Source: Blog – Alliance for American Manufacturing

AAM President Scott Paul testified Tuesday evening before the new House select committee on China. Here are some of the highlights.

The brand new House Select Committee on the Strategic Competition Between the United States and Chinese Communist Party (CCP) held its first hearing on Tuesday night, and our very own Scott Paul was one of the four witnesses providing testimony.

As far as 3-hour-long congressional hearings go, it was a pretty exciting one. The hearing room was packed, and given that it took place at 7 p.m., most committee members stayed for the whole thing. There were even protestors!

But both Members and witnesses seemed to be pretty united that the actions of the CCP over the past two decades — along with some pretty big mistakes on behalf of U.S. policymakers and big corporations — have caused damage to America’s national security, weakened our competitiveness, and severely damaged our ability to make the things we need.

In his testimony before the committee, Paul noted that “while CCP policies have been destructive, our own policies made matters worse.” Giving the green light to China joining the World Trade Organization (WTO) “seemed like a slam dunk but instead became a spectacular failure of conventional wisdom and elite option,” Paul noted.

And as problems in the U.S.-China relationship began to emerge — millions of lost jobs and tens of thousands of factory closures among them — the U.S. “turned a blind eye.”

“America has become too dependent on China for many essential goods,” Paul continued. “PPE during the pandemic. 5G hardware. Commercial drones. Medicine. The list is long and terrifying. At the same time, U.S. manufacturing capabilities eroded. The defense industrial base weakened. We’re behind the curve on clean energy manufacturing. We couldn’t make enough semiconductor chips, which broke supply chains. It doesn’t have to be this way.”

Headed by Chairman Mike Gallagher (R-Wis.) and ranking member Raja Krishnamoorthi (D-Ill.), the new select panel is charged with examining the threats facing the United States because of the CCP’s actions and developing “a plan of action.”

Thus far, committee members have taken pains to ensure that their work is bipartisan, focused on the issues at hand and working to avoid partisan grandstanding. And as Krishnamoorthi noted in his opening remarks on Tuesday, Members also are aiming to focus their attention on the CCP and its bad behavior — not the Chinese people or Chinese Americans.

“Xenophobia and stereotyping is what the CCP would want to happen,” Krishnamoorthi said. “The CCP is counting on us being divided.  We must rise to the occasion and prove them wrong.”

Keeping focused on policy solutions is one way to do that, and Paul offered several ideas for the committee, including:

Building on semiconductor technology export restrictions

Vigorously enforcing the Uyghur Forced Labor Prevention Act 

Sharpening trade tools through legislation such as the Leveling the Playing Field Act 2.0 and “de minimis” reform

Screening outbound investment of U.S. companies in China and increase oversight of Chinese investment in the U.S. 

Expanding the Transportation Infrastructure Vehicle Security Act (TIVSA), barring Chinese firms from federal transit contracts to all other public investment funding streams

Revoking China’s permanent normal trade relations (PNTR) status 

“A bright future for American manufacturing is possible, even in the wake of the CCP’s destructive policies,” Paul said. “Factories are rebounding, and it’s not accidental: It’s a result of public policies, and pressure on corporations to rethink supply chains.”

Along with Paul, other witnesses included H.R. McMaster, who served as national security advisor under President Trump, and Matthew Pottinger, who worked as deputy national security advisor in the same administration. But arguably the most touching testimony came from human rights advocate Tong Yi, who recounted her time spent in prison in China because of her work as a dissident.

While Yi described herself as a “proud immigrant citizen of the U.S.” she said she also wants “my country to do better” when it comes to its relationship with China. Too often, she said, the United States has put business before human rights concerns.

“In the U.S., we need to face the fact that we have helped to feed the baby dragon of the CCP until it has grown into what it now is,” she said, adding: “Since the 1990’s US companies have enriched themselves by exploiting cheap labor in China and have in the process also enriched the CCP.”

Rep. Ro Khanna (D-Calif.), who has become a fierce advocate for reshoring and strengthening manufacturing, highlighted Paul’s testimony, noting it highlighted the devastation caused by “the mistake we made as a country for the past 40 years, in basically deindustrializing the nation, saying manufacturing didn’t matter, we could just have the MIT folks win the Nobel prizes and somehow production was not relevant.”

Khanna pointed out some of the areas where China has overtaken the U.S., from steel (the U.S. makes 4% of the world’s steel, China makes 57%); to aluminum (2% to 57%) to paper (17% to 30%). And Khanna noted China used much of the formula put forth by Alexander Hamilton centuries ago to build its own industry.

Khanna then asked Paul if it would be appropriate for the U.S. government to play a role in rebuilding industry, including through government purchases.

“There is no doubt that the government has to be a partner in this,” Paul responded. “In a perfect world, the market would work, and it would settle things out. We are not in that world… we have a market failure, and we are starting from behind.”

Another hearing highlight came from Rep. Haley Stevens (D-Mich.), who represents a whole lot of manufacturers. Stevens noted that the United States is now too reliant on China for the things we need, and that is threatening American industry, noting 80% of battery manufacturing takes place in China, 98% of microchips purchased by the Defense Department are made in Asia, and 85% of the refining capacity for rare earth minerals is controlled by China.

“This is a cause for grave concern,” McMaster agreed.

In his opening remarks, Gallagher promised the committee will “act with a sense of urgency,” focusing on policy efforts “over the next ten years will set the stage for the next hundred.”

“Therefore, we must learn from our mistakes. For much of the past half century, we tried to win the CCP over with honey, believing that economic engagement would lead to reforms in China,” he said.

“We were wrong. The CCP laughed at our naïveté while they took advantage of our good faith. But the era of wishful thinking is over. The Select Committee will not allow the CCP to lull us into complacency or maneuver us into submission.”

Have three hours to spare? Watch the full hearing:

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