practices and their impact on American Companies and workers a both at home and abroad. Confronting these practices in protecting our economic advantages into the future will require an impressive u. S. Government response, supported by congressional action and oversight. In the white house published its whole government Response Plan in a document called the United States strategic approach to the peoples republic of china. E todays hearing will focus on the economic dimensions of the overall u. S. Strategy. As a white House Strategic press points out, the ccp uses a variety of weapons to undermine americas economic competitiveness including cyber attacks, intellectual property theft, force of Technology Transfers and illegal subsidies to stay down enterprises. I hope where enterprises will describe the impact of chinas campaign with respect to industries under the commerce jurisdiction such as telecommunication, maritime, aviation and space. Americas future Economic Prosperity is not the only thing at stake in the strategic competition, the covid19 pandemic continues, china is paapparently using topics from s flavor in our Public Health center. In indicted two chinese hackers for a widespread cyber attack campaign supported by the chinese intelligence service, the target allegedly included at least four pharmaceutical and biotech firms working on covid19 testing and treatmentd products. Covid19 has revealed unacceptable vulnerabilities with years of letting the ccp destructive and economic practices. Without an effective, core native response, hopefully that is about to change. During the initial phase of covid19, chinese exporters and shipping ground to a halt, and many u. S. Businesses were forced to go. In particular United States pharmaceutical has been shown to be overly reliant on chinese suppliers. We cannot tolerate having these economic vulnerabilities. The ccp is unlikely to stop its predatory practices. And therefore u. S. Government has helped our economy, more resilient against constant pressure from beijing. I want to ask her witnesses on the state department and the Commerce Department through detailed measures they are taking to support a multicompany. They complained of significant role in supporting the efforts of the executive branch. In the Commerce Committee is doing it in the health producing bipartisan legislation. Such as the recently enacted secure and trusted Communications Network act. Known as the rip and replace. There are funds in the covid19 placeth for proposal by the majority leader in this regard. In this will help protect elamerican communications, networks from threats, posed by ccp back suppliers such as huawei and gte, that is the removal of that equipment and i would welcome suggestions from all of our witness on how congress can continue to bolster the administration efforts. But mr. Chairman and Ranking Member and the champions in this regard, i appreciate your bipartisan support, i think the witnesses for the time today and look forward to the recommendations. Thank you very much. Thank you, mr. Chairman and i want to welcome her witnesses. I have instructions to say if the witness does not take their seats, please ask them too a do, we have no witnesses here in the room but i think theyve taken their seats virtually so i can see them on the screen, i want to welcome mr. Michael, commissioner of the u. S. China economic and Security Review Commission and mr. Rush goucher director of the chinese strategy at the brookings institution, gentlemen you each will have five minutes to deliver an oral statement, a longer written statement will be included for the record, thank you again for being here, when we begin with you. Thank you for the invitation to appear before you today, the topic of todays hearing directly affects every one of our citizens. My name is michael and im appearing before you as a commission on the u. S. China economic and Security Review Commission, for a normal washington and speaking for myself although my comments are informed by my service on the commission and other work ive been involved in for many years. Todays hearing raises the critical issue on how to respond to the china challenge. Or chinas policy and actions pose the greatest threat to our competitive posture, other nations or washing americans response to determine if they should emulate chinas actions or whether america will stand tall and defend and promote its interest. Last week chinas foreign minister said that, the Current Situation in chinese u. S. Relations is not what china desires to see. The United States is responsible for all of us. I agree we dont want the current state of relations to continue but i strongly disagree that the u. S. Is totally responsible, years of repeated attacks on our Industrial Base with continuous theft of our intellectual property, countless unfair trade practices, mass subsidies of state owned in state entities and many other predatory protection policies along with human rights abuses, current actions in hong kong and projection of the South China Sea and elsewhere required that we more seriously confront china. Chinas actions led to the response. Chinas leadership has made clear that their intention through number policy announcements and activities, they pose their approach as being a winwin but rather winning and dominating, the Chinese Communist party policy has contributed to the hollowing out of production, the dangerous reliance on uncertain and risk of supply chain and a loss of resiliency. Countless jobs have been lost. In my prepared testimony and many of the ccp policy or practices perform the basis for our concerns, they are wellfo documented, the dangerous dependence on china for medicines, medical devices and personal protective equipment has painted a stark picture for the public, that dependence exist in many other sectors and could increase if the ccc achieves its stated goals. But as it relates to policy failures here in the u. S. That must be addressed, our action on others that have contributed to the current problems, after the obsession of china the world trade organization, many began to set up operations in china with the stated goal of serving the Chinese Market despite facing requirements for joint ventures, Technology Transfer and other policies, the amount of investment by u. S. Firms in china increased as did their employment which rose by almost 600 to 1. 7 Million People by 2017. R d by u. S. Firms in china has increased an average of 13. 6 per year since 2003, almost double the rate of the domestic. The promise of serving the Chinese Market has not yield benefits. Research shows that 60 of chinas exports for the u. S. From foreign invested enterprises, not all of thosent are u. S. But many are. Now we chinas rising debt load and need for capital is beginning to open its Financial Sector to foreign firms, it is not doing that what the service own needs. It is significant in economic terms that chinas military and technological capabilities. Hundreds of billions of dollars flow into china over the next few years, this bears careful in strict scrutiny, on these and many other fronts, we should examine policy options the promoter interest, and our testimony identifies several recommendations made by the commission as well as several of mine, we need a conference of approach and i believe emulating the congressional effort with the competitiveness of an act of 1988 which played a Critical Role and is worth considering. We not only need to confront the acts and policy fostered by the ccp but need to invest in our own competitiveness and adopt rules that will have the answer interest. We also need to focus not only beyond todays challenges but those over the horizon. They stand for the opportunity to appear before youou this morning and i look forward to your questions. Thank you, i would like to now ask for your Opening Statement. Much. Ank you very distinguished members of the committee, thank you for the privilege of being able to testify in the court with the challenge and efforts with the resiliency and competitiveness proved i will refocus my recente enter marks. Beijings ambition for global schnology ambition. Second, the activities and challenges they pose to our supply chain and Workable Technology leadership and policy recommendation to bolster competitiveness and resilience with superpower marathon. First of all talk about China Technology and ambition, beijing is robust with United States and Global Technology leadership, how do leaders believe were in the middle of the Fourth Industrial Revolution made up of Artificial Intelligence, ig and et cetera, he wants to leave the village revolution it is also driven by geopolitical. According to party text beijing argues the last three Industrial Revolutions because of diversion allowed some countries to be geopolitical leaders and others as bloggers. Their overview of the history is where history remains. The first Industrial Revolution is brought r steam power, and building an empire, the second Industrial Revolution would mean leave the unitedki states. An informationtechnology kept the u. S. A leading state. Beijing missed out on the revolution in the hopes to ride to globalou a leadership. In china almost all agrees technology is the battlefield between the u. S. And china. That leads to a second subject, what is china doing two sees Global Technology leadership. Here there are a few options, china is spending in some cases equal if notat greater even thoh china has a smaller economy. The Technology Central to the Industrial Revolution, china might be defending us. As ten times competing. Beijing believes its given advance in beijing has a 1. 4 trillion initiative intent sectors apart for the next evolution. Several multimillion dollar technologies and of course has 100 technology plans with success. In predatory behavior, something states might take over and force Technology Transfer to close the gap inside the states. Third chinese sources agree, rather they argue, although the u. S. Is better innovation we cannot bring our products to market which gives china an opportunity with reversed engineering and the passing of space. Beijing understands postcode with the world is tried to diversify and has very reason that xi jinping has declared the protecting china chambers of the top national priority. Europeanamerican chambers in china have indicated the vast majority of numbers are not yet leading the country. So with the cost chinas world factory and supply chain and he keeps his company struck in many cases adversely affected our security and technological leadership. Going to the third and final question, what can you do about this, much more, testimony i figured the china and the bystanders in committee thinking how to compete in resilience comes from those individuals. We need information on the supply chain, we need to know where were vulnerable in an entity on our supply chain, stress test with institutionalized about them. Second, we need better coronation, some of this is that the strategy level in the strategy document, we dont have a National Strategy for competitiveness. The agency level as well as taiwan is inspiring this regard, the only government thats been successful from china, over 33 billion to entertain in one way they did it was top one office served as a shop for all businesses back in taiwan. Congress could consider pushing a corporation to01 look beyond r example tax policy, and shareholders with equity positions and we need pro competition approaches as well. Can you novation Frontier Companies are making bets on the future. If will have one company the hightech industry to make the wrong bet, were out of luck, we have multiple Companies Making multiple bets, then where multiple elections and thats what can uniquely happen with the policy i approach. Finally we should reinvest in our constraints facing the system in our federal t spendin. Including where china does a much we do a home. This committee will be the center. Thank you for your time and consideration. I will look forward to your question. Thank you gentlemen, outstanding Opening Statements by both of you giving us a lot to think about and a lot to agree y on. So let me begin by asking both of you some very general openended questions, i spent a lot of time in china and working in this relationship from a lot of differentre perspectives, one core principle that i think we need to focus on, i think its again something considered and viewed as bipartisan in the issue of reciprocity. , right now the u. S. Chinath relationship across so many spheres, the relationship is not typical. At the end of the day its really an issue of fairness. What we enable chinese, a journalist orur businesses or academic institutions to do in america, we cant do over there. It is very long list across many spheres of thef relationship and in my meetings with chinese, they sometimes even acknowledge this, remarkably what they do when they say the relationship is nonreciprocal, they say, ive heard this as a u. S. Senatory d u. S. Other positions, senator, its because were still developing country in your undeveloped country. I heard that from the abbasid or a year end half ago. Its a pretty ridiculous statement. I would like the two of you to comment onn this issue of the lack of reciprocity as a core principle that we need in the relationship between the United States and china and secondly, if you can talk about an issue that i referred to as promise fatigue. This is the issue over the last three decades, almost every major agreement that t the chine have undertaken with regard to the United States, they dont follow through on. Two examples during the Obama Administration, they led the effort with the comprehensive agreement on intellectual property theft, the butcher administration and they continue to steal intellectual property ohio levels in a 2015, xi jinping, next to president obama in the rose garden said we will not militarize the South China Sea. President china said that the rose garden said that the United States. Within weeks, they were breaking that promise, promise fatigue is another issue that i would like the two of you to address. If you look at reciprocity, promise fatigue. Thank you for the excellent question which really goes toqu the heart of the relationship at this point in the challenges that we face. Let me go to promise fatigue and then ill address the question of reciprocity. Im a democrat but one of the great statesman, Ronald Reagan said trust but verify. I think we feel to have the kind of provisions in place that would do just that, meaning window promises made, we need to implement all automatic provisions to ensure promisesns areap kept, too often we rely on those promises and hopefully the best, find out many years later or even quicker sometimes that the promises are broken and we look at what tools might be available to fix that. , we need more automatic trade majors and provisions to put in place. All rely on my colleague who is skilled in the chinese language, we need to have a much better understanding of what china actually says and that requires the courtoc documents. One looks at the Bilateral Agreement on cyber hacking for example, it was a fundamental misunderstanding here because the chinese said that they would not hack for economic benefitco alone. The fact is, they view economics and military security as intertwined and the result is when they hack for economic gain, it is for military National Security gain, we were talking and using different definitions, finally and quickly, reciprocity is an appropriate tool to use in certain sectors potentially not across the board, we dont want to be like the chinese but we want them to understand when they take certain actions to our interest that they have to expect the sameec here. I believe reciprocity has a role a number of segments. Just on reciprocity. I pose this issue to the chinese when i was in beijing, the lack of reciprocity in areas like journalist, if not hundreds or thousands in our country, pretty much free roaming, we dont have that in their country, they have confucius institutes in our universities and when i was in beijing, the ambassador told me they could get i could not get n the campus of the University Without an escort, i pose these to the chinese. If you want confucius institutes a hundreds of universities we should have james mattis of freedom andad liberty. On your university. I just made the term up but the point was there was no reciprocal relationship, their answer was confucius institutes only each culture and language in james mattis with freedomit d liberty would teach propaganda. I think that the fundamental misunderstanding of james mattis. And would you care to comment on these questions before he turned to the other senators. Ill simply say reciprocity should be the cornerstone of our relationship, the question is where we want reciprocity and where we may not a lotth too. The cold war, the soviet union have cervical relationship when it came to journalists, we had equivalent numbers of each others countries and we dont have that approach now, some would say benefits United States to have more access than it does presently but unlikely china was provided because they see reciprocity as a direct threat in the Chinese Communist party. For them p reciprocity becomes a direct challenge to everything that is what they are and becomes very difficult to assist successful. Sorry to interrupt you, they booted a bunch of our journali journalist, if they allow five american journalist in all of china, is it in our interest to say then you get five chinese journalist. We know a lot of them are mouthpieces for the Chinese Communist party anyways, some are not journalist i suspect. But would that make sense, should we just say all right you get five journalist in america . If we cannot have james mattis with freedom and liberty we will boot yours to all of ours. Does that make sense . Thank you, senator its an important question. I think the answer will vary. I think with any luck well be able to find some an arrangement where we will have better access to china in the long term but for now the five journalist in thee United States with reciprocity would not do nearly as much for china as they would do to the United States in beijing, they were able to tell us what was happening on theji ground. Thats an area where we get from that then they might. Because her mouthpieces are not particular effective in our journalist can be affected with Media Coverage for example. You raise a very important question and im not sure i have a perfect answer v for. To overview on promise fatigue before we turn to senator klobuchar . I completely agree that its a significant issue, there so many promises notot been to bron across and the key goes back trust to verify. Senator klobuchar. Thank you very much v chairmn sullivan and Ranking Member for holding the supporting hearing today. N ive long been critical of chinas unfair methods of competition hit right at home in northern minnesota and i know its not just manufacturing and trade which we need to be vigilant, china is using old and new tools including expansion of state owned businesses required disclosures from private companies doing businessbu in china and outright theft of intellectual property. Interdependence has highlighted weaknesses inn ensuring access o critical, medical supplies, ill start with you, i mentioned the omeel dumping in both under the Obama Administration at the very end we took it on a big way and made a difference and continue to the advocacy with the Trump Administration on this issue. Do you agree with the importance of standing up to illegal and unfair trade practices that harm our workers such as illegal steell dumping . I could not agree more. The fact is when our workers work hard, play by the rules, they deserve to know that those roles are going to be enforced and they dont have a fair chance toth compete. China has not only in steel by the so many other industries and design not to promote winwin but to win and dominate, steel is a perfect example where as you know, they will have close to a billion metric tons of capacity far more than they need in the Global Community and undermining the ability of our companies and our workers to survive, that covers steel, aluminum, rubber, fiberoptics and probably 15 17 separate sectors. Standing up to the nonmarket activities is vital for the preservation of our own industry but also prone economic success. In your testimony, you also note that intellectual property theft cost up to 600 billion a year, china according to testimony accounts for most of the loss. Do you believe the ministrations response to chinese intellectual property theft has been sufficient to protect our economy from counsel influence . I believe they have taken some initial steps that are helpful, as they appointed out so many analysts and myself included believe that stage one or phase one of their agreement was insufficient. It does not get to many of the structural issues, subsidies, state owned enterprises and the basic core structure of chinese nonmarket courses. , it is also somewhat problematic to believe that intellectual property will change as a result of theha phae one agreement, weve seen the indictments iin continue to be issued virtually every day, continued cyber hacking, theft et cetera in the cost of doing business in china is still dependent on joint ventures and so manyve other sectors, those joint ventures often require u. S. Tu companies to share their intellectual property, its a cost of doing business and that has not changed. This could mean trade alliance and other things to push on these issues and you could continue the weakening of u. S. Alliances and disengagement around the globe an opportunity to fill the vacuum left by u. S. Leadership. House of the u. S. Respond to efforts by china, i will ask this of him as well, to expand the largest Economic Partners in regions around the globe specifically what role should strengthening alliances in u. S. Leadership of multilateral institutions play in this offer . Can we just go alone in china or do we have to work with the rest of the world. I think weve seen it going alone is not working as well as it should, weor are engaging as you seen recently, Great Britain has turned the corner on the question of always in chairman worker talked about earlier in the leadership of this committee and looking at that threat. We have to reform organizations like the wto to make sure that they work for us and i think were past the point where as it was in the past, our allies would hold it while we bloodied our nose, they realize we have increasingly realized the china challenges not just post to u. S. Interest but their own as well. They need to come to the forefront and work with us, if they dont, we need to go it alone because we need to protect her industry andnd her people bt i think the world is waking up and we have to work on reforming those organizations, doubling down and participating where it can be helpful but wherever we need to go alone we gotta do it for people. Thankor you. Thank you, chairman. To both of the panelist, a couple of questions. One is, what has china done in their effort to make it difficult for us to have ownership and other thingsth in china that makes it easy for us to leaveve and two, how are the dramatic demographic changes in china going to impact their ability to continue to compete and to keep wages low, the country is going to dramatically change in terms of what it looks like and how is going to affect the global position in their continuing economic model. Lets start with mr. Wessel on the mr. Doshi. Thank you for the question, it is a key question in terms of how china will approach its own future. As we have seen they have an aging population with over time fewer replacement workers and that will put new stresses and strains on their system. One wherera weve seen one of te most evident changes in healthcare with a 1. 4 billion people aging quickly or aging out of foster paste then have expected, thats why theyre trying to dominate the biotechnology synthetic by biology and medical supply to meet their own needs and also to wndominate worldwide. It also puts enormous stress on the need for them to promote Economic Growth, productivity and efficiency and as a result, they are trained to move up the value chain in terms of products that they have produced when china entered the w geo, the old view, it was about textiles, now its about quantum computing, biotechnology, a. I. And other critical industries. Thank you, senator for that question, i think this is the exact question that the president is worried about in china. First, they make it hard for the companies to leave, they know wages are rising in china and thats eliminating their advantage, hoping to move towards mark manufacturing the mass of 1. 45 trillion g grit to make sure that the use pressure for the companies from moving yinto make them at the center. That is the first thing they are trying to do to make sure that they have dominance in their supply chain. The second area on demographics, you are right, the demographic challenge is enormous, the least favorable demographic of any great power in the world today and theyre worried about it, they are worried theyre going to get old before theyy get rich and that is why theyre stepping up to the industrial policy to target our Hightech Industries because theyre hoping they can grasp that before they let go the last one which is lower wage manufacturing. Never enormous challenges and this is a moment of transition and thats where were seen so much money being spent on industrial policy. In a know we need to have more help coming, certainly australia and some of our friends have stepped up to resist chinese inability to be willing to work with others, what about moving forward and where are the likely friends in this economic fight that we should be thinking come cinext tell me what do you think happens there, and again, both of you. Senator, its a great question, again as i said, i think countries are now beginning to appreciate better theha china challenge for a long time, they look to the u. S. To lead or elsewhere, they would not always follow. So on overcapacity where they were multilateral talks, young little to no help from our allies, their last two or three years or whats happened with the pandemic has awoken many of our trading partners in many of our allies into the dangerous vulnerabilities and the lack of resiliency and unacceptable dependence on chinese supply chains, i think were entering an air where theres opportunity to have greater allies and support. We need to chart a course that they see themselves winning in as well and is able to enforce those and those enforcement masers and institutions brought a limitedst passion. Thank you, senator, china believes our allies are a single biggest in its most important thing, what were going to work with them particularly on the economic to technological space, now as michael mentioned, post covid Approval Ratings for china are a plummeting around the world and many of the countries we are very close ties with including European Countries and india, parts of thes asianpacific, and now to work with those countries to create coalition at the forprofit technology, people talk about democracies to Work Together on 5g, there is no reason we can expand that work with the coalition and everything from biotechnology to medical supply chain to Artificial Intelligence and it will be coalition, i think that is a directional beginning to move in in the north part accelerated post covid19. Thanks to both of you. That is a very insightful, on the allies, something ive not heard before. Senator rosen. In morning mr. Chairman, thank you for holding this important t hearing today, i wat to thank both of our witnesses, not just for being here but youre from thoughtful testimony so far, a lot of your work and what we need to learn and the lessons we take away. I want to talk about the stem work. Technology is increasingly at the center of China Economic competition, i think we can agree to booster competitiveness and we must invest in the capable workforce to continue being the most innovative country in w the world, we needo maintain a workforce to integrate. In thehe United States is expecd to take a shortfall, nearly 3. 4 million technical workers in just a few years by 2022, a recent study found that half of the cases for 12 students are getting any cyber related education. Excuse me im going to take a drink. To promote our workforce, i will have introduced multiple bipartisan bills, one that prepare the students for careers in education. Excuse me i have something caught in my throat. Going to go right to my questi question, under testimony point out that the growing trade with china has eliminated millions of american jobs with manufacturing and agricultural sectors, these jobs have not migrated to other industries. What kind of programs do you think we shouldd invest in to better prepare students to enter the workforce. Thank you for that, excellent question and you are f spot on n terms of the question of the need to invest in our children and young adults in our workers and not just them but lifelong learning. We need to make sure our workers haveve the skills to compete in the worlde economy. It also requires that we fight more for some of those hightech jobs the new jobs of the future whether there and biotechnology or quantum computing and so the investments making their own success in families making their students and they can achieve a good return, they know they can have a Bright Future ahead of them. Without the skills, we dont have the critical input that we need too succeed and every industry now is an advanced industry whether its i agriculture, as you know, i was on the farms in iowa for a portion of last summer, every tractor is hightech and when you look at any factory, there is a computer assistance that support the factories of 100 years ago, we need to constantly upgrade your skills inou Stem Education. Im going to ask both ofat y, china prioritized him as a National Security issue, they mandated seclusion, and action plan in the United States in contrast is mostly an opportunity approach, that does not mean to include stem in a lot of ways, does not include alonnonprofits are industry partnership. So for both of you, how can we best help our states, School Districts and schools, what can we get in invest in with a private partnership and with legislation, grants, what can we do to create an action plan of our own and really support our School Districts, that is where the learning is going to happen, and doctor, we can start with you. I think thats exactly the right question, your diagnosis of china is exactly right. Its informed by the research and development, the research and education both, and the university whether federal institution when it comes to science and technology and the graduate students, more effectively if we have more fun, of many of us know, 1. 6 of gdp at the federal level in our federal government would spend 1. 6 on technology research, that is far lower than any point during the cold war, toys been interesting and catalyzed with technology sector, were below. Theres a lot we can doe that even a simple doubling which is a significant amount of money with 200 billion was several hundred to china putting in would make it possible to educator population and the same time. But you go over. I believe my time is expired but i like to think of this as an investment in a new calculators return and we can project the economic return by investing early at all levels, k12, university and if we dont dodo it we will be at a loss for time. Thank you, senator rosen. Thank you, chairman sullivan and Ranking Member for the hearing today. As we know this is very complicated and ever evolving. Can you hear me okay. We are good. It is complicated, i was pleased with the administration of chinese officials with the trade agreement. Senator, as you know trade discussions remain ongoing in the United States and the uk. Concerns urban brought to my teattention that the uk Steel Company was recently acquired by chinese steel manufactured. And toio American Products and o make an investment in European Countries, not just the one that i mentioned today. Has a commission conducted any research on the impact with the investment of the uk would have on her own Steel Industry . I thank you for that question. The commission has not addressed that, let me just point out quickly, i also am the staff chair for the laboror Advisory Committee which advises the department of labor, that issue has come up, the question of whether a Chinese State own which as you pointed out the largest Steel Company in Great Britain, how this will be dealt with in the u. S. , uk agreement. Our own policies need to also whats happening withh our partners on the potential. Let me just ask you this in terms of taking herself out of uk for negotiating other countries, are we digging down to the passive ownership issues, i dont think theres a passive ownership in this book company, is that something ive confirm confirmed, theyre not the primary owner, the material country. Is a fundamental problem, it will be increasing important of how China Investment around the globe and india in 0 or no cost financing. In inputs likeik green pipe whih has growing minor trends for transformation in that country and then comes here and dramatically trade agreements. We can model out the activity of china seeks to export and create a platform and another company to be used as a platform. I have great concerns about that on a lotot of different, im going to go different products and to West Virginia and the coal industry. They have been very hard hit bye the time there was a pair of and response to section 301 investigation, and the phase one negotiation providing the policy on both of those. Theyre still not living up to purchase agreement. Do you think that is to the overall economy or is this something that consist on all other products. , and the coal folks who invest in the future. And whether theyll live up to the purchase requirement. Thank you to the question that ink have to say, i have too a bit more research on those particular products and others were look for example soy, we saw china was buying soy then rather from the u. S. Each product is different but again as i said earlier as the chairman, and we need to make sure that the promises made to the industry and workers and is not that there is a swift insurer response. I think thats absolutely critical and the product all across the state, the last thing i would mention and is something that we see popping up, recently interstate into individuals who were tied to china who were prosecuted for income taxes and heavily connected to chinese universities in china in general. I think that is cascading acrosg the country as you look at whats happening in our university. Is that part of what you lookk at, or am i out of your real house. We do look at that on both of a classified and unclassified reporting scenario every year, clearly the fbi and other Law Enforcement as well as intelligencer versus have been diving much deeper over the last two or three years into the activities of individuals and weve seen at various universities as you point out, researchers, et cetera, we need to have a much clearerwe understanding of whats going on in my testimony i talk about reengaging between the fbi in our University Systems so they have a better understanding of what not only the rules are but what to look out for and we need to have a much more coherent strategy, some of that has been done but much more remains to be done. Very supportive of that and the realization that a lot of the things that have been embedded for not just a couple of years but many decades, thank you very much for your service and thank you, y mr. Chairman. Thank you, senator capital. Im going to continue on. Let me ask a few followup questions from this very interesting discussion, of course there are challenges but in any relationship if its going to be sustainable in regards to economic relationships between the United States and china, we talked about the trumperat administra administration, the approach with regard to trade and there was something i was quite involved in and trying to ensure that the president and the u. S. E trade representative and the entire team was focused on many different sectors of the economy including our sector. That was something i was focused on, the lost is a superpower seafood i like to call it over 60 are harvested in the United States and comes from alaska, alaskas waters, we export a lot. Email seen when the president announced phase one, he did talk about the aspect of that agreement that includes chinas commitment to increase the purchase ofnc american seafood, dramatically increased. However, i were egan there might be another promise moment with phase one. Can either of youen talk about w we press as many reevaluating and licking opportunities for American Workers and american fishermen and farmers and the market and the balance in my correct . Ill open that up to both of you. Thank you for thett question. I will turn it to you quickly. Seafood. Im talking beyond seafood, im talking aboututm the marke. I understand. I understand, the seafood has been underappreciated in those particular attention as chinese incomes are risen and the desire and the demand for sources of protein arises with income. In this with seafood and all all the products and many others. And china has a critical problem and primarily around seafood safety because of their factory farming techniques as youre well aware many of their shipments of seafood toen the u. Has been denied entry because of concerns about the safety and healthiness of their products. But china needs to understand if it does not open into our products it will have an increasingly difficult time in the u. S. But we need to work with our allies to make sure that they understand your initial question that reciprocal mark action thats taken when china with the sole limit access to portfolio their own companies, we need to take a responsible approach. Thank you. Do you have a view on that, the opportunities that also exist exporting balancing that with many challenges . Three. China. They have the dependence on the United States. In partial dependence. If you look at this Food Security in china, its a major concern for the leadership and would like to be able to make sure the more secure in every aspect. And of agriculture. So you see them, read and put that and have stability. Its very long way of saying that there are places where there are opportunities for x to export to them. And i think will of our trade disagreements. In addition to exports. With more High Technology exports come in those cases but then again. And that technology. There are areas we have to be very careful. They give very much for that. Senator black . They give mr. Chairman i know it is difficult for you to join us virtually but we do when youre doing that. This is a question for the panel i will appreciate the response for each one. With a budget for r d talking about Great Power Competition as we look at china and the fact and then military complex began. China has traditionally brought about new products in their country from all of them and what they do is to reverse engineer and steel information. And what they spent with r d. And then we have some explosive growth with the r d budget. On the commitment for the us for r d. And with 496 billion r d. So as we look at the next century and we talk about the digital silk Road Initiative and also to talk about huawai and 5g that is worthy of our time to discuss i would like to hear from you all. And for these expenditures. This is such an important question with this component. And together we with a much smaller economy. And that government component. And with the gdp for a long time one of the lowest levels and 60 years. That the United States forgets what they used to do so well. And then to make an enormous difference. So where are they primarily focusing is it supercomputing or Artificial Intelligence or Intel Communications . There is a lot of opacity. And those party documents suggest of that investment of that revolution with Artificial Intelligence and manufacturing is high up there. And with those advance sectors. And made in china with the 2025 plan. We would appreciate that. Of course in tennessee we have a bridge. We are looking at the applications. Twentyfirst century warfare. That Additional Information would be appreciated. I yield back. Thank you to both witnesses you are here today. Talk about zoom and tiktok but few of them know they are formidable to surveillance , data harvesting and censorship. By the Chinese Government. Zoom and tiktok engaged on behalf of the chinese and those reports are reliable and alarming. And then to be based in the United States suspected by zoom z following by the Chinese Communist party. What were the crimes . Holding a peaceful commemoration of the Tiananmen Square massacre and calling on answers repeated the asking who has access to personal data. And also content moderation and tiktok and zoom have utterly failed. Even answering the most basic questions of Business Operations in the case of the tiananmen vigil, zoom has still failed to answer the question to turn information over to the Chinese Government about people who attended the meeting and that failure supports the request that me on that we made so my question to bothio of you is do you agree with me that reports about zoom and tiktok about collecting information to the Chinese Governmentt based on that request are alarming . Thank you for your leadershiplo on this and others. This is a critical issue putting the very lives of citizens at risk as well as our own economic intelligence. So what youre doing is critical quite frankly i dont trust the answers of those companies because the chinese National Security law requires any firm hand over the information the government requests. We have seen over many, years with the chinese based platforms like t8 and tiktok as others time after time we have seen the Intelligence Community but also the private sector to continue cyberintrusion the lack of security and espionage when the shipment of data through the act of citizens from hong kong and many others. Thank you. Thank you for your leadership on this. The Chinese Communist party has a discourse how it feels about the social media platforms it would simply be the information content provider. One support of tiktok in particular if t20 who becomes more susceptible. I think there is strong bipartisan agreement that the United States needs to protect our privacycy from this invasive action the committee on Foreign Investment in the United States is considering new conditions on how they operate ten tiktok but so far this government has failed to act to protect americans and action is necessary. Im so glad you are supporting it b without action by this committee as well. Wthank you. Thank you senator and thank you for your work on these important issues. I agree the vast majority is bipartisan this is important for the future of our own nation. To have it turned into partisan issues. I want to ask the witnesses i was asked to give a speech last september i entitled that winning the new cold war with china and how the United States should respond five areas of response that gained bipartisan support but i would like each of the witnesses to just comment and what you see as important elements of the strategy and im sure we are missing things in that broadbased us strategy what would those be . I will also senators for the record but the focus that i had over the last year was reciprocity, roreinvigorating american competitivenes competitiveness, rebuilding our American Military strength, deepening and expanding the Global Network ofgl alliances. And importantly, critical element of winning the cold war to employ our Democratic Values as they compare to the damage with the global authoritarian influence. All authoritarians just look at whats going on in hong kong this is the enormous comparative advantage that has benefited us during the long struggle of the cold war. And the soviet union also fear their own people. Do you care to comment on any of those key aspects of the. Strategy . Senator thank you. Thank you for your question and your leadership looking at this across the various platform sectors you hit all of the major areas. We appreciate that and they all need to be dealt with at the same time with an understanding of the clear and comprehensive. We failed to identify consistency to the chinese and the Business Community and our people so they know what our planss are and what our objectives are. So in each of the areas that youee identify, we need to be even clearer and a more comprehensive identified plan of the limits what has been noted everything from Stem Education with the surveillance platforms et cetera so china understands what we view as acceptable and again with a fairly automatic response when those lines are crossed. Thank you do you have any views . I do. Thank you for your leadership i remember your speech i think it is extremelys comprehensive i just have a very small point this is a longterm competition for many years to come i think its important for support for this approach Going Forward as well as your leadership and the fact theres been so much partisan cooperation with recent axon hong kong and there is a greater consensus of the grand strategy Going Forward the most important thing is to have a consistent grand strategy over time in a systematic way. Like the strategy of containment the relationship with the soviet union was very bipartisan over decades and to successfully when the coldol war. Correct . Absolutely. Thats what im thinking about. Sometimes marshaled in the past or the present and then of course consistent bipartisan leadership. Thank m you. One finalu question. Both of youu have testified of the i importance to secure our supply chains in the National Defense authorization act proud to have a provision included and just last week the bill to passss the Senate Minerals that we rely on too much in regard to china but yet with the great state of alaska where we mine and process in a much more environmentally responsible way that the chinese do butut yet we rely on them for only one other things within the supply chain focus in regard to b medicine and ppe with the pandemic republicans feel that that is what we are debating now and hopefully we will have compromises and get to some additional relief for the American People for the pandemic with broad bipartisan support with some of the issues discussed today to make sure we are not reliant on china for ppe, Semi Conductors, Critical Minerals, there is a lot of legislation with the bill that senator murkowski and i with the version we are debating in the senate now. Can you talk briefly of the importance of securing our supply chains with enhanced manufacturing to help workers to meet the Silver Lining of the pandemic . Thank you senator for your leadership with the mda a and those the actions you and the committee have taken asth well. The fact is because of the pandemic with our dangerous dependence and reliance on china as you know they have shown their willingness to take the supply chain to achieve its goals and did it with japan and as we also saw with the pandemic using ppe as a to will to gain access from any of our allies in fact to have the ability to have the supply chains we have the ability to have a strategy. We use to produce not only at a facility in california but also in indiana but in 1996 we sold that facility to the chinese that was shortsighted with the predatoryry practices of the California Mine and the bankruptcy. We should be clear of our longterm needs and our economic success in the military competitiveness and to ensure we have the ability to meet our needs clearly the interest of the American Public is paramount. Thank you very much for that. An excellent answer of your services in this area. Thank you chairman. Its clearly the case that china recognizes and they want to keep that position against those efforts there are indications the Chinese Media for those political stances so we need the unofficial approach. Were not exactly sure where we are vulnerable but perhaps even stress test the Financial Institution with the nation not one the nature of those interconnections that will be in a better position to compete but also how the Global Economy and where we put her efforts. Taiwan has been very inspiring. Thank you for that detailed and wise answer. This is exactly what we t need not only in the senate but to the American Public there is growing bipartisan support with a strong participation of numerous senators in the aisle and expert tees on expertise and thank you to those witnesses showing that expertise and insight that is the forefront of foreignpolicy and we need to wake up. We have and address that and executed in a bipartisan way and i think we are. That is an important beginning but again to the first panel of witnesses thank you again im sure there will be additional questions for the record you are now excused we will turn to the second part of our hearing in the hearing room to Senior Administration officials talking specifically to these new policies of the Trump Administration not only formulating but beginning to implement the under secretary of state for Economic Growth and energy andro environment given a role in the executive branch of americas us strategy relating to the strategic realm and the assistant secretary for industry and analysis and also an expert in this area. And secretary the floor is yours you will have a fiveminute Opening Statement in your longer written statement will be submitted for the record. Welcome. Thank you chairman sullivan and Ranking Member of the subcommittee on security. I appreciate the opportunity to discuss the chinae challenge with the economic security. Last week secretary pompeo said wearing the mask and watching the pandemic and the body count rise. Staggering statistics watching the Chinese Military grow nstronger on the backs of clean innervation so with that Economic Warfare growing up in small town ohio i saw them wield their weapons of production to be Vice President of General Motors to learn when you build the plant in china you give them access to the t market you dont just give them the blueprints but to train the labor force i spent the rest of my career in Silicon Valley where the property was ripped off i saw firsthand the china strategy to seduce with money while reinforcing with intimidation and retaliation. With the largest 7 trillion was conducted for the network last year and i remember we welcome chinese visitors to isour headquarters and that company was ali baba. And then to spend two weeks in china looking for market opportunitiesni this time it was different those that spoke so passionately about their grand strategy for global domination and i saw how they positioned in the United States then i got the indepth look at technology as soon as i got back he went to washington and spoke to anyone who would listen and said you understand the country of the best technology usually wins. Thats why i am here today because of the china challenge. My first week on the job secretary pompeo gave me to National Security strategy we have developed is the three pillars the turbocharged impediments and with those emerging technologies in key areas critical to Economic Growth insecurity. I can tell you the second pillar of the strategy including intellectual property would require transparency and enforcement of laws. And also to understand to use theha assets including our openness and values every chinese action with skepticism and secretary pompeo said do not trust and verify. On the ccp to reclaim that strategy we will answer to build up a new alliance and envision this Civil Society to operate under principles for all areas of economic a collaboration and those are American Values. Integrity accountability transparency reciprocity respect for rule ofnt law and sovereignty of nations respect for human rights talking to my counterparts there reaction is, its about time we been waiting for an alternative. Chinas one belt one way road. The new alliance is a clean alternativeer let me update you on the state department Campaign Secretary pompeo said allowing the countries with the information doesnt end up in the hands of the Chinese Communist party. For years they have strong arm nations to purchase the huawai infrastructurein and with that expense one way china firewall with the data comes in but not out and reciprocally propaganda goes out but does not come out. Now leading to the 5g path requires all data to transit only through trusted equipment to turn the tide against huawai and as a result tt is evaporating we saw that with the uk and then last week now there are 30 clean countries some of those that are also clean. For the top three in singapore in the top three in canada. That campaign is so successful we are prepared to expand that including clean apps clean cable and currency. Its also important recently the state department joined other agencies to issue a Business Advisory with i the exposure of forced labor and others. And as i said in the followup letter they have a moral responsibility for that fiduciary duty to establish these principles that contribute to human rights hoabuses. Soon President Trump will make recommendations on the transparency to enhance Investor Protection and ensure they remain the Gold Standard for thean world tackling many facets require all three branches of the government was secretary pompeo Said Alliance of the democracies. And for the sake of the children or grandchildren. Thank you veryth much. Thank you chairman and Ranking Member. Thank you for the opportunity t to testify. We are at a historic crossroads and the steps we take now our for the leadership for decades toor come. The us began to face headon the china predatory practices. As a result they lost capability in sector after sector organizers understand its important to understand the tools that it deploys. Indeed those are governed for interest or no rules. The absence over state owned enterprises with the intent of dominating strategic sectors worldwide. And throughout a the economy with wages and Raw Material Prices to ask for those services worldwide. And then to force them out of the market the goal is to haul out the industries and then to take advantage of the overcapacity. And then the infrastructure of 5g critical industry like Semi Conductors the prc has opportunities abroad the prc increasing control for technicalur products cobalt, graphite, lithium and nickel are a few. Because these Critical Materials cannot be replaced china can exert influence over the rest of the world next the prc supports the intellectual tproperty. But even a perceived to collaborate take for example huawai announcement with that fiber Cable Research the gains are only onesided. With that collaboration to generate overcapacity to obtain that monopoly position and then to provide the infrastructure thehe National Security the engagement of International Standards are also a greatar concern. Because china is a sovereign state it would never be fully sufficient. S of course the past policies of predatory economic actor and as a low cost producer on the intellectualproperty and as a result we have exported the Manufacturing Capabilities and jobs to a nonmarket t economy where transparency does not exist. And then to distort the prices rather than marketbased. And with the supply chain so at the outset the United States mustt, systematically identify alls that are critical to National Security. This administration in particular has begun to do this. The second essential component with domestic r d and Manufacturing Capabilities third Us Government procurement authority. To new American Investments for this new production operations and then to take a leap of faith it is axiomatic that we must have a strategy to fight back lowcost imports from production of growth. T these elements are essential would require a whole of government approach it will be effective to rebuild supply chains i would like to conclude by emphasizing the economy of the 20th century was developed by the United States although aggressively seeking it is not too late to act. The supply chain vulnerability that would expose this country to even more terror. Thank you. I want to begin on a critical question. On the question of alliances. To be critical of the Trump Administration approach. I believe certainly in the previous p panel we are in ally rich nation they are ally poor nation maybe in a strategy to deepen and expand the alliancee is important i think this administration has been working hard that your statement of a new coalition talking about a democracy coalition, talk about that in more detail what you end secretary pompeo are starting to do in thatrt regard . With strong bipartisan support and one of many anecdotes with word World Leaders and senior officials a number of them heve been saying it has to be the United States but if we step out we feel will be creamed by the chinese. We will support that under us leadership so can you give more detail from your testimony and support from the senate . You are absolutely right this terrifies countries. This is the whole reason for the alliance of democracies because there is strength and power in the china is tactics. Do you believe that china recognizes the ultimate strength right now that we would have an and. Look at what the strategies are comprised of. And then to have compound advantages. The likeminded partners and friends so they turned the table onn that so in terms of opportunity strategy and i said this when i got confirmed was a relationship with our allies and friends to leverage and amplify the moral high ground of American Values so to combine that into one is huge. One confronted they really back down so to say we will reconsider that huawai and that was a few months ago when you can see immediately that retaliation by the ccp and the chinese uk ambassador threatened to take away the Infrastructure Investment and secretary pompeo said we stand with our allies and the uk whatever we need to do. That is a powerful concept because it is fragmented. So we are starting to see success. Lm ee so what we see in this coalition is dressed in partners. The fastest way to build a network was to build a network of networks. The Blue Dot Network for infrastructure high quality private sector on private sector led innovation. Another is the 5g initiative there is another one of Rare Earth Minerals that secretary pompeo set up last year with that Energy Security network as well and really if you think about it and look at these Different Networks with that collaboration it is investment in commerce Digital Infrastructure and those are the things we will take advantage of and its based on those trusted principles to take over the International Standards. The way to count that is have overriding set of standards and you cannot participate unless you do. But then to require any Chinese Company or any citizen for technology mr. Secretary focusing on our allies and our Networks Strong support here and bipartisan support with minerals and energy these are important comparative advantages and we went to help you with that. Thank you mr. Chairman it will come mr. Undersecretary. A new power competition is unfolding u before the eyes of the world americas predominant challenger china is the unscrupulous authoritarian regime that doesnt respect our values. To meet these challenges to show america has the resiliency they have shown over the last century. We can harness our economy and renew the american project itself during this moment in history. This is a piece of legislation and we believe it will provide the rocket fuel for those innovators Going Forward. s. We provide 100 billion of strategic investment with the National Science foundation and to r deliver 10 billion around various areas ofes the country with existing pockets of expertise in a particular sector or technology. That is launching of Innovative Companies and the creation of new jobs across the country. In the coming years we will strengthen American Power and increase prosperity to carry on the never ending quest. We have done this before. Undersecretary deeply the United States government should ramp up investment with largescale domestic innovation efforts in key technologies . Absolutely thank you senator as well as senator schumer. Because that will tremendously move the needle in these National Security sectors. And will be a great catalyst and one thing i have talked about in Silicon Valley is that American Innovation time equals money. So as webo discussed before we have some serious facts from the private sector if we choose we can get it from our allies. How do we utilize our relationships with the greatest geopolitical resources of those alliances how do we leverage those shrelationships for those partners and allies . And as the chairman alluded to starting off with the ten closest Technology Technological allies but one would be from thebu offensive position of joint collaboration on collaboration and all of that. Of investment screening. Because of the china competition. The soft underbelly meets our currency. And to get it coupled with the private sector. So as you think of competition with china we shouldnt only play defense. Although they have a role not only encourage our partners and allies there is fear of a backdoor not only to ensure of those implications of foreign aid and to outgrow and outcompete the chinese which is arguably the most important so that is by far the number one thing. Thats we practiced so that puts us on the offensive and gets a set of a reactionary posture. To turnes up the heat on developing these new technologies and then as we met privately do you envision where countries around the world have to choose from the United States or china cracks . What about this economic decoupling between china and the United States . To have an opportunity to have foreign counterparts and i will say how is your relationship going with china . They will say a big trading partner and then lean inea and look both ways and say we dont do that. Stuff. You look at those American Values and principles you do business of people that you trust. So think about it. Arguably our greatest geopoliticalal resource name one ally the Chinese Communist party the red peoples republic of china has. They have. They have states like north korea but not genuine alliances and with the radical twins between china and iraq. And then you are absolutely right. That is not an alliance but a marriage of convenience divorce. O that is why through the years that is a one belt oned way tollroad because they are getting the resources sucked up in the currencieses sucked u. There is a lot of things. Thank you for your support and encouragement clearly you have elevated that department. I know colonel sullivan served there before, i take it to be elevated any further, but especially the important. Of time to make sure we are properly scoped for your presence here y today. I yield back. Thank you for your presence today its important that you are highlighting each section of us state department. Senator blumenthal. Thank you mr. Chairman and take you for being here and for your service. I dont know if you are here for the last penalty may questio question, but i will repeat them for you but we wrote and to the department of justice asking for the investigation of zoom and ticktock because of surveillance of censorship of participants on their platform and essentially suppression of people in their country and those reports to ask for investigation by the Justice Department and repeatedly of zoom and tiktok of their practices to collect information about americans and providing it to the Chinese Government. They both failed to answer these basic questions. So we turn to the United States government to protect our citizens. Is the administration aware of the cooperation between zoom and tiktok and with the peoples republic of china and what you plan to do about it quick. That picks up right where i anwas like tiktok if you look at drones and underwater cable its all part of the china Surveillance States so thats why not just between networks but the entire e system. I could not agree withgr you more. Because to that surveillance state. He will now see a campaign with that we havee done with 5g and i could not agree with you more. That support is very meaningful. I hope you take that because if the administration puts the money where its mouth is or the investigation it has to be swift and pure and fair with that surveillance censorship to provide the data is a direct intrusion on the Civil Liberties that will be in iuch with the department of justice and they have been great allies and then the clean store they have been great. I hope they will send a message and respond to ourselves favorably i appreciate your endorsement. Let me ask you are there measures such as a review that could impose to collect information and assurances the data will not wind up in the hands of the chinese o government . Please state your question again. Are there measures by the committee of Foreign Investment that would impose on chinese firms collecting information . To share that information with the chinese . There are a number in the government and by the way on that everchanging landscape. And to get them from the mitigation the other is the executive order and then to focus on china i dont want to get out ahead of the president on that one but that gives us all the tools that we really need to do what you are atalking about. Tell us the time we should be concerned. 80 percent of the worlds drones are made by the chinese. They can collect information and send it right back to the chinese. They do. There is a company thats 90 percent market share. If you do something with your son you want to take the video from up there but that feed goes back directly to china unless you are pretty savvy and go through seven different venues it can download right to your iphone. But obviously this is Drone Technology is some of the scariest military technology. By the way thats one of the things i saw on my last trip when i came out to washington. By the way i dont know how you defend against it. And by the way thats also were working on his clean drones. You said you know how we defend against it . As a military perspective. Talk about ordinary civilian use. But its doing the same thing. So they are collecting information on our children. I have five children and with the chinese buying a my children and with the chinese drones by the way that is a very important thing to consider but it is on the table spirit that gets back to senator young the best offense is a good b defense the last i checked i think they have 90 percent market share. We will have a hearing on that topic. And i will say senator sullivan is right in order to ban the product that we do it in this country because thats the only way to defend or protect our Civil Liberties. Because those in the market share and to squelch competition sound like to know from you in the future when you say its on the table am hoping you will report back to us. You got it. You are absolutely right and the chinese subsidizes it takes capital andnd many and it all comes out and we deeply appreciate what congress is doing and with the Semi Conductorot business we started and invented it. We were able to get the taiwan Semi Conductor and that many goes for the entire Semi Conductor industry to bring it back on the shores because only that is done in the United States as part of the equipment manufacturers. And this is the tipping point. Turning to senator cruise. Thank you for your testimony today. I want to start with something discussed with supply chain issues. I am deeply concerned of the supply chain particularly with critical infrastructure. And then to pose a National Security threat i have introduce legislation the on shoring rare earthar act rare earth mining. What should we do to fix the problem . Weso collaborate. Ud rare earth has been a comprehensive read shoring strategy that is led by theom white house. To underscore the importance of it of Critical Minerals it when you look at rare earth and is Critical Minerals China Threatens to withhold access we cannot stand for that. So the solution will have certain pillars to provide a financial incentive. That that is what gets companies f the next part is Technology Sharing withh our allies but if the supply chains are located far away with d any adversary and then the processing and for both herself and her allies and then to collaborate and basically in this respect. We have those investments for r d and to process but at the end of the day if they know that this will displace them . Ohat measures will be think about . I know nobody likes to talk about and speaking is an economist but this is a key strategy and then certainly to look at the downturn. s and think about financial incentives. And what are some of the measures we can put inme place so i appreciate what you are doing with the economic and then with this supply chain. The china strategy in terms ofof slapping prices the way the Chinese Communist government has approach the United States i believe they are engaged in a battle of global domination and they have deliberately g identified the vulnerabilities of america and they have determined their pricing. The hurts are to attack america. So on a practical matter why do those Rare Minerals matter . Why should we care . They are essential everything that is for National Security. What you will very much appreciate it my statement khrushchev says we need to declare war upon you and in the Peaceful World ofpo trade we will declare war we will win over the United States. We value trade for economic reasons and for political reasons. This is from the 1952 trade act and interestingly the statement of purpose one is through trade agreements for mutual trade benefits with a communist economic penetration this is a problem the same problem we are dealing with today. So for the first time its talking almost simultaneously were looking very hard at this in very closely at this that because these are complex problems and time is not on our side. Thank you w very much. Pinky senator cruise i want to comment on the other rare earth then Critical Minerals we have them in america we have them in my state. By the way our record on mining them and producing them is much higher in terms of the environment standard versus the chinese that we have them to support the National Security and a strong record on Environmental Protection and we shouldna utilize that. The minerals are not that rare in the United States but what the chinese have done taking the processing plants out of business to subsidize. I hear what you said there aim is not just to compete but to run us out of business then they can jackk up prices and then they go off and do it to cthe next sector they are very good at this. And the one thing i must say its good to see this administration coming ins because what were doing in terms of really analyzing the strategic bench points of the supply chain i dont know if this was ever done before. Then to get to the level of specificity with the product how do we get them in the allies hands . And then you really have to do again. Thank you senator cruise for your leadership and making progress on that. One final question madam secretary. This very challenging issue we have seen is the temptation by us companies you want to access the Chinese Market and then what ends up happening is the companies are forced to transfer Technology Beyond what they want to do or they kowtow to chinese interests with broader statements that china would find objectionable and American Companies are in a position to tow the china line. It is a dilemma because this takes place in the private sector. These could be for shortterm profit, the longer term in us strategy could be undermining our Strategic Moves as a nation to sell out for access to the Chinese Market. What should we as a government do with this issue where the private sector is leveraged to get access to the market of china or tow the line to broader issues there almost forced to make statements that are in line with the Chinese Communist part party . I will start to give the economist perspective as a company you have no choice to do with b the exports your only option is to go into the Chinese Market with the cost structure. So then you not only transfer technology but then fled the local market even more. So even with Market Access to compete with their ownco competitors. Its interesting china announced the implementation of the Corporate Credit system at any time you can Ask Companies in china to hand over their data of Sensitive Technology and it the chamber d of commerce its could be a life or death for companies because if you dont you can be sanctionedt. Companies are starting to get spooked. So with huawai they made some pretty impressive threats against nokia and ericsson but europe will ban huawai from the 5g networks because they have restrictions on ericsson and otf from china so now they are talking they are changing the operation. What should we be doing for government policy thats mostly taking place in the spirit of the private sector . What should we be doing . There is one view to punish our own companies. That could backfire. What is the government of the United States executive branch viewing to give the ceos backbone not to comply with these demands so what should we be doing . This is what i was getting at if its cheaper to operate we cannot can compete we have to figure out how to get them to compete onshore offshore to another country. We have to amplify the risks of doing the business in gov cha giving the threat to companies to amplifyea the risks give them away to be cost competitive. Thank you. Do you have a view on that . Im sure you have seen a in your government position the private sector. Three points. You hit on them very well. When i host secretary pompeo i told him we had dinner at my home in San Francisco we talk about Corporate Responsibility and social responsibility and National Security because it is a real and urgent threat to democracy but an urgent threat because they want to put you out of business. Now the elephant in the room is that retaliation. Its all about standing up to that bully with your friends behind you think of the laws we put into place with anticorruptionut it is illegal to give a bribe. But we may think the us Companies Need to say to china i cant do that that is our law. Because they will obey the law. So getting our allies to do that would give us leverage over chinese practices we certainly dont want to help promote and prohibit but if we do it with our allies you think thatsha leverage . This is also one where i recommend in terms of collaboration with the private sector. Because that has to be crafted. The other thing we do have to do is shine the light on china , yes but alsoav ourselves. If you look at the chinese xccompanies these are the only ones that dont obey sarbanesoxley and as a guy he was taken three companies public, thats not the point it puts in very American Investments at risk increase in a level Playing Field for our companieses because anybody in the Business World understands the competitive strategy and this allows them to misstate earnings, highly subsidize revenue, perpetual revenu revenue, 300 million in investments so it gives the Chinese Companys competitive advantage the third thing is thatti sacrifices the whole standard of the American Exchange and the average american bondholder and the emerging index fund its all buried in there. Thats what i wrote in the ope oped. It is incumbent on us companies to disclose who are the Financial Institutions particularly speaking mutual funds . To shine a light in terms of disclosure is a great tool just like reciprocity and enforcement so we should use that to the full extent that we can because that process is simple and right on and easy to understand. Thank you. I know theres a number of other senators you have questions for the record bit want to thank both witnesses this is the beginning not only laying out the strategy but the implementation. I believe its very bipartisan we saw a number of senators focusing on many of the same concepts and you were hoping this begins to establish a policy that can be utilized and implementedat for decades like a containment policy against the soviet union well regarded and accepted to continue throughout the administrations i think this hearing is a helpful beginning. So the record will remain open for two weeks for this hearing during this time senators may submit questions upon receipt. We respectfully ask witnesses to submit written answers as soon as they a can but no later than friday august 14. Thank you for appearing in the good work you are doing educating the broader American Public on these challenges. But we are finally realizing the challenge and we are adjourned. [inaudible conversations]