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| <title> - COMBATING THE GENERATIONAL CHALLENGE OF CCP AGGRESSION</title> | |
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| [House Hearing, 118 Congress] | |
| [From the U.S. Government Publishing Office] | |
| COMBATING THE GENERATIONAL | |
| CHALLENGE OF CCP AGGRESSION | |
| ======================================================================= | |
| HEARING | |
| BEFORE THE | |
| COMMITTEE ON FOREIGN AFFAIRS | |
| HOUSE OF REPRESENTATIVES | |
| ONE HUNDRED EIGHTEENTH CONGRESS | |
| FIRST SESSION | |
| __________ | |
| FEBRUARY 28, 2023 | |
| __________ | |
| Serial No. 118-2 | |
| __________ | |
| Printed for the use of the Committee on Foreign Affairs | |
| [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] | |
| Available: http://www.foreignaffairs.house.gov/, http:// | |
| docs.house.gov, | |
| or http://www.govinfo.gov | |
| __________ | |
| U.S. GOVERNMENT PUBLISHING OFFICE | |
| 51-256PDF WASHINGTON : 2023 | |
| ----------------------------------------------------------------------------------- | |
| COMMITTEE ON FOREIGN AFFAIRS | |
| MICHAEL T. MCCAUL, Texas, Chairman | |
| CHRISTOPHER H. SMITH, New Jersey GREGORY MEEKS, New Yok, Ranking | |
| JOE WILSON, South Carolina Member | |
| SCOTT PERRY, Pennsylvania BRAD SHERMAN, California | |
| DARRELL ISSA, California GERALD E. CONNOLLY, Virginia | |
| ANN WAGNER, Missouri WILLIAM KEATING, Massachusetts | |
| BRIAN MAST, Florida DAVID CICILLINE, Rhode Island | |
| KEN BUCK, Colorado AMI BERA, California | |
| TIM BURCHETT, Tennessee JOAQUIN CASTRO, Texas | |
| MARK E. GREEN, Tennessee DINA TITUS, Nevada | |
| ANDY BARR, Kentucky TED LIEU, California | |
| RONNY JACKSON, Texas SUSAN WILD, Pennsylvania | |
| YOUNG KIM, California DEAN PHILLIPS, Minnesota | |
| MARIA ELVIRA SALAZAR, Florida COLIN ALLRED, Texas | |
| BILL HUIZENGA, Michigan ANDY KIM, New Jersey | |
| AMATA COLEMAN-RADEWAGEN, American SARA JACOBS, California | |
| Samoa KATHY MANNING, North Carolina | |
| FRENCH HILL, Arkansas SHEILA CHERFILUS-MCCORMICK, | |
| WARREN DAVIDSON, Ohio Florida | |
| JIM BAIRD, Indiana GREG STANTON, Arizona | |
| MICHAEL WALTZ, Florida MADELEINE DEAN, Pennsylvania | |
| TOM KEAN, JR., New Jersey JARED MOSKOWITZ, Florida | |
| MIKE LAWLER, New York JONATHAN JACOBS, Illinois | |
| CORY MILLS, Florida SYDNEY KAMLAGER-DOVE, California | |
| RICH MCCORMICK, Georgia JIM COSTA, California | |
| NATHANIEL MORAN, Texas JASON CROW, Colorado | |
| JOHN JAMES, Michigan BRAD SCHNEIDER. Illinois | |
| KEITH SELF, Texas | |
| Brenden Shields, Staff Director | |
| Sophia Lafargue, Staff Director | |
| C O N T E N T S | |
| ---------- | |
| Page | |
| WITNESSES | |
| Kritenbrink, Daniel J., Assistant Secretary, Bureau of East Asian | |
| and Pacific Affairs, U.S. Department of State.................. 8 | |
| Estevez, Alan F., Undersecretary of Commerce for Industry and | |
| Security, U.S. Department of Commerce.......................... 14 | |
| Nathan, Scott, Chief Executive Officer, U.S. International | |
| Development Finance Corporation................................ 27 | |
| Schiffer, Michael, Assistant Administrator, U.S. Agency for | |
| International Development...................................... 34 | |
| APPENDIX | |
| Hearing Notice................................................... 96 | |
| Hearing Minutes.................................................. 98 | |
| Hearing Attendance............................................... 99 | |
| STATEMENT SUBMITTED FOR THE RECORD FROM REPRESENTATIVE CONNOLLY | |
| Statement submitted for the record from Representative Connolly.. 100 | |
| RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD | |
| Responses to questions submitted for the record.................. 102 | |
| COMBATING THE GENERATIONAL CHALLENGE OF CCP AGGRESSION | |
| Tuesday, February 28, 2023 | |
| House of Representatives, | |
| Committee on Foreign Affairs, | |
| Washington, DC. | |
| The committee met, pursuant to notice, at 10:11 a.m., in | |
| room 210, House Visitor Center, Hon. Michael McCaul (chairman | |
| of the committee) presiding. | |
| Chairman McCaul. The Committee on Foreign Affairs will come | |
| to order. The purpose of this hearing is to identify gaps in | |
| pursuing a more holistic approach to capturing the Chinese | |
| Communist Party. | |
| I now recognize myself for an opening statement. | |
| I would like to first say that one of our colleagues, | |
| Joaquin Castro, is at MD Anderson and got diagnosed with | |
| cancer. And let's offer our thoughts and prayers to him for a | |
| speedy recovery. And if you can reach out to him personally, | |
| that would be awesome. And, anyway, our prayers are with him. | |
| There is no doubt that the growing aggression of the | |
| Chinese Community Party poses a generational threat to the | |
| United States, from using a spy balloon to surveil some of | |
| America's most sensitive military sites to their theft of | |
| upwards of $600 billion of American IP every year, much of | |
| which goes into their military, to their continued military | |
| aggression and expansion in the Indo-Pacific. | |
| And now CIA Director Burns has recently stated U.S. | |
| intelligence has reason to believe China is considering sending | |
| weapons, lethal weapons, to Russia, all this ahead of the | |
| upcoming meeting between Chairman Xi and Putin next week where | |
| they will surely strengthen their unholy alliance. | |
| We are living through one of the most dangerous periods in | |
| American foreign policy in a generation. It is a struggle for | |
| the global balance of power. And the primary battleground is | |
| technology leadership. | |
| This is an issue Congress and this Administration cannot | |
| ignore. I commended the Administration for their recent export | |
| control rules on semiconductors and semiconductor equipment. | |
| And I look forward to hearing the details about your work with | |
| the Dutch and the Japanese to harmonize these controls. | |
| But I am concerned the Administration's efforts aren't as | |
| all-encompassing as they should be. Congress authorized the | |
| Bureau of Industry and Security with expansive powers to stop | |
| the transfer of dual-use technology that the CCP is using to | |
| build their military. Yet overwhelmingly, BIS continues to | |
| grant licenses that allow critical U.S. technology to be sold | |
| to our adversaries even though it is designed, designated as | |
| threats to national security. | |
| In just one recent 6-month time period, BIS approved | |
| licenses worth $60 billion to Huawei and $40 billion to SMIC, | |
| their semiconductor company. Both of these companies are | |
| military companies for the CCP. And both are listed on the | |
| entities list. | |
| If BIS continues to mindlessly green light sensitive | |
| technology sales, the CCP has proven they will use our own | |
| inventions against us. Look no further than the recent spy | |
| balloon that the Administration allowed to fly across much of | |
| the continental United States. It has been reported western- | |
| made components were found in this balloon. That is on top of | |
| the recent hypersonic missile test, which circled the globe and | |
| landed with precision. This was only possible through U.S. | |
| technology that was sold to them. This should be a wake-up call | |
| to all Americans. | |
| I stand ready to work with the Administration and with the | |
| Democrats on this panel to strengthen our export control | |
| systems where needed and why I launched a 90-day review of BIS. | |
| We are also falling behind on the ideological battlefield. | |
| Congress appropriated $325 million to the State Department to | |
| counter CCP's maligned influence around the world. But instead, | |
| that money was used to fund bakeries in Tunisia, electric | |
| vehicle charging stations in Vietnam. | |
| And at the same time, the CCP continues to invest large | |
| amounts of money in developing countries, building bridges, | |
| roads, ports, and energy infrastructure, all the while growing | |
| their influence over the people in these developing nations. | |
| Both the USAID and the Development Finance Corporation play | |
| key roles in developing lasting partnerships and long-term | |
| development in trade with other countries. Every day we should | |
| make sure people around the world know that our aid is not the | |
| debt-trap diplomacy that the CCP uses to exploit developing | |
| countries. | |
| But we are not succeeding. Of the 6.3 billion people living | |
| in developing countries, about 70 percent have a positive view | |
| of both China and Russia, 70 percent. All the while, the threat | |
| against Taiwan grows everyday. Yet arms sales to Taiwan, those | |
| that the ranking member and I signed off on nearly 4 years ago, | |
| have yet to be delivered despite the Administration admitting | |
| Taiwan is facing an imminent threat from the CCP. We must | |
| strengthen Taiwan's defenses through weapons and training. We | |
| will not tolerate any attempts to delay notification to | |
| Congress of arms sales to Taiwan. | |
| But it is not too late to reverse this trend. As the | |
| chairman of the Foreign Affairs Committee, it is my priority to | |
| make sure Congress and this Administration are working together | |
| in a bipartisan fashion to confront this generational threat. | |
| That starts with ensuring that we are using the tools we have | |
| on the books like export controls to constrain the CCP's | |
| military and surveillance systems. | |
| And I stand ready to work with the Administration and those | |
| on the other side of the aisle to strength our export control | |
| systems where needed. We need tough diplomacy and real actions | |
| to keep critical technologies and manufacturing capabilities | |
| out of the grip of our adversaries. | |
| So I look forward to hearing from each of you what you are | |
| doing to address the China challenge and what steps you are | |
| taking to dramatically shift your agency's priorities to meet | |
| this challenge head on. From what I have seen over the last 2 | |
| years, much more is needed. | |
| It is time we move beyond the false belief that the CCP | |
| will ever deal in good faith. Time and again they do not stand | |
| behind their commitments. The CCP is acting in their own | |
| interest. And it is time that we start protecting ours. | |
| And with that, the chair now recognizes the ranking member, | |
| the gentleman from New York, Mr. Meeks, for any statements he | |
| may have. | |
| Mr. Meeks. Well, thank you, Mr. Chairman. | |
| And while I do not--first, let me just say also in regards | |
| to our colleague, Mr. Castro, who has all of our prayers, I | |
| have talked to a number of members of his staff. And they have | |
| told us that the surgery has been very successful, that Mr. | |
| Castro is hoping to be back after the next recess that we have. | |
| He will be home shortly recuperating. And so, to him, I want to | |
| make sure that everyone knows that every member of this | |
| committee, he is in our hearts, our thoughts, and our prayers | |
| as he recovers. | |
| First, the aggregate data regarding license approvals and | |
| denials provides no information about the transactions that | |
| took place. To use them to conclude that problematic | |
| transactions are taking place is both wrong and I believe | |
| disingenuous. | |
| Second, our export Administration regulations are published | |
| publicly and spell out exactly which items and technologies are | |
| not allowed to be exported to specific entities on the entity | |
| list. Companies generally do not apply for a license when they | |
| know it would be denied. So it should be no surprise that we | |
| see far more approvals than denials. | |
| The current entity list and licensing process gives the | |
| Administration tremendous visibility into what goods and | |
| services are being legally exported. One would think we would | |
| want that. And the agency review process consisting of BIS, the | |
| State Department, Department of Defense, and the Department of | |
| Energy reviews these licenses. The public debate on the issue | |
| should be done with this important context in mind. | |
| Now, the PRC and its policies clearly present the greatest | |
| geopolitical challenge that the United States faces today. And | |
| I want to thank Chairman McCaul for making this the very first | |
| hearing on the 118th Congress. And I thank all the witnesses | |
| here today for your service and for appearing before this | |
| committee. | |
| And since this is our very first hearing this Congress, I | |
| want to remind everyone what this committee is all about. The | |
| House Foreign Affairs Committee must be at the forefront of | |
| positioning the United States for success in the strategic | |
| competition with China, as this is the only committee that is | |
| focused on diplomacy. | |
| Other committees have jurisdiction over military, over our | |
| domestic institutions, over financial systems, and so on. Our | |
| job on this committee is to make sure that the State | |
| Department, USAID, the Development Finance Corporation, the | |
| Bureau of Industry and Security have the tools and resources | |
| they require to effectively compete with the People's Republic | |
| of China. | |
| So what does effective competition look like? An effective | |
| China strategy is one that invests in the leverages, and that | |
| leverages our strengths and one which does not exaggerate the | |
| threats we face. A smart strategy is not simply about | |
| responding to Chinese actions or provocations. It is one where | |
| the United States leads by representing a positive agenda and a | |
| vision for the rest of the world. If we are simply in the | |
| countering China business, we are not living up to our | |
| responsibilities to the American people. | |
| First and foremost, we must complete and compete | |
| diplomatically. Our alliances and partnerships are our | |
| superpower and something Beijing cannot replicate. Instead of | |
| taking unilateral steps that will be less effective and | |
| alienate us from our allies and partners, we must focus on | |
| working collectively to isolate Beijing. | |
| Our generals are constantly telling me that the State | |
| Department helps make their jobs much easier. So I hope this | |
| committee will pass a bipartisan State authorization bill and | |
| work to ensure that we adequately staff and resource our Indo- | |
| Pacific strategy. | |
| Second, we must show up diplomatically and stand up | |
| rigorously for our interests. We need to work with our allies | |
| and partners and in multilateral institutions to advance U.S. | |
| interests and uphold a rules-based order. Whether it is about | |
| calling out Beijing's genocide in Xinjiang, its provocations of | |
| the Taiwan Strait and the South China Sea, or its coercion of | |
| sovereign States, the United States cannot be silent about the | |
| PRC's problematic behavior. | |
| The Biden Administration deserves credit on this front. It | |
| has directly shared our disagreements with China while | |
| strengthening our diplomatic partnerships, whether by elevating | |
| the Quad, starting new initiatives like Aukus, or elevating our | |
| relations with partners in ASEAN and the Pacific Islands | |
| through high level summits and strategies. | |
| Third, it is critical that the United States remain the | |
| responsible player in this competition. We all know what the | |
| PRC is going to do. But the world needs to know what the United | |
| States will play by the rules, that we will remain open to | |
| cooperation with Beijing on areas of shared interests and | |
| global concern, and that we are trying to keep channels of | |
| communications open to ensure that this competition does not | |
| slide into conflict. | |
| Fourth, we need to recognize that war with China would be a | |
| policy failure of catastrophic proportions. It would cost | |
| countless American lives and devaState our economy. We must | |
| make clear that we do not seek war, and we will work to avoid | |
| it. However, we will continue to stand up to the PRC's | |
| aggression against our interests. | |
| And finally, we must not engage in a race to the bottom | |
| with the Chinese Community Party when it comes to our values. I | |
| have been deeply troubled by the spike in anti-Asian violence | |
| spurred by the political rhetoric around COVID-19. I was | |
| similarly dismayed when one of our colleagues just last week | |
| questioned the loyalty of Congresswoman Judy Chu. There is no | |
| place for that in our democracy and in our debate. We should | |
| celebrate our diversity and safeguard our freedoms to present | |
| and clear contrast with the CCP. | |
| And what our committee does, it matters. It matters because | |
| both the country and the world are watching. | |
| And with that, I look forward to today's testimony. And I | |
| thank Chairman McCaul. And I yield back the balance of my time. | |
| Chairman McCaul. I thank the ranking member. | |
| I have a housekeeping measure. Based on our consultation, | |
| for purposes of Section 4820(h)(2)(B) of Title 50 of the United | |
| States Code, premised upon the national interest determination | |
| described therein, I ask unanimous consent that the committee | |
| authorize a disclosure of some non-business confidential | |
| aggregate data derived from documents provided to the committee | |
| by the Department of Commerce that summarizes export licensing | |
| decisions concerning those on the entity list as reflected in | |
| the BIS licensing data report breakdown document that has been | |
| provided to members. | |
| Such authorization does not include the disclosure of the | |
| applicant names, trademark, or brand names, item descriptions, | |
| or ECCN, or license numbers. | |
| Without objection, so ordered. | |
| Other members are reminded--the ranking member is | |
| recognized. | |
| Mr. Meeks. Yes. Thank you, Mr. Chairman. | |
| Let me just say quickly that while I do not oppose the UC, | |
| I do want to provide some context as to what the data is and | |
| what it represents. And I have concerns about whether the | |
| information being authorized for disclosure is of utility for | |
| the public on its own. In fact, I am concerned that it can, in | |
| fact, be misleading and politicized without the adequate | |
| context. | |
| So we have asked BIS to provide an explanatory document | |
| that will accompany the data being disclosed on the record. And | |
| it is important that the data be considered alongside the | |
| context regarding BIS's regulatory and licensing process. | |
| Chairman McCaul. I appreciate the ranking member's remarks. | |
| And we just want to see the data. It has never--we got one | |
| production of a 6-month window of time. And I look forward to | |
| your compliance with this committee, sir, Secretary Estevez. | |
| And we have had great conversations about this issue. | |
| Other members of the committee are reminded that opening | |
| statements may be submitted for the record. | |
| And we are pleased to have a distinguished panel of | |
| witnesses before us today on this important topic. First, Mr. | |
| Daniel Kritenbrink is the Deputy Assistant Secretary for East | |
| Asia and the Pacific at the Department of State. Mr. Alan | |
| Estevez is Undersecretary of Commerce for Industry and | |
| Security. Mr. Scott Nathan is the Chief Executive Officer of | |
| the U.S. International Development Finance Corporation. And Mr. | |
| Michael Schiffer is USAID Assistant Administrator of the Bureau | |
| for Asia. | |
| I want to thank all of you for being here today. Your full | |
| statements will be made part of the record. And I will ask that | |
| each of you keep your remarks to 5 minutes in order to allow | |
| time for the members to ask questions. | |
| I now recognize Mr. Kritenbrink for his opening statement. | |
| STATEMENT OF THE DANIEL J. KRITENBRINK ASSISTANT SECRETARY, | |
| BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF | |
| STATE | |
| Mr. Kritenbrink. Thank you, Mr. Chairman. Chairman McCaul, | |
| Ranking Member Meeks, distinguished members of the House | |
| Foreign Affairs Committee, thank you for this opportunity to | |
| testify before you today. I am grateful for the bipartisan | |
| approach of this committee regarding our competition with the | |
| People's Republic of China. | |
| The PRC represents our most consequential geopolitical | |
| challenge, because it is the only competitor with both the | |
| intent and increasingly the economic, diplomatic, military, and | |
| technological capability to reshape the international order. | |
| The scale and scope of the challenge posed by the PRC as it | |
| becomes more repressive at home and more aggressive abroad will | |
| test American diplomacy like few issues we have seen. We will | |
| effectively compete with the PRC and are focused on managing | |
| this relationship responsibly. In doing so, we have emphasized | |
| the importance of open, sustained, and empowered channels of | |
| communication. | |
| To that end, Secretary Blinken met with Wang Yi, the | |
| Director of the Chinese Community Party's Central Foreign | |
| Affairs Office, on the margins of the Munich Secretary | |
| Conference on February 18th. Their meeting was exceptionally | |
| direct. | |
| Regarding the unacceptable and irresponsible violation of | |
| U.S. sovereignty and international law by the PRC high altitude | |
| surveillance balloon, the secretary made clear that the United | |
| States will not stand for any violation of our sovereignty and | |
| that such an incursion must never happen again. We have also | |
| exposed the breadth of the PRC's surveillance balloon program, | |
| which has intruded into the airspace of more than 40 countries | |
| across 5 continents. | |
| The secretary condemned Russia's brutal war against | |
| Ukraine. And he warned about the implications and consequences | |
| if China provides material support to Russia or assistance with | |
| systematic sanctions or export controls evasion. | |
| The secretary also reaffirmed there has been no change to | |
| our longstanding One China Policy, which is guided by the | |
| Taiwan Relations Act, the Three Joint Communiques, and the Six | |
| Assurances. He underscored our fundamental interest in | |
| maintaining peace and stability across the Taiwan Strait. | |
| The secretary reiterated President Biden's statements that | |
| the United States will compete and unapologetically stand up | |
| for our values and interests, but that we do not want conflict | |
| with the PRC and we are not looking for a new cold war. At the | |
| same time, the secretary reiterated our commitment to | |
| maintaining open lines of communication at all times so as to | |
| reduce the risk of miscalculation that could lead to conflict. | |
| We are continuing to implement the core pillars of our PRC | |
| strategy, invest, align, compete. | |
| With your help, we are investing in the foundations of our | |
| strength at home with bipartisan bills like the CHIPS and | |
| Science Act, the Inflation Reduction Act, and the Bipartisan | |
| Infrastructure Law. | |
| We are aligning with allies and partners on our approach | |
| abroad to build collective resilience, close off | |
| vulnerabilities, bolster security ties, and advance a shared | |
| affirmative vision. | |
| By harnessing these key assets, we are competing with the | |
| PRC to defend our interests and build our vision for the | |
| future. | |
| We will continue standing up to PRC threats and | |
| provocations, whether in the South and East China Seas or | |
| across the Taiwan Strait, to its economic coercion aimed at | |
| partners in Asia, Oceania, Europe, and elsewhere, and to | |
| China's attempts to undercut U.S. and allied technological | |
| advantages, and exploit our cutting edge technologies to | |
| advance the People's Liberation Army military modernization. | |
| We will continue to support the people of Hong Kong as they | |
| confront the steady of erosion of their rights and fundamental | |
| freedoms. And we will continue to call out the egregious and | |
| unacceptable human rights abuses across China, including in | |
| Xinjiang and Tibet. And we will hold accountable those involved | |
| in these practices. | |
| Our Indo-Pacific strategy, by contrast, presents the | |
| positive, affirmative vision we have for a region that is free | |
| and open, connected, secure, prosperous, and resilient. | |
| Through our Indo-Pacific strategy, we are building regional | |
| capacity and resilience, including to the challenges posed by | |
| the PRC, by defending democracy and the rule of law, | |
| strengthening the collective capacity of allies, partners, and | |
| friends, as well as the regional architecture, through | |
| collaboration with the Quad, ASEAN, and Partners in the Blue | |
| Pacific, driving shared prosperity through the Indo-Pacific | |
| economic framework, bolstering regional security through | |
| enhanced maritime domain awareness, and more. | |
| These efforts support the ability of our allies and | |
| partners to make sovereign decisions in line with their | |
| interests and values, free from external pressure, while | |
| meeting their economic and development needs. | |
| With the resources and authorities provided by this | |
| committee and the Congress, we will continue taking concrete | |
| actions to meet this moment. Again, we recognize the scale and | |
| scope of the PRC challenge will continue to grow. | |
| We will compete vigorously with the PRC while managing that | |
| competition responsibly. And we remain willing to explore | |
| cooperation with Beijing where it is in our interest to do so. | |
| In closing, let me reiterate our commitment to approaching | |
| our PRC strategy in a way that is consistent with our values, | |
| with bipartisan efforts at home, and in lockstep with our | |
| allies and partners abroad. | |
| There are few issues where bipartisan action is more | |
| critical. In coordination with the U.S. Government departments | |
| and agencies, this committee, and colleagues across Capitol | |
| Hill, we are confident we can sustain the resources and | |
| policies needed to prevail in our competition with the PRC. | |
| Thank you very much. | |
| [The prepared statement of Mr. Kritenbrink follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman McCaul. Thank you, Mr. Kritenbrink. | |
| I now recognize Mr. Estevez for his opening. | |
| STATEMENT OF ALAN F. ESTEVEZ, UNDERSECRETARY OF COMMERCE FOR | |
| INDUSTRY AND SECURITY, U.S. DEPARTMENT OF COMMERCE | |
| Mr. Estevez. Thank you, Chairman. Chairman McCaul, Ranking | |
| Member Meeks, distinguished members of the committee, thank you | |
| for inviting me to testify this morning. This is my second time | |
| appearing before this committee as Undersecretary for Industry | |
| and Security. It is an honor for me to lead the dedicated | |
| personnel of the Bureau of Industry and Security in the | |
| Department of Commerce as we take on the challenge of the | |
| People's Republic of China. | |
| As President Biden notes in the 2022 National Security | |
| Strategy, the People's Republic of China harbors the intention | |
| and increasingly the capacity to reshape the international | |
| order in favor of one that tilts the global playing field to | |
| its benefit, even as the United States remains committed to | |
| managing the competition between our countries responsibly. The | |
| NSS goes on to State that the PRC presents the most | |
| consequential geopolitical challenge. | |
| Given the PRC's capability and intentions, as I told this | |
| committee in my July 2022 testimony, I have directed and am | |
| currently overseeing a top to bottom review of our export | |
| control policies related to the PRC. | |
| While my formal written statement goes into more detail, | |
| Commerce is using our regulatory and enforcement authorities to | |
| confront the PRC's military-civil fusion program and related | |
| efforts to obtain advanced technologies for military | |
| modernization, human rights violations, and other activities | |
| that threaten U.S. national security. | |
| In October of last year, we announced significant, robust, | |
| new controls related to advanced computing and semiconductor | |
| manufacturing. We added new controls on certain high capability | |
| chips, components going into PRC supercomputers, semiconductor | |
| tools, and items going into the PRC's advanced fabrication | |
| facilities, or FABs. | |
| We also imposed restrictions on certain activities of U.S. | |
| persons, which limits the ability of Americans to support the | |
| maintenance and operation of these technically complex machines | |
| at the PRC's advanced FABs. | |
| The threats posed by the PRC's military-civil fusion | |
| strategy and its stated intentions for global dominance in | |
| artificial intelligence are real. Unfortunately, many of the | |
| powerful computer chips that come in consumer goods can also be | |
| the foundation of systems for mass surveillance in Xinjiang or | |
| modeling and development of nuclear missiles and other weapons. | |
| So let me be clear. These actions were taken to protect | |
| national security and foreign policy interests of the United | |
| States. We are not engaged in economic warfare as the PRC | |
| government often claims. | |
| Our export controls work best when applied on a | |
| multilateral basis with allies and partners, as demonstrated by | |
| our 38-member coalition's response to Russia's atrocious and | |
| illegal war in Ukraine. Conversations about coordinating | |
| substantially similar controls by critical allied countries are | |
| confidential due to their sensitivity. I would be happy to | |
| brief further on this in an appropriate setting with the | |
| appropriately cleared staff. | |
| I would also note that we have implemented multilateral | |
| controls on certain items and electronic design software | |
| necessary for the production of advanced semiconductors. | |
| In addition to these consequential rules, we have been | |
| vigorous in identifying and adding entities to the PRC to our | |
| entity list, which imposes requirements that exporters obtain | |
| licenses approved by BIS and our colleagues at the Department | |
| of Defense, State, and Energy before exporting items subject to | |
| our jurisdiction. | |
| Since the beginning of the Biden Administration, we have | |
| taken aggressive posture, adding 160 PRC parties to the entity | |
| list. Approximately 25 percent of all PRC listed entities were | |
| added during this Administration. | |
| Finally, we have been vigorous in our enforcement efforts, | |
| both through our own administrative and civil authorities in | |
| imposing criminal penalties in partnership with the Justice | |
| Department. | |
| My north star at BIS as it relates to the PRC is to ensure | |
| that we are doing everything within our power to prevent | |
| sensitive U.S. technologies from getting into the hands of | |
| malign actors. We will continue to review our export control | |
| policies, assess the threat environment, and work across | |
| Federal Government with allies and partners, and act to protect | |
| U.S. national security. | |
| I look forward to your questions. | |
| [The prepared statement of Mr. Estevez follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman McCaul. Thank you, Mr. Estevez. | |
| I now recognize Mr. Nathan for his opening statement. | |
| STATEMENT OF SCOTT NATHAN, CHIEF EXECUTIVE OFFICER, U.S. | |
| INTERNATIONAL DEVELOPMENT FINANCE CORPORATION | |
| Mr. Nathan. Thank you, Mr. Chairman. Ranking Member Meeks, | |
| and members of the committee, thank you for inviting me here | |
| today. I appreciate this opportunity to testify about how the | |
| Development Finance Corporation is meeting the challenge posed | |
| by the People's Republic of China as it seeks to expand | |
| influence in the developing world. | |
| I would like to begin by thanking this committee for its | |
| central role in creating the DFC through the passage of the | |
| BUILD Act. DFC launched just over 3 years ago. And strong | |
| bipartisan support since then has enabled DFC to build the | |
| capacity to better pursue the dual mission Congress gave us, to | |
| focus on making positive development impact in the poorest | |
| countries of the world and at the same time advance the | |
| strategic interests of the United States. | |
| We meet this mission by financing private sector projects | |
| across regions and sectors. I want to emphasize this point. | |
| Unlike the development approach of the PRC, which often burdens | |
| countries with unsustainable, sovereign-level debt, DFC's | |
| efforts are directed toward supporting private entities, | |
| mobilizing private capital, and through that activity, building | |
| resilient market economies. | |
| We are guided by the belief that developing a robust | |
| private sector is the best way to alleviate poverty over the | |
| long term and strengthen the economic and strategic positions | |
| of our partners around the world. DFC's investments also carry | |
| our values of openness, respect for local laws and conditions, | |
| and high environmental, labor, and integrity standards. | |
| That stands in sharp contrast to what the PRC offers. There | |
| is no doubt that the PRC has put an immense amount of money | |
| into projects around the world through its Belt and Road | |
| Initiative. But they are using a different model. What they | |
| offer frequently comes laden with burdens, not all of them | |
| financial. When the PRC's State-controlled entities put money | |
| into projects, they often bring their own workers rather than | |
| create local jobs and show little respect for community, | |
| environmental, or labor standards. When the workers go home, | |
| the projects left behind are often inappropriate for local | |
| conditions and are poor quality. | |
| As I travel in our markets and meet with leaders from | |
| developing nations, it is clear that many would prefer an | |
| alternative to what the PRC offers them. The key is that we | |
| need to show up and offer them that choice. That is why you | |
| created DFC. And that is what we are striving to do every day. | |
| And we have made significant progress in close partnership | |
| with you. Last year DFC committed to financing 183 transactions | |
| totaling over $7.4 billion, a record level of investment and | |
| associated impact. This was across our product range, including | |
| direct lending, loan guarantees, political risk insurance, and | |
| importantly our new tools of technical assistance grants and | |
| equity investments. | |
| We are also working across sectors, from infrastructure and | |
| energy to health care and support for small business, pursuing | |
| private sector opportunities that improve people's lives and | |
| strengthen the strategic position of our allies and partners. | |
| In my written testimony, I describe many of DFC's recent | |
| transactions of particular strategic importance. I would like | |
| to now highlight just a few. | |
| Strategic seaport investments are a high priority for us. | |
| And DFC recently committed to lend $150 million to finance the | |
| expansion and modernization of a container port in Ecuador. In | |
| addition to ports, we are pursuing strategic and developmental | |
| infrastructure investments around the world, including | |
| airports, railways, and toll roads. | |
| In the 21st century, we also need to think about | |
| infrastructure more broadly, making investments to close the | |
| digital divide in a secure and open manner. To that end, DFC is | |
| supporting companies which have out-competed Chinese suppliers | |
| for cell phone networks, data centers, and smart city systems. | |
| For example, DFC recently worked with our Australian and | |
| Japanese counterparts to enable Telstra to secure the digital | |
| networks of six Pacific Island nations. | |
| DFC financing is also promoting access to reliable energy | |
| that is cleaner, more sustainable, and more secure. In the last | |
| year, amongst other projects, we financed non-Russian gas | |
| supplies for Moldova, enabled the construction of new solar | |
| panel manufacturing plant in India, free from the problems of | |
| the Chinese supply chain, and expanded our support for a gas- | |
| fired power plant in electricity-starved Sierra Leone. | |
| DFC is also actively pursuing new opportunities in nuclear | |
| energy. And we are working to sustainably diversify the supply | |
| and processing of critical minerals away from dependence on the | |
| PRC. | |
| We recently invested $30 million in the latest round of | |
| equity financing for U.S.-aligned critical minerals platform, | |
| TechMet Ltd., to support their investment in nickel and cobalt | |
| production in Brazil. | |
| So, to conclude, these are just some examples of the type | |
| of transactions that offer an alternative to the activity of | |
| the PRC in the developing world. I am proud of the work that | |
| the fantastic team at DFC has done through these transactions | |
| and many others. And although DFC is just 3 years old, we have | |
| made great progress and are building on a record year of | |
| impact. But I know we can and must do more. | |
| I welcome the opportunity to keep the members of this | |
| committee informed of our progress. Thank you. And I look | |
| forward to your questions. | |
| [The prepared statement of Mr. Nathan follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman McCaul. Thank you, Mr. Nathan. | |
| I now recognize Mr. Schiffer for his opening statement. | |
| STATEMENT OF MICHAEL SCHIFFER, ASSISTANT ADMINISTRATOR, U.S. | |
| AGENCY FOR INTERNATIONAL DEVELOPMENT | |
| Mr. Schiffer. Thank you, Mr. Chairman. Chairman McCaul, | |
| Ranking Member Meeks, distinguished committee members, thank | |
| you for inviting me here today to testify on USAID strategy for | |
| engagement in the Indo-Pacific and for strategic competition | |
| with the People's Republic of China. | |
| As we enter the new year, there is no shortage of global | |
| challenges, Russia's further invasion of Ukraine, which has | |
| sparked a global food emergency, a climate crisis, which has | |
| become a threat multiplier, and a global pandemic, from which | |
| we are now emerging, but which for a moment allowed autocratics | |
| to ride high and seek to control as the regular patterns of our | |
| lives were upended. | |
| Perhaps nowhere are these challenges more evident than with | |
| the PRC under Xi Jinping's hyper-nationalist authoritarian | |
| rule, intent to rewrite for its own narrow advantage the | |
| existing global rules and norms. | |
| In many significant respects, the challenge we face from | |
| the PRC, geoeconomic as much as geopolitical or geostrategic, | |
| is unlike any we have previously dealt with as a Nation. | |
| For USAID, the response to this challenge does not begin | |
| with the PRC however. It begins with our own nation's value | |
| proposition, that democracy delivers, and a belief that | |
| equipped with our ideas and our ideals and with congressional | |
| support, the necessary resources, we can drive development | |
| diplomacy that elevates democratic norms and supports a vision | |
| for a rules-based international order congruent with our | |
| Nation's interests and values. | |
| And our results demonstrate our success. Eleven of our top | |
| 15 trading partners today benefited from U.S. and USAID's | |
| foreign assistance as they developed. That I would offer is | |
| what successful global leadership looks like. | |
| Development outcomes in a very real sense are where | |
| territorial integrity, sovereignty, and a free and open | |
| architecture live. USAID does not weaponize development | |
| assistance for our own benefit or in a transactional way to the | |
| detriment of our partners, as the PRC often does. At the same | |
| time, we are very clear-eyed about that what Beijing does | |
| abroad can have a detrimental impact on our own affirmative | |
| development agenda and the well-being of our partners. | |
| In response, we are committed to work with our allies and | |
| partners to shape the environment in which Beijing operates and | |
| in so doing advance our vision for an open, transparent, and | |
| rules-based world. | |
| As we contemplate the challenges before us for the balance | |
| of this century, there are four pillars to our approach. | |
| First, USAID is prioritizing new development partnerships | |
| to accelerate the flow of capital into the investments that are | |
| critical for success in the 21st century. USAID's model enables | |
| competition, fair and transparent dealmaking, free market, and | |
| incentivizes investments and creates opportunities for American | |
| workers. Through enterprise-driven development, USAID is | |
| reducing dependency on PRC debt diplomacy, especially for | |
| infrastructure. | |
| Second, USAID is improving assistance outcomes through | |
| digital technology and open and inclusive and secure digital | |
| ecosystems. Our work enables U.S. firms to bring world leading | |
| technologies to developing countries and to drive investment, | |
| especially in key emerging markets. | |
| Third, USAID is enabling partner countries and local | |
| communities to become increasingly independent of and resilient | |
| to authoritarian influence. We identify and address malign and | |
| corrupting authoritarian narratives. And we amplify the | |
| positive impacts of democratic governance. | |
| And finally, we support vibrant civil societies. We support | |
| anti-corruption efforts, human rights, and inclusive, locally | |
| driven and locally owned development, including gender equality | |
| and women's economic empowerment, all of which are vital | |
| enablers for sustainable development. | |
| In short, USAID is elevating our contributions, doubling | |
| down on our commitment, and appealing to the best parts of our | |
| rooted history in the countries where we work. That is how we | |
| will continue to show our value, bolster American leadership | |
| around the world, and outcompete the PRC in the years ahead. | |
| Thank you for the opportunity to represent USAID and to | |
| work with members of this committee in a bipartisan fashion to | |
| advance our Nation's interests and values around the globe. I | |
| look forward to answering any questions you may have. | |
| [The prepared statement of Mr. Schiffer follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman McCaul. Thank you, Mr. Schiffer. | |
| I now recognize myself for 5 minutes. | |
| To Mr. Estevez and Kritenbrink, I just attended the Munich | |
| Security Conference where we witnessed a showdown between the | |
| Chinese Foreign Minister and the Secretary of State over the | |
| recent spy balloon that happened across this country, spying on | |
| this Nation, and then the advanced warnings their intelligence | |
| has provided that China is now considering providing lethal | |
| weapons to Russia. | |
| Clearly China is supporting Russia in their war against | |
| Ukraine currently by selling them satellite technology, micro | |
| electronics, and buying Russian energy. I know that seven PRC | |
| companies were put on the entities list because they were | |
| contributing to Russia's military and defense industrial base. | |
| I also commend the Secretary of State for saying, warning | |
| China. But I hope that if that happens, that the information | |
| will be declassified so the American people can see what is | |
| really happening. | |
| My question to both of you is, what is the precise nature | |
| of the CCP support to Russia in this conflict, and what is | |
| State and BIS doing about it? And second, what actions would | |
| deter the PRC from providing these lethal weapons? Mr. | |
| Kritenbrink. | |
| Mr. Kritenbrink. Mr. Chairman, thank you for your | |
| questions. | |
| Mr. Chairman, as you indicated, the secretary made very | |
| clear in Munich in his meeting with Director Wang Yi the | |
| consequences and the implications if China were to provide | |
| lethal support to the Russian military for use in its barbaric | |
| invasion of Ukraine. | |
| The secretary has also noted publicly that in many ways | |
| China has been supporting Russia's war in Ukraine from the | |
| beginning through its dissemination of Russian propaganda and | |
| its own use of disinformation to support Russia's war there and | |
| to blame inappropriately the war on the West, the United States | |
| and NATO. We have seen China stepping up its economic | |
| engagement in purchases from Russia. | |
| And then also, Mr. Chairman, you recognized some of the | |
| countries that we, or some of the entities rather, PRC entities | |
| we put on the entities list for providing the assistance that | |
| they did to Russia, including one firm, Spacety, that was | |
| providing satellite imagery to the Wagner Group. | |
| So we have made very clear that we will not hesitate to | |
| take steps to hold to account PRC entities that assist Russia. | |
| And we have made that very clear to the Chinese. The secretary | |
| certainly did so in Munich. And, of course, the president and | |
| the national security advisor have done so directly to the | |
| Chinese on previous occasions. | |
| Chairman McCaul. And I think we need to make it clear to | |
| China this will not be tolerated, if in fact it is happening. I | |
| know it is happening with respect to the seven entities, | |
| companies listed on the entities list, but with respect to | |
| lethal weapons, that it is not acceptable. | |
| Mr. Estevez, do you have any comments on the seven | |
| companies? | |
| Mr. Estevez. Yes, it is actually 12 companies---- | |
| Chairman McCaul. Now it is 12. | |
| Mr. Estevez. Yes, we had some back in December that we also | |
| put on. | |
| Chairman McCaul. OK. | |
| Mr. Estevez. Plus one that was supplying parts to the | |
| Iranian drone program, so 13 if you count that one. | |
| And we have made clear, as my colleague just said, that we | |
| will not hesitate to put companies on the entity list as soon | |
| as we see factual data that they are supplying Russia. And we | |
| are looking across all third parties, but especially China in | |
| that regard. | |
| Chairman McCaul. I am glad you mentioned the Iranian drones | |
| that are in Crimea, that the Ukrainians, I just back from | |
| theater, cannot attack the Iranian drones without the longer | |
| range artillery. | |
| But having said that, components were found in these | |
| Iranian drones that were from the United States of America and | |
| also the spy balloon and also the hypersonic built on the | |
| backbone of American technology. We got to stop doing this. | |
| They steal it. We do not have to sell it to them. | |
| We got a snapshot of your, Mr. Estevez, from January 2022 | |
| to March 2022, BIS denied 8 percent of licenses applications | |
| and approved more than $23 billion worth of license | |
| applications to the PRC companies on the entities list. | |
| How does this align with your statement that ``we are doing | |
| everything within BIS's power to prevent sensitive U.S. | |
| technologies from getting in the hands of PRC military, | |
| intelligence services, or other parties' '? | |
| Mr. Estevez. First, let me quickly address the Iranian | |
| drone thing. As you know, we put companies in Iran on the | |
| entity list, invoking the foreign direct product rule, so that | |
| at ports that are American branded, not necessarily made in | |
| America, also cannot go to that program. | |
| For the point on licensing, which, of course, is an | |
| interagency process that is done with my colleagues in Defense, | |
| State, and Energy, we have specific licensing rules. The entity | |
| list is not a blanket embargo. So going on the entity list may | |
| have a particular rule. | |
| And in the case of Huawei and SMIC, there were particular | |
| rules. SMIC is now, of course, subject to the rule that we put | |
| out in October on semiconductor manufacturing. The licensing | |
| rule, the previous Administration that still stands for Huawei, | |
| allows things below 5G, below cloud level to go. And, you know, | |
| I will say that all those things are under assessment. | |
| Chairman McCaul. OK. Thank you. I see my time has expired. | |
| The chair recognizes the ranking member. | |
| Mr. Meeks. Thank you, Mr. Chairman. | |
| And I just want to say that, because I hear the chairman, | |
| particularly with the work that BIS has. And one of the things | |
| I think that is important, and maybe we can do this in a | |
| bipartisan way, that, you know, for me, BIS may need additional | |
| resources for all of the work that we are telling them that | |
| they need to do, et cetera. So maybe we can talk about that at | |
| some point and figure out how we can make sure that they have | |
| more resources to do all the work that Congress is asking them | |
| to do. So we will talk about that later. | |
| But let me ask my question first to Mr. Kritenbrink, to the | |
| secretary. I concur that I am very concerned about some of the | |
| conversations that we have had with China contemplating giving | |
| Russia weapons. And as indicated, you know, part of my | |
| viewpoint is to make sure that is a line that cannot be | |
| tolerated, if they are giving Russia the weapons to pursue | |
| their illegal war. | |
| Are we talking to and preparing our allies also so that it | |
| is not, if there is a sanction, and that is what I hear, part | |
| of it will take place as sanctions, so if there are sanctions | |
| to be placed, if China does step over that line, so that it is | |
| not just the United States, that if Russia, that China feels | |
| the full force and power of us and our allies, similarly as | |
| Russia is with NATO, EU, and our other allies in fighting the | |
| war in Ukraine? | |
| Mr. Kritenbrink. Yes, sir, Mr. Ranking Member. Thank you | |
| for your question. And, again, when we look at our invest, | |
| align, compete strategy vis-a-vis China, I think one of the | |
| most important pillars and certainly a real focus in the State | |
| Department is the align pillar. So we are incredibly aligned | |
| with allies and partners and friends, including on the | |
| situation of Russia's illegal war in Ukraine. And, Mr. Ranking | |
| Member, it's been quite striking to me how many partners in | |
| Europe and Asia increasingly recognize that a security matter | |
| in Europe cannot be separated from the security situation in | |
| Asia. | |
| So, yes, we have been in touch with our key partners in | |
| both Europe and Asia on this matter, and I think it's, | |
| obviously, everything that happens in Ukraine and Russia's | |
| illegal war there remains a matter of significant concern. And | |
| we've shared with them our concerns regarding China's | |
| consideration in providing this illegal assistance, and I think | |
| I'm confident to say that many partners share our concerns. | |
| Mr. Meeks. So the other issue that I'm really, you know, | |
| when I'm watching what the PRC is doing, the economic coercion | |
| that they're having with our allies, and I was proud, along | |
| with Representative Ami Bera and Representative Tom Cole, | |
| bipartisan way, to introduce the Countering Economic Coercion | |
| Act of 2023 which provides the President with new tools to | |
| provide rapid economic support to partners and allies facing | |
| economic coercion from the PRC. So how are your agencies | |
| preparing for the next time that we see the PRC economically | |
| coerce other nations over, for example, Taiwan and what | |
| counter-coercion policies, responses, and tools are at your | |
| agency's disposal for when this happens again, as we saw that | |
| took place with Lithuania, and are there additional authorities | |
| you require from Congress that would give you more flexibility | |
| to support our allies and partners who have been targeted by | |
| Beijing's economic coercion? | |
| Mr. Kritenbrink. Mr. Ranking Member, I'll respond first and | |
| see if other colleagues want to chime in. Mr. Ranking Member, I | |
| fully agree that this is a significant threat posed by the PRC. | |
| Beijing's increasing willingness to weaponize many aspects of | |
| its external engagement, including its economic engagement, is | |
| of deep concern. We've seen a number of countries who have been | |
| subject to economic coercion. Certainly, you've mentioned | |
| Lithuania. That's the most recent example, but many other | |
| partners around the world, including Australia, Japan, the | |
| Philippines, and others have been subjected to this. | |
| At the State Department, we're developing a range of tools | |
| to help respond to this. I know in the Lithuania case it was | |
| helpful that we were able to provide Eximbank credits to assist | |
| Lithuania, and we were able to organize reverse trade missions | |
| and the like to assist them, and we certainly look forward to | |
| working closely with Members of Congress to further develop | |
| those tools because this challenge will only grow, Mr. Ranking | |
| Member. | |
| Mr. Meeks. And, last, what is the Administration doing to | |
| support the people of Hong Kong in the face of Beijing's | |
| growing crackdown there? | |
| Mr. Kritenbrink. Well, Mr. Ranking Member, we share your | |
| concern at the erosion of rights that we've seen over the last | |
| few years in Hong Kong, which is deeply concerning. We continue | |
| to speak out to condemn those actions. We have held to account | |
| officials who have implemented the new national security law | |
| and other draconian measures by subjecting them to U.S. | |
| sanctions. We'll continue to speak out, and we'll continue to | |
| stand with the people of Hong Kong so that their rights are | |
| observed. | |
| Mr. Meeks. My time has expired. I yield back, Mr. Chairman. | |
| Chairman McCaul. Thank you, Ranking Member. The Chair now | |
| recognizes Mr. Smith. | |
| Mr. Smith. Thank you very much, Mr. Chairman. Secretary | |
| Kritenbrink, if I could ask you, we all know that China targets | |
| certain industries. They've done it with the pharmaceuticals, | |
| they've done it in a whole host of other products and issues | |
| that they would like to control the flow of money and the flow | |
| of research. They steal just about everything by violating | |
| international property rights. | |
| But let me ask you the question with regards to | |
| pharmaceuticals. Where are we in standing up either in | |
| countries that are friends or within a domestic capability | |
| those important pharmaceuticals and those chemicals that are | |
| all-important in the curative aspect of it, and I would include | |
| antibiotics there, as well. We know some of it is transshipped | |
| through other countries from China, but where are we on that? | |
| Second, no where in Africa is the CCP's malign impact more | |
| egregious than the DRC. I've been to the DRC. I've been to the | |
| mines. I've been not to the cobalt mines but others previously. | |
| And I chaired a hearing last Congress as part of the co- | |
| chairman of the Tom Lantos Human Rights Commission on the issue | |
| of cobalt, and the fact it's something on the order of 35,000 | |
| children, forced labor for children, many of whom get sick, | |
| some die. They do not have any protective equipment. They | |
| shouldn't be subjected to child labor anyway. And then the | |
| adults, something on the order of 200,000, are mining cobalt, | |
| all of which goes to China for refinement for batteries. You | |
| know, no matter where anybody comes down on EVs, you know, | |
| they're on the roads, they're everywhere, growing in number. | |
| But the supply chain should in no way be linked to such | |
| horrific practices as forcing children into those mines. | |
| And I'm wondering, I know there's been a standup of some | |
| kind of counselor or some organization. I do not believe | |
| anything has been done or will be done until that supply chain | |
| is attacked in a way that we find other sources or we make sure | |
| that all of this exploitation ends. Unfortunately, in the D.R. | |
| Congo, there's a great deal of buying of the government, and I | |
| believe that to be true. And, you know, when money talks, we do | |
| not have anything called the Foreign Corrupt Practices Act or | |
| anything that even comes close to it, it's easy to buy off a | |
| corrupt official. | |
| And, finally, on the implementation of a Hong Kong Human | |
| Rights and Democracy Act, are there gaps or are there things | |
| that we need to be doing to advance further that law? I was the | |
| House sponsor of it, and, when it passed, it took years to get | |
| passed. Introduced in 2014, everybody told me it was a solution | |
| in search of a problem. When we finally did, it was very many | |
| days late and lots of dollars short, but it still is a useful | |
| tool. | |
| If you could speak to those three issues. | |
| Mr. Kritenbrink. Thank you, Congressman. On | |
| pharmaceuticals, I think the general point that I would make, | |
| sir, and it gets at your question about the DRC, as well, is | |
| that we have tried to make clear to countries around the world | |
| that they need to have diverse supply chains. And so promoting | |
| the diversity of supply chains gives countries options and | |
| makes them less subject to coercion and undue influence. So | |
| that is the general principle that animates much of our work. | |
| Now, on the details of pharmaceuticals and of the | |
| activities in the DRC, I am not an expert on either issue, but | |
| I will just underscore our message to countries is you should | |
| not be overly dependent on any one country or any one entity | |
| for your supply chains because it makes you subject to undue | |
| influence, No. 1. No. 2, whether it's countries in Africa, | |
| Asia, or Latin America, we do encourage them to understand the | |
| implications of their engagements with the PRC, PRC | |
| investments, loans, and other activities that, again, could | |
| make countries subject to undue leverage and influence, which I | |
| think is the root of the problem of many of the issues you've | |
| outlined there. | |
| On the Hong Kong Human Rights Protection Act, thank you, | |
| Congressman, for your work there. I hope, through my comments, | |
| I've indicated how deeply concerned we are by the continued | |
| erosion of rights in Hong Kong, the continued harassment and | |
| arrest of individuals for simply speaking their mind and | |
| standing up for their rights. We look forward to working with | |
| you and other members to continue to implement the Act and to | |
| stand up for the values that we hold dear. | |
| Mr. Smith. In the final 10 seconds, there has been an | |
| announcement that Ford will enter into a contract with China or | |
| Chinese companies with regards to cobalt. How can we ensure | |
| that none of that cobalt is coming on the backs of African | |
| children? | |
| Mr. Kritenbrink. Well, thank you, Congressman. Perhaps I | |
| should take that issue back with me. I'm happy to look into it | |
| and report back to you. Thank you, sir. | |
| Chairman McCaul. The Chair now recognizes Mr. Sherman. | |
| Mr. Sherman. Mr. Kritenbrink, China's hot. The Pacific | |
| Islands rarely are in terms of the attention. As co-chair, | |
| along with Mr. Bera, of the Pacific Islands Caucus, I'd like to | |
| know, now that what lies between the United States and China is | |
| the Pacific Islands and China is certainly making a play there | |
| in several different respects, can you assure us that you're | |
| giving a high priority to actually getting those compacts | |
| completed and renewed? Hopefully, that's a yes answer. | |
| Mr. Kritenbrink. Congressman, it's an emphatic yes. We | |
| recognize the importance, obviously, of the Pacific Islands, | |
| and we certainly recognize the importance of the freely | |
| associated States. You may have seen, Congressman, that we have | |
| concluded MOUs with all three of the freely associated States, | |
| and we look forward to working with Congress to complete those | |
| deals. | |
| Mr. Sherman. It should be front burner. | |
| Mr. Kritenbrink. Yes, sir. Yes. | |
| Mr. Sherman. Mr. Chairman, I thank you for distributing a | |
| sheet describing how China controls our corporations, but | |
| there's much to be added. You point out that China forces a | |
| change slightly in marketing of Top Gun as to how it's marketed | |
| in China. Now and then, a movie is edited for presentation in | |
| China, so we figure China is controlling what the people of | |
| China see. No, China controls what Americans see and what the | |
| world see by limiting American studios to 40 movies going into | |
| China every year. | |
| What that means, of course, is nobody is going to make a | |
| movie, another movie about Tibet because it's not going to be | |
| shown in China. No, it means no studio is going to make any | |
| movie that offends China because none of their movies will then | |
| be admitted to China. And so China, you think we have a First | |
| Amendment in this country. In Beijing, they control our | |
| studios. Make a movie they do not like, none of your movies get | |
| in. | |
| JPMorgan is told you better advise your clients to invest | |
| in China 15 percent of their portfolios, or you won't be doing | |
| business in China. And I know that Lithuania is a success, but | |
| it's a small country, and we're talking about a very small | |
| amount of money. There are hundreds of billions dollars lost by | |
| American corporations who are treated unfairly in China or that | |
| would be lost if those corporations did not change their | |
| behavior unfairly in order to meet China's demands, and we need | |
| a program to collect billions and tens of billions and hundreds | |
| of billions from China so that we can make sure that every | |
| American corporation that's unfairly treated either currently | |
| or that dares to do something like maybe mention the Uyghurs is | |
| compensated for that unfair treatment. | |
| Mr. Kritenbrink, there's a considerable dispute as to | |
| whether COVID came from a wet market or came from the lab. The | |
| reason for that dispute is that China was absolutely opaque. | |
| They failed to cooperate, they failed to come clean. Millions | |
| of people died around the world, and a substantial percentage | |
| of them died because of China's obfuscation at the beginning. | |
| The State Department has done almost nothing to tell the world | |
| how China's responsible, not maybe for the virus but certainly | |
| for their obfuscation and failure to cooperate afterwards. Is | |
| the State Department going to do a better job of informing the | |
| world of the Chinese Communist Party's responsibility here? | |
| Mr. Kritenbrink. Congressman, thank you. On the issue of | |
| COVID, we have long stated that China needs to do a better job | |
| of being transparent. | |
| Mr. Sherman. But do people in India and Europe and South | |
| America who have lost relatives know that those relatives might | |
| be alive if China and its Communist Party had cooperated with | |
| the world in the first few months? The answer to that, I'll | |
| answer for you, is no because the State Department has done | |
| very little to tell the world. | |
| Third question, and that is Taiwan. Would the | |
| Administration support an immediate declaration now that if | |
| Taiwan is blockaded or invaded that that immediately ends MFN | |
| for China? Don't American corporations deserve to know whether | |
| that would be the case? | |
| Mr. Kritenbrink. Congressman, on your last question, I'm | |
| happy to talk about our approach to the Cross-Strait situation | |
| in Taiwan. As I said in my remarks, we're committed to our One | |
| China policy, our longstanding One China policy---- | |
| Mr. Sherman. I'm asking you whether you--people are trying | |
| to run companies around--they deserve to know whether MFN for | |
| China would be ended if China blockades or invades. Can you | |
| give them that answer, or do they have to fly blind? | |
| Mr. Kritenbrink. What I can say, Congressman, is we are | |
| committed to maintaining peace and stability across the Taiwan | |
| Strait and---- | |
| Mr. Sherman. I think they already knew the---- | |
| Mr. Kritenbrink [continuing]. Taking a range of steps to do | |
| that. | |
| Mr. Sherman. They had already heard that. Thank you. | |
| Mr. Kritenbrink. Thank you. | |
| Chairman McCaul. The Chair recognizes Mr. Wilson. | |
| Mr. Wilson. Thank you, Chairman Mike McCaul, for your | |
| leadership, and Ranking Member Greg Meeks for this bipartisan | |
| hearing on something so important as we understand the | |
| significance of the challenge of the Chinese Communist Party, | |
| also the relationship, actually, to the war in Ukraine. | |
| In fact, my appreciation of the people of China, my father | |
| served in the Flying Tigers in World War II, and so it was | |
| really, I grew up with such an appreciation of the Chinese | |
| people. He served in Kunming, (inaudible). And growing up, I | |
| just grew up with such, his affection for the people of China. | |
| And so we want the best for the people of China, but that | |
| obviously means we also want a free and independent Taiwan. | |
| And I appreciate the recognition a few minutes ago about | |
| Lithuania, how they've been taking a lead on providing to stop | |
| Chinese Communist Party influence in Europe. And I was, just | |
| last week, in Prague and the Czech Republic. They, too, are | |
| working hard to promote the independence of the people of | |
| Taiwan opposing the Chinese Communist Party influence. | |
| With that in mind, I want to thank all of you for being | |
| here today, but I believe the world is in a global competition | |
| between democracies with rule of law opposed by authoritarians | |
| with rule of gun. Today, the conflict is war criminal Putin's | |
| mass murder in Ukraine. Ukraine must be victorious to deter the | |
| Chinese Communist Party from attacking the 24 million people of | |
| Taiwan, and Ukraine must be victorious to stop Iran from its | |
| efforts to vaporize Israel as it develops intercontinental | |
| ballistic missiles to devaState American families. | |
| With that in mind, I would like to ask Secretary | |
| Kritenbrink, the Chinese spy balloon endangered the security of | |
| American families from Guam to my home community of South | |
| Carolina. And, yet, the President said he advised not to shoot | |
| down the balloon on January 28th when it was still over the | |
| Alaskan Aleutian Islands and not until over the U.S. mainland. | |
| What was the reason for such a delay? | |
| Mr. Kritenbrink. Congressman, thank you. On the balloon, | |
| I've been honored to brief the House before on this issue | |
| together with a number of colleagues, and I'll reState here we | |
| tracked, we detected, we surveilled, and then we took down the | |
| Chinese high-altitude balloon when it was safe to do so. The | |
| President made a decision on the advice and in consultation | |
| with our military commanders. We took the steps to protect | |
| ourselves, to mitigate against any threat posed by that balloon | |
| and then made the decision, again, to take down that balloon | |
| once it was safe to do so. | |
| It's a massive structure, 200 feet tall. The payload | |
| underneath it is the length of three buses. So the concern was, | |
| in the modeling that was done, if you take that down over land, | |
| the debris field could be quite significant and could pose a | |
| real harm to Americans on the ground, and that's why the | |
| President made the decision to take it down when he did. | |
| But I can say, Congressman, we also learned a great deal by | |
| us surveilling that balloon while it flew in our air space, and | |
| we are learning more as we have collected the payload since we | |
| took it down. | |
| Mr. Wilson. Well, to me, it's very disappointing. It was a | |
| threat to my constituents. I representative Fort Jackson, and I | |
| represent Savannah River Nuclear Laboratory. To have a spy | |
| balloon come over our State, it's just, it's inconceivable. | |
| And, indeed, Governor Greg Gianforte, Senator Steve Daines, | |
| Congressman Ryan Zinke have all said that they would have | |
| welcomed to have the balloon shot down over Montana as being | |
| only a threat to prairie dogs. | |
| And so I just find that inconceivable, and I want to ask | |
| you if you could provide, and I've asked and not been given the | |
| information, what was the exact trajectory over South Carolina | |
| and North Carolina? I would like to know what counties the | |
| balloon traveled over; and, for some reason, that has been | |
| called classified, which it's on opensecrets.com, but this | |
| needs to be revealed to the American people and what a threat | |
| this was. And I sincerely disagree with you that the thought of | |
| shooting it down off of Surfside Beach South Carolina into the | |
| ocean, it should have been recovered in some way so that we | |
| could find out what type of threat there is from the Chinese | |
| Communist Party. | |
| With that, I yield back. | |
| Mr. Kritenbrink. Congressman, thank you. Again, I do want | |
| to underscore, as I did in my opening statement, that China's | |
| introduction of this high-altitude surveillance balloon into | |
| U.S. sovereign territorial air space was irresponsible and | |
| unacceptable, full stop. But as I indicated, we tracked it from | |
| the beginning. We made an assessment of how to mitigate the | |
| risk and the determination the President and our military | |
| commanders was that it was not safe to take it down until it | |
| was off the waters of South Carolina. When we did, and in the | |
| water, we were able to recover the payload, and I'm confident | |
| we'll learn more from that. | |
| Chairman McCaul. The Chair recognizes Mr. Bera. | |
| Mr. Bera. Thank you, Mr. Chairman. Yes, I've said this a | |
| number of times in my capacity as the chair, now ranking | |
| member, on the Subcommittee on Asian Pacific, you know, if we | |
| think about the geopolitical order in 75 years post-World War | |
| II, you know, it really was U.S.-led but peace, prosperity, | |
| lifting, you know, millions out of poverty, and creating | |
| stability. And, you know, prosperity for China, as well, in | |
| that. But there's no--Mr. Chairman, thank you for having this | |
| hearing because there is no questioning, you know, where a | |
| decade ago we may have hoped as China developed a broader | |
| middle class, an entrepreneurial class, they would go in a | |
| direction of more freedom and openness and open markets. Xi | |
| Jinping's policies have taken Beijing in a very different | |
| direction, and we do not have to guess that direction, and it | |
| really does set up for, and competition is fine, but the hope | |
| is to avoid confrontation. And much of this is led by, you | |
| know, the Chinese may say, well, the United States is changing | |
| this. It isn't. It is China changing the calculus here. The | |
| aggression in the South China Sea has changed the calculus in | |
| the South China Sea, aggression across the Taiwan Straits, | |
| human rights violations in Xinjiang, you know, what they've | |
| done in Hong Kong. | |
| The Ranking Member touched on economic coercion and how | |
| they use those tools of coercion. It really does mean a whole- | |
| of-government approach, not just here in the United States but, | |
| you know, I applaud the Administration for the alliances and | |
| renewal of, you know, the elevation of Quad coalition to the | |
| leaders' level is certainly incredibly important. You know, | |
| partnership around AUKUS, incredibly important for maritime | |
| security. | |
| You know, I was just in Japan last week, and Prime Minister | |
| Kishida's Administration efforts to get to 2-percent of GDP to | |
| increase their self defense capabilities. Again, the hope is to | |
| avoid confrontation, but, given the realities that we see in | |
| the Indo-Pacific, hugely important. | |
| Secretary Kritenbrink, I applaud and hope we get the | |
| compacts done as quickly as possible and the renewed interest | |
| and focus on the Pacific Islands. Let me touch on the economic | |
| coercion component of it and, you know, the Ranking Member | |
| touched on the bill that we introduced last week in a | |
| bipartisan way with Congressman Cole, that builds on a bill | |
| that we introduced last Congress, the Countering China Economic | |
| Coercion Act that I introduced with Representative Wagner that | |
| was signed into law by President Biden. That particular bill | |
| looks at how we can engage with the private sector on issues | |
| related to PRC economic coercion and how we can bridge that gap | |
| between the public and private sector. You know, Congressman | |
| Sherman touched on some of the coercive tactics that were used | |
| against our film industry, you know, used against the NBA | |
| players and the NBA, as well. | |
| I'd just be curious, and maybe this is a question for | |
| Commerce or State, you know, how should we think about the | |
| partnership across government and the private sector to make | |
| sure we've got tools and resiliency to counter some of these | |
| coercive behaviors? Maybe, Secretary Estevez, if you want to | |
| touch on that or---- | |
| Mr. Estevez. Thank you, Congressman. While not in the area | |
| of export controls in general, you know, first of all, to go | |
| back to the point of what do we tell companies. When companies | |
| come to see me, I point out the dangers of reliance on single- | |
| source supply chains and the need to diversify, to point out | |
| what happened to companies that were operating in Russia when | |
| Russia invaded Ukraine and how they had to pull out. And so | |
| companies need to take stock of their own risk calculus, and I | |
| believe they are all doing that, which will help all of us, | |
| quite frankly, as they diversify. | |
| The other thing we need to look at is things like chips, | |
| which, you know, my boss is rolling out today. Very important | |
| for bringing technology and important advanced technologies | |
| back to other United States. We're working with our friends, as | |
| well, so that we are not reliant on China for such things. | |
| Mr. Kritenbrink. Well, Mr. Ranking Member, thank you for | |
| your comments again, and I'll reiterate we're committed to | |
| continue to step up our engagement across the Pacific Islands, | |
| including the compacts, and I know the special envoy, | |
| Presidential Envoy for Compact Negotiation. Joe Yun is working | |
| on that as we speak. | |
| On economic coercion, I do agree that we do need to work in | |
| partnership with the American private sector. I know, as a | |
| diplomat overseas, I'm incredibly proud to represent the | |
| world's finest private sector. When you look at the Indo- | |
| Pacific, $2 trillion in trade between the United States and the | |
| Indo-Pacific, a trillion dollars in U.S. investment, and almost | |
| a trillion dollars in investment from the region in the United | |
| States. This is a vitally important economic trading and | |
| investment relationship, and we look forward to working closely | |
| with our private sector to make sure that we stand up for our | |
| values and for American workers but also to protect critical | |
| technologies, as well. | |
| Chairman McCaul. The Chair recognizes Mr. Perry. | |
| Mr. Perry. Thank you, Mr. Chairman. Secretary Kritenbrink, | |
| I want to take you down a stroll down memory lane here to fall | |
| of 2019 when China realized their first case of the Wuhan | |
| virus. Now, it wasn't until January of the next year until they | |
| reported it some weeks or months later, and then in February | |
| their top bioweapons expert took control of the lab. | |
| Now, the mantra from the press and from the party in the | |
| current Administration was is that it occurred naturally. And, | |
| of course, people like me, and speaking on behalf of myself but | |
| the millions of Americans who saw all the evidence in front of | |
| them that pointed to the lab as opposed to it occurring | |
| naturally, those people were vilified in the public, and the | |
| new Administration used the information to frighten Americans | |
| and confuse them and to distort the facts. | |
| Based on that, I'm just wondering did you, does the State | |
| Department have any irrefutable evidence that the Wuhan virus | |
| came from the wet market in China? Irrefutable evidence. Do you | |
| have any? | |
| Mr. Kritenbrink. Congressman, I would point to comments | |
| that National Security Advisor Sullivan made on Sunday. He | |
| stated that there are a variety of views in the intelligence-- | |
| -- | |
| Mr. Perry. I know there are a variety of views, but the | |
| American people have been taken for a ride for 2 years, more | |
| than 2 years over this, and I want to know what evidence the | |
| State Department or you have that is used to debunk people's | |
| opinions based on what they see and what they know and what is | |
| reported as fact. What evidence--do you have a bat from the wet | |
| market? Does the State Department have one of these bats? | |
| Mr. Kritenbrink. Congressman, I'll State again there is not | |
| a definitive answer that has emerged from the U.S. intelligence | |
| community on this question. | |
| Mr. Perry. I'm not asking---- | |
| Mr. Kritenbrink. Some elements of the IC---- | |
| Mr. Perry. Sir, sir, I'm not asking---- | |
| Mr. Kritenbrink. I'm sorry. | |
| Mr. Perry [continuing]. About differences of opinion. You | |
| work for the State Department. You're the undersecretary, | |
| right? You're almost in charge over there, and the State | |
| Department speaks for the United States of America, and | |
| Americans across the country were ridiculed and vilified for | |
| having a difference of opinion. | |
| So with all due respect, sir, what facts do you have? Do | |
| you have the pangolin where the virus jumped from the pangolin | |
| to a human? Do you have it? What facts do you have? Do you have | |
| any facts whatsoever to support your claim that the virus | |
| occurred in the wet market, as opposed to the Wuhan lab? | |
| Mr. Kritenbrink. Well, Congressman, again, I'll State, if | |
| you look at what elements of the U.S. intelligence community | |
| have said, some have pointed to say they come down on the | |
| question that it looks like it was naturally occurring, some | |
| have come down on the other side of that. Some have said we do | |
| not have enough evidence to judge. | |
| Again, I will say, in conclusion, the intelligence | |
| community does not have a definitive answer on the COVID origin | |
| question. President Biden has directed from the beginning of | |
| his Administration to take all necessary steps, including all | |
| elements of our intelligence community, to get to the bottom of | |
| it. But the---- | |
| Mr. Perry. OK. Fair enough. If there are difference of | |
| opinions, then what authority does the State Department or this | |
| government have to refute the opinions based on facts that we | |
| do know? Because there are no facts at all that it occurred in | |
| a wet market, a wet market outside of Wuhan, right. There are | |
| zero. We all know that, right. But there's plenty of | |
| circumstantial evidence, if not more, because a bunch of it was | |
| destroyed. We know they destroyed the samples in the lab, | |
| right, so that nobody could see them. But if that's the case, | |
| will the State Department at least acknowledge, acknowledge | |
| that they were wrong and apologize to the millions upon | |
| millions of Americans that they disparaged for their opinions | |
| based on what they know happened in 2019 in the Wuhan Institute | |
| of Virology? Will the State Department acknowledge it and | |
| apologize? Will they ever do it? | |
| Mr. Kritenbrink. Congressman, what I will acknowledge and | |
| commit to is to doing what the President has said: that we will | |
| use all elements, including in the IC, to get to the bottom of | |
| this. But as we stand right now---- | |
| Mr. Perry. And when they get to the bottom of it---- | |
| Mr. Kritenbrink [continuing]. There is not a definitive | |
| answer that has emerged from---- | |
| Mr. Perry. Mr. Secretary, when they finally do get to the | |
| bottom of it, if they ever do get to the bottom of it, knowing | |
| that the communist Chinese destroyed a bunch of the evidence, | |
| knowing that, if they do get to the bottom of it and they do | |
| determine that it is the Wuhan Institute of Virology, will they | |
| apologize? Will the State Department apologize to the American | |
| people it disparaged? | |
| Mr. Kritenbrink. Congressman, the President has directed | |
| his team that we will share with Congress and the American | |
| people what we learn. I'll just reiterate there's not a | |
| definitive answer that has emerged from the intelligence | |
| community on this question. | |
| Mr. Perry. Thank you, Mr. Chairman. I yield. | |
| Chairman McCaul. Let me just say, when we were in the | |
| minority, we published a report finding by a preponderance of | |
| the evidence it did originate from the Wuhan lab. I feel the | |
| latest intelligence has confirmed our opinion, and that can be | |
| found on the House Foreign Affairs website. | |
| With that, the Chair now recognizes Mr. Cicilline. | |
| Mr. Cicilline. Thank you. I want to begin by thanking you, | |
| Chairman McCaul and Ranking Member Meeks, for giving us the | |
| opportunity to explore this important issue, and I really want | |
| to thank the four witnesses both for their service to our | |
| Nation but also for helping to inform today's discussion, for | |
| being with us. | |
| From the genocide against the Uyghur population in Xinjiang | |
| to the 2021 crackdown on democracy and the rule of law in Hong | |
| Kong, we've seen a glimpse at the values the People's Republic | |
| of China is trying to impress upon the world: a rejection of | |
| human rights, a commitment to authoritarianism, a silenced | |
| press, and the abandonment of the rule of law. Those values are | |
| antithetical to our own and must be confronted globally by | |
| American leadership, diplomacy, and investment. | |
| And in taking up this important work in today's hearing and | |
| those in the future while working on these issues, it's my hope | |
| that we can do so in a way that does not promote or advance | |
| xenophobic anti-China rhetoric, which we've seen lead to an | |
| alarming increase in hate crimes against Asian Americans across | |
| the country. We simply cannot allow this committee or others to | |
| give that rhetoric any oxygen because the consequences are too | |
| dangerous and too serious. | |
| I want to begin with, Mr. Schiffer. The PRC's repression of | |
| Uyghurs and other ethnic minorities is global in nature, and | |
| we've seen the PRC pressure governments in the Middle East and | |
| in South and Central Asia to cooperate with or overlook its | |
| campaign to intimidate, harass, detain, and deport Uyghur | |
| refugees and the diaspora members around the world. And there | |
| was a recent Wilson Center report that documented over 5,000 | |
| cases of Uyghur intimidation and worse. | |
| So I'd like you to speak to what USAID and the State | |
| Department are doing to urge nations to prevent the harassment | |
| and detention and deportation of Uyghurs and other ethnic | |
| minorities on their soil in the face of this kind of tremendous | |
| PRC pressure and really demands that they're making and what | |
| role we can play in Congress in supporting the work that you | |
| are doing. | |
| Mr. Schiffer. Thank you very much for that question. We | |
| have, at USAID, working with our colleagues at the Department | |
| of State, just launched a new international religious freedom | |
| and human rights assistance activity to work with members of | |
| the Uyghur community outside of the PRC and to try to provide | |
| them with the support that they need navigating this very, very | |
| oppressive environment that the People's Republic of China is | |
| trying to create for them both inside the PRC but also, as you | |
| so rightly pointed out, all around the world. | |
| We regularly engage with our partners and allies in | |
| conversations about what their governments can do, as well, as | |
| we look to align, as Secretary Kritenbrink offered, to make | |
| sure that the international community is fully engaged on this | |
| issue to speak out on the PRC's genocidal actions in Xinjiang | |
| and to support the Uyghur community wherever they may be. | |
| Mr. Cicilline. And is there anything that we should be | |
| doing additionally to support that work? | |
| Mr. Schiffer. Well, I certainly think the congressional | |
| leadership over the past several years, including legislation | |
| that the House has moved forward, has been an important part of | |
| creating the momentum that we need to be able to continue to | |
| press back against the PRC. So I would certainly look forward | |
| to working with you and your colleagues to continue to raise | |
| voices on this issue. | |
| Mr. Cicilline. Thank you. | |
| Mr. Kritenbrink. Congressman, would it be OK if I addressed | |
| that question, as well? I just want to underscore that, in | |
| response to the genocidal actions in Xinjiang, the United | |
| States has designated 12 persons under Global Magnitsky | |
| sanctions. We've imposed visa restrictions on another 7. We've | |
| coordinated with the EU, UK, and Canada on the imposition of | |
| sanctions, as well. That would be the first point, Congressman. | |
| The second point, any time we learn of Uyghurs who have | |
| been detained or harassed abroad and are threatened with | |
| forceful involuntarily return to China, we've engaged with | |
| those governments to try to stop that action. We will continue | |
| to do so. Thanks. | |
| Mr. Cicilline. Thank you. Mr. Nathan, just quickly, I know | |
| there's a lot of evidence that the Belt and Road Initiative is | |
| sort of running out of steam and financing for projects is | |
| becoming more difficult and many countries are now struggling | |
| to repay loans. Would you just speak to what the Development | |
| Finance Corporation is doing to finance projects that are in | |
| this position so that countries have an understanding that | |
| there are other options out there to deal with their needs? | |
| Mr. Nathan. Thank you for the question. For sure, when I | |
| travel and meet with leaders in the developing world, they are | |
| actively looking for an alternative and we need to be there to | |
| present it, whether that's in the Indo-Pacific, Africa, Latin | |
| America. Countries are actively seeking alternatives that are | |
| high standard that reflect values of the private sector and do | |
| not burden them with debt. I think they found out that, often, | |
| projects that are funded by the Belt and Road Initiative or by | |
| the PRC State-controlled entities turn out to be inappropriate | |
| for their local conditions and frequently not of high quality | |
| and leave them with burdensome debt loads. | |
| Mr. Cicilline. Thank you. Thank you, Mr. Chairman. I yield | |
| back. | |
| Chairman McCaul. The Chair recognizes Mr. Mast. | |
| Mr. Mast. Thank you, Chairman. I want to talk diplomacy | |
| because that's what we do here in this committee. And, hands | |
| down, one of the biggest things asked, I think, probably to all | |
| of us, either side of the aisle, is what are you doing. We see | |
| China visits Russia, Russia pulls out of New START. We see | |
| balloons flying over America. We see China testing hypersonics. | |
| And the question constantly is what are you doing. | |
| And one of those forms of diplomacy that we have to deal | |
| with this is the entity list, correct? I mean, that's one of | |
| the ways that we help deal with this to say, listen, you cannot | |
| get the nut, the screw, the bolt, the epoxy, the semiconductor, | |
| the pencil to draw it up if that's what we decide, you cannot | |
| get what you need, China, Chinese, you know, Communist Party | |
| company, you cannot get what you need to make those things that | |
| threaten America or our allies because we are going to put you | |
| on a list, correct? Correct understanding, Mr. Estevez? | |
| Mr. Estevez. I wouldn't call it a tool of diplomacy, but | |
| correct understanding. | |
| Mr. Mast. You wouldn't say, I mean, I look at diplomacy in | |
| this way, and I always ask this question is does our support | |
| equal our policy goals? So if we're allowing somebody to get | |
| something, that's a form of support. If we're stopping them | |
| from getting something, those are diplomatic efforts, right? | |
| Mr. Estevez. Close. | |
| Mr. Mast. All right. Well, I'll take that. You said close. | |
| We'll say it's close. So, sir, Mr. Estevez, looking at those | |
| entity lists, I'll call it a form of diplomacy. Whether we're | |
| going to let Chinese Communist Party entities get the supplies | |
| that they need to build things that are a threat to America, | |
| America's allies, and Americans, in order to do that, this | |
| list, how many have you published in the last year? How many | |
| have you recommended to go up to the Federal Register? I know | |
| you've talked about 12 recently. | |
| Mr. Estevez. We put 160 entities on the entity list since | |
| the beginning of this Administration. That's about a quarter of | |
| the entities in the PRC, and the entity list goes back to the | |
| 90's. | |
| Mr. Mast. Very good. So when we look at this, and I want to | |
| bring Wendy Sherman into the conversation and say, you know, | |
| it's been the conversation, I believe, from Wendy Sherman that | |
| State agrees with the action of you guys having the end user | |
| review for that, but there's really somebody higher than you | |
| all, and that's whether it's Mr. Kritenbrink or Wendy Sherman | |
| or Blinken. They might ultimately decide if those end user | |
| reviews are going to be put into the Federal Register, correct? | |
| Mr. Estevez. There's an interagency process. We never go up | |
| that high, to tell you the truth. Only 1.1 percent of | |
| discussions over licenses or entity lists even go up to the | |
| assistant secretary for adjudication because usually there's | |
| pretty good consensus on what goes on the list based on the | |
| evidence that we have. | |
| Mr. Mast. There's a process. But even if you all recommend | |
| that that review goes forward and put it on the Register, if | |
| Secretary Blinken or Mr. Kritenbrink or Wendy Sherman decide | |
| they do not want that on there, that's not going on there, is | |
| it? | |
| Mr. Estevez. The process actually flows a little | |
| differently than that. | |
| Mr. Mast. Mr. Kritenbrink, would you like to---- | |
| Mr. Estevez. We have a vote. We put people on the list. | |
| Mr. Kritenbrink. Congressman, yes. Thank you. I think we | |
| collaborate exceptionally well with our colleagues at Commerce | |
| and not just Commerce but Energy and DoD, as well, who are also | |
| part of this process. And our goal is to do exactly what you've | |
| outlined. The entities list is designed to prevent China or | |
| other actors from acquiring U.S. technology inappropriately or | |
| to use for their military modernization in ways that would | |
| threaten our interests. So we're very supportive of that | |
| effort---- | |
| Mr. Mast. So let's ask a specific question on that then. | |
| Mr. Kritenbrink. Yes, sir. | |
| Mr. Mast. I'm glad we have both of you sitting here. So how | |
| many PRC entities have passed that end user review, the | |
| committee, that have not been published yet? | |
| Mr. Estevez. I'm not aware of any. | |
| Mr. Mast. None? | |
| Mr. Estevez. None. | |
| Mr. Mast. Very good. That would be great to hear. Do you | |
| want to consult with your staff and make sure that that's the | |
| case? Anybody behind you? | |
| Mr. Estevez. I do not have to do that. | |
| Mr. Mast. Mr. Kritenbrink, are you familiar with any that | |
| Ms. Sherman might think that she agrees with the action but | |
| does not agree with the timing because it might piss off China? | |
| Mr. Kritenbrink. Congressman, I would say that, once a | |
| proposed entity listing is approved by these four agencies, | |
| this regulatory action in ERC, it goes on the entity list. That | |
| is the process. | |
| Mr. Mast. It does not just go there. You all have the | |
| opportunity to pull that back as higher leadership in the State | |
| Department. | |
| Mr. Kritenbrink. I think what I would say, Congressman, is | |
| that we feel like our job, the reason why we have this | |
| consultative body is to sit down these four agencies and to | |
| think through all of the implications. Is this proposed action | |
| going to achieve our goals? Is it potentially going to | |
| inadvertently harm our own interests or the interests of allies | |
| and partners? We have to think through all of those things, | |
| but, once we reach consensus and we vote, those actions go | |
| forward and are published on the entities list. | |
| Mr. Mast. Thank you for your time, Mr. Chairman. | |
| Mr. Kritenbrink. Thank you. | |
| Chairman McCaul. The Chair recognizes Mr. Kim. | |
| Mr. Kim of New Jersey. Thank you, Mr. Chairman. Thank you | |
| to our panelists for coming today. Mr. Kritenbrink, I wanted to | |
| start with you. I guess I just want to ask you how central to | |
| the work that we're trying to do in the Indo-Pacific, | |
| especially vis-a-vis China, how important is coalition building | |
| to our strategy and our efforts there? | |
| Mr. Kritenbrink. Well, Congressman, I would say it is | |
| absolutely vital. It is central to what we do. As the Assistant | |
| Secretary of State for East Asia and Pacific, I spend the vast | |
| majority of my time and my bureau's time on building the | |
| coalitions that you're talking about and what we refer to as | |
| building the collective capacity of our allies and partners and | |
| friends to work together with us to support the rules-based | |
| international order and to counter all challenges, including | |
| those posed by the PRC. It is absolutely central, and I would | |
| argue it is the most important thing that we do. | |
| Mr. Kim of New Jersey. I very much agree with you that it | |
| is so central and, to your point, you said perhaps the most | |
| important thing that we are trying to do. And I think this | |
| committee, we have talked a lot about, in the context of | |
| Ukraine, just how central that coalition was for our efforts | |
| over there. But what we've also recognized is that, in many | |
| ways, our coalition in the Indo-Pacific, it is much more | |
| fragmented and segmented in some ways than it is over in the | |
| Transatlantic. | |
| So I guess I want to ask you what does this kind of | |
| coalition building 2.0 look like? What is this next level that | |
| we can do to try to take that and add some greater gravity to | |
| it and pull it together? | |
| Mr. Kritenbrink. Well, thank you, Congressman. Again, we | |
| talk about building a latticework of an interlocking web of | |
| relationships. We start with our treaty allies, our five treaty | |
| allies in Asia: Japan, Korea, Australia, the Philippines, and | |
| Thailand. I would argue that our alliance relationships are | |
| stronger than they have ever been before, and we are working | |
| together not just in bilateral ways to improve our security but | |
| increasingly in trilateral and multilateral ways to advance our | |
| shared interests, not just in the security realm but in | |
| economics in terms of promoting our values. | |
| And then, beyond that, I am sure you've seen, Congressman, | |
| the President hosted an unprecedented summit with the leaders | |
| of ASEAN last year. He hosted another unprecedented summit with | |
| the leaders of the Pacific Island countries. We formed new | |
| informal mechanisms, such as the Quad, the Partners of the Blue | |
| Pacific, again forming these interlocking webs of relationships | |
| that we think are absolutely vital. | |
| Mr. Kim of New Jersey. And trying to build that trust there | |
| and that partnership there, it is so important---- | |
| Mr. Kritenbrink. Absolutely. And, sir, I feel like my No. 1 | |
| duty every day and the duty of my colleagues is to demonstrate | |
| the credibility of our commitment to the region and to our | |
| partners to let them know that they can count on us and let | |
| them know that we will all be better off, more prosperous, more | |
| secure, if we work together, including in countering threats | |
| from the PRC. | |
| Mr. Kim of New Jersey. There is a little bit of a debate | |
| here about how best to build this coalition. I want your | |
| thoughts on it. I have had a number of people come to me and | |
| say we should be applying greater pressure to some of these | |
| partners that we are working with in the Indo-Pacific, pushing | |
| them to more definitively choose between the United States and | |
| China. And I guess I wanted your thoughts on whether or not | |
| that would help or hurt your ability to build the coalition you | |
| need. | |
| Mr. Kritenbrink. Well, Congressman, I would say, generally | |
| speaking, we do not try to force countries to choose. They tell | |
| us that they do not want to choose. Most countries in the Indo- | |
| Pacific do not need an education on the threat posed by the | |
| PRC. What they want to know is how can they work together with | |
| the United States and increasingly together in these | |
| interlocking webs of relationships to advance our shared | |
| interests. | |
| The way we look at it is we are not asking countries to | |
| choose. We are working to make sure countries have choices and | |
| to make sure they can make their own sovereign decisions free | |
| from coercion. And if we do that, I am confident that we will | |
| prevail in this competition and we will continue to preserve | |
| the free and open region toward which we are working. | |
| Mr. Kim of New Jersey. One thing that I have heard when I | |
| was out there in the region talking to some of our vital | |
| partners there is they do have concern about some of how we are | |
| approaching vis-a-vis China, our rhetoric, our posture. And I | |
| guess some of their concern was saying that they really want to | |
| work with us and to be a partner, but that may be more | |
| difficult for them if they feel like or see or is perceived | |
| like the United States is the instigator for aggression or | |
| provocation in that relationship between the U.S. and China. | |
| Do you hear the same from partners that you are talking to? | |
| Mr. Kritenbrink. I do, Congressman. Look, I think it is | |
| important that we always demonstrate that the United States is | |
| a responsible actor, that we are committed to the rule of law, | |
| to peaceful resolution of disputes, committed to the rules- | |
| based regional order. And when we do that and when we work | |
| together with our partners, I think that is when we are most | |
| effective. And I think it is quite clear across the range of | |
| issues we have discussed today, I think it is quite clear which | |
| party is taking steps to undermine the rules-based---- | |
| Mr. Kim of New Jersey. And I think that is something we can | |
| highlight while underscore that we are that responsible actor. | |
| Thank you. I yield back. | |
| Chairman McCaul. The Chair recognizes Mr. Barr. | |
| Mr. Barr. Thank you, Mr. Chairman. And thank you for you | |
| and the Ranking Member holding this very important bipartisan | |
| hearing related to the threat from the Chinese Communist Party. | |
| Secretary Estevez, in your testimony, you State that in | |
| Fiscal Year 2, BIS and its interagency partners approved | |
| approximately 69.9 percent of license applications involving | |
| the PRC and denied or returned without action approximately 30 | |
| percent of such license applications. How many of those BIS | |
| licenses were approved for companies on either DoD's 1260H list | |
| of Chinese military companies or Treasury's Chinese military | |
| industrial complex companies list? | |
| Mr. Estevez. Unfortunately, Congressman Barr, I would have | |
| to get you that information, which I will be happy to---- | |
| Mr. Barr. Does BIS have that information at your | |
| fingertips? | |
| Mr. Estevez. When we vote through the interagency, | |
| obviously, Defense can bring, first of all Defense can propose | |
| anything they want and Defense can raise the concern over any | |
| license based on their list. | |
| Mr. Barr. Well, here is the concern I have. And you and I | |
| have had a good conversation about this: the lack of | |
| coordination and the lack of visibility across agencies, big | |
| problem, big problem. How important is it that Commerce entity | |
| list designations be coordinated or be cross-referenced by OFAC | |
| or Treasury or DoD for purposes of sanctions to prevent | |
| American investors from financing entities tied to the CCP or | |
| these Chinese military industrial complex firms that are still | |
| included in emerging growth index funds either on U.S. | |
| exchanges or foreign stock exchanges or even through private | |
| equity or credit investments? | |
| Mr. Estevez. So what was locked on back there, obviously, | |
| investors should be looking at all those lists. As far as | |
| coordination between myself, the Treasury Department, and the | |
| Department of Defense, we actually have pretty excellent | |
| coordination going on right now, certainly with regard to what | |
| we're doing---- | |
| Mr. Barr. Well, I am not sure we do. Sorry. Reclaiming my | |
| time. I am not sure we do because the OFAC list that is subject | |
| to the EOs, they are not aligned, frankly, with your entity | |
| list and certainly not with some of these other lists, the | |
| military end user list, the unverified list even. | |
| And here is what I would just say editorially, and we are | |
| going to be looking at this in the Select Committee on China | |
| and in this committee and in the Financial Services Committee | |
| on which I serve. Restrictions on capital flows to China should | |
| be aligned with our export controls regime and limited to | |
| capturing outbound investments that circumvent the spirit of | |
| existing export control rules. In other words, why should | |
| restrictions or notification regime on outbound American | |
| investments in China not also be applicable to what is on an | |
| export control list? | |
| Mr. Estevez. And, of course, we are working on an outbound | |
| investment program, and I know that the Congress is looking at | |
| that, as well. | |
| Mr. Barr. Do you have visibility into PRC entity list | |
| companies that remain in index funds listed on U.S. or other | |
| exchanges? | |
| Mr. Estevez. I do not. | |
| Mr. Barr. That is what we need. That is what we need. That | |
| is what we do not have right now. So we need list coordination | |
| because if we are worried about export controls, if we are | |
| worried about companies that are on this entity list, but | |
| American investors are financing, unwittingly financing these | |
| same companies, that is a problem. That is a gap that we have | |
| that we need to fix, and I appreciate your attention to that. | |
| Mr. Nathan, and also, believe me, we are going to be | |
| talking to Treasury about that problem because you are doing a | |
| good job, you have got a good entity list, but we need | |
| coordination so that we are not unwittingly financing these | |
| technologies even if we have export controls. | |
| DFC, Mr. Nathan, we have talked about this, DFC must | |
| prioritize a lower middle income economies defined by the World | |
| Bank, but there are some higher-income economies where Belt and | |
| Road is alive and well. Would you like to have the capability | |
| of going into some of those higher-income countries that are | |
| strategic, like Panama, where China is all over the Canal? | |
| Mr. Nathan. Thank you for the question, and I appreciate | |
| our previous discussions, Congressman. Congress has provided us | |
| the opportunity specifically for Energy to operate in high- | |
| income countries in Europe through the European Energies | |
| Security and Diversification Act. If Congress moved forward | |
| other legislation, we would obviously work together to make | |
| sure that that was aligned with our objectives and our mission | |
| under the BUILD Act. As you and I have discussed previously, | |
| some of the World Bank income classifications are a little bit | |
| clumsy in terms of the countries where we can operate. | |
| Mr. Barr. And last question to you. Due to budgetary | |
| treatment of DFC equity investment, DFC has not been able to | |
| fully unlock this tool. How can we help you with that? | |
| Mr. Nathan. Excellent question, and thank you for asking | |
| it. Equity is a very important tool for us to be forward | |
| leaning on risk to be able to fund infrastructure projects, | |
| companies, and other projects that meet the needs of the | |
| countries where we are operating and give them the choice that | |
| they are looking for as an alternative to the State-directed | |
| investment from the PRC. The current budgetary treatment does | |
| not allow us to fully realize the promise of the tool and I | |
| believe what the intention of the BUILD Act was. We are looking | |
| for a way to fix that so that we can have more certainty and a | |
| larger amount of equity to deploy to fulfill our mission. An | |
| equity fix would be very useful. | |
| Mr. Barr. Thank you. My time is expired, Mr. Chairman, but | |
| I look forward to working with you, Mr. Chairman, on this issue | |
| that companies on the BIS entity list need to be included on | |
| Treasury's CMIC sanctions list. And I yield. | |
| Chairman McCaul. And I agree with the gentleman, and I will | |
| be working very diligently on that. And I also agree with the | |
| equity issue. We need to fully fund the equity. Otherwise, you | |
| cannot fulfill what Congress intended. | |
| So with that, the Chair now recognizes Ms. Jacobs. | |
| Ms. Jacobs. Thank you, Mr. Chairman, and thank you to our | |
| witnesses. Assistant Secretary Kritenbrink, I want to start | |
| with you and zoom out a little bit. I think we spent a lot of | |
| time talking about strategic competition, and I think the | |
| Administration has rightly identified the PRC as a challenge | |
| and taken several actions engaged in strategic competition. But | |
| I would like to hear from you what are we competing for, and | |
| what is the Administration's end goal with China so that we're | |
| not just talking about competition as an end in and of itself? | |
| Mr. Kritenbrink. Yes, ma'am. Thank you very much for the | |
| broad strategic question. We are competing for and fighting for | |
| the kind of region that we want to live in. We talk about a | |
| free and open region where countries can freely pursue their | |
| interests and where people in those countries can enjoy | |
| freedom. We are talking about an interconnected region where we | |
| work closely with our allies, partners, and friends. We are | |
| talking about a prosperous region, right, where everyone | |
| benefits from free and unfettered trade. We are talking about a | |
| secure region where disputes are resolved peacefully and we | |
| counter threats to security. And we are talking about a | |
| resilient region that has the capacity to respond to | |
| transnational threats, like climate change and pandemic | |
| disease. We are fighting for freedom and democracy, as well. | |
| That is what we stand for. It is an affirmative vision. That is | |
| where I start and end my day everyday. What are we doing | |
| everyday to advance those affirmative goals. | |
| As far as our end goal with China, we talked about the | |
| means that we use in our competition, but we also are | |
| interested in exploring cooperation where it is in our | |
| interests to do so. And at a minimum, whatever we do, we want | |
| to keep channels of communication open so that we do not have | |
| some kind of a miscalculation that could veer into unintended | |
| conflict. | |
| Ms. Jacobs. Thank you. | |
| And I just think it is really important that we stay | |
| focused on those end goals because China is not going anywhere, | |
| and we do not want to feed into the CCP's talking points around | |
| us just being out to weaken China for the sake of weakening | |
| them indefinitely, and figuring out what kind of world we | |
| actually want to try to get to. | |
| On the question of keeping lines of communication open, | |
| quickly, I know that Secretary Blinken told Wang Yi that we do | |
| want diplomatic engagement and open lines of communication and | |
| he would be prepared to visit Beijing as soon as the conditions | |
| allow. When exactly will conditions allow for the visit to be | |
| rescheduled? And what conditions are you looking to? | |
| Mr. Kritenbrink. Congresswoman, thank you for your | |
| question. | |
| Yes, the Secretary did make the decision, following the | |
| irresponsible, non-acceptable intrusion into our airspace of | |
| the Chinese high-altitude balloon, that he simply could not | |
| travel to China at that time and be able to conduct any of the | |
| business across the broad-ranging agenda that he had intended | |
| to. We did say that he would look to travel when conditions | |
| allow. We will determine what those conditions are and when. | |
| Ms. Jacobs. Thank you. | |
| Well, I think many of us on the committee would encourage | |
| keeping lines of communication as open as possible, recognizing | |
| that it takes two to be able to do that. | |
| Mr. Kritenbrink. Yes, ma'am. I would say, unfortunately, | |
| sometimes our Chinese friends have used those channels of | |
| communication as a source of leverage, and that is unfortunate. | |
| Ms. Jacobs. Yes. | |
| Assistant Administrator Schiffer, I want to go to you. You | |
| know, we have had a lot of talk about the Belt and Road | |
| Initiative and what China has been doing in that regard. I | |
| think we sometimes have a temptation to play Whac-A-Mole with | |
| our investments and just feel like we need to show up wherever | |
| China is showing up, even if it is not necessarily in our | |
| strategic interest. | |
| So, I just wanted to hear how USAID is viewing this part of | |
| their work and how you are thinking about prioritizing | |
| strategic investments where we have a comparative advantage, | |
| instead of just this sort of trying to match one-to-one. | |
| Mr. Schiffer. Thank you for that question. | |
| You know, it is absolutely critical, if we are going to be | |
| successful in creating a sort of world that we seek to create, | |
| as Secretary Kritenbrink laid out, that we are disciplined and | |
| strategic in our approach. And I would offer that I think we | |
| have been, as we look to work with countries that are on the | |
| front line of visioning this course of economic practices and | |
| countries and partners that are critical for our own security, | |
| and for being able to build the free and open architecture that | |
| we seek, whether it is in the Indo-Pacific or around the world. | |
| The challenge that we have is that, while Beijing's model | |
| for development assistance isn't actually about development | |
| assistance--it is about geostrategic advantage--our model is | |
| premised on being able to create bankable propositions that can | |
| attract capital and that can have market access for success. | |
| And that is a much trickier proposition. | |
| But we are seeking to fully align our work with the | |
| strategic priorities of the Administration, including in the | |
| Indo-Pacific. We are looking to expand our presence there | |
| significantly over the course of this year. | |
| Ms. Jacobs. Thank you, and I would just note we are already | |
| seeing many countries where the Belt and Road Initiative has | |
| backfired and where countries are starting to sour on Beijing | |
| as a result. So, I appreciate your strategic approach. | |
| And, Mr. Chairman, I yield back. | |
| Chairman McCaul. The chair recognizes now the chair of the | |
| Indo-Pacific Subcommittee, Mrs. Kim. | |
| Mrs. Kim of California. Thank you, Chairman McCaul and | |
| Ranking Member Meeks, for holding today's hearing on the | |
| generational challenge posed by the PRC. | |
| I want to ask the first question to Mr. Estevez. When you | |
| came before the committee more than 6 months ago, you stressed | |
| your desire to harmonize the various U.S. Government lists | |
| related to PRC companies. And I think most of us agree that is | |
| a common-sense policy that needs to be implemented. | |
| So, for example, CRRC, a giant, well-known PLA supplier, is | |
| not on the Commerce Entity List, but it is on the DOD military | |
| list, right? That seems like a glaring omission. So, what | |
| specific steps have you taken to work with DOD to harmonize | |
| these lists, and when can we expect this process to be | |
| implemented? | |
| Mr. Estevez. So, a couple of things about the lists, and I | |
| understand the confusion over different lists. Different lists | |
| have different authorities around them. So, the DOD list, which | |
| is required by the 1999 NDAA, I believe, has no consequence for | |
| the companies that are listed. Whereas, the Entities List, | |
| which requires factual and articulable information in order to | |
| put somebody on the Entity List, has consequences for the | |
| company. So, I need data in order to put someone on the Entity | |
| List, as opposed to research. Also, I really want to see if | |
| there are exports to that company, because, otherwise, it is a | |
| useless enterprise. But we do put people on the Entity List | |
| with very few exports. | |
| DOD, which sits on the committees that authorize licenses | |
| and put people on the Entity List, can always propose someone | |
| to go onto the Entity List, and then, we will take that up and | |
| we will look at the facts and the data around that. So, from | |
| the standpoint of whether DOD can put someone on the list, the | |
| absolute answer is yes, through the process. | |
| Mrs. Kim of California. So, you are referring to legal risk | |
| associated with harmonizing DOD lists with the Entity List. Let | |
| me tell you, our committee has consulted many lawyers and legal | |
| experts about this issue, but they have been told that BIS | |
| faces minimal legal risks. | |
| So, for instance, Congress expressly precludes BIS from the | |
| Administrative Procedures Act and sets a very low bar to clear | |
| for entity listings; that an entity be, or have the potential | |
| to be, a threat to U.S. national security and foreign policy | |
| interests. So, we have found only two recent cases in which PRC | |
| companies took BIS to court over an entity listing, and BIS | |
| prevailed both times. | |
| So, can you please explain the legal foundation for your | |
| assessment? | |
| Mr. Estevez. Representative Kim, I am not a lawyer. So, I | |
| am not going to give you the legal foundation that my lawyers | |
| happily articulate to me all the time, when I am saying, Why | |
| cannot we put this person on the list? Because we do need to | |
| have fact-based. We are not the PRC. We do not make it up. We | |
| actually follow a process and we live by the rule of law. | |
| Mrs. Kim of California. It sounds like, to me, it is more | |
| like a political concern than a legal one. | |
| Mr. Estevez. Zero political concern, ma'am. | |
| Mrs. Kim of California. Well, let me go on. How do you | |
| explain the declining rate of BIS entity listings? Because, by | |
| our count, there were 114 in 2019, 147 in 2020, 85 in 2021, and | |
| 68 in 2022. So, can you explain that? | |
| Mr. Estevez. I would have to go back to look at that, but I | |
| do not see us having a declining rate. I actually---- | |
| Mrs. Kim of California. All right. | |
| Mr. Estevez [continuing]. See us as having an expedited | |
| rate on---- | |
| Mrs. Kim of California. All right. I will move on then. | |
| You know, I would like to ask a question to Mr. | |
| Kritenbrink. I am going to ask you about the backlog of $21 | |
| billion in sales to Taiwan. Last Congress, as you know, I | |
| introduced the Arms Exports Delivery Solutions Act, and that | |
| requires DOS and DOD to report to Congress on reasons for | |
| backlogged sales to Taiwan and the Indo-Pacific allies. And it | |
| provides the authority that Congress could use to expedite | |
| these deliveries. | |
| So, the legislation was already signed into law through | |
| NDAA. So, can you provide me with an update on the | |
| implementation of that law and what steps that the State | |
| Department is taking to expedite the delivery of arms to Indo- | |
| Pacific partners and allies, especially our allies who are | |
| facing threats from the PRC and North Korea? | |
| Mr. Kritenbrink. Madam Chairwoman, thank you for your | |
| question on this, the specific question about a backlog in arms | |
| sales to Taiwan. | |
| I can assure you that the U.S. Government, and certainly | |
| the State Department, we are committed to meeting our | |
| obligations under the Taiwan Relations Act to assist Taiwan in | |
| maintaining a sufficient self-defense capability. | |
| Just last year, we notified 13 different sales to Taiwan, | |
| which is the largest single number of notifications for Taiwan | |
| in the last 20 years. I would say, ma'am, there are production | |
| and delivery delays worldwide, not just for Taiwan, but for | |
| other partners. We are working expeditiously to get through | |
| those. | |
| But I would also say, sometimes I think that the notion | |
| that there is a long backlog, some of that can also be | |
| misleading. Because when we notify the Congress of the intent | |
| to have a sale, it does take some time for the companies to, | |
| then, negotiate those contracts and implement them. | |
| But I can assure you we are doing everything that we can. | |
| The Biden-Harris Administration has notified more than $5 | |
| billion in foreign military sales to Taiwan, $37 billion since | |
| 2010 and $21 billion since 2019. We are committed, not just to | |
| arms sales to help Taiwan grow its deterrent capability, but | |
| also diplomatically with allies, partners, and friends to | |
| support the peace and stability within international---- | |
| Mrs. Kim of California. Would you be able to tell us | |
| quickly the percentage of those sales that were signed off | |
| since President Biden has been in office? | |
| Mr. Kritenbrink. I would have to do the math, but the | |
| figure, as we stand today, is $5 billion thus far. But I would | |
| also say, beyond just comparing the numbers, it is important to | |
| look at the kinds of systems. And again, in consultation with | |
| our partners in Taiwan, we are focusing on building Taiwan's | |
| asymmetrical defense capabilities, which we think--we both | |
| think is most effective in maintaining a deterrent capability, | |
| so as to maintain peace and stability. | |
| Mrs. Kim of California. Thank you. My time is up. So, I | |
| yield back. Thank you. | |
| Chairman McCaul. The chair recognizes Ms. Manning. | |
| Ms. Manning. Thank you, Mr. Chairman. | |
| And thank you to all of our witnesses for your service to | |
| our country. | |
| Assistant Secretary Kritenbrink, I have just returned from | |
| a congressional trip to Japan, where we met with the Prime | |
| Minister and a host of lawmakers who talked extensively about | |
| their concerns about Chinese aggression and their decision to | |
| double their military spending--really an unprecedented | |
| decision--but also about their deep economic relationship with | |
| China. | |
| How can our relationship with Japan enhance our position | |
| with regard to China, and what additional steps can we be | |
| taking? | |
| Mr. Kritenbrink. Ma'am, thank you very much for your | |
| question. | |
| There is certainly no more important ally than Japan. And I | |
| think that our alliance has never been stronger, and our | |
| cooperation, both in a bilateral alliance sense, but, | |
| increasingly, globally, has really never been stronger. Japan | |
| is chair of the G7 this year, and we are working really | |
| diligently together with them, under their leadership, to make | |
| sure we take steps around the globe to promote peace and | |
| prosperity vis-a-vis the war in Ukraine, but also encountering | |
| Chinese economic coercion as well. Certainly, from an alliance | |
| perspective, we very much welcome the historic steps that Japan | |
| has taken under Prime Minister Kishida. | |
| The decision, as you noted, to increase their defense | |
| spending to 2 percent of GDP, their unprecedented national | |
| security strategy, which is almost completely aligned with the | |
| same vision that we have outlined, and that other partners | |
| across Asia and Europe have outlined, for their vision of the | |
| kind of world that we want to live in--I think our alliance | |
| collaboration and coordination is closer than ever before. We | |
| have collaborated as well in ways that the U.S. military will | |
| be adjusting its force posture in Japan, which also we believe | |
| will further contribute to regional stability. | |
| And increasingly, ma'am, maybe the thing I am most excited | |
| about is that Japan has become our partner across the region | |
| and across the world, in Southeast Asia, certainly in the | |
| Pacific Islands, and on the Ukraine war as well. Japan has | |
| played an absolutely leading role, and we are very grateful for | |
| that. And again, I think our alliance is stronger than ever, | |
| and we both benefited from the agreement. | |
| Ms. Manning. Thank you. | |
| Under Secretary Estevez, can you share with us details | |
| about the recent deals the U.S. has reached with Japan and with | |
| the Netherlands on export controls that are important to our | |
| efforts to deal with China's aggressive behavior? | |
| Mr. Estevez. What I can say, Congresswoman, is that, first, | |
| multilateral controls are critically important when we do these | |
| types of things. We are always in deep discussion with our | |
| allies around that. And further than that, I would have to say | |
| we need to talk in a closed hearing. | |
| Ms. Manning. OK. Thank you. | |
| So, Assistant Secretary Kritenbrink, I am going to go back | |
| to you. One of the other things that we learned from our | |
| friends in Japan is that fewer Japanese students are coming to | |
| the U.S. to study, as opposed to a large number of Chinese | |
| students who are now studying in the U.S. Is this an issue of | |
| concern, and if so, how can we increase the number of Japanese | |
| students to strengthen that relationship among different | |
| generations? And also, how can we harness the talent of the | |
| Chinese students who are studying here to help our country? | |
| Mr. Kritenbrink. Yes, Congresswoman. Thank you. Vitally | |
| important questions. | |
| I continue to believe that people-to-people ties are an | |
| absolute essential element of many of our partnerships around | |
| the world. Certainly, that is the case with Japan. And I can | |
| speak from personal experience, having been an exchange student | |
| as an undergrad in Japan for a year, which was a really | |
| wonderful and life-altering experience. | |
| We have been concerned to see the decrease in the number of | |
| Japanese students studying in the United States. And my team, | |
| together with colleagues across the State Department, across | |
| the interagency, and our fantastic embassy in Tokyo, are taking | |
| steps to further highlight the benefits of studying in the | |
| United States and the benefits of growing those people-to- | |
| people ties, which remain, obviously, very deep between the | |
| United States and Japan. | |
| But, ma'am, I would say as well, you could say the same for | |
| the importance, continued importance, of people-to-people ties | |
| between the United States and China. There are some 290,000 | |
| Chinese students in the United States right now. I think, as | |
| one of the Members of Congress made clear earlier, we should | |
| always distinguish between the Chinese Communist Party and the | |
| Chinese people. | |
| I am confident that the study that is carried out, the | |
| legitimate study carried out by Chinese students in the United | |
| States benefits them, benefits the United States as well. And I | |
| know a large number of those very talented students end up | |
| staying in the United States and contribute to our society and | |
| our economy here as well. | |
| And the final point, ma'am, that I'll make, that a Member | |
| made earlier as well, I hope that we are also very careful, as | |
| we focus on legitimate concerns about the Chinese Communist | |
| Party, as we focus on some of the concerns about how some of | |
| these exchange programs were in some instances not used for | |
| legitimate purposes, we do have to make sure, again, we are | |
| distinguishing between the Chinese people and the Chinese | |
| Communist Party. And we also have to make sure that none of our | |
| actions contribute to a disturbing rise in discrimination and | |
| hate directed at Asian Americans. | |
| Thank you. | |
| Ms. Manning. Thank you. My time has expired. I yield back. | |
| Chairman McCaul. The chair now recognizes the chair of the | |
| Western Hemisphere Subcommittee, Ms. Salazar. | |
| Microphone? | |
| Ms. Salazar. Yes, thank you, Chairman, for holding this | |
| very critical hearing. | |
| And as we have spoken, the penetration of China in Latin | |
| America is real and terrifying. It has reached a level where | |
| our national security is in danger. Almost 30 percent of | |
| China's global lending goes to Latin America. That is almost | |
| $140 billion. China has a physical presence in 25 out of the 31 | |
| Latin American countries and is the second largest user of the | |
| Panama Canal. | |
| But we know that the Chinese are not here for trade; they | |
| are here for war. And why do I say that? Because 10 years ago, | |
| China sold Hugo Chavez/Venezuela VN1 tanks and advanced radar | |
| systems. Bolivia, via Evo Morales, is using right now Karakorum | |
| fighter jet planes, one of China's most advanced fighter jets. | |
| And now, Argentina--that is very concerning--is considering | |
| opening Chinese fighter jet factories. Chairman Xi Jinping has | |
| been to Latin America more times than Presidents Obama, Trump, | |
| and Biden combined in the last 10 years. And I will explain to | |
| you what bothers me the most at this moment, and it should | |
| scare all of us. | |
| Assistant Secretary, Mr. Kritenbrink, thank you for being | |
| here and for wanting to answer our questions. | |
| Ten years ago, | |
| [inaudible], who is today Argentina's Vice President, | |
| Cristina Fernandez, who has been accused of corruption and who | |
| stole millions of dollars from the Argentinians, now she has | |
| sold her soul to the Chinese by allowing them to have this, a | |
| deep space station the size of 400 football fields in the | |
| middle of the Patagonia desert--400 football fields. I am sure | |
| the Chinese are very interested in studying the stars and every | |
| constellation, but from the Argentina skies. But the problem is | |
| that Argentina has no idea what is going on there because the | |
| Chinese do not let them in. They do not let them in on | |
| Argentinian soil. | |
| So, my question to you is, how dangerous is this station | |
| for our national security, sir? I am asking you, Assistant | |
| Secretary, are you as concerned as we are, yes or no? | |
| Mr. Kritenbrink. I will say two things, ma'am. One, we are | |
| concerned with China's efforts around the world to increase its | |
| military presence, No. 1. And we---- | |
| Ms. Salazar. But I am talking about this space station, in | |
| particular. | |
| Mr. Kritenbrink. No. 2, I would have to consult with my | |
| colleagues across the interagency and get back to you. And | |
| perhaps it would be more appropriate---- | |
| Ms. Salazar. You do not know anything about this? | |
| Mr. Kritenbrink. Perhaps it would be more appropriate in a | |
| classified session. | |
| Ms. Salazar. But I am asking you, do you know about this | |
| deep space station in Patagonia? | |
| Mr. Kritenbrink. I am not an expert on this situation. | |
| Ms. Salazar. You are not? So, you did not know this | |
| happened? | |
| Mr. Kritenbrink. I am not an expert on the issue that you | |
| raise---- | |
| Ms. Salazar. Four hundred football fields in the middle of | |
| Patagonia. I mean, isn't that concerning? Does this have | |
| anything to do with the Chinese balloon that was flying over | |
| our territory? | |
| Mr. Kritenbrink. Again, I'll say, ma'am, that we are aware | |
| of a number of steps that China has taken around the world to | |
| increase its military presence---- | |
| Ms. Salazar. I'm talking about Latin America and I'm | |
| talking about this---- | |
| Mr. Kritenbrink. Understood. | |
| Ms. Salazar. You do not? You do not know about this? | |
| Interesting. OK. So, who does? | |
| Mr. Kritenbrink. Ma'am, as I said, I would be delighted to | |
| consult with my colleagues in the interagency and get back to | |
| you. And perhaps it would be most appropriate to do so in a | |
| classified session. But I would be happy to do that. | |
| Ms. Salazar. OK. So, interesting. Right. | |
| So now, let me ask you something else. Do you also know | |
| that Cristina Fernandez, the actual Vice President, wants to | |
| buy 18 Chinese JF-17 fighter jets? They want to buy them from | |
| the Chinese. Are you aware of that? And then, not only that, to | |
| build a fighter jet factory in Buenos Aires and sell those | |
| fighter jets to other neighbors, meaning Paraguay, Uruguay, | |
| Chile, Bolivia. Are you aware of that? | |
| Mr. Kritenbrink. Ma'am, again, I'm not an expert on either | |
| of those questions, and I would be happy to take that back and | |
| come back to you. | |
| Ms. Salazar. OK. So, we certainly hope that either you or | |
| one of your colleagues can come back to this forum and explain | |
| to us---- | |
| Mr. Kritenbrink. We look forward to that. Thank you. | |
| Ms. Salazar. I would imagine that it is pretty concerning. | |
| So, since we cannot get any answers from you, then, I was | |
| going to use this forum to send a message to the Argentinians, | |
| specifically to the Vice President. And I'm going to do it in | |
| Spanish, because maybe they are not hearing from you, but maybe | |
| they will hear it from me. And I'm going to forewarn them that, | |
| if they decide to build a fighter jet factory of Chinese | |
| fighter jets, it is a very bad idea for them, and moving | |
| forward, and everything that has to do with the relationship | |
| with the United States. So, that is why I am going to say it in | |
| Spanish, and I beg your pardon, if you do not understand. | |
| [Ms. Salazar speaks in Spanish.] | |
| Thank you, Mr. Chairman. I yield back. | |
| Chairman McCaul. Thank you, Ms. Salazar. | |
| And I will be requesting a classified briefing on this very | |
| issue. | |
| Ms. Salazar. Thank you. | |
| Chairman McCaul. The chair now recognizes Mr. Dean. | |
| Ms. Dean. Well, it is Madeleine. | |
| Chairman McCaul. I'm sorry, Madeleine Dean. What am I | |
| saying? Excuse me. Apologies. | |
| Ms. Dean. Thank you. Thank you, Mr. Chairman McCaul, | |
| Ranking Member Meeks, and to all of our witnesses for | |
| testifying. | |
| I hope you know that some of our absences in this room | |
| reflects not at all on the subject matter and your work, but on | |
| a markup in another committee at the same time. | |
| So, with the limited time that I have, I would like to | |
| examine and understand China's role in illicit fentanyl and | |
| what the United States is doing about it. We all know that | |
| fentanyl is wreaking havoc on our Nation, on our communities. | |
| In the year ending September 2022, CDC estimates that | |
| synthetic opioids, mainly fentanyl, were responsible for about | |
| 73,000 overdose deaths, 70 percent of all drug overdose deaths, | |
| which topped 108,000 in a single year. Those numbers are | |
| staggering. That is 300 people a day dying of overdose. | |
| Some of you may know this is an issue personal for me. I | |
| have a son in recovery, long-term recovery, from opioid | |
| addiction, now for over a decade. By the grace of God, he is in | |
| that space. But we know too many of our children and adults are | |
| not, and we are losing them. | |
| China was the primary source of illegal fentanyl entering | |
| the United States until the PRC imposed controls in 2019. | |
| Today, Mexican drug cartels rely on PRC-sourced precursor | |
| chemicals to produce fentanyl. While cooperation between the | |
| United States and PRC has yielded some success in curbing | |
| illegal fentanyl, recent tensions have hindered that progress. | |
| Under Secretary Estevez, Assistant Secretary Kritenbrink, | |
| how is the Biden Administration working to pressure the PRC to | |
| improve further controls on fentanyl precursors? And what is | |
| the Administration doing, what progress is being made, to | |
| pressure the PRC to come back, financial flows, from illicit | |
| fentanyl? Under Secretary Estevez or--either one, yes. | |
| Mr. Kritenbrink. Ma'am, thank you very much for your | |
| question. | |
| Certainly, we recognize the tragedy and the travesty caused | |
| by these opioids, synthetic opioids, and certainly fentanyl. I | |
| think you have described it very well, ma'am. China did take | |
| steps in 2019 to control fentanyl, which brought direct | |
| shipments of fentanyl down to almost zero. Now, the problem, | |
| ma'am, has transformed into precursor chemicals that are coming | |
| out of China are being diverted elsewhere, and then, | |
| manufactured into fentanyl, synthetic opioids, and brought into | |
| the United States. | |
| I would say we have done two things. One, in our | |
| engagement, direct engagement, with the PRC, we have made | |
| cracking down on this precursor fentanyl problem one of our | |
| absolute highest priorities. We have told the Chinese they need | |
| to take a number of steps to make sure that they and their | |
| entities know to whom they are selling these precursors, to try | |
| to prevent their diversion, to make sure that they are properly | |
| labeled, and the like. And I will say, candidly speaking, | |
| ma'am, our conversations have not been very satisfactory on | |
| that for a variety of issues, partly related to the broader | |
| bilateral relationship, partly related to some of the concerns | |
| that the Chinese have, which we think are unfounded. But I can | |
| assure you this is an absolute top priority in our engagement | |
| with China. | |
| The second major thing that we are trying to do is work | |
| with other countries in the world to together put pressure on | |
| China to take the right steps. We are not the only country that | |
| suffers from this scourge. Certainly, in North America, others | |
| do, but this has increasingly been becoming a global problem. | |
| Thank you. | |
| Mr. Estevez. And if I could? | |
| Ms. Dean. Yes, please. | |
| Mr. Estevez. Unfortunately, there is no exports going to | |
| the fentanyl or precursor manufacturer in China. However, we | |
| are working with DEA right now to assess whether we can put | |
| restrictions on machinery or lab equipment that they use for | |
| that. So, we are doing that kind of assessment, working both | |
| with law enforcement and my Export Administration side to see | |
| what we can do to crack down on that. | |
| Ms. Dean. And if I could followup, Mr. Kritenbrink, you | |
| said that direct engagement is not going very well. So, what do | |
| we do in the face of that? | |
| Mr. Kritenbrink. I would say two things. One, we haven't | |
| given up in our direct engagement with the Chinese and using | |
| all tools and all leverage at our disposal to try to make | |
| progress directly with the Chinese. | |
| But I think, as I hope I have made clear here today, I | |
| think equally important in our diplomacy writ large with China, | |
| and on the fentanyl issue as well, is to work together with our | |
| partners and friends who are also suffering from the diversion | |
| of these precursor chemicals, and together, to engage the | |
| Chinese and put pressure on the Chinese to do the right thing, | |
| to control these chemicals in a way that prevents their | |
| diversion in illegal manufacturing of fentanyl. | |
| Ms. Dean. Well, I hope you will call upon me and call upon | |
| all of us to be partners with you in making sure that we do | |
| everything possible--and we have to think outside the box-- | |
| everything possible to reduce the trafficking, the manufacture | |
| of fentanyl, the trafficking of fentanyl. | |
| We now know that it is being laced into almost anything and | |
| you do not have to be an addict to die of this. We heard | |
| testimony from a father whose 15-year-old son Noah recently | |
| died of fentanyl poisoning, thought he had purchased a Percocet | |
| pill. So, you do not have to be an addict. It is not one thing | |
| or another. | |
| This is extraordinarily deadly in our communities. So, | |
| anything we can do to partner with you, Congress can partner | |
| with you, please call upon us. | |
| Mr. Kritenbrink. Yes, ma'am, and thank you for your | |
| leadership on this issue. Thank you. | |
| Chairman McCaul. And thank you, Ms. Dean, and I look | |
| forward to working with you and the ranking member on this very | |
| important issue. This is, obviously, a very bipartisan issue, | |
| and we would like to get something done. And it touches | |
| thousands of lives, and I think 100,000 young people died just | |
| this last year. So, thank you for bringing that up. | |
| The chair now recognizes Mrs. Radewagen. | |
| Mrs. Radewagen. Talofa | |
| [speaking Samoan]. Good morning. | |
| Thank you, Chairman McCaul, Ranking Member Meeks. | |
| And thank you all for testifying today. | |
| Secretary Estevez, my questions are for you. Why is it | |
| appropriate for BIS to let U.S. technologies be exported to | |
| SMIC to advance the CCP's military modernization efforts? | |
| Mr. Estevez. Thank you for that question. | |
| SMIC is on the Entity List. It is on the Entity List with | |
| not a complete stop. It is we prevent the most advanced | |
| capabilities for making semiconductors from going to SMIC. So, | |
| they cannot make semiconductors below 14 nanometers. | |
| Mrs. Radewagen. Thank you. | |
| Following up on that, does BIS think it has visibility into | |
| where the chips produced by a CCP military company are going? | |
| Mr. Estevez. Most chips actually made in China are consumed | |
| in China. However, we are watching to see if they are moving | |
| chips to Russia in violation of our sanctions. | |
| Mrs. Radewagen. Is increased dependency on the PRC for | |
| these types of chips a national security issue? And how many | |
| PRC chips are you comfortable in having in DOD systems and U.S. | |
| critical infrastructure? | |
| Mr. Estevez. So, my export controls do part of the job | |
| here. The other part of the job is what we call in Commerce | |
| ``playing defense''; the other part plays offense. | |
| I want to thank Congressman McCaul for his support of the | |
| CHIPS Act, being rolled out as we speak. | |
| Developing capability in the United States for the most | |
| advanced chips is critical. And for me personally, no chip in a | |
| DOD system should come from anywhere else but the United | |
| States. | |
| Mrs. Radewagen. If these are risks, why is BIS failing to | |
| act and mitigate this threat, when it can easily use existing | |
| authorities? | |
| Mr. Estevez. I'm sorry, ma'am, I believe that we are | |
| stopping the most advanced chips from being made in China. | |
| Chips are a ubiquitous commodity at the legacy level. | |
| Mrs. Radewagen. Thank you, Mr. Chairman. I yield back. | |
| Chairman McCaul. The chair now recognizes Mr. Crow. | |
| Mr. Crow. Thank you, Mr. Chairman. | |
| And thank you, all of you, for your testimony today. | |
| My first question is about Afghanistan and China's efforts | |
| to capitalize on some of the mining opportunities there. In | |
| 2008, under the Karzai Administration, the Afghans signed a 30- | |
| year contract with a Chinese joint venture company to extract | |
| high-grade copper from Mes Aynak. Can one of you give me an | |
| update on Chinese involvement with regard to that contract and | |
| their operations to try to get copper out of Afghanistan? | |
| Mr. Kritenbrink. Representative Crow, thank you for your | |
| question. I would have to take that back and get back to you. | |
| I'm not familiar with the details of that deal. I know of it in | |
| general terms, but not in any detailed way. But I would be | |
| happy to bring that back. | |
| Mr. Crow. Yes, that would be great for the record. Thank | |
| you. | |
| Then, the second is a broader question about Chinese | |
| infrastructure generally. I mean, we I think sometimes view the | |
| Chinese as 10-feet tall, but they, obviously, have problems | |
| upon problems of their own, one of which is pretty substantial | |
| blowback in certain areas on One Belt, One Road Initiative | |
| efforts. | |
| I have spoken with a number of Ambassadors and heads of | |
| State in Africa, and they have relayed to me not only the | |
| predatory economics and high debt financing terms of a lot of | |
| these investments, but the infrastructure itself is not great | |
| and it is failing; plus, a lot of it is built with Chinese | |
| labor, which is causing domestic turmoil within a lot of | |
| African countries, as they see Chinese workers come in to build | |
| projects, while their unemployment rate remains very, very | |
| high. | |
| Can you talk to me about some of the blowback that you are | |
| seeing with regard to their practices, particularly in Africa? | |
| Mr. Kritenbrink. Why do not I take an initial stab, | |
| Congressman? I think you have outlined the problem well. We | |
| hear the same complaints from partners around the world. | |
| And what we have done is, one, to caution countries to be | |
| well aware of what they are getting into when they sign into | |
| one of these deals, whether it is the predatory finance that | |
| you mentioned; the fact that the quality of the infrastructure | |
| can be in question, and then, through the use of PRC labor, | |
| oftentimes, the economic benefits do not redound to that | |
| country--not to mention whether the product will be--or the | |
| project will be sustainable, including in environmental terms. | |
| But the other thing we try to do is offer alternatives. And | |
| I wonder if my colleagues would like to speak to that. | |
| Mr. Nathan. Thank you, Secretary. | |
| I completely agree with what you said, Congressman. I mean, | |
| our experience is that, not only do projects by the PRC not | |
| often accrue to the economic benefit of the countries, then | |
| they do burden countries with debt. But they also frequently | |
| involve environmental hazards, labor violations, poor quality, | |
| inappropriateness for local laws and conditions. | |
| But this is why we have experienced strong demand for our | |
| product. Countries are looking for choice, and particularly, | |
| the choice that we and our allies offer, which is high | |
| standard, which respects local laws and conditions, just | |
| transparent, which is funding at the private level. This is the | |
| value proposition that the Development Finance Corporation is | |
| presenting around the world. | |
| Mr. Crow. And with regard to the Development Finance | |
| Corporation, which I think is a phenomenal program, what | |
| barriers are you seeing in really scaling that and expediting | |
| it? And what would you need from Congress to, frankly, double | |
| down on that effort? | |
| Mr. Nathan. Thanks for that question. | |
| You know, the DFC is just over 3 years old, and I think we | |
| have made extraordinary progress in that time. But the BUILD | |
| Act contemplated a new tool set for DFC, importantly, one that | |
| includes the ability to make equity investments. Equity | |
| investments would allow us to take more risk, to be forward- | |
| leaning on the type of opportunities that we pursue in | |
| infrastructure and other companies around the world. | |
| We have made progress, but we have limitation from a | |
| budgetary treatment of equity, limitation in our ability to | |
| realize the full promise of the equity tool. We look forward to | |
| working with this committee and others to remove those barriers | |
| and realize the full potential BUILD Act contemplated for DFC. | |
| Mr. Crow. Thank you. | |
| And I just wanted to finish on this topic of China having | |
| their own problems and just being very clear to China and to | |
| everyone listening that there has been a lot of talk about | |
| Ukraine emboldening China and strengthening China and weakening | |
| the West, given the attrition and the amount of weapons and | |
| equipment we are pouring into Ukraine. | |
| I actually think it is the opposite. I think the United | |
| States, NATO, and the West are greatly formalizing and | |
| increasing the intelligence-sharing and our analysis. We are | |
| strengthening our Defense Industrial Base by, essentially, | |
| doing a real-time audit of some of our weaknesses and | |
| shortfalls, but we are fixing it and moving fast to fix it. We | |
| are increasing our partner training. We are learning about | |
| weapon systems and how ours perform vis-a-vis old Soviet | |
| systems, or strengthening NATO and increasing investments and | |
| modernizing the NATO alliance. So, this is, I think, an | |
| opportunity for us to show the strength of the West and how | |
| China is on the wrong side of history. | |
| Thank you. I yield back, Chairman. | |
| Chairman McCaul. Thank you. | |
| The chair now recognizes Mr. Huizenga. | |
| Mr. Huizenga. Thank you, Mr. Chairman, and I appreciate the | |
| opportunity to be here. | |
| For those of you that we are questioning today, this is my | |
| first term and first time being here at the Foreign Affairs | |
| Committee. I sit on the Financial Services Committee. And the | |
| reason why I mention that is because, in one of my past jobs, | |
| it was chairing what at the time was called the Monetary Policy | |
| and Trade Subcommittee, where I had the opportunity to look at | |
| our review process here in the United States when it came to | |
| sensitive technology. | |
| And I am going to briefly touch on something here regarding | |
| a battery company, A123, that we reviewed at the time. But, | |
| obviously, COVID exposed a real issue with our supply chains | |
| and our dependence, whether it is chips, but certainly | |
| batteries. And coming from Michigan, I do not have any of the | |
| direct manufacturers, but I have all the suppliers, all the | |
| Tier 1, Tier 2, Tier 3 automotive suppliers that are in my | |
| district, both past district and current district, including | |
| battery companies. | |
| But the A123 battery deal at the time was somewhat | |
| controversial. And I know I was in on some classified briefings | |
| on that. And yet, that seemingly went through the process | |
| pretty quickly, and I felt like I was arguing against our own | |
| government, frankly, at times about why this would be, could be | |
| problematic. | |
| And I'm curious, Under Secretary Estevez, do you mind, just | |
| very quickly, is dependence on China for batteries a national | |
| security issue? | |
| Mr. Estevez. First of all, I want to note that the 123 deal | |
| went through CFIUS and---- | |
| Mr. Huizenga. Yes. Yes. Yes, I'm aware. I am aware. | |
| Mr. Estevez. It is probably not the best decision that | |
| CFIUS made, but that is---- | |
| Mr. Huizenga. Well, we are finding consensus there then. | |
| Mr. Estevez. Yes, look, there is a whole bunch of | |
| technologies that we need to start doing investment on in the | |
| United States. We should not be reliant on China for batteries, | |
| for chips, for pharmaceutical precursors, for rare earths. And | |
| we need to--and my colleagues to my left are more in the | |
| engagement with allies---- | |
| Mr. Huizenga. Yes. | |
| Mr. Estevez [continuing]. To buildup those capabilities. I | |
| mean, the stopping from the Chinese to get stuff. | |
| Mr. Huizenga. Yes. | |
| Mr. Estevez. But we certainly need to look at our supply | |
| chains better. | |
| Mr. Huizenga. Sure. And we had a review of the CFIUS | |
| process, and Representative Barr, who is also on this | |
| committee, who followed me as the chair of MPT, was a crucial | |
| part of that. | |
| I do want to move on here in my last 2 minutes. For Mr. | |
| Kritenbrink, has the State Department refused to approve or | |
| requested the delay of sanctions to hold the PRC accountable | |
| for human rights violations against the Uyghurs? | |
| Mr. Kritenbrink. Congressman, what I would say is, as I | |
| indicated earlier, human rights remains central to our foreign | |
| policy. | |
| Mr. Huizenga. I understand that. | |
| Mr. Kritenbrink. We have taken a range of---- | |
| Mr. Huizenga. But has there been a request for a delay? | |
| Mr. Kritenbrink. We have taken a range of steps to impose | |
| costs on those who are carrying out genocide in Xinjiang, | |
| including sanctioning, under Global Magnitsky, 12 officials | |
| and---- | |
| Mr. Huizenga. OK. | |
| Mr. Kritenbrink [continuing]. And another seven who have | |
| been placed under restrictions. | |
| Mr. Huizenga. All right. I have got a minute and a half | |
| here. Let's get very specific. Has Deputy Secretary Sherman | |
| refused to approve or requested any delay in implementation of | |
| congressionally mandated the Uyghur Human Rights Policy, or | |
| UHRPA, sanctions? | |
| Mr. Kritenbrink. What I would say, sir, is we continue to | |
| take a number of steps, and we will take a number of steps, to | |
| hold accountable those in China who are---- | |
| Mr. Huizenga. That is--that's a yes-or-no kind of question, | |
| though. | |
| Mr. Kritenbrink. Congressman, I will--I will just reiterate | |
| what I have said. We are committed to---- | |
| Mr. Huizenga. Well, either you know or you do not know. | |
| Mr. Kritenbrink. Congressman, we are committed to taking | |
| steps. I'm happy to take that back and come back to you. | |
| Mr. Huizenga. Please do. Yes, that is the purpose of this. | |
| And have you personally supported any delay in UHRPA? | |
| Mr. Kritenbrink. I support making sure that we take steps | |
| to ensure that we hold to account those in China who are | |
| carrying out---- | |
| Mr. Huizenga. I understand that, but, respectfully, that's | |
| not my question. Both for Ms. Sherman or for yourself, have you | |
| felt it was in the best interest for a delay? | |
| Mr. Kritenbrink. I think it is in America's national | |
| interest to continue to carry out our steps to hold account | |
| those people who are doing that---- | |
| Mr. Huizenga. And are you doing everything that you can do | |
| to push forward on those steps and implementing those steps, as | |
| has been congressionally mandated? In a bipartisan manner, I | |
| might add. | |
| Mr. Kritenbrink. Yes, sir, I'm confident that all of my | |
| colleagues and all of my leadership are committed to making | |
| sure that we hold to account those in China who---- | |
| Mr. Huizenga. And moving ahead in a timely fashion? | |
| Mr. Kritenbrink. Yes, sir. | |
| Mr. Huizenga. OK. We are going to hold you to that. | |
| Mr. Kritenbrink. We are committed, again, to holding to | |
| account those who are carrying out genocide in Xinjiang, in | |
| China. | |
| Mr. Huizenga. OK. We expect that action to continue. | |
| And with that, Mr. Chairman, my time has expired. I yield | |
| back. | |
| Chairman McCaul. Thank you. | |
| The chair recognizes Mr. Stanton. Mr. Stanton is | |
| recognized. | |
| Mr. Stanton. Thank you very much, Mr. Chairman, for holding | |
| this important hearing. This is my first hearing as a member of | |
| this committee, and I am honored to be here. | |
| Last year, Republicans and Democrats came together to pass | |
| the CHIPS and Science Act, an historic investment in American | |
| ingenuity and advanced technology. Few States stand to benefit | |
| more than my home State of Arizona, as we welcome $40 billion | |
| in investment from TSMC in north Phoenix, expand Intel's | |
| footprint in my district in the East Valley, and support | |
| innovation from dozens from other companies. | |
| That is why I am gravely concerned about the theft of | |
| American intellectual property by the PRC. Last fall, FBI | |
| Director Wray warned that, not only does Chinese IP theft | |
| threaten these companies' bottom lines, but it jeopardizes our | |
| economic competitiveness and our national security. | |
| Mr. Estevez, last October, the Biden Administration imposed | |
| controls designed to limit the development of production in | |
| China of advanced node semiconductors, semiconductor production | |
| equipment, advanced computing items, and supercomputers. That | |
| was a very important step. What other steps is the Department | |
| of Commerce taking to combat IP theft, particularly for | |
| semiconductor technology? | |
| Mr. Estevez. So, let me start off by saying thank you for | |
| the notice on chips, very important. | |
| We put those sanctions on, export controls on semiconductor | |
| equipment and related technologies for national security | |
| reasons, not necessarily for IP theft. However, when we find | |
| companies that it is provable that they have stolen IP, we will | |
| take action against those companies. Full stop. | |
| Mr. Stanton. What additional tools do you need from | |
| Congress to better protect American enterprise from IP theft? | |
| Mr. Estevez. From the export control perspective, I think I | |
| have the authorities that I need. From a greater perspective of | |
| cyber theft, you know, companies need to invest in their cyber | |
| protection and they need to notify when such breaches happen. | |
| Mr. Stanton. Thank you. | |
| I want to piggyback on questions from my colleague, | |
| Madeleine Dean earlier. More than five Arizonians die every day | |
| from opioid overdoses, nearly half of which involve fentanyl. | |
| Unfortunately, the PRC continues to play a deadly role by | |
| allowing export of precursor chemicals, the core ingredients | |
| that some bad actors, like the Mexican drug cartels, can use to | |
| make fentanyl. The PRC seems to have backed off cooperating | |
| with the United States on stopping the flow of fentanyl | |
| substances. They attribute that to U.S. entity listings and | |
| export controls, including on institutions implicated in human | |
| rights violations. | |
| Mr. Estevez, this question is for you as well. What is your | |
| analysis? What is really going on here? Has the PRC stopped | |
| cooperating out of retaliation or have some of our controls | |
| truly complicated their ability to cooperate? | |
| Mr. Estevez. That is really a better question for my State | |
| colleague. But from a national security perspective, it is | |
| important that we exercise our authorities with export | |
| controls. | |
| Mr. Stanton. Mr. Kritenbrink, please. | |
| Mr. Kritenbrink. Congressman, thank you very much for your | |
| question. Again, this is vital national security issue | |
| important to the lives and the health and safety of American | |
| citizens. We have made it one of our absolutely top priorities | |
| in engaging with the Chinese. Unfortunately, they have put up | |
| various roadblocks to cooperation lately. They have complained | |
| about regulatory steps that we have taken that allegedly impede | |
| that cooperation. We do not agree with that view, and we do not | |
| believe that there are any steps that the United States has | |
| taken from a regulatory perspective that ought to impede | |
| cooperation. We believe that China has a responsibility to take | |
| steps to impede the flow of these precursor chemicals. | |
| As I indicated earlier, in 2019, they did take steps to | |
| schedule fentanyl, which stopped the shipment of fentanyl to | |
| almost zero. Now, the problem is these precursor chemicals | |
| which are diverted, and then, illegally manufactured into | |
| fentanyl. We have made clear in our bilateral engagement that | |
| China needs to do better and needs to take steps to make sure | |
| that their companies know to whom they are selling; that these | |
| chemicals are appropriately labeled, and the like. | |
| And then, Congressman, I would hasten to add, we are also | |
| working with other international partners to put pressure on | |
| the Chinese to do the same. | |
| Mr. Stanton. OK. I have time for one rather quick question. | |
| On export control, obviously, we have shown real leadership on | |
| that issue, the Biden Administration, but, obviously, we need | |
| our partners around the world to do the same thing. We cannot | |
| act in a unilateral way. What steps--what other countries are | |
| we engaging with to impose multilateral export controls? And | |
| that is for any of our witnesses. | |
| Mr. Estevez. Yes. So, for any control we put on, we | |
| generally engage multilaterally, unless we, the United States, | |
| are the only country that makes a piece of equipment. I cannot | |
| talk in specifics around the semiconductor export controls, but | |
| we have engaged multilaterally on that. And I would be happy to | |
| talk in a classified setting about what we have done there. | |
| And just look what we have done on Russia: 38 nations put | |
| on like controls to what we put on. That eventually will stifle | |
| the Russian industrial base, so they cannot reconstitute their | |
| military. | |
| Mr. Stanton. Thank you very much. I yield back, Mr. | |
| Chairman. | |
| Chairman McCaul. The chair recognizes Mr. Davidson. | |
| Mr. Davidson. Thank you, Chairman. | |
| Despite the World Trade Organization membership China | |
| enjoys, China is neither a market economy nor a developing | |
| nation. As a condition of membership, China committed to be a | |
| market economy. They are also allowed to pretend that they are | |
| still a developing economy. Claiming this special status allows | |
| the People's Republic of China to exploit the developed nations | |
| like ours through various perks, such as restricting imports to | |
| protect certain industries and complying with fewer WTO | |
| obligations. | |
| The failure of our country and others to enforce the | |
| obligations of World Trade Organization membership on China has | |
| been disastrous for America's economy, our manufacturing | |
| sector, in particular, and our middle class. The consequences | |
| are especially harmful in my home State of Ohio. | |
| Are any of you aware that the Chinese Communist Party | |
| military intelligence units have conducted cyberattacks on U.S. | |
| businesses resulting in intellectual property theft of dual-use | |
| technology? | |
| Mr. Kritenbrink. Congressman, thank you for your question. | |
| The cyber threat posed by China is vast, highly | |
| significant. We are taking a number of steps to counter it. | |
| But, certainly, the cyber-enabled theft of intellectual | |
| property rights and trade secrets remains a top concern. | |
| Mr. Davidson. Are whole-of-government uses of intelligence | |
| units to steal intellectual properties characteristics of | |
| market economies? | |
| Mr. Kritenbrink. Congressman, I would say that it is | |
| unacceptable for any country, regardless of status, to use | |
| cyber-enabled means to steal intellectual property and trade | |
| secrets. | |
| Mr. Davidson. I agree with your statement there, and thank | |
| you for that. | |
| Is China unique in its use, as a World Trade Organization | |
| member, of its intelligence units to steal intellectual | |
| property of American companies on behalf of the companies that | |
| they are trying to benefit inside China? | |
| Mr. Kritenbrink. I can speak with confidence to the | |
| challenge posed by China. I would have to take back your | |
| question as to whether there are others that pose a similar | |
| threat. | |
| Mr. Davidson. Thank you. And that is concerning. | |
| But, you know, Mr. Estevez, in 2020, BIS published a report | |
| which revealed some concerning information regarding AK Steel, | |
| which is now owned by Cleveland Cliffs. It stated, quote, ``If | |
| AK Steel's Grain-Oriented Electrical Steel, GOES, operation | |
| were to close, the United States would lack the ability to | |
| produce transformers of any power-handling capacity without | |
| relying on foreign sources.'' Does this assessment sound | |
| accurate? | |
| Mr. Estevez. I would have to go back and look at that, but | |
| I would be happy to get a detailed discussion on GOES with you, | |
| if you would---- | |
| Mr. Davidson. Yes. So, you know, your organization | |
| publishes a lot of these reports. So, I wouldn't expect you | |
| know all of them, but this is work that BIS did do, and it | |
| highlights how important it is to understand the particular | |
| sectors that are vulnerable. And China, when they use these | |
| powers and exploit their membership status in WTO, they are | |
| shaping market access, and they are targeting specific | |
| companies and specific intellectual property. | |
| This Grain-Oriented Steel produced by AK Steel, or | |
| Cleveland Cliffs now, is the only U.S. source for this. And as | |
| we look at the sensitivity of our electrical grid and | |
| vulnerabilities there, this is just one of the core issues. | |
| And as I have just a little bit of time, Mr. Kritenbrink, I | |
| just want to highlight, with the abuses in fentanyl and tools | |
| there, would it help if we designated cartels, in particular, | |
| which are moving this product, as enemies of our country, and | |
| made people that support those cartels by supplying precursor | |
| chemicals, for example, or moving money and cash back and forth | |
| eligible for sanctions and intelligence collection? Would that | |
| be helpful? | |
| Mr. Kritenbrink. Well, Congressman, I think, as a matter of | |
| general principle, we would be supportive of looking at any | |
| step we can to get at this scourge. But I would need to take | |
| your question back to the experts, both in our Department and | |
| across the interagency, and come back to you with a more formal | |
| answer. | |
| Mr. Davidson. Thank you. I hope to do just that, because it | |
| highlights the important relationship between the Financial | |
| Services Committee, which I also serve on, and this committee. | |
| Because when you look at the sanctions regime and OFAC, it | |
| is an important tool, the financial intelligence that we look | |
| at. The cartels are in this business for money, and I think we | |
| have to get at all of the corrupt influence the People's | |
| Republic of China is doing. And the Chinese Communist Party | |
| does not allow these things to go on unchecked. We have to | |
| believe they have the power to change course. And I hope that | |
| we will use all the tools in the kit bag to check the abusive | |
| influence of the Chinese Communist Party and the negative | |
| impact on our country, our economy, and our culture. | |
| I yield back. | |
| Chairman McCaul. Thank you, Mr. Davidson. You raise a great | |
| point. Why is China still under a developing nation | |
| designation, which entitles them to interest-free loans by the | |
| World Bank or very low interest rate loans? And then, it allows | |
| them, then, to use that for their Belt and Road Initiative with | |
| usurious interest rates. And then, they rape the rare earth | |
| minerals. They bring in their own workers; take over a port or | |
| base. And then, when they fail, then the IMF goes in to bail | |
| them out. | |
| I think they are extraordinary, and I give them an A+ for | |
| being very clever the way they can manipulate the global | |
| institutions and take advantage of them. I am sure all of you | |
| agree with that, but I won't ask you for a comment on that. | |
| But I thank the gentleman for raising the point. I think we | |
| should be taking a hard look at that. | |
| The chair recognizes Mr. Phillips. | |
| Mr. Phillips. Thank you, Mr. Chairman. | |
| I think it is fair to say that Russia's invasion of Ukraine | |
| has forced Central Asian countries to reassess their | |
| relationship with Moscow. So, I am curious, Mr. Kritenbrink, | |
| based on your assessment, how has China's approach to the | |
| region changed, and how receptive are the member countries in | |
| Central Asia to their overtures? | |
| Mr. Kritenbrink. Thank you, Congressman, for your question. | |
| I would note Central Asia is outside of my area of | |
| responsibility. So, I will quickly outstrip the level of my | |
| expertise. | |
| But I would say, certainly, China has stepped up, yes, its | |
| engagement in the region, but so has the United States. And I | |
| think you can see that including through our senior-level | |
| travel. | |
| But I would have to take back any detailed questions on | |
| Central Asia. | |
| Mr. Phillips. Can you speak about--you just mentioned our | |
| approach, though. How has our approach changed? | |
| Mr. Kritenbrink. I think it would be safer if I would take | |
| that back to my---- | |
| Mr. Phillips. OK. | |
| Mr. Kritenbrink [continuing]. Assistant Secretary colleague | |
| to answer in an expert way. | |
| Mr. Phillips. OK. | |
| Let me ask, also, about Iran. I know President Raisi | |
| visited President Xi in China recently. Your assessment of that | |
| visit? | |
| Mr. Kritenbrink. Well, I can, again, speak in general | |
| terms, and beyond that, I would have to take your question | |
| back. | |
| We are concerned about the deepening ties between Iran and | |
| the PRC, make no mistake about it. And it concerns us in a | |
| number of ways, both the oil purchases for sure, but also other | |
| concerning areas of cooperation that I think pose a national | |
| security threat to the United States and the international | |
| community. | |
| Mr. Phillips. OK. Let me turn to Mr. Schiffer and Mr. | |
| Nathan, if I might. | |
| How successful has China been in the Middle East and | |
| Central Asia with their Belt and Road Initiative? If you can | |
| speak to either, starting with you, Mr. Nathan? | |
| Mr. Nathan. It is hard for me to say how successful it is. | |
| They definitely spend a lot of money. I think that is the | |
| overall issue with the Belt and Road Initiative, is that they | |
| have exerted influence, spent money, burdened countries with | |
| debt, left projects behind that are poor quality, often | |
| inappropriate, and then, use that as a way to extract other | |
| concessions. | |
| When we make investments, it is based on our values, our | |
| standards, the private sector, and we are not attaching strings | |
| to them in some way. | |
| Mr. Phillips. So, let me ask--I'm glad you mentioned that, | |
| Mr. Nathan, because we quantify their influence by dollar | |
| amounts. | |
| Mr. Nathan. Right. | |
| Mr. Phillips. Is it fair to say in some cases it actually | |
| might be backfiring, as they layer on burdens, | |
| responsibilities, commitments that cannot be fulfilled on | |
| countries that have been beneficiaries? Are there any examples | |
| of that that you might share? | |
| Mr. Nathan. Well, I do not have at my fingertips any | |
| examples, but I think it is absolutely the case that it | |
| backfires. When I travel and talk to leaders, they are very | |
| interested in our projects, in our funding, that comes with | |
| high standards. It is free from the kind of integrity and | |
| corruption problems, environmental and labor standards, that | |
| BRI projects often entail. | |
| Mr. Phillips. And Mr. Schiffer? | |
| Mr. Schiffer. Yes, it is a very, very important set of | |
| questions that you are asking. And I can certainly offer one | |
| example in our wheelhouse. | |
| You know, we have had the opportunity to engage with the | |
| Kyrgyz Republic over the past year, because they have become | |
| increasingly concerned about the amount of debt that they owe | |
| to China's Exim Bank. And so, they have worked with us to | |
| support efforts to provide better analysis of their debt burden | |
| and to build better capital controls into their system to | |
| manage that debt relationship with the PRC going forward. | |
| So, we do see opportunities like that---- | |
| Mr. Phillips. OK. | |
| Mr. Schiffer [continuing]. In Central Asia where we are | |
| looking to find opportunities for AID, our colleagues at DFC, | |
| and across the interagency, to be able to play smarter and | |
| better in that region. | |
| Mr. Phillips. So, on that subject, Mr. Schiffer, you know, | |
| I am getting personally a little bit tired and concerned of us | |
| completely or spending most of our time pointing out how we are | |
| failing in our competition with China. How can we do better | |
| vis-a-vis your perspectives, especially you, Mr. Nathan and Mr. | |
| Schiffer, in competing with them? What can our Congress do to | |
| support your efforts? | |
| Mr. Schiffer. Well, look, we certainly welcome any | |
| opportunity to work with Congress to be able to shine more of a | |
| light on the efforts that we are undertaking, whether it is in | |
| Central Asia, across the Indo-Pacific, or around the world, | |
| that demonstrates the value proposition that we bring to the | |
| game and the importance of American leadership. | |
| Mr. Phillips. We just have a few seconds left, but, Mr. | |
| Nathan? | |
| Mr. Nathan. Yes, I would say one of the missions that we | |
| were given by the BUILD Act explicitly was to offer an | |
| alternative to authoritarian government, State-controlled | |
| investments in the developing world. Part of the commitment of | |
| the BUILD Act to give us that tool was the equity investment | |
| authority that we were given. And finding a budgetary treatment | |
| that allows that tool to fully realize its potential I think | |
| would be critical. | |
| Mr. Phillips. Indeed. Thank you. | |
| Thank you all for your time today. | |
| I yield back. | |
| Chairman McCaul. Thank you, Mr. Phillips. | |
| Mr. Nathan, I understand that you have a hard stop at | |
| 12:50, and clearly we are now exceeding that, so I would | |
| request that if members have questions for you that you would | |
| be able to respond in writing, if that is OK. | |
| Mr. Nathan. That's absolutely OK. I really appreciate it. | |
| Thank you very much. | |
| Chairman McCaul. Thank you. | |
| With that, I will recognize Mr. Kean. | |
| Mr. Kean. Thank you, Mr. Chairman. | |
| Thank you for your testimony here today. | |
| And, Mr. Nathan, thank you. You can leave while I speak. | |
| Don't worry about that. I will be directing some of my | |
| conversations to your right. Thank you. | |
| Assistant Secretary Kritenbrink, my district in New Jersey, | |
| 7th congressional District, just like many districts around the | |
| country, has been impacted by fentanyl. We see time and time | |
| again intercepts in human--and that impacting all of a--all | |
| Americans. | |
| In a January 30, 2003 State Department press release | |
| announcing sanctions against U.S. fentanyl traffickers, you-- | |
| department *125221 any mention of fentanyl--of China or that | |
| the designees of relationship to OFAC designate Chinese | |
| chemical transportation company Shanghai Fast Fine Chemicals, a | |
| stark contrast from Treasury's press release. Why is that? | |
| Mr. Kritenbrink. I'm sorry, Congressman. I do want to make | |
| sure I understand your question, that there was a sanctions | |
| announcement on January 30 that did not include Chinese | |
| entities. Is that right, sir? | |
| Mr. Kean. Yes, whereas Treasury's press release did and the | |
| Department's--and your State Department did not. Why is that? | |
| Mr. Kritenbrink. Congressman, I'll--I'll have to take that | |
| back. I--I'm--I'm not sure what the--the precise answer to that | |
| question is, but I'm happy to take that back--go back, too. And | |
| I will, as I mentioned earlier, certainly stopping the flow of | |
| fentanyl precurses from China is an absolutely top priority and | |
| happy to talk about what we're doing on that. But I'll have to | |
| take your question back, sir. | |
| Mr. Kean. Thank you. Also to you, can you--I know that | |
| Chairman McCaul also mentioned the impact on--in Ukraine and | |
| China and the Russia partnership therein. Can you speak to how | |
| China is helping Russia evade sanctions that have been put in | |
| place due to Putin's invasion of Ukraine? | |
| Mr. Kritenbrink. Well, Congressman, this is what I can say: | |
| We've made very clear including most recently when Secretary | |
| Blinken was in Munich and met with Director Wang Yi what the | |
| implications and consequences could be for China if it engaged | |
| in providing material assistance to the Russian military in | |
| Ukraine or assisted China--assisted Russia in systematic | |
| sanctions evasion. | |
| I think what I could say, sir, is we do have a concern for | |
| some of the steps that China has taken to support Russia's war | |
| in Ukraine: its--its--its spreading of disinformation about the | |
| cause of the war and about Russian activities there, its | |
| shielding of Russia in the U.N. and--and--and other areas, some | |
| of its economic activities. We have sanctioned certain Chinese | |
| entities who--who have provided assistance to Russia. Perhaps | |
| my colleague would want to respond to that in more detail. | |
| Mr. Estevez. That's correct, Congressman. First of all, I | |
| want to recognize that my sister lives in your district. | |
| Mr. Kean. OK. | |
| Mr. Estevez. In Mendham. We have put 12---- | |
| Mr. Kean. Great community. | |
| Mr. Estevez. Yes, it is. We've put 12 Chinese entities on | |
| the entity list, meaning that cannot get exports from the | |
| United States, under a licensing regime that we put on because | |
| they were backfilling Russia, providing dual-use technology to | |
| Russia. We also put one Chinese entity on the entity list for | |
| providing parts that go into Iranian drones. | |
| Mr. Kean. Yes. | |
| Mr. Estevez. So we constantly work this with our colleagues | |
| at State Defense and Energy and with the intelligence community | |
| to assess trade flows and identify companies that may be | |
| violating our sanctions. And if they are, we'll take care of | |
| them. | |
| Mr. Kean. And sanctions are obviously part of these | |
| conversations. Why have they potentially not been enacted | |
| sooner? | |
| Mr. Estevez. For an entity listing we need specific data | |
| about a--a specific entity, so specific and articulable facts | |
| that when we see something going on that we can legally put | |
| them on the list. | |
| Mr. Kean. Thank you. | |
| Yield back my time. Thank you. | |
| Chairman McCaul. Thank you. | |
| With that, I will go ahead and recognize Mr. Allred. | |
| Mr. Allred. Well, thank you, Mr. Chairman. | |
| And thank you all for being here. I know it has probably | |
| been a long day. I hope we can have a bipartisan response to | |
| our concern with Beijing's actions, but I want to be clear: We | |
| have so many strengths that the CCP could only dream of | |
| bringing to the table. | |
| And as I have had a chance to see firsthand in my travels | |
| as a member of this committee around the world, from Africa to | |
| the Indo-Pacific with our allies there to even former Soviet | |
| States and Central Asia, everyone would prefer to trade with | |
| us, to attract our investment, and even to have us as their | |
| preferred security partner. And we need to keep in mind that as | |
| this President has made a central focus of his foreign policy | |
| that we are in a global competition but that we should be | |
| confident in our abilities. And I sometimes worry that some of | |
| the discussions here make us sound like we are afraid. And I | |
| think we have nothing to be afraid of. As I said, I think we | |
| have real strengths. | |
| But I am concerned in particular with the Chinese expansion | |
| of their influences in the global south and wanted to, if I can | |
| find the question, ask about our USAID process and timelines. | |
| Just give me 1 second. This is the problem when you have too | |
| many questions and you go to this stage of the hearing. | |
| So how do our USAId project timelines--so 5-year projects, | |
| 1-year budget planning compare to the types of investments and | |
| projects that are funded by the PRC and how do those timelines, | |
| if they do or at all, inhibit longer-term consistent U.S. | |
| engagement in partnerships around the world, particularly in | |
| the global south? | |
| Mr. Schiffer. You know, in--in--in some significant | |
| respects it--it does place us at a disadvantage in the sense | |
| that our--our friends in--in--in Beijing can, as you pointed | |
| out, operate with a--a long timeline and without the sort of | |
| economic and--and market logic that constrain--constrain our | |
| activities. And--and the reality of the congressional | |
| authorization and appropriation cycle and how we work--work | |
| through that system to be able to--to obligate for--for | |
| projects can--can create a certain tension in--in the process, | |
| if I can put it that way. | |
| Mr. Kean. Well, this is your opportunity to let us know how | |
| Congress can provide USAID with additional tools, or resources, | |
| or authorities to allow you to better compete, because I think | |
| it is an important component of our competition. We talk a lot | |
| about our defense deterrence. We are going to talk a lot about | |
| our controls. But this is one of our most important tools and | |
| everywhere I go, especially in the global south, I hear that we | |
| are not doing enough. | |
| Mr. Schiffer. I mean, at--at the liberty of suggesting that | |
| you have a--a--a conversation with your friends on the | |
| Appropriations Committee, if it were possible to have multiyear | |
| appropriations, that would go a very, very long way toward | |
| allowing us to do the sort of longer-term planning that--that | |
| would allow us to be more competitive. | |
| Mr. Kean. Well, I just want to say to my colleagues this is | |
| the damage that is done when we do not make long-term | |
| investments. If you want to talk about competing with China, it | |
| is in having a strategic vision that you can carry out also | |
| with our soft power, and I think we should keep that in mind. | |
| So I do want to ask about--Secretary Kritenbrink and Under | |
| Secretary Estevez, we are seeing further integration of China's | |
| civilian and military industries as their policy of civil- | |
| military fusion continues. And as more and more dual-use | |
| technologies come on the market how do we effectively control | |
| exports of these products and technologies to China? | |
| Mr. Estevez. Yes, let me start off with--with that. | |
| Obviously we look at this all the time. You know, as I talked | |
| about earlier, in the advanced fabrication semiconductor area | |
| we just cut them off from the most advanced semiconductors | |
| because I cannot tell whether it's being used for a benign | |
| activity, you know, a gaming system or for artificial-- | |
| artificial intelligence for military applications. So we just | |
| stop it. | |
| And then after that it becomes a little bit of like | |
| assessing company by company whether we see them facilitating | |
| Chinese military use. We'll stop that. Specific technology | |
| areas usually in the advanced technology area, we'll stop that. | |
| Things around quantum computing, for example. So it's--it's--we | |
| have to assess the technology, assess what they're doing with | |
| it. And if we're likely using it for those type of | |
| applications, we want to ensure that they're not. | |
| Mr. Kean. Yes. Tough to know the difference. | |
| Do you have anything to add, sir? | |
| Mr. Kritenbrink. Well, Congressman, I'd just say thank you | |
| for the question. Very important. Agree that it's the civ-mil | |
| fusion that--that poses the real threat here. It's why the U.S. | |
| Government, including my colleagues in Commerce and elsewhere, | |
| have taken these targeted steps to prevent China from getting | |
| its hands on these technologies that assist its military | |
| modernization and which threaten our national interest. | |
| Mr. Kean. Thank you. I yield back. | |
| Chairman McCaul. Thank you, Mr. Allred. | |
| With that, I will recognize Mr. McCormick. | |
| Mr. McCormick. Thank you, Chairman. | |
| It is know that China obviously has a lot more debt that we | |
| do, up to $20 trillion more debt, yet they have a smaller GDP. | |
| My question is how are they allowed to use this money that | |
| they basically fabricate by manipulating their monetary policy | |
| without a true central banking system like we have that when we | |
| call the Federal Reserve--the Federal Reserve, most people | |
| understand, it is neither Federal nor the reserve--but yet | |
| China gets away with having a fake monetary policy and spending | |
| trillions of dollars per year more than we do around the world | |
| expanding their global presence in the Western Hemisphere, | |
| expanding their military, expanding their technologies on this | |
| while simultaneously investing near a trillion dollars in our | |
| national debt, which we pay interest to their economy with? Why | |
| do we allow that to happen and can Congress do something about | |
| that? | |
| Mr. Kritenbrink. Congressman, thank you very much. I'll-- | |
| I'll have to take that back because matters of currency and the | |
| global economy. I think it would be best if I take that back to | |
| colleagues at the Treasury and elsewhere to come back to you. | |
| But apart from the monetary questions that you asked, | |
| obviously the whole focus of our conversation here today has | |
| been trying to counter the malign influence that we have seen | |
| posed by the PRC in a--in a range of areas. And we try to | |
| address that. But I--I think it's safer, sir, that I take your | |
| monetary question and currency question back. | |
| Mr. McCormick. Here is what is upsetting me, because I have | |
| been asking this for about 2 months to multiple government | |
| agencies, multiple Congressman about something that is as | |
| central to the future of America and the global security as | |
| anything, which is money. Money is power. Money is what | |
| develops technologies. Money is what buys military power. Money | |
| is what buys strategic influence on foreign national | |
| governments. And they have literally been cheating for at least | |
| a decade and they have run up $20 trillion more debt than us; I | |
| am going to emphasize that, with a smaller GDP and that the | |
| world does not see this as a house of cards that needs to | |
| crumble. | |
| They do not have the inflation that they should have with | |
| that. They do not have a normal monetary policy. And for a | |
| decade nobody has asked that question? How do we not know the | |
| answer this far into it? Fifty trillion dollars into a | |
| question, we do not have an answer, and this hasn't been--this | |
| is not a new question. I do not understand why we have to go | |
| back to staff to ask a question that is very fundamental to the | |
| existence of our influence strategically to the rest of the | |
| world versus a rising power that is cheating. | |
| Mr. Kritenbrink. I appreciate your question, Congressman, | |
| but I--I'm--I'm confident in my areas of expertise and areas | |
| that are outside of my area of expertise. I'm going to take | |
| that back. I commit--I commit to you we will get you and | |
| answer. | |
| Mr. McCormick. I get it. It is frustrating because it seems | |
| like everybody I ask has the same answer and I am not really | |
| sure who to ask anymore. | |
| But with that I will yield since nobody has those answers. | |
| Mr. Kritenbrink. Understood, sir. | |
| Chairman McCaul. Thank you, Mr. McCormick. | |
| With that, I will recognize Mr. Moran. | |
| Mr. Moran. Thank you, Mr. Chairman. | |
| Secretary Kritenbrink, I want to start with you. I am going | |
| to move down the line. You mentioned in your testimony about | |
| the three core pillars of the U.S. strategy: invest, align, and | |
| compete. Seems to me however that frankly our efforts have been | |
| meager compared to the Chinese efforts when we look at what | |
| they are doing to invest, align, and effectively dominate | |
| economically in the world. | |
| Mr. Nathan noted in his testimony some examples about U.S. | |
| investment globally and he noted two specific examples: $150 | |
| million loaned to Ecuador to expand and modernize a container | |
| port; $48.4 million to the country of Georgia to expand and | |
| modernize a port there. But when I look at some of the | |
| transactions that China is doing across the world: $1.4 billion | |
| in loans to Djibouti; $6.7 billion in loans to Pakistan; $1 | |
| billion of loans to Montenegro for a highway project; $3.1 | |
| billion in Chinese investments to the Dominican Republic, which | |
| effectively cut ties with Taiwan over that. | |
| Would you agree that China is flexing more economic muscle | |
| around the world and as a result is influencing the foreign | |
| policies of many countries in a manner inconsistent with the | |
| foreign policy and national security goals of the United | |
| States? | |
| Mr. Kritenbrink. Congressman, what I would say is that | |
| we're very confident in the capabilities and the tools that we | |
| bring to the table. We--we have different capabilities and we | |
| play a--a very different, quote/unquote, ``game.'' China is in | |
| the--in the game of--of State-backed loans and--and State- | |
| directed enterprises. What we stand for is catalyzing primarily | |
| U.S. private sector investment, which is unrivaled across the | |
| world, just in my region of the world and in the Pacific a | |
| trillion dollars in American investment across the--the Indo- | |
| Pacific, larger than--than--than any other country. So that | |
| would be point one. | |
| And point two, sir, I--I would say that we've also tried to | |
| demonstrate to countries the--the downside oftentimes of | |
| signing up to those loans and those projects by the Chinese, | |
| because you have to be careful about the debt trap you might | |
| find yourself in, again concerns raised by another member on | |
| the quality of the infrastructure and also the labor used in | |
| them. | |
| And then third and finally--my colleague Mr. Nathan isn't | |
| here anymore, but we do obviously strive to offer alternatives. | |
| But I'll go back to point one. Oftentimes we try to catalyze | |
| U.S. private sector investment rather than State-led. | |
| Mr. Moran. And I certainly understand that. The $7.4 | |
| billion from Fiscal Year 2022 that Mr. Nathan references in his | |
| testimony does seem meager compared to what the Chinese are | |
| doing across the globe and is having an effect no doubt on the | |
| foreign policies of these other nations. | |
| I want to go back to what you mentioned though about | |
| private sector investments. What are we doing to--if anything, | |
| to incentivize private sector companies to effectively unwind | |
| with their economic ties to China? | |
| Mr. Kritenbrink. I would say what--what we're doing, sir, | |
| is we're taking a number of steps to try to make sure that | |
| through our economic engagement with China that our national | |
| security is not undermined. And so we're looking at ways in | |
| careful select narrowly defined ways to achieve those goals. | |
| But we are not pursuing decoupling. | |
| We have a $750 billion trading relationship with China, but | |
| I think the point that we're making here today, both-- | |
| particularly my--my colleague from Commerce in talking about | |
| entity list decisions and other regulatory tools, is we're | |
| trying to take narrow targeted steps that prevent China from | |
| using those interactions in particular to increase the | |
| capabilities of the PLA that would endanger American national | |
| security. | |
| Mr. Moran. Secretary Estevez, I want to pose a question to | |
| you as it relates to targeted aspects of how we deal with China | |
| economically. In my district I hear all the time that as it | |
| relates to the entity list and export controls against Chinese | |
| companies that companies in my district tell--are telling me | |
| that China easily escapes this by--escapes these restrictions | |
| by setting up dummy companies in other nations and running | |
| through--their exports through them. They are also telling me | |
| that when they get caught there is really not much teeth to | |
| this and these individuals behind these attempts simply go set | |
| up additional dummy companies and continue on with getting | |
| around U.S. law. | |
| Do you agree that additional enforcement and prevention | |
| measures are needed to stop Chinese violations in this regard | |
| to undercut American companies and American law? | |
| Mr. Estevez. Thank you for that question. We have a fairly | |
| robust enforcement capability in the Department of Commerce. | |
| You know, just the other day, I think yesterday we fined a | |
| company $2.8 billion, revoked their export privileges for | |
| violating export controls related to China. | |
| Mr. Moran. But did you get to the individual behind those | |
| companies so they couldn't move on to set up new companies? | |
| Mr. Estevez. This was a U.S. company that violated export | |
| control law. | |
| Mr. Moran. Same question: Did you get to the individual | |
| behind the company? | |
| Mr. Estevez. Absolutely. Absolutely in this case. | |
| Now there is a bit of whack-a-mole out there. Companies put | |
| up a facade. We go after that. And we'll put that company on | |
| the entity list as well. I cannot stop people from being--you | |
| know, doing illicit things, but we're going to after them. And | |
| we do take action. | |
| Mr. Moran. Yes, I would suggest that we can and we should | |
| take additional hard actions against the individuals behind | |
| those actions. | |
| Thank you. I yield back. | |
| Chairman McCaul. Thank you, Mr. Moran. | |
| With that, I will turn it over to Mr. Issa. | |
| Mr. Issa. Thank you. I am going to follow right back up on | |
| that question. That $2.8 billion fine, did they successfully | |
| export sensitive data? | |
| Mr. Estevez. They exported data that was in violation of | |
| our export controls. | |
| Mr. Issa. So they succeeded and you are now fining them? | |
| Mr. Estevez. That's correct. | |
| Mr. Issa. So in the game of whack-a-mole what you are | |
| saying is after they have succeeded and they try--well, in the | |
| case of software, we know they try millions of times a day, but | |
| they certainly try in the case of hardware hundreds or | |
| thousands of times every day. And they succeed sometimes and | |
| you succeed in fining those who do it sometimes. Is that a fair | |
| assessment without adding too much either way? | |
| Mr. Estevez. I also stop shipments from going. | |
| Mr. Issa. Sometimes you catch them in advance? | |
| Mr. Estevez. That's correct. | |
| Mr. Issa. Those are the successes, the best part of whack- | |
| a-mole, but often it is reactive, not proactive, correct? | |
| Mr. Estevez. We try to be as proactive as possible. | |
| Obviously when someone breaks the law and I catch them doing | |
| it, we take action. And it's unfortunately after-the-fact. | |
| Mr. Issa. And currently you punish U.S. companies | |
| effectively because by definition you cannot punish the Chinese | |
| company who lives to fight another day and try to circumvent | |
| the law another day. | |
| Mr. Estevez. Well, I would certainly entity list the | |
| Chinese company. | |
| Mr. Issa. OK. Let me ask you a question: What do you think | |
| the most important transnational challenges are facing the | |
| United States in its China relationship? | |
| Mr. Estevez. Well, you know, from a--from the Commerce-- | |
| from the export control universe it is their chase after dual- | |
| use technology for military modernization through their civil- | |
| military fusion strategy. | |
| Mr. Issa. And does that and should that define the U.S.- | |
| China relationship in a major way? | |
| Mr. Estevez. That--that is part of the China relationship. | |
| And again, I'm going to turn it over to Assistant Secretary | |
| Kritenbrink to answer---- | |
| Mr. Issa. Yes, briefly answer in another direction them, | |
| Mr. Secretary, how would you--would you say there is something | |
| different than that answer that is equally important? | |
| Mr. Kritenbrink. Yes. Yes, sir, Congressman. If I | |
| understand your question correctly about transnational | |
| challenges, I--I would--I would list several. Certainly climate | |
| change would be one. Certainly food security would be one. | |
| Pandemic disease would be another. Proliferation would be | |
| another. | |
| Mr. Issa. So you would list those that I have got on the-- | |
| -- | |
| Mr. Kritenbrink. I would--yes, I would | |
| [inaudible]. | |
| Mr. Issa. Well, that's 90 minutes--for 90 minutes when the | |
| President met with President Xi that is all he talked about. He | |
| did not talk about the export relationship. He did not talk | |
| about the stealing of intellectual property. In other words, to | |
| China this is what the President thinks, not your partner | |
| there's recognition of a constant pervasive attempt and success | |
| in stealing from America. | |
| Mr. Kritenbrink. Congressman, I would say that the | |
| meeting--the most recent meeting between President Xi and | |
| President Biden in Bali was wide-ranging and exceptionally | |
| candid and covered a--a much broader agenda than just the | |
| transnational challenges that you've listed there, sir. | |
| Mr. Issa. OK. In the remaining time that I have I am going | |
| to back to the BIS for a second. Secretary Ashew worked very | |
| hard for his nearly 4 years to limit what China got. You are | |
| doing the same thing. Both of you have successes that you can | |
| point to and both of you have those failures where you get a | |
| fine, but money does not make up for the fact that China has | |
| succeeded. | |
| Let me ask you a larger question for a moment: It is | |
| outside your jurisdiction, but it is not outside your mandate. | |
| Every day in America thousands of Chinese nationals come here | |
| supposedly for an education. I just left the Science Committee; | |
| several hours there on the same subject. China is constantly | |
| sending over spies, either official spies or would-be spies in | |
| the form of students. | |
| You have no authority over limiting them within your | |
| jurisdiction, but according to the dollar figure, over half a | |
| trillion dollars a year, isn't that probably the greatest | |
| leakage of sensitive futuristic data, not what you are dealing | |
| with on a daily basis, which is important, but in fact the | |
| technology that they are stealing as a matter of policy | |
| particularly using the people they imbed in our universities? | |
| Mr. Estevez. Thank you for that question. First, I do not | |
| want to leave the idea that all Chinese students are Chinese | |
| spies. | |
| Mr. Issa. But all Chinese students are--have family back in | |
| China and potentially are raked for their knowledge in the | |
| future. That is well established. | |
| Mr. Estevez. Basically, sir, it's not subject to our export | |
| controls, however certain technical data is subject to our | |
| export controls. We have a university outreach program. I wrote | |
| letters to every university that does--big research | |
| universities and offered expertise from our export control | |
| officers to come in and talk to them. We go out regularly. I | |
| was just out at universities talking to them about how they can | |
| protect the technical data that is subject to export controls. | |
| Mr. Issa. And for the record would you followup with an | |
| answer to the question of should you in fact have some form of | |
| jurisdiction over universities and that--should that be added | |
| to your portfolio? If you would opine on that. | |
| Mr. Estevez. I will followup. | |
| Mr. Issa. Thank you. | |
| Thank you, Mr. Chairman. | |
| Chairman McCaul. Thank you, Mr. Issa. | |
| With that, I will recognize the gentleman from Texas, Mr. | |
| Self. | |
| Mr. Self. Thank you, Mr. Chairman. | |
| I want to congratulate everyone that is still here. We will | |
| call ourselves the survivors. | |
| We do have votes in just a few minutes, so I will make this | |
| quick. I just returned with the chairman from Germany, Poland, | |
| and Ukraine. There is a lot of media attention on the funds | |
| that we are providing to Ukraine. Are they being properly--do | |
| we have proper oversight over them? And I think we ought to ask | |
| the same question to some of the funds that we provided to the | |
| State Department here. You may have heard that the chairman | |
| indicated that part of the Countering Chinese Influence Fund | |
| was used to fund a bakery, and other examples like that. | |
| We also have the CHIPS Act where--so we have committed to | |
| something like a billion-and-a-half dollars over the last--the | |
| next 5 years for the Countering Chinese Influence Fund and we | |
| have also committed to $500 million. So that is well over $2 | |
| billion. | |
| My concern here is measurable objective standards for the | |
| use of those funds. Now I have heard a lot of--I have heard the | |
| phrase ``take steps'' often in this hearing this morning, but I | |
| am interested in the measurable objective standards that you | |
| use, because obviously we have mounting debt and deficit in the | |
| Congress. It will be one of our primary objectives to get a | |
| handle on that. | |
| So can you share with us the measurable objective standards | |
| that you use for the use of the U.S. taxpayer dollars? | |
| Mr. Kritenbrink. Congressman, thank you for your question. | |
| I first want to thank Congress for providing these funds. We | |
| think the Countering PRC Influence Fund is a very powerful | |
| tool. It's something that is used to counter Chinese influence | |
| globally. There have been more than 100 projects approved over | |
| just the last 2 years. I'd have to come back to you, | |
| Congressman, if--if you're looking for more details and--and | |
| more instances of success, but I do know that--that through | |
| these programs we've been able to influence countries to resist | |
| Chinese attempts to get them to sign onto 5--their 5G, for | |
| example. It's also been used to make sure to highlight the | |
| issues involved in--in forced labor, products produced using | |
| forced labor coming out of Xinjiang. | |
| But I--I'd be happy to take that back, but we think it's a | |
| powerful tool. It's one that we take very seriously and that we | |
| use we think very judiciously and effectively. But I'd be happy | |
| to take your question back to come back in more detail, | |
| Congressman. | |
| Mr. Self. Thank you. I am not looking for success stories. | |
| I am looking for the measurable objective standards that you | |
| use as the guidelines, the guide rails for the use of these | |
| funds. | |
| And since I do have some time remaining, something that we | |
| have not addressed today that I am very surprised has not been | |
| addressed is what are the diplomatic actions that you are | |
| taking against the Chinese basically annexing waters well | |
| beyond their international waters in the South China Sea, | |
| because that is in my mind a dangerous precedent that we are | |
| allowing to happen? So what diplomatic actions are you taking | |
| against that? | |
| Mr. Kritenbrink. Thank you, Congressman. Another very | |
| important question. We are deeply concerned about Chinese | |
| activities in the South China Sea. Many of their activities and | |
| many of their positions have no basis in international law. I | |
| would say we're doing three primary things, both on the | |
| diplomatic and the military front. | |
| First, diplomatically we're engaging with partners across | |
| the region to make sure that we all stand up for defending | |
| international law. We stand up for freedom of navigation, | |
| freedom of overflight. We ensure that when countries make their | |
| claims that those claims are based in international law. And | |
| it's through that diplomacy we also point out many of the de- | |
| stabilizing actions the Chinese have taken including harassment | |
| of other countries, of their boats, of their fishermen, and-- | |
| and the illegal reclamation that they've carried out in the | |
| South China Sea. | |
| Second, both the State Department and the DoD have very | |
| significant programs to build the maritime capacity of our | |
| partners in the South China Sea, building their maritime domain | |
| awareness, building their security capabilities so they can | |
| understand what is happening in their own waters, better deter | |
| threats posed by China, and also ensure that they have access | |
| to the minerals in their waters to which they're rightfully | |
| entitled. | |
| And then third and finally, we support the operations of | |
| our colleagues at DoD who regularly exercise both presence | |
| operations and freedom of navigation operations to make sure we | |
| demonstrate that the United States of America will fly, sail, | |
| and operate everywhere that international law allows and that | |
| other countries should enjoy those same rights. Those are the-- | |
| the--the top three activities, sir, that we're carrying out in | |
| the South China Sea. | |
| Mr. Self. Thank you. I yield back. | |
| Chairman McCaul. Thank you, Mr. Self. | |
| Gentlemen, again I really appreciate your time and coming | |
| today. | |
| I had noted in your, Assistant Secretary's statement that | |
| you said to reiterate we seek competition, not conflict. Can | |
| you define conflict for me? | |
| Mr. Kritenbrink. Well, yes, sir. What--what we're referring | |
| to there is we welcome competition. We think that's healthy. | |
| This--this is what we do as Americans. What we do not want to | |
| see is some kind of a miscalculation that veers into conflict, | |
| potentially military conflict. That--that is what we are | |
| seeking to avoid and we're trying to make clear. Competition | |
| does not equal conflict in our mind. | |
| Chairman McCaul. No, understood. So your definition of | |
| conflict though is from the kinetic element. It is not | |
| discussing the economic, resource, cyber, and other types of | |
| malign activities that the PRC and the CCP are engaged in | |
| currently. | |
| As we know that China is continuing their Road and Belt | |
| Initiative, they have a geopolitical alignment between China, | |
| Russia, Iran, and North Korea whereby they are already seeking | |
| to utilize Ukraine as Eurasian expansion. They are taking over | |
| Mariupol and the waterways, Africa, Oceania, recreating the | |
| maritime Silk Route in an attempt to try and cutoff Western | |
| Hemisphere supply chain while simultaneously controlling the | |
| ports as we talked about and the waterways as Ms. Salazar | |
| discussed in Panama, which would essentially cutoff all of our | |
| supply chain. | |
| Now in addition to this, we also know that they are | |
| continuing to buy in the billions farmlands and other areas | |
| around our military bases and we continue to see where they are | |
| utilizing billions of dollars of intellectual property theft | |
| from American businesses. They are continuing to try and | |
| utilize surveillance and espionage techniques. | |
| So do you not determine that that is in fact conflict? | |
| Mr. Kritenbrink. Congressman, I would say that we share | |
| your concerns over many of the activities that you outlined. | |
| Chairman McCaul. But the question is do you consider that | |
| conflict? | |
| Mr. Kritenbrink. The--the way that we have used conflict in | |
| a way that I | |
| [inaudible] moment ago is--is--is kinetic. | |
| Chairman McCaul. [Inaudible] or do you consider that to be | |
| in any way a conflict from them to us? | |
| Mr. Kritenbrink. What I consider that to be are | |
| unacceptable steps that pose a threat to our national security | |
| and other interests to which we are responding proactively on a | |
| daily basis. | |
| Chairman McCaul. Understood. And just to stay on the topic | |
| of unacceptable, you did talk about the egregious and | |
| unacceptable human rights abuses that are across China. We know | |
| exactly what they are doing with the human rights abuses | |
| against the Uyghur. We know that they are illegally doing organ | |
| harvesting, that they have denied Hong Kong of the one country, | |
| two system framework, that they are in conjunction with Iran | |
| and Russia from an economic support perspective. | |
| Why is it that you do not view decoupling an adversarial | |
| nation that is out to try to eliminate the U.S. dollar from the | |
| global currency and remove us from being a superpower? Why | |
| would you not advise that that is good to decouple? | |
| Mr. Kritenbrink. Well, Congressman, again as I hope we've | |
| made clear here today, we have deep concerns across a whole | |
| range of activities including several of which that you have | |
| outlined and we are responding to them forcefully. But our | |
| policy is not to pursue decoupling. Our policy is to respond to | |
| those and counter those behaviors in a way that we think best | |
| serves the American national interest. | |
| Chairman McCaul. Do we as America determine that Iran--we | |
| labeled them as a State sponsor of terrorism, is that correct? | |
| Mr. Kritenbrink. That is my understanding. | |
| Chairman McCaul. So what would you call then the Nation who | |
| actually helps to support and fund in a proxy utilization--what | |
| would that country then be? Would that not also be a State | |
| sponsor of terrorism? | |
| Mr. Kritenbrink. Again, Congressman, I've tried to outline | |
| here that where we have concerns with Chinese behavior and | |
| actions we've taken resolute steps to respond to them. | |
| Chairman McCaul. Sir, I am just asking a simple question, | |
| which is that we already have defined that Iran is a State | |
| sponsor of terror. If another nation is in conjunction | |
| supporting that State sponsor of terror, does that not then | |
| also lean to them doing the same? | |
| Mr. Kritenbrink. I'll just say, Congressman, we'll--we'll | |
| respond to the actions of--of China that are of concern to us | |
| and we'll do it in a way that supports our national interest. | |
| Chairman McCaul. No, that is understood. And again, our | |
| national interest seems to be on the ideas of what is | |
| economically beneficial. | |
| Can I ask a question to you, Mr. Schiffer? How much money | |
| does USAID invest in China? | |
| Mr. Schiffer. We do not invest any money in China. | |
| Chairman McCaul. No programs? No projects that are being | |
| done in China at a taxpayers' expense? | |
| Mr. Schiffer. There are programs that we undertake to | |
| support Tibetans and others who are victims of China's | |
| oppression and human rights violations. | |
| Chairman McCaul. So we will allocate and spend money to | |
| help the people in China who China will not help, but in return | |
| we will also continue to give hundreds of billions of dollars | |
| in trade to China while they sponsor countries like Iran, who | |
| we have noted as a State sponsor of terror, or Russia, who is | |
| engaged in war in Ukraine. But yet we still won't determine | |
| that they are a nation in which we are in conflict with. We | |
| won't decouple. We won't stop and actually hold them | |
| accountable noting that they are an adversary. Is that my | |
| understanding of everyone's testimony right now? | |
| Mr. Schiffer. Well, in terms of the programs that--that-- | |
| that we support; and be happy to talk to you more about them in | |
| a--in--in a different setting, we believe that it's important | |
| for the United States to stand up to oppressed people who are | |
| victims of human rights violation, cultural genocide, and--and | |
| more. | |
| Chairman McCaul. And I completely agree with that. I think | |
| we should always be trying to help those who are engaged in | |
| human right abuses or denials. | |
| One question: Do you believe that TikTok is a threat or a | |
| national security issue? And this is for everyone on the panel. | |
| Mr. Kritenbrink. Congressman, on--on your--your previous | |
| question I would just say obviously we're taking a range of | |
| resolute steps that we've outlined here today to advance our | |
| national interest and push back on concerning China's behavior. | |
| On--on--on TikTok I think you're aware that we have banned | |
| the use of TikTok on all U.S. Government devices. My | |
| understanding is CFIUS is looking at a number of--of steps | |
| related to--to TikTok. But I think it would be safer to refer | |
| questions to Treasury and the CFIUS process regarding those | |
| details. | |
| Mr. Estevez. I would also say TikTok is a threat. And like | |
| Secretary Kritenbrink just said, CFIUS is adjudicating that | |
| process right now. | |
| Chairman McCaul. Thank you so much, gentlemen. | |
| With that, I will recognize Mr. Burshett. | |
| Mr. Burchett. Thank you, Mr. Chairman. It is Burchett, but | |
| close. I appreciate it. | |
| Chairman McCaul. Hey, it is close enough, right? | |
| Mr. Burchett. Yes, it is close enough. | |
| I fear that the U.S. Government has been compromised by the | |
| Communist Chinese. Our own President when this surveillance | |
| balloon, or whatever you want to call it, flew over our | |
| country, the President called, from what I--the earlier reports | |
| were that he called for it to be shot down. And then our own-- | |
| from what I understand General Milley said no, it should not. | |
| And then it was allowed to transverse the entire | |
| Continental United States of America. Came over my area, Oak | |
| Ridge National Laboratory. I believe Y-12 in that mix. | |
| And he was the same general under President Trump at the | |
| end of his presidency that actually spoke with the Chinese, | |
| apparently unbeknownst to the White House. And this is the same | |
| man who is telling our President not to shoot this thing down. | |
| And Leon Panetta, former CIA Director, former Chief of Staff | |
| under Obama, he--I saw him in an interview and he said he would | |
| have shot it down over Alaska. | |
| I say that just as a preempt. Doesn't have anything to do | |
| with my questions, but it is something I think that needs to be | |
| said. | |
| But, Secretary Estevez, I am concerned about the | |
| possibility research conducted at ORNL, Oak Ridge National | |
| Laboratory, which may result in matters of national security | |
| could fall into the Chinese Communist Party's hands. And I know | |
| Oak Ridge is part of the Department of Energy, but does the | |
| Department of Commerce have export controls in place to stop | |
| this from happening? | |
| And I believe they are calling for votes. Is that correct? | |
| Yes, I am good. | |
| OK. Go ahead, brother. | |
| Mr. Estevez. That's a--it is a better question for the | |
| Department of Energy. I doubt that Oak Ridge is exporting | |
| anything to China, but we certainly have controls around | |
| nuclear--nuclear goods, nuclear-related items going to China, | |
| full stop. | |
| Mr. Burchett. OK. Secretary Kritenback--brink--how do--is-- | |
| did I say your name right, Kritenbrink? | |
| Mr. Kritenbrink. Yes, sir. | |
| Mr. Burchett. OK. I got it right. | |
| Mr. Kritenbrink. Thank you. | |
| Mr. Burchett. They cannot get Burchett right, but we get | |
| Kritenbrink right. I know you all woke up this morning and | |
| thought, gosh, we are getting to go to testify before Congress. | |
| This is going to be great. | |
| There are many researchers at Oak Ridge National Laboratory | |
| with ties back in China, and these people are very loyal folks. | |
| They are good folks. But what is being done to protect these | |
| researchers and their families from Chinese Communist Party | |
| influence? From what I understand that they--people will get | |
| approached, not necessarily at Oak Ridge, but they could be | |
| get--approached and they will say, hey, you got family back | |
| here. Basically they imply they are going to disappear, which | |
| is greatly within the possibility of Communist China. Is there | |
| something that could done about that? Is there something we can | |
| do about that? | |
| Mr. Kritenbrink. Congressman, thank you for your question. | |
| I--I will have to take that back because I do not know the | |
| details of that program. But I'm happy to take that back and | |
| provide---- | |
| Mr. Burchett. Would you please do, not just do the--not use | |
| the usual---- | |
| Mr. Kritenbrink. Yes, sir. | |
| Mr. Burchett. I realize it as the 435th most powerful | |
| Member of Congress I am not at the top of your list, but | |
| [inaudible]. | |
| Mr. Kritenbrink. No. No, sir. I'm happy to. Could I respond | |
| very briefly on the balloon as well---- | |
| Mr. Burchett. Yes. | |
| Mr. Kritenbrink [continuing]. And I had the opportunity to | |
| mention earlier, Congressman, we--we detected, we tracked the | |
| balloon. President ordered that it be taken down. And that was | |
| done as soon as it was determined it could be done safe--safely | |
| and not in a way that rained debris down potentially on top of | |
| the heads of American citizens that could have injured or | |
| killed them. | |
| I would also say that at the President's direction we took | |
| a number of steps to shield ourselves from any vulnerability | |
| from that balloon. We learned a--a lot from that balloon by | |
| tracking it and we're going to learn even more now that we have | |
| taken it down and recovered the debris. | |
| Mr. Burchett. Yes, sir. I fear that with it dropping in | |
| salt water the electronics will be fried. And also since it--it | |
| could have been dropped in Montana. The Democrat U.S. senator | |
| from there even said it should have been dropped there. | |
| I said this jokingly, but it is the truth: You dropped it | |
| off the coast of Myrtle Beach. You are more likely to hit some | |
| guy with a mullet and a tie-dyed t-shirt riding in a shrimp | |
| boat that you were to hit somebody in Montana. | |
| I mean, you have got all these computer models and you can | |
| tell us where stuff drops. To me that is just very hard to--I | |
| am not calling you a liar, but I am calling somebody a liar | |
| because they are not telling us the truth about this thing. And | |
| it is the type of thing we will never hear about or if we do it | |
| will be in some expose later and then--and nobody will bat an | |
| eye. | |
| Mr. Kritenbrink. Well, Congressman, again I'll just say | |
| that when--when the U.S. military and others did this modeling, | |
| that was the precise concern. You have a balloon that's 200 | |
| feet high and the--the payload, the--the collection apparatus | |
| is the length of three buses---- | |
| Mr. Burchett. I realize that, but---- | |
| Mr. Kritenbrink [continuing]. You shoot that down from that | |
| height, debris scatters over a very wide field. | |
| Mr. Burchett [continuing]. We have models that can---- | |
| Mr. Kritenbrink. Yes, sir. | |
| Mr. Burchett [continuing]. That can read the data off a | |
| dime on the pitcher's mound at Yankee Stadium. | |
| Real quickly, is China--I know China is involved in the | |
| fentanyl crisis. Is the State Department doing anything to | |
| combat that? And I am out of time, I realize, but if you can | |
| just answer that? | |
| Mr. Kritenbrink. Yes, sir. | |
| Mr. Burchett. Maybe have somebody come to the office and | |
| get to me. | |
| Mr. Kritenbrink. We will. Fentanyl is an absolute scourge. | |
| We're engaging the Chinese aggressively. And perhaps most | |
| importantly we're engaging our partners to collectively put | |
| pressure on China to take their right steps that they should. | |
| We'd be happy to brief you, sir. | |
| Mr. Burchett. I wish you would. I hope you all just lock | |
| them down because I do not believe they have anybody's best | |
| interest--and I worry about the good folks in Tennessee that | |
| have family back in China. Thank you, brother. | |
| Chairman McCaul. Thank you, Mr. Burshett. | |
| With that, I will recognize---- | |
| Mr. Burchett. Burchett. Birch like the tree and ett like I | |
| just ett dinner. Ett. Burchett. | |
| Chairman McCaul. Yes, but if I say it correctly, you won't | |
| correct me. | |
| Mr. Burchett. Burshett? What is that? Come on. | |
| Chairman McCaul. I am giving you the French version. | |
| Mr. Lawler? | |
| Mr. Lawler. Thank you for correctly pronouncing my name. | |
| Secretary Estevez, earlier this month Chairman McCaul and I | |
| sent you a letter requesting information on the Department of | |
| Commerce's implementation of U.S. export control laws regarding | |
| Chinese exports to State sponsors of terrorism. I ask unanimous | |
| consent that a copy of the letter be entered into the hearing | |
| record. | |
| Chairman McCaul. Without objection. | |
| [The information referred to follows:] | |
| *********COMMITTEE INSERT********** | |
| Mr. Lawler. Between 2010 and 2016 Chinese company ZTE | |
| illegally exported tens of millions of dollars worth of U.S.- | |
| origin equipment to Iran, clearly violating U.S. sanctions and | |
| export control laws. And I am sure this is not the only case of | |
| illicit activity. | |
| What has BIS done to enforce compliance with enhanced | |
| controls on State sponsors of terrorism? | |
| Mr. Estevez. Thank you for that question. On ZTE, of course | |
| ZTE is under criminal penalty regarding their violation of--of | |
| law there. | |
| Tracking trade from China to other benign--or--or malicious | |
| actors in the world, you know, we can track the trade. What | |
| that is and whether there is American content in those items is | |
| harder to discern. So we have a 10 percent de minimis rule for | |
| stuff going to a State sponsor of terrorism. So we're doing | |
| assessment of what we can do there. That's the most I can say | |
| at this point. And obviously we're going to respond to your | |
| letter. | |
| Mr. Lawler. Thank you. Is BIS able to conduct end-use | |
| checks in China for diversions of two State sponsors of | |
| terrorism like Iran? | |
| Mr. Estevez. We are able to use--to do end-use checks on | |
| our goods that go to China and how they're being used to ensure | |
| they're not being diverted from China. China exports going out | |
| are not subject to our end-use checks. However, we can ensure | |
| that, you know, if--if they're exporting stuff from the United | |
| States, we can start to, you know, do an assessment of how much | |
| content there is. | |
| Mr. Lawler. Do you believe there are certain technologies | |
| that we should not be exporting to China? | |
| Mr. Estevez. If there's technologies that we're--should not | |
| be exporting to China, my job is stopping those. So my view is | |
| no, but as technology advances, we're always taking action | |
| appropriately. | |
| Mr. Lawler. OK. Thank you. | |
| Secretary Kritenbrink, I am deeply concerned with recent | |
| reports that China may be sending ammunition and other military | |
| equipment to Russia in support of its war against Ukraine. How | |
| is the Administration working to prevent this arms transfer and | |
| how would the Administration respond if a deal goes through? | |
| Mr. Kritenbrink. Congressman, yes, you're right, we are | |
| deeply concerned that--our understanding is China is | |
| considering taking steps to provide lethal assistance to the | |
| Russian military in Ukraine. We have not seen them take that | |
| step yet. We've tried to signal very clearly, both in private | |
| in Munich and then publicly, our concerns. We've talked about | |
| the implications and the consequences if they were to do so. | |
| And we also know that many of our like-minded partners share | |
| those--those concerns. So I think we've--I think we've made | |
| that very clear. | |
| Mr. Estevez. And if I could, Congressman? | |
| Mr. Lawler. Yes, please. | |
| Mr. Estevez. For dual-use items that are part of our | |
| sanctions package, our export control package that we and 38 | |
| other nations have put on regarding support to Russia, we have | |
| put 12 Chinese entities on the entity list for providing | |
| support to Russia. | |
| Mr. Lawler. Thank you. As we all know, the CCP has been | |
| conducting vast espionage operations in our country for years, | |
| long before this most recent episode with the Chinese spy | |
| balloon. What specific steps are the--is the Administration | |
| taking to counter China's espionage efforts over the past 2 | |
| years? | |
| Mr. Kritenbrink. Congressman, I think it would be safer if | |
| I take that back and have colleagues in the intelligence | |
| community brief you in--in a classified setting. | |
| Mr. Lawler. That would be great. | |
| Mr. Kritenbrink. Thank you, sir. | |
| Mr. Lawler. Last, how is the Administration working with | |
| the ASEAN countries to push back on China's militarization of | |
| the South China Sea? | |
| Mr. Kritenbrink. Yes, sir. Well, I'd say a--a--a couple of | |
| things: First of all, our engagement with ASEAN, the 10 | |
| countries of ASEAN, soon to be 11, is really vitally important | |
| to the United States. Collectively these--these countries form | |
| the world's fourth largest economy and with 650 million people | |
| are--or collective 1 billion people I think have a bright | |
| future together. | |
| But specifically with countries in ASEAN and especially the | |
| subset of ASEAN States who are South China Sea claimants we do | |
| several things: We're engaged with them diplomatically to make | |
| sure that they and all countries promote the peaceful | |
| resolution of disputes, the respect for international law | |
| including international maritime law, and that we work | |
| diplomatically to preserve the freedom of navigation and | |
| freedom of overflight. | |
| Second, we are providing, both the State Department and | |
| DoD, a--a--a great deal of assistance to build these partners' | |
| maritime capacity including their maritime domain awareness | |
| capacity and defense capacity so they better understand what's | |
| happening in their waters, they can better deter China and | |
| others from violating their rights and they can better secure | |
| the minerals in their waters to which they're entitled. | |
| And then third and finally, we work very closely with our | |
| partners at DoD who on a daily basis are, through their | |
| presence operations and freedom of navigation operations, | |
| demonstrating that we'll fly, sail and operate anywhere | |
| international law allows. And every other country should be | |
| entitled to the same right. | |
| Mr. Lawler. Great. Thank you. I yield back. | |
| Chairman McCaul. Gentlemen, thank you so much. I want to | |
| thank the witnesses for their valuable testimony as well as the | |
| members for their questions. The member of the committees may | |
| have some additional questions for the witnesses, and we would | |
| ask that you respond to these in writing. | |
| Pursuant to committee rules all members may have 5 days to | |
| submit statements, questions, and extraneous material for the | |
| record subject to the length limitations. | |
| Without objection, the committee stands adjourned. | |
| [Whereupon, at 1:41 p.m, the committee was adjourned.] | |
| APPENDIX | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| STATEMENT FOR THE RECORD FROM REPRESENTATIVE CONNOLLY | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| [all] | |
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