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Lawmakers seek to stop China’s tech rise without a ‘Great Wall’

Protecting pharma and steel, but not textiles and soybeans

Rep. Ro Khanna, a member of the new select committee on China, has called for a broad industrial strategy to revive domestic manufacturing in several sectors and subsidies to help U.S. companies compete against Chinese exports in some sectors.
Rep. Ro Khanna, a member of the new select committee on China, has called for a broad industrial strategy to revive domestic manufacturing in several sectors and subsidies to help U.S. companies compete against Chinese exports in some sectors. (Tom Williams/CQ Roll Call)

Across the political spectrum there seems to be a consensus that the decadeslong free flow of trade, money and technology from the U.S. to China must be fundamentally overhauled, but several lawmakers involved in the effort are confronting the difficulty of an overhaul that doesn’t sever economic ties between the two countries.

From the recent episode of a Chinese spy balloon traversing the U.S. to long-standing issues of Beijing’s cyberattacks and bellicose actions toward Taiwan and across the South China Sea, as well as China’s military buildup, members of Congress cite many reasons to reduce U.S. dependence on China in critical areas by restoring domestic capacities, even as they seek to maintain the status quo in others. 

“There are certain areas that meet the test of national security as well as issues that the American people care about … [including] semiconductors, large-capacity batteries that have to do with electric vehicles, critical minerals, artificial intelligence, quantum computing, but also pharmaceutical ingredients, automobile manufacturing,” said Rep. Rosa DeLauro, D-Conn., the ranking member on the House Appropriations Committee.

“We are not putting a Great Wall of China against China,” DeLauro said in an interview. “What we are trying to do is safeguard our own domestic market and safeguard our national security.” 

Getting legislative agreement, however, could still prove a challenge. DeLauro’s proposal to screen and restrict U.S. capital flowing into key tech sectors in China passed the House but not the Senate in the last Congress. And an effort to tighten restrictions on high-tech exports while leaving others to fend for themselves may cause some lawmakers to balk.

DeLauro, a founding member of the Congressional Progressive Caucus, said she intended to take up her capital-flow measure in the current Congress and push back against opposition from U.S. companies, including the U.S. Chamber of Commerce, that called for more narrowly tailored legislation. DeLauro is also encouraging the Biden administration to take executive action to track and restrict U.S. capital investment in China.

“I would hope that, given all that China does with their intellectual property and the balloon incident, would have some impact on” U.S. companies’ view of their engagement with China, she said.  

The administration has been ratcheting up restrictions on exports of critical technologies to China as well as placing Chinese tech companies on export blacklists. 

On Feb. 10, days after the Pentagon shot down a Chinese spy balloon over the Atlantic Ocean, the Commerce Department blocked six Chinese companies that were said to be involved in aerospace programs, including development of surveillance balloons, from access to U.S. technologies. 

U.S. companies would have to obtain a license from the department to sell anything to such restricted foreign companies. 

“The export of technology to China that then goes into their most advanced weapons systems” is a top priority, Rep. Michael McCaul, R-Texas, chairman of the House Foreign Affairs Committee, told CBS News’ “Face the Nation” on Sunday. 

Selective disengagement

Rep. Mike Gallagher, R-Wis., said it’s possible to trade some goods with China even as the U.S. closes Beijing’s access to others. Gallagher is chair of the House Select Committee on Strategic Competition between the U.S. and the Chinese Communist Party, tasked with proposing a wide range of measures to address the U.S.-China ties.

“I don’t have a problem with us buying cheap clothes from China. … We probably don’t want to spend a bunch of money onshoring textile manufacturing,” Gallagher said in an interview.

“I also don’t have a problem with Wisconsin farmers selling soybeans to China, but I do have a problem with us being dependent on China for advanced pharmaceutical ingredients, or micro electronics. … I have a problem with dependency on rare earths,” he said.

But such selective disengagement must be accompanied by stronger U.S. relationships with the rest of the world, Gallagher said. 

“You cannot selectively decouple, in my opinion, if you do not simultaneously deepen your economic engagement and technological collaboration with the free world at the same time to try and reduce our dependence on China,” Gallagher said. 

Washington should consider “taking intelligent risks,” including striking a free-trade or digital-trade agreement with Taiwan, and work with allies such as Japan, Australia, South Korea and India in trying to figure out how to reduce those countries’ dependencies on China, Gallagher said.

Rep. Ro Khanna, D-Calif., a member of the select committee on China and the Congressional Progressive Caucus, said it’s not enough to decouple from China and that the U.S. must aim for a broader economic rebalancing and reduce the U.S.-China goods and services trade deficit that was about $383 billion last year. 

In addition to bringing back key U.S. industries, such as steel, that shifted operations abroad in the past few decades, “we have to push to open the Chinese markets to American products,” Khanna said in an interview. “What’s going to keep us ahead of China is to have China become dependent on American technology and have American technology lead.” 

The U.S. also should push China to stop requiring joint venture agreements with U.S. companies seeking access to Chinese markets, which often leads to technology transfer, Khanna said. 

In a recent essay in Foreign Affairs magazine, Khanna called for a broad industrial strategy to revive domestic manufacturing in several sectors as well as U.S. subsidies to help U.S. companies compete against Chinese exports in some sectors. 

“Washington should focus on subsidizing exports of clean energy technology around the world to compete with China’s subsidized clean energy exports, such as batteries and solar panels,” Khanna wrote, calling for revitalization and investing more in the Export-Import Bank, which helps U.S. companies sell abroad.

Gallagher said the U.S. could successfully execute the “two-step” of partly decoupling from China while deepening engagement with allies with expanded trade ties.

“If we don’t … then we descend into autarky, and that doesn’t help Americans,” Gallagher said.

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