Senate Hearing on Chinese Economic Competition Addresses Export Controls
China is a threat to the U.S., Sen. Tom Cotton, R-Ark., said, and he said there's a risk that “the next administration could roll back much of the progress we’ve made the past few years, in an attempt to return to the failed dream of engaging and accommodating China.” Cotton, the chairman of the Senate Banking Committee Subcommittee on Economic Policy, led a subcommittee hearing Dec. 16 on U.S.-China Economic Competition. Cotton said during the hearing that export controls must be tightened.
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Most of the witnesses raised alarms about how China steals or takes through coercion U.S. intellectual property, and several raised issues on espionage. Rep. Will Hurd, R-Texas, who is retiring from Congress at the end of the year, testified that “[w]e are engaged in a new Cold War with the Chinese Communist Party.” Hurd, who said that he served as an undercover operative in the CIA on Chinese issues, said that in China's Made in China 2025 plan, they “themselves have said they’re trying to surpass the United States as the sole hegemon. This is a generation-defining struggle.”
Derek Scissors, a resident China scholar at the American Enterprise Institute, said reciprocity is a good strategy in some contexts, but is not enough to deal with China at this stage. He asked: “How are we going to reciprocally respond to Chinese theft?” Scissors testified that the Joe Biden administration would be well-served to document coercive IP transfers, industrial subsidies and outbound capital flow to China from the U.S., which he said travels mostly through the Cayman Islands. He said if the Biden administration and Congress want to invest in domestic semiconductor manufacturing, it doesn't make sense to have U.S. funds also supporting semiconductor manufacturing in China, so if U.S. investors are funding strategic areas, outbound investment has to be restricted.
He complained that the Bureau of Industry and Security has not implemented export controls on foundational and emerging technologies, saying they've only promulgated rules on two of 14 items in two-and-a-half years. “The top thing I want from nominees at Commerce at BIS, undersecretaries, assistant secretaries, [is a promise that] 'We’re going to get this done in 2021' They’re not going to be perfect, but at least we can see them.”
Scissors said these controls and sanctions have to be on sectors, not companies; however, since if they were strong enough to cripple a ZTE or Huawei, the Chinese government would just stand up a new company with the sanctioned company's staff and assets. And, he said, the U.S. has to start punishing companies that benefit from IP theft and forced technology transfers. He said if that doesn't happen, IP theft will get worse once export controls are tightened.
Center for American Progress Director for China Policy Melanie Hart said the biggest lesson from the last four years is that “taking China on unilaterally doesn’t work.” She said that U.S. consumers and companies are carrying costs for the rest of the world. Hart said there may be a way to manage Chinese steel overcapacity without punishing other exporters, by agreeing on a carbon border adjustment tax. She said that if Europe buys American steel rather than Chinese steel, because American steel is less carbon intensive, that could boost American workers.