[House Hearing, 116 Congress] [From the U.S. Government Publishing Office] CHINA'S EXPANDING INFLUENCE IN EUROPE AND EURASIA ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON EUROPE, EURASIA, ENERGY, AND THE ENVIRONMENT OF THE COMMITTEE ON FOREIGN AFFAIRS HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS FIRST SESSION __________ May 9, 2019 __________ Serial No. 116-35 __________ 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 www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 36-214PDF WASHINGTON : 2019 -------------------------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Publishing Office, http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). E-mail, [email protected]. COMMITTEE ON FOREIGN AFFAIRS ELIOT L. ENGEL, New York, Chairman BRAD SHERMAN, California MICHAEL T. McCAUL, Texas, Ranking GREGORY W. MEEKS, New York Member ALBIO SIRES, New Jersey CHRISTOPHER H. SMITH, New Jersey GERALD E. CONNOLLY, Virginia STEVE CHABOT, Ohio THEODORE E. DEUTCH, Florida JOE WILSON, South Carolina KAREN BASS, California SCOTT PERRY, Pennsylvania WILLIAM KEATING, Massachusetts TED S. YOHO, Florida DAVID CICILLINE, Rhode Island ADAM KINZINGER, Illinois AMI BERA, California LEE ZELDIN, New York JOAQUIN CASTRO, Texas JIM SENSENBRENNER, Wisconsin DINA TITUS, Nevada ANN WAGNER, Missouri ADRIANO ESPAILLAT, New York BRIAN MAST, Florida TED LIEU, California FRANCIS ROONEY, Florida SUSAN WILD, Pennsylvania BRIAN FITZPATRICK, Pennsylvania DEAN PHILLPS, Minnesota JOHN CURTIS, Utah ILHAN OMAR, Minnesota KEN BUCK, Colorado COLIN ALLRED, Texas RON WRIGHT, Texas ANDY LEVIN, Michigan GUY RESCHENTHALER, Pennsylvania ABIGAIL SPANBERGER, Virginia TIM BURCHETT, Tennessee CHRISSY HOULAHAN, Pennsylvania GREG PENCE, Indiana TOM MALINOWSKI, New Jersey STEVE WATKINS, Kansas DAVID TRONE, Maryland MIKE GUEST, Mississippi JIM COSTA, California JUAN VARGAS, California VICENTE GONZALEZ, Texas Jason Steinbaum, Democrat Staff Director Brendan Shields, Republican Staff Director ------ Subcommittee on Europe, Eurasia, Energy, and the Environment WILLIAM KEATING, Massachusetts, Chairman ABIGAIL SPANBERGER, Virginia ADAM KINZINGER, Illinois, Ranking GREGORY MEEKS, New York Member ALBIO SIRES, New Jersey JOE WILSON, South Carolina THEODORE DEUTCH, Florida ANN WAGNER, Missouri DAVID CICILLINE, Rhode Island JIM SENSENBRENNER, Wisconsin JOAQUIN CASTRO, Texas FRANCIS ROONEY, Florida DINA TITUS, Nevada BRIAN FITZPATRICK, Pennsylvania SUSAN WILD, Pennsylvania GREG PENCE, Indiana DAVID TRONE, Maryland RON WRIGHT, Texas JIM COSTA, California MIKE GUEST, Mississippi VICENTE GONZALEZ, Texas TIM BURCHETT, Tennessee Gabrielle Gould, Staff Director C O N T E N T S ---------- Page WITNESSES Le Corre, Philippe, Nonresident Senior Fellow, Europe and Asia Programs, Carnegie Endowment for International Peace........... 7 Segal, Stephanie, Deputy Director and Senior Fellow, Simon Chair in Political Economy, Center for Strategic & International Studies........................................................ 18 Kendall-Taylor, Andrea, Senior Fellow and Director, Transatlantic Security Program, Center for a New American Security........... 27 Cooper, Zack, Research Fellow, American Enterprise Institute..... 38 APPENDIX Hearing Notice................................................... 69 Hearing Minutes.................................................. 70 Hearing Attendance............................................... 71 RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD Resposnses to questions submitted from Representative Pence...... 72 Resposnses to questions submitted from Representative Spanberger. 75 ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD Channeling the Tide Report....................................... 78 CHINA'S EXPANDING INFLUENCE IN EUROPE AND EURASIA Thursday, May 9, 2019 House of Representatives Subcommittee on Europe, Eurasia, Energy and the Environment Committee on Foreign Affairs Washington, DC The subcommittee met, pursuant to notice, at 10:01 a.m., in room 2167 Rayburn House Office Building, Hon. William Keating (chairman of the subcommittee) presiding. Mr. Keating. The hearing will come to order. We are in a different room, I can tell just from the microphones. It is reverberating. The subcommittee is meeting today to hear testimony on China's Expanding Influence in Europe and Eurasia. Without objection, all members will have 5 days to submit statements, questions, extraneous materials for the record, subject to the length and limitation in the rules. I will now make an opening statement and then turn it over to the ranking member for his opening statement. We are holding this hearing today on China's engagement in Europe and Eurasia as part of a series of hearings being held within the Foreign Affairs Committee this week, all of them on China. I am pleased that the committee is taking this step in- depth because I firmly believe that failing to develop a strategy for engaging with an increasingly competitive China, we will be confronted with one of the greatest security threats of our generation. The goal of today's hearing is not to preemptively disqualify Chinese investments as illegitimate. Competition after all is the bedrock of a successful capitalist system. However, a core value of Western democratic countries is also that competition must be fair and everyone must play by the same rules. So as we consider the range of China's economic and financial endeavors across Europe and Eurasia today, that is the principle that we must keep in mind. And the question we must ask is this, is China playing by the rules? Unfortunately, the overwhelming evidence across the range of China's global dealings indicate, really, that at this time they are not. In today's hearing, we will be able to assess China's investment in Europe and Eurasia through the Belt and Road Initiative and by Chinese companies, with an eye toward understanding the risks of accepting these investments when China does not adhere to the rules and abide by principles of free and fair competition. There are real security and economic risks if we do not take this opportunity to reaffirm the rules- based international order. And whether it is using Chinese companies to build Europe's 5G networks or investments in ports and critical infrastructure, there are real security concerns for NATO and cooperation with our allies. And with the lack of transparency around these deals and evidence of predatory lending, the economic risks are clear. Further, we see that China uses their newfound economic ties for leverage within Europe to avoid criticism for their human rights record and other concerning policies. All of this undermines our shared values around democracy and the rule of law and the principles and cooperation that we have made in the U.S. and share with our allies and have shared for more than 70 years. Today is an important day because today is Europe Day, May 9th, the anniversary of the Schuman Declaration which first put forth the idea of a unified Europe on peace. We all can appreciate and celebrate that today. It is an important day not just for Europe, but for us in the United States as well, because a united Europe is a stronger Europe. These are our allies and closest partners in security and in business, and when Europe is stronger, we are stronger. For our part, we can do more here in the United States to enforce our standards and make sure China is playing by the rules here at home. This is our own companies that embrace free and fair competition and make our economy stronger and they are not pushing and going to be pushed out by the unlevel playing field that China has so far been involved in, so that we do not have to also leave ourselves more vulnerable to cyber and security threats. Europe must do the same, and I am very encouraged by the screening mechanism framework which we will hear something about I hope that was passed quickly by the EU and went into force this year. This is a critical step and we should continue to work with the EU and our allies and partners across the region to harmonize our screening mechanisms and share information on how to watch for risks associated with these Chinese investments. We should also recommit to working together to offer alternatives to Chinese investments. Countries are not wrong to want to have investments in important sectors in their economies, and we have to make sure that alongside of working with governments to avoid predatory and unfair Chinese investments, we are also there to offer safe alternatives to make our economies and our alliances stronger. The U.S. took an important step in this regard passing the BUILD Act last year and Europe has announced its similar connectivity strategy and spur for greater investment and projects around the world. This is something we can work on, I believe, together not just independently. We can do more. A troubling poll earlier this year in Germany found that 43 percent of Germans thought China was a more reliable partner than the United States on economic partnerships. At a time when Russia and China are actively working to chip away at our alliance with Europe and undermine the values and rules that we have brought for greater security and prosperity for all of us, this is a moment where we must reaffirm our alliance, recommit to trade, recommit to investment agreements and reinforce our shared standards for rule of law. That is how we operate from a position of strength in responding to threats from Russia and China. So I would like to thank our witnesses for being here today so we can examine these issues carefully and our policy options for moving forward in this way. Now I will turn to the ranking member for his opening statement. Mr. Kinzinger. Well, I thank the chairman. And I thank the witnesses for being here today. And I want to apologize up front, I have another hearing in Energy and Commerce I will have to leave for, but that does not belittle the importance of this issue. And I think it is important to note that there is no daylight between the Republicans and Democrats, the chairman and I, on this threat, this concern. A lot of our differences get a lot of media attention, but there is way more that unites us than actually divides us, and so that is important to note. When President Xi assumed power in 2013, he set China on an ambitious path to increase its regional control while expanding its global reach. During the cold war, we had this great battle of ideas between capitalism in the West and Communism in the East. This has shifted to a battle between democracy versus authoritarianism and the United States must respond accordingly. We have seen the CCP conduct influence operations around the world to affect how media, business, academia, and politicians view the Chinese threat. Whether it be Chinese, Russian, or ISIS ideological ideas, we should not be brushing them off without a second thought. Yet this is what many countries around the world are doing when it comes to China's debt-trap diplomacy. Through State-funded projects such as Made in China 2025 and the Belt and Road Initiative, the CCP has found a way to use capitalism to benefit the spread of their authoritarian system. By offering incentive-laced ideas, China has gained access to European markets which have historically shied away from their system of governance. China has had over 350 mergers, investments, and joint ventures across Europe. In many cases, they can access critical information about how these systems work or even steal sensitive IP. More than half of China's investments in Europe is in the largest economies, Germany, United Kingdom, France, and Italy. What concerns me though is that these are linchpins in our NATO alliance. China has now passed the U.S. as Germany's largest trading partner and they are closing the gap for the EU as a whole. They have also bucked American concerns and have stated their willingness to integrate their systems with Hauwei's 5G networks which compromise our intelligence sharing. In the U.K. alone, China has invested over 70 billion. They are trying to get a foot in the door in anticipation of any Brexit deal that sees the U.K. leaving the EU. Italy is becoming the first G7 country to sign a memorandum of understanding with China to participate in the BRI. While not binding, it is a symbolic win for China to secure such a significant nation. Chinese companies now either fully own or have sizable investments in Greek and Portuguese ports, a British and Portuguese energy system, and airports in London, Frankfurt, and Toulouse. As a result, Chinese influence has pushed countries like Greek and Hungary to water down EU statements regarding China's illegal island-grabbing in the South China Sea. Following a massive flow of Chinese investment, the Czech Republic's President stated that his country would become an unsinkable aircraft carrier of Chinese investment expansion. Luckily, amidst growing American and European concerns over China's intention, the CCP has softened their tone and decreased foreign investment over the past few months. By no means do I believe that they will back down. This gives Congress and the administration time to engage with our European partners to formulate a plan as we must be ready for China's next investment push. Again, I thank the chairman for convening this extremely important hearing today and I thank the panel for your commitment in testifying for us, and I yield back. Mr. Keating. The chair thanks the ranking member. I will now introduce our witnesses. Philippe Le Corre is a Nonresident Senior Fellow in the Europe and Asia Programs at the Carnegie Endowment for International Peace and an affiliate with the project on Europe and the transatlantic relationship at the Harvard Kennedy School Belfer Center for Science and International Affairs. He is a former Special Assistant and Counsellor for international affairs to the French Minister of Defense. And thank you very much for being here, Mr. Le Corre. Stephanie Segal is the Deputy Director and Senior Fellow, Simon Chair in Political Economy at the Center for Strategic & International Studies, and the former codirector of the East Asia Office at the United States Department of the Treasury. Thank you for being here. Dr. Andrea Kendall-Taylor is the Senior Fellow and Director of Transatlantic Security Programs at the Center for New American Security and a former Deputy National Intelligence Officer for Russia and Eurasia at the National Institute Counsel and the Office of Director of National Intelligence, thank you. Dr. Cooper, Dr. Zach Cooper is a Research Fellow focusing on U.S.-China strategic competition at the American Enterprise Institute. He is also an Adjunct Assistant Professor at Georgetown University with an Associate from Armitage International and a National Asia Research Fellow. He previously served at the National Security Council and at the Department of Defense. I would like to thank all the witnesses for being here today and look forward to your testimony. You will have the opportunity, although we are not going to put a clock over your head too harshly, to limit your testimony to the range of 5 minutes. Without objection, your prepared written statements will also be part of the record. As I stated at the outset, members will be able to forward other questions in the future for your response. I will now go to Mr. Le Corre for his statements. STATEMENTS OF PHILIPPE LE CORRE, NONRESIDENT SENIOR FELLOW, EUROPE AND ASIA PROGRAMS, CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE; STEPHANIE SEGAL; ANDREA KENDALL-TAYLOR; AND, ZACK COOPER, RESEARCH FELLOW, AMERICAN ENTERPRISE INSTITUTE STATEMENT OF PHILIPPE LE CORRE, NONRESIDENT SENIOR FELLOW, EUROPE AND ASIA PROGRAMS, CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE Mr. Le Corre. Thank you very much, Mr. Chairman, Ranking Member, distinguished members of this committee, thank you for inviting me for the second time in a year. And I have to say, this hearing takes place in the context of a shift in the attitudes of both the United States and Europe toward China's economic and political rise. For the past 2 years, the U.S. has taken a tougher stance in dealing with China especially in the field of economic reciprocity and violations of international norms of intellectual property. More broadly, Washington has taken a consensual bipartisan approach vis-a-vis Beijing, which now appears as the main threat to American interests. But I also want to stress that Europe, the Europe we are dealing with today is not the one we were dealing with 3 years ago in this particular context. True, Europe remains divided vis-a-vis the People's Republic of China, but for the past 3 months a number of important events and developments have taken place. First and foremost, on March the 12th, the European Commission published a document called the ``EU-China: A Strategic Outlook''. The tone and the language of this document is quite different from what we are used to, those of us looking at European documents. It labels China as a systemic rival and it lists all the issues that are basically in the way of a smooth relationship between China and the EU. For example, the role of State-owned enterprises, intellectual property issues, the lack of market access in China, 5G, and generally different values and issues that have become a problem, and also in the eyes of European countries. Second, in March again, President Xi Jinping visited Europe. He visited Italy and he visited France. In Italy, yes, he did sign an MOU with the Italian Government on the Belt and Road Initiative, but it is only an MOU and I will come back to that in a minute. But in France he was welcomed not just by President Macron, but also by Chancellor Merkel and the president of the European Commission, Mr. Juncker. This is a far cry from the usual attitude, the divided attitude of Europeans vis-a-vis China. Of course, you could argue that the Chinese Prime Minister who later came to Europe and countered the 16 countries, the 16+1 mechanism, but not much came out of this except perhaps, you know, it became the 17+1. But I think the most important thing to remember is that there is a unified position toward China at least represented by the EU. The EU-China annual summit took place on April the 11th in Brussels in the presence of Premier Li Keqiang, and it concluded with a joint communique that sets a date for comprehensive agreement on investment that is also quite important. And fourth and last, but not least, in April again, the EU introduced a new screening mechanism as you were referring to, Mr. Chairman, on foreign investment after less than 2 years of internal discussions. Despite divisions within Europe, no EU country, in the end, opposed this new nonbinding scheme. At the same time, Chinese investments in the EU have declined considerably after peaking in 2016. This is mainly due to restrictions of capital outflows from China and also the fact Chinese investments are mainly in the area of technology and infrastructures, particularly as part of President Xi Jinping's signature project, the BRI. I mean the BRI by the way targets not just Europe, but pretty much every continent except North America. It is true that 12 European leaders attended the BRI forum in Beijing, but neither the German Chancellor or the French President took part. The EU was represented, but not by its most senior officials. Division remains, but countries in Europe have become aware of China's discourse and feel the need to protect themselves through the European Union. The EU today remains one of the strongest advocates of liberal and democratic values in the world, many of them shared in America, which is why, Mr. Chairman, distinguished members of the committee, I would urge, in conclusion, that Congress does all it can to collaborate with Europe to build consensus over the immediate security, technological, and geoeconomic threats of China's expansion. As the current U.S. administration continues to send mixed messages to America's oldest and most reliable allies, it is critical that Congress takes a leading role in reinforcing a transatlantic dialog on China's global influence. Thank you. [The prepared statement of Mr. Le Corre follows:] [GRAPHIC] [TIFF OMITTED] T6214.013 [GRAPHIC] [TIFF OMITTED] T6214.014 [GRAPHIC] [TIFF OMITTED] T6214.015 [GRAPHIC] [TIFF OMITTED] T6214.016 [GRAPHIC] [TIFF OMITTED] T6214.017 [GRAPHIC] [TIFF OMITTED] T6214.018 [GRAPHIC] [TIFF OMITTED] T6214.019 [GRAPHIC] [TIFF OMITTED] T6214.020 [GRAPHIC] [TIFF OMITTED] T6214.021 Mr. Keating. Thank you, Mr. Le Corre, for those comments and look forward to coming back to you with some questions about some of those comments. Ms. Segal, thank you for being here. You may proceed. STATEMENT OF STEPHANIE SEGAL, DEPUTY DIRECTOR AND SENIOR FELLOW, SIMON CHAIR IN POLITICAL ECONOMY, CENTER FOR STRATEGIC & INTERNATIONAL STUDIES Ms. Segal. Thank you, Mr. Chairman, Mr. Ranking Member, members of the committee. Thank you for the opportunity to contribute to today's hearing. I have submitted my full written statement for the record. My comments today will focus on Chinese investments in the context of the Belt and Road Initiative and China's strategy to become a global innovation leader. I will conclude with a few thoughts on cooperation between the United States and Europe. While China's going out strategy can be traced back to the 1990's, initiatives under President Xi have focused on strategic and geopolitical goals. These include One Belt and One Road, the Asian Infrastructure Investment Bank, and Made in China 2025. One Belt, One Road, renamed the Belt and Road Initiative, or BRI, is China's most ambitious going out effort to date. Over 125 countries have signed BRI cooperation documents and, in April, Italy became the first G7 country to sign on. Here are the concerns with China's investment and critical infrastructure and recipient countries' excessive reliance on debt to finance such investments. To date, European interests under BRI are most directly implicated in Central and Eastern Europe. Through its 16+1 format, recently expanded to 17+1 with Greece's participation, China has increased its activities in the region. Since its inception, criticism of BRI has mounted, particularly in the areas of transparency and debt sustainability. One cautionary example is Montenegro where a Chinese-financed highway project has sent the country's debt soaring. Moving to another Chinese initiative, Made in China 2025 aimed to establish China as a global innovation leader. A report from the Council on Foreign Relations notes that Chinese companies have been encouraged to invest in foreign companies to gain access to advanced technology. Here are the concerns with China's acquisition of advanced technologies and the potential for China to gain unfair competitive advantage that will distort global markets. In response to external pressure, China has downplayed the formal Made in China 2025 slogan, but there is little doubt that China will continue pursuing policies that foster homegrown innovation. In recent months, Europe has sharpened its approach to China. As Philippe just mentioned, in March, the European Commission delivered a strategic outlook to the European Parliament and the European Council. Significantly, that report refers to China as an economic competitor and a systemic rival promoting alternative models of governance, echoing language from the National Security Strategy of the United States. Recently, Europe has taken steps which reflect the growing appreciation in Europe that the balance of challenges and opportunities presented by China has shifted. As we mentioned, the new EU-wide foreign investment screening mechanism mandates information sharing in certain circumstances and incentivizes all EU members to adopt investment screening mechanisms. A recent report attributed last year's decline in foreign investment from China in Europe to greater scrutiny in recipient countries as well as the macro conditions in China. There is also focus on export controls to address potential risks from the sale or licensing of sensitive technology. As indicated in the Commission's strategic outlook, European policymakers are considering modalities to address national security risks stemming from outbound investment and emerging technologies, in particular to address the challenges of different jurisdictions between member States, the European Union, and other advanced technology-exporting countries. Regarding trade and the WTO, Europe is calling on China to adhere to stronger disciplines on industrial subsidies and is also working in the trilateral context with the United States and Japan. Just a few comments on cooperation, cooperation between the United States, Europe, and other like-minded countries maximizes the chances for shaping China's behavior and protecting U.S. interests. Coordination with Europe is essential to ensure problematic investments or technology transfers are not simply diverted from one country to another. Such cooperation can take the form of greater information sharing as well as ex ante coordination on possible listings of sensitive technology. With respect to trade, cooperation to discipline China's behavior in the area of subsidies, self-declaration as a developing country, and digital issues will be necessary to shape global outcomes. Separate but related, I would like to add that the imposition of tariffs, including on U.S. allies on national security grounds, undermines trust in the United States as a reliable partner. China has capitalized on U.S. rhetoric and actions. To reset the narrative, the United States should remove steel and aluminum tariffs imposed under Section 232, and end the threat of new tariffs on autos and auto parts, especially on U.S. allies and partners. Again, I thank the subcommittee for the opportunity to offer these thoughts and I look forward to answering members' questions. [The prepared statement of Ms. Segal follows:] [GRAPHIC] [TIFF OMITTED] T6214.022 [GRAPHIC] [TIFF OMITTED] T6214.023 [GRAPHIC] [TIFF OMITTED] T6214.024 [GRAPHIC] [TIFF OMITTED] T6214.025 [GRAPHIC] [TIFF OMITTED] T6214.026 [GRAPHIC] [TIFF OMITTED] T6214.027 [GRAPHIC] [TIFF OMITTED] T6214.028 Mr. Keating. Thank you, Ms. Segal. Dr. Kendall-Taylor? STATEMENT OF ANDREA KENDALL-TAYLOR, SENIOR FELLOW AND DIRECTOR, TRANSATLANTIC SECURITY PROGRAM, CENTER FOR A NEW AMERICAN SECURITY Ms. Kendall-Taylor. Chairman Keating, distinguished members of the subcommittee, thank you for the opportunity to be here to discuss China's influence in Europe. I want to begin my statement by briefly highlighting four overarching ideas that I think should shape Washington's approach to competing with China and Europe. First, is the issue of prioritization. As the United States develops its approach to Europe, it must recognize that in the coming decade China will be our No. 1 challenge. To effectively compete with China, the United States will need strong and cohesive relations with Europe. On the security front, the United States and Europe must divide and conquer. The U.S. needs Europe to do more to provide for its own security and defense to free up Washington to focus on the Indo-Pacific. Outside the security realm, the United States and Europe must stand together. The U.S. needs Europe as a partner to confront China on economic, democracy, and human rights issues globally. This arrangement will require a new deal with Europe. Washington will have to accept that greater European autonomy will inevitably transform the transatlantic alliance. And, finally, Washington must realize that now is the time to engage Europe and China. As has been said, in the last 2 years and in particularly in recent months, Europe has grown more attuned and concerned about China. So what does China seek to accomplish in Europe? First and foremost, China is pursuing its economic interest, but it is looking to translate its investment into greater political influence. China seeks to use its investment to secure support for China's interests or at least prevent the EU from taking a unified position that is at odds with China. China is also looking to undermine Western cohesion, weaken democracy norms, and is looking to access European innovation including technologies, intellectual property, and talent that it can use to upgrade its industrial capacity. China goes about advancing these interests in a number of ways. I elaborate on these tactics in my written statement, but they include things like using divide-and-rule tactics to weaken European cohesion, leveraging U.S.-Europe fissures, and constructing networks among European politicians, businesses, media, think tanks, and universities to create support for pro-China positions. I also want to call attention to one additional tactic and that is the growing synergy between China and Russia. Relations between China and Russia are deepening. Although their approaches to Europe are different and seemingly uncoordinated, taken together they are having a more corrosive effect than either would have singlehandedly. So what will China's growing influence mean for U.S. interests? The bottom line is that China's economic influence in Europe will translate into political leverage. This will affect U.S. interests in a number of areas like U.S. prosperity and competitiveness. It will affect global values and norms from rules governing data and privacy to internet freedom, AI, and governance. And it is on the issue of democracy where the synergy between China and Russia is especially problematic. Russia's assault on democratic institutions weakens some actors' commitment to democracy, but it is the alternative model of success that China presents and especially the revenue that it brings that gives countries the capacity to pull away from the West. China's rising influence also has implications for NATO. China does not pose a direct military threat to NATO, but Beijing's growing presence will interfere with NATO mobility. China's investments in European ports and its construction of rail lines in particular could hamstring NATO's ability to move troops and equipment across Europe. This is yet another area where China-Russia synergy is concerning. It is not hard to imagine a scenario, for example, where China uses its control of key infrastructure like ports and rail to delay a NATO response to Russian aggression. And, finally, is 5G. Allowing China to build Europe's 5G network would introduce systemic risk, making Europe more vulnerable to things like intellectual property theft, and weaken data privacy, things that enable China to continue to steal the know-how that enhances its competitiveness. So what can be done? There are number of approaches the U.S. can take to check Chinese influence. The U.S. should enhance cooperation and coordination with Europe to combat China's unfair and illegal trade and investment practices. By combining our shared heft, we can exert much greater leverage on the Chinese. The U.S. should engage on norms in new spaces, cyber, artificial intelligence, and space. The U.S. should encourage EU and European defense and security initiatives that would better enable the United States to prioritize the Indo-Pacific. To counter the adverse effects of the Belt and Road, Washington should capitalize on growing disillusion with the Belt and Road, particularly in Central and Eastern Europe, and work with Europe to provide alternatives to Chinese investment in Europe and beyond. And, finally, Congress should enable the U.S. Government to consider China and Russia together as well as separately. Given the trend toward deepening China-Russia relations and the significant implications that a more robust partnership would pose to U.S. interests, policymakers will have to account for the ways in which these players are working together. In sum, it is clear that the United States must do more to stand up to Chinese threats to U.S. interests, but to do that effectively Washington must work with its European allies. Thank you. [The prepared statement of Dr. Kendall-Taylor follows:] [GRAPHIC] [TIFF OMITTED] T6214.004 [GRAPHIC] [TIFF OMITTED] T6214.005 [GRAPHIC] [TIFF OMITTED] T6214.006 [GRAPHIC] [TIFF OMITTED] T6214.007 [GRAPHIC] [TIFF OMITTED] T6214.008 [GRAPHIC] [TIFF OMITTED] T6214.009 [GRAPHIC] [TIFF OMITTED] T6214.010 [GRAPHIC] [TIFF OMITTED] T6214.011 [GRAPHIC] [TIFF OMITTED] T6214.012 Mr. Keating. Thank you very much. Dr. Cooper? STATEMENT OF ZACK COOPER, RESEARCH FELLOW, AMERICAN ENTERPRISE INSTITUTE Mr. Cooper. Chairman Keating and other distinguished committee members, it is an honor to join you today. I believe that the growing transatlantic divide on China policy is a serious challenge not just for our policy on Europe, but also for broader American grand strategy. Our greatest strength in the competition with China is our global network of allies and partners and increasingly we are finding that network put under pressure. The good news is that there is an emerging and largely bipartisan consensus in Washington on the challenges that the Chinese Communist Party poses. The bad news, however, is that this consensus is not yet shared with many of our European allies. Furthermore, there is still no agreement either on this side of the Atlantic or the other or on the Pacific as well about what kind of China strategy we should be pursuing. Although the United States has identified China as a strategic competitor, it has not yet adopted a clear set of objectives for that competition. In my written testimony, I describe three areas that are undermining transatlantic unity on China, Chinese investments with noncommercial aims, targeted technology acquisition, and coercive economic Statecraft. Most notably, our European allies, as has been discussed, have largely chosen a strategy of mitigation rather than exclusion with regard to the Belt and Road Initiative and 5G infrastructure as evidenced by recent decisions in London, Berlin, Rome, and elsewhere. During a recent trip to Europe to discuss Chinese activities on the continent, European leaders expressed concern and frustration with some U.S. policies. In particular, they singled out the administration's criticism of allies and its embrace of unpredictability as sources of concern. These divisions make clear that we must do more to fashion a united transatlantic strategy on China. And with this in mind, I want to suggest three ways in which the Congress could help bridge the transatlantic divide on China. First, Congress could work with the administration to empower our allies and partners to better mitigate the risks of Chinese investment and broader economic Statecraft. Many countries are choosing to accept Chinese investments and infrastructure and technology regardless of U.S. objections. We may not agree with these decisions, but we should be helping to mitigate the risks. Therefore, Congress could work with the administration to help provide greater technical assistance to allies and partners, not just in Europe but elsewhere, to help them manage Belt and Road and 5G technology challenges. Second, Congress could encourage cooperation with allies and partners on an overall China strategy with clear aims and objectives. We should forge a common position on critical issues such as intellectual property theft, market access, technology standards, foreign investment review, and human rights concerns. I am encouraged that the House Foreign Affairs Committee is holding five hearings this week on China alone and its role globally, and U.S. strategy on China in particular, and I think including allies and partners in these discussions is absolutely critical. Third, Congress could continue to forge a bipartisan consensus on China and increasingly to try and broaden that consensus by including the American people in the debate. The BUILD Act, FIRRMA, and the Asia Reassurance Initiative were all important signals of America's ability to execute a coherent long-term strategy. But polls suggest that a gap is emerging between views in Washington and those in much of the rest of the country. Discussing China policy more directly with constituents would ensure that our policies are supported not just inside Washington, but outside as well. And, finally, while we must be clear-eyed about the challenges that China poses. We should always acknowledge that our concerns have to do with the actions of the Chinese Communist Party, not with the aspirations of the Chinese people. Upholding the principles of freedom, democracy, and rule of law will strengthen our united position and send a clear signal about the seriousness and the sustainability of our strategy. So I thank you for holding this important hearing and providing me the opportunity to testify, and I look forward to your questions. [The prepared statement of Mr. Cooper follows:] [GRAPHIC] [TIFF OMITTED] T6214.029 [GRAPHIC] [TIFF OMITTED] T6214.030 [GRAPHIC] [TIFF OMITTED] T6214.031 [GRAPHIC] [TIFF OMITTED] T6214.032 [GRAPHIC] [TIFF OMITTED] T6214.033 [GRAPHIC] [TIFF OMITTED] T6214.034 [GRAPHIC] [TIFF OMITTED] T6214.035 Mr. Keating. Thank you, Dr. Cooper. I will now recognize myself for 5 minutes for questions. And I would like to get back to what I mentioned in the opening statement that about the screening process that is now underway, and in particular what can the U.S. do, if anything, to be more influential in that process themselves so it is just not a unilateral EU process in screening? Mr. Le Corre? Mr. Le Corre. Thank you, Mr. Chairman. I do believe the lack of information has been an issue for the past few years when it came to Chinese investments in Europe and infrastructures, especially in ports, airports fields. I do believe there is a lack of knowledge about the political system in China as well as the economic strategy. The Belt and Road Initiative which has been mentioned a few times already today is still a fairly vague project that originally targeted Europe, but now is looking at across the world. And I think some of the sort of work that has been done in Washington and other parts of America on sort of looking forward to this new superpower that is China, it could be, you know, it could be shared with Europeans where the level of sinology, unfortunately, is not what it was. So, generally, I think more information on what China is about and on the risks in the technology fields, for example, as well as infrastructures, what it would mean to have, you know, the Suez Canal---- Mr. Keating. So, essentially, it is information from us that---- Mr. Le Corre. Yes. Mr. Keating [continuing]. Would be helpful as well. So, I am just curious too, just anyone that might want to comment on this. It was referenced about Italy's decision as just being a memorandum of understanding and trying to downplay that. But what risks does that take and with Italy moving forward? Anyone that wants to jump in on that would be helpful. Dr. Cooper? Mr. Cooper. Yes, so I was just in Rome right after the decision on the memorandum of understanding was made, and I think Philippe is absolutely right that, yes, it is just a memorandum of understanding and the real question will be what kinds of projects do we see the Italians engaging in. But I think the question that many of us should be asking is whether the Italian Government has the support it needs to actually be able to provide the oversight for those projects. And when I was in Rome, there were a lot of questions asked about the government's ability to do that and so this is where I think we can be very helpful. We know a lot about some of the challenges we have seen with Belt and Road, with the lack of transparency, with environmental protections, financial arrangements, and we should be helping our allies like Italy that are engaging in Belt and Road projects so that they make sure that, fine, they sign a memorandum of understanding, but let's actually make sure that the projects they get are high- quality, high standards, just like the projects that we would expect from any other country. Mr. Keating. Yes. It was mentioned too, if I could just skip topics too a little bit, would the reaction--I was just in Europe, I think, about 6 weeks ago, myself. And I cannot understate the feeling of the European leaders--I do not think we recognize that fully--with the tariffs imposed. Not just the tariffs themselves, but the rationale that was given that they are a security risk of the U.S. and they are taking that to heart, frankly, and how deep is that fissure? And, No. 2, if we move ahead with automobile tariffs or something, how much more deeply will the fracturing occur between the U.S. and the EU countries in that respect and what will be the ramifications, in your opinion? Ms. Segal? Ms. Segal. So, if I could also go back just to the question you asked about the concern or the implications of Italy signing the MOU, I would like to highlight the fact that it is a G7 country. And when we think about different mechanisms for coordination, to have what could be a potentially dissenting voice in the G7, I think, is another thing that is problematic. As far as the impact of tariffs and how deeply it is felt, I have had a similar impression in our trips to Brussels and also to member States and I think, there, it is important to recognize that when Europe looks at the risks stemming from China, they may have less of a focus on national security risks as compared to the sentiment here in the United States, but there is more of an emphasis on the economic security risks. And if their main concern with China is its ability to use its State-driven model and to push that out to distort global markets and trading relationships, the fact that the United States is then relying on tariffs imposed under the guise of national security, I think in their perception that has the same sort of distortive effect on the trading relationship and that is their rationale for why they see that so problematic. Mr. Keating. Great. My time is past and I will now recognize the ranking member, Mr. Kinzinger. He was here a minute ago. The chair will recognize Representative Pence. Mr. Pence. Thank you, Chairman Keating and Ranking Member, for convening this. To all the witnesses, I say thank you for being here today. Dr. Kendall-Taylor, I was very intrigued by an article you and your colleague, Dr. Shullman, wrote titled, ``How Russia and China Undermine Democracy.'' In this article, you both wrote, ``Russia and Chinese actions are converging to challenge a U.S.-led global order.'' You do not argue that China and Russia are acting in a coordinated manner with one another, but that their actions are converging in new and synergistic ways. Your example of Serbia was well taken. I think you described quite well how Russian and Chinese actions there are destabilizing and reinforcing one another. While you and your co-author used Serbia as an example, it is not unique in facing this challenge. Russia and Chinese actions are undermining the sovereignty of countries across Europe. While this is something Europe is waking up to, I am concerned about the potential for Russia and China's currently uncoordinated and unintentional strategies becoming just that coordinated. As you say in your article, ``The countries' strategies have become mutually reinforcing in power, if perhaps unintended, in different ways.'' Dr. Cooper, you stated that Congress could help encourage cooperation with allies and partners on an overall Chinese strategy. Republican leader McCaul and Chairman Engel, Championing American Business Through Diplomacy Act, H.R. 1704, is a good step in countering Chinese debt-trap diplomacy and I am a proud co-sponsor of the legislation. My questions are to all of you. What would be the implication for U.S. policy in Europe and beyond if the currently unintended efforts of Russia and China become unintentional, and what specifically should Congress's response be to a coordinated Russian and Chinese effort in Europe? Ms. Kendall-Taylor. Thank you for the question. I also share your concern. And of the issues that I think that I am looking at today, the growing relationship between Russia and China, I think, is one that causes me the most concern. So when we look down a whole kind of spectrum, all areas, all dimensions of their relationship, the trajectory is toward closer relations. So in economic terms, China has become Russia's single, most important trading partner. They are the single, largest purchaser of Russian oil and gas. Military ties, Russia continues to sell China advanced military systems. They are exercising together for the first time with the Vostok-2018 exercise where Russian and Chinese soldiers exercise together. Certainly, the political ties between Putin and Xi are very close, but it does not stop there. We increasingly see this grow into deeper levels of government in ways that provides, I think, a very kind of solid foundation. And the key is, so we have thought of this as an issue where Russia and China are united in their discontent, that they have these shared grievances, but my concern is that as we see these repeated interactions that this relationship turns into something more deep, meaningful, and sustainable. And you can think about Russia's relationship with Iran as an example. That had historically been a relationship where there was significant mistrust. But given their interactions over the JCPOA and in close operations on the battlefield in Syria, that is now a very close relationship. So my point is that it is because of the repeated interaction, this has the ability to turn into something. And I will also note that the DNI in his annual threat assessment has marked this as an issue where we are seeing increasing coordination and collaboration between the partners. Simple solutions to drive wedges between them will be ineffective. Russia looks at the United States and is more suspicious and concerned about our efforts to destabilize his regime. There is a very immediate threat that he feels and the immediacy of that threat is more important than the much longer-term threat that I think he views coming from China. And so, he would prefer to trade that risk and he has put his lot in with the Chinese. And particularly after 2014 he sees no opportunities in the West, and so I think you see Mr. Putin increasingly willing to become the junior partner. So given his deep suspicions of the United States, driving a master wedge between Russia and China is going to be a very difficult thing to do. And so, I think this is an issue that needs more investigation and more thought because certainly labeling both as adversaries, although is an important and I think right strategy, it also has the unintended consequence, I think, of pushing them closer together. So one of the things I highlight is to look for opportunities to drive mini-wedges, and so the Arctic could be one such place where they have interests that are at odds, perhaps in the Middle East where they compete for energy and military sales and other things. I think it is a series of things that the United States will do some kind of careful diplomacy I think will be required to put the brakes on the relationship. And also, I highlighted in my testimony today for the Congress to enable the U.S. Government to look not just at Russia and at China, but to consider them in a combined framework so that we are thinking through how what we are doing might affect the relationship between them. Mr. Pence. Well, thank you, Doctor. I yield back. Mr. Keating. The chair recognizes the vice chair of the committee, Representative Spanberger. Ms. Spanberger. Thank you very much, Mr. Chairman. Thank you to the witnesses today for being here. To followup a little bit on what Dr. Kendall-Taylor has written, you recently wrote in the Foreign Affairs that empowering U.S. ally populations to stand up against foreign subversion would be the most effective weapon against Chinese and Russian influence. And the success of the strategy does rely on the strength of our historic transatlantic ties and our shared value. But I am very concerned over the fact that of February 2019, Gallup poll across 133 countries showed that Chinese leadership had a higher approval rating than in the United States. And then in pivoting over to what Mr. Le Corre was saying, my question is as we are looking at many of the larger EU States such as France and Germany, and as they wish to adopt a coordinated EU approach to China that allows their countries to effectively stand up to China as an equal partner, and Mr. Le Corre in your testimony you talked about the European Commission's recently issued strategic outlook when they look at China as a systemic rival and a strategic competitor, my question is, what should the U.S. role be in supporting or facilitating the coordinated EU approach which would provide a greater opportunity to mitigate China's influence in Europe, and ideally by extension positively impact the United States' challenges that we are facing with China? And I will open it up to Mr. Le Corre or Dr. Kendall-Taylor or the other two witnesses as well. Mr. Le Corre. Thank you, Congresswoman. I think, you know, the EU remains the most efficient body that we have in Europe when it comes to advocating values and democracy and the rule of law and norms which are--in fact, Congressman Pence was referring to Serbia earlier. Serbia is not part of the European Union and that is one of the reasons why both Russia and China are using it as some kind of playing field. In Western Europe and I would say in the whole of the EU, you have a difference set of values. And the fact that the high-speed train project between Hungary and Serbia has not even started has a lot to do with the fact the European Commission started an investigation in Hungary when Hungary did not actually go through the normal competition rules, and therefore on the Serbian side they have not even started either. I think, you know, again the fact that all of the EU members supported the screening mechanism, supported the EU- Asia Connectivity Strategy is a sign that people are sort of waking up in many cases. I would say as well that if you look at things from a Chinese perspective, they are trying to sort of divide the EU by dealing with countries on a separate basis, the 16+1, now 17+1 mechanism, and a good example. The U.K. is another good example if the U.K. is to leave the European Union. And then they also tried to have a 5+1 mechanism with Southern Europe. So by having the EU as a strong sort of entity--and the European Commission is actually mainly a trade body but is now handling investment quite interestingly, it was not part of its mission originally--I think that is the best thing that the United States could do. Ms. Kendall-Taylor. Maybe I will just chime in with a much broader point on the cohesion issue. And I mean, I think it is probably recognized here, but the cohesion and the unity between the United States and Europe is key. Both Russia and China want to break it. Those are both kind of explicit goals. Both Russia and China seek to break the transatlantic unity. And I think Russia, but especially China, realized very early on that its rise would trigger balancing in the West and it has done everything that it can to influence Europe to make sure that Europe sits on the fence. The worst thing from China's perspective is if Europe is firmly aligned with the United States and so where there is that break in unity, that is a good-news story from China's perspective, because if the United States and Europe could combine our collective heft, we hold, the U.S. and the EU, 40 percent of global GDP. So if we are going to lean on China to change its unfair trade practices and all of these other things that we are so concerned about, it has got to come from a unified position. And I think the problem is just as you say, the trust for the United States right now is really stymying cooperation, and what we see then in Europe is that they are looking to kind of go it on their own. So far, I think their attitude has been that they are going to look to improve their own capacity and not build a joint approach with Europe. And that is going to be problematic, because as China is putting pressure on both of us, if we fill some holes, they are going to pop up somewhere else. And so, you know, in terms of stealing technology and global supply chains it has got to be a unified approach. Ms. Spanberger. Thank you very much. I am out of time. But I did want to State for the record that, Dr. Cooper, I will be submitting another question to you because I was particularly struck by your comment that there is a bipartisan consensus related to China within Washington, within the government, but we really need to bring the American people into that conversation. I look forward to following up with you on that. Thank you. I yield back. Mr. Keating. The chair recognizes the ranking member, Mr. Kinzinger. Mr. Kinzinger. Thank you, Mr. Chairman. And again, thank you all for being here. I will get right to it. The access to Chinese 5G from companies like Huawei in Europe remains a primary concern for the United States. Dr. Cooper, what would 5G inclusion in NATO-member countries mean for transatlantic security? Mr. Cooper. Well, I think we are going to see that it means when we are deploying forces abroad, especially flowing them through Europe, that there are going to be greater risks to those forces because Russia, potentially, could gain access to that information as Dr. Kendall-Taylor said. And the Chinese likely will have some access to that information depending on which parts of the 5G backbone Huawei and ZTE are involved in. But I would say that I think that is going to be a reality. Even if the Brits and the Germans go along with us on 5G, which is looking unlikely at the moment, other countries in Europe are going to accept them. So we are going to have to come up with a mitigation strategy to manage that risk. Mr. Kinzinger. Thank you. Expand a little on what the potential harm to NATO operations could be in that case. Mr. Cooper. Well, there has been a statement recently by a number of retired four-star commanders both in Europe and in the Pacific suggesting that increasingly our forces will use battle networks that include 5G networks. Those 5G networks obviously it would be better if we and our allies and partners controlled them. I think the reality though is if you are looking in Eastern Europe, Huawei is already in a lot of those networks, inside the 3G and 4G networks, and they are definitely going to be inside the 5G networks that are going to buildupon them. So the Chinese are going to have some access to technology about U.S. forces as they flow through Europe and maybe through Asia as well. Mr. Kinzinger. There has been a controversy surrounding the firing of British Defence Minister Gavin Williamson as he took the fall for the leak of a potential deal between Britain and Huawei on 5G integration. Dr. Cooper, what should this action tell us about Britain's relationship with China? Mr. Cooper. Well, I do not know all the details and of course there has been a lot of speculation in the press about what happened with the firing. I think one question is what the decisions are being made within GCHQ on 5G technology. There has been some discussion that suggests that the British feel confident that they can manage the 5G challenge of having Chinese companies inside their 5G networks because they think they have been able to manage the 3G and 4G challenge. I think we do not know yet because we have not seen the public statements exactly where GCHQ has come out, but I hope that we will have a better understanding. And I know Secretary Pompeo is just returning from a trip to London to talk about those issues. Mr. Kinzinger. And what do you think that means for the future of British and Chinese economic engagement on controversial topics? Mr. Cooper. Well, there has been no question that the British have been trying to get increased Chinese investment in London. I think we have seen the same thing in Berlin and elsewhere and that is going to be a challenge. And we have seen this outside of Europe as well, where the Chinese have substantial economic involvement, they gain substantial leverage and they are often willing to use it. And so, we should not be surprised when many of our friends are put in a difficult position and they are basically offered either Chinese investment or technology, or the decision to side with us on security issues. So I think increasingly our friends are going to be put in this kind of tough position and we are going to have to work to make sure that they make the decisions we want, but also that we keep the alliances together by not putting too much pressure on them politically that puts them in a difficult position. Mr. Kinzinger. And Montenegro has seen their debt rise from 63 percent to 80 percent over the past few years as the result of a deal with China to construct a 103-mile long highway from the Adriatic to Belgrade. Unfortunately, the project is not complete and the IMF has warned Montenegro to avoid any further loans. And a question again for you, Dr. Cooper, what would be the ramifications of China making Montenegro default on its loans for the bridge project? Mr. Cooper. Well, this is the much-discussed debt-trap diplomacy question and I think many of us will have views. Some people think that we have not seen a lot of debt-trap diplomacy other than a few cases. But what we definitely have seen is an increase in debt that the Chinese often hold that allows them to gain access to infrastructure and in some cases to either gain leases for 99 years on that infrastructure or to basically take over ownership. And so, we should all be very concerned, I think, about the kind of debt agreements that countries make in making sure that the recipient countries when they enter into agreements know whether they can handle the debt level or not. And I think in Serbia and Montenegro this has been one of the major issues with the Chinese investment. The debt levels are very high and it is not clear that the payoff and the infrastructure is going to be worth the sacrifice those countries are making. Mr. Kinzinger. Thank you. And again, even though my questions were just to you, I thank all four of you for being here and providing your expertise. And I will yield back to the chairman. Mr. Keating. Thank you very much. The chair recognizes Representative Cicilline from Rhode Island. Mr. Cicilline. Thank you, Mr. Chairman. And thank you to you and the ranking member for this important hearing. Thank you to our witnesses. I think we all recognize that the United States must have a clear-eyed approach to China that seeks cooperation where we can, but also ensure that we are able to compete where we must, and of course defend our interests where necessary. We have to be smart and we have to continue to invest in education, infrastructure, technology, and job training here at home and we need to work with like-minded countries in Europe and elsewhere to stand up for international norms, our rules-based world order, and defend fundamental human rights. Sadly, working on a coordinated approach with Europe is difficult given the Trump administration's erratic policies and often confusing rhetoric toward Europe, but I think this is where Congress has a particularly important role to play and make clear that we will not allow any transatlantic rift to prevent transatlantic cooperation in the face of an emerging China. And so, my first question is, the Chinese Government sponsors intellectual property theft through means such as forced technology transfer and cyber espionage and it has caused an estimated tens of billions of dollars in annual losses for American companies. Efforts by the United States thus far to deter these practices have had little or no impact. And I am wondering what steps European governments might be taking to address this issue if there is an opportunity for more cooperation between the United States and some of our European allies to help protect U.S. intellectual property. Are there things that Congress should be doing in this regard? Maybe Dr. Taylor, if we could start? Ms. Kendall-Taylor. I do not focus explicitly on the kind of economic coercion side of this, but as we have been talking about with the investment screening mechanisms and the need for coordination between the United States and Europe, I would say that is kind of the most important, from my perspective, is that we are kind of sharing information about what the nature of the threat. In a lot of these countries too there is not a lot of good capacity and area expertise on China, so kind of working with especially at the country level vice at the European level, if we are working at the national level of government, helping to build the capacity in-country to understand the nature of the threat to help improve their kind of national level legislation. But I think, really, it is the coordination piece that we are in lock-step so that we can break down that kind of squishing mechanism, I would say, or seeping mechanism. Mr. Cicilline. Thank you. Ms. Kendall-Taylor. But I will let my colleagues who might have some more specific ideas. Mr. Cicilline. Sure. Ms. Segal. I would just add on trade-related issues and economic issues and I would include the protection of IP, that it is important then for the United States to be working with other like-minded countries. There is a trilateral mechanism between the United States, Japan, and the European Union to address a number of trade related issues including some in the digital economy space, and I think we need to leverage those mechanisms. Because as has been pointed out previously, our ability to influence China's behavior is going to be maximized by bringing together allies and partners and really isolating China when it is behaving poorly and is a bad actor. Mr. Le Corre. I would just add, Congressman, that the fact the Europeans and the Chinese are now looking at a bilateral investment treaty as are the Americans and the Chinese, although I understand it is not making much progress, is an interesting opportunity for both sides of the Atlantic to cooperate on IP as well as technology, the issue of technology transfers which is as damaging to European companies as to American companies. And, in fact, referring to reports by the American Chamber of Commerce in China as well as the European Union Chamber of Commerce in China, you have the same feeling that companies are both affected, I mean on both sides affected by this issue. So I think it is the right moment to start a kind of conversation on norms and on market access. And I understand there is some, you know, potential there from the Chinese side as well since the recent session of the Chinese Parliament that they might actually reduce technology transfer requirements to certain investments inside China. Mr. Cicilline. Thank you. And, finally, Freedom House has ranked China as not free. And, actually, in Freedom House's 2019 survey of democracy around the world, China ranked as one of the least free countries in the world, as you know, stamping out dissent, throwing those who speak out in prison, and extraordinary surveillance and an effort to stamp out free speech and free thought, and while at the same time gobbling up lots of data about its citizens. And as China emerges as a growing power, the United States, in my view, has to speak out against these violations of human rights. But sadly, in many instances, European Governments have been more vocal than the United States. I wondered if you would share what your thoughts are on the impact and the kind of message it sends when the United States fails to speak out forcefully and what can Congress do to promote stronger transatlantic condemnation of human rights abuses and the kind of role that as China's power rises and as they emerge, this human rights record of course has a greater impact on a greater number of people. Mr. Le Corre. Congressman, I think it is a serious issue that needs to be addressed and perhaps in the context of the G7. Unfortunately, the United Nations has become a complicated venue for big nations to express their views on this for reasons that were expressed earlier with, you know, interference and setting the role of China and Russia as permanent members of the Security Council. I think, you know, again, in Brussels there is a will to express strong views on Xinjiang, on human rights records in China, and again there should be some kind of discussion on both sides of the Atlantic to make it a stronger stance. Mr. Cicilline. Thank you. I see my time has expired. Thank you, Mr. Chairman. I yield back. Mr. Keating. The chair recognizes Mr. Wright from Texas. Mr. Wright. Thank you, Mr. Chairman. I thank all of you for being here today. Ms. Segal, you mentioned something earlier that had been discussed a great deal and that is the impact of the tariff situation on our allies. We need to maintain strong alliances and not create a situation that would make dealing with China more appealing. At the same time, we have an obvious need to from time to time review all our trade agreements and trade situations to make sure that they are working the way they were intended and, more importantly, to make sure that they are fair to the American people. So how do you suggest we reconcile those two goals that we maintain strong alliances, but we also have these agreements that are fair to the American people? Ms. Segal. Thank you very much for that question, because I agree a hundred percent with the fact while the U.S. is looking out for national security interests as it should, it also needs to look out for its economic security and its economic interests. My comment was more related to the mechanisms that we use, and in particular the mechanism of the 232 tariff is one that is based on a national security concern. So to the extent that that is the rationale for the imposition of those tariffs, I think that is one of the pieces that is of concern to Europe, but also of concern to many of us that look at the impacts of that on the system. And here there are spill-over effects to the United States invoking national security concerns as the basis for a protectionist policy and there is concern that once the United States does that, that basically opens the floodgates for others to do it and to use it against us, which would be not in our best interest economically. Mr. Wright. Right. Dr. Cooper, would you have any comment on that? Mr. Cooper. Well, the only thing I would add is I was in Europe, and overnight before some of our meetings the U.S. Trade Representative put on tariffs on some of our European allies. And I have to tell you, it made the discussions the next day much more difficult on asking the Europeans to work with us on 5G and on Belt and Road. And so, I think everything that Ms. Segal said is exactly right. We have got to think hard before we put tariffs on our friends. And I understand what the President's logic is, but the downside in Europe is that often it looks like the Chinese are coming with money and with technology and investment, and we have got to provide something positive in response and I just do not think tariffs are the right way to do that. Mr. Wright. OK. And, Dr. Kendall-Taylor, I have a large Czech population in my district and I am co-chair of the Czech Caucus. And we know that the Czech President is very cozy with the Chinese, but that is mainly a ceremonial office. Do you see any--and I will also open this up to you, Mr. Le Corre--concern there that the President of the Czech Republic is so cozy with them? Ms. Kendall-Taylor. I think, broadly speaking, what is of concerning is where we see democratic backsliding in Europe leading to closer relationships with Russia and China. So even in the academic research there is some good research that demonstrates that kind of shared regime-type provides a solid foundation for cooperation. And so, when we are thinking about the democratic backsliding and the rise of populism in Europe, it is not just a democracy and human rights issue, it is a national security issue. And I think we will have to be highly attuned to where we see some of this backsliding taking place, whether or not that is creating kind of shared foundation where maybe it did not exist before for closer relationships between those countries and countries like Russia and China. So, yes, it is a concern. Mr. Wright. Thank you. Mr. Le Corre? Mr. Le Corre. Thank you. If I may just add, I think there is actually a debate going on in Prague, a much stronger debate than in many European countries, about the relationship with China. The fact the Czech President has had dealings with China through a number of advisors, one of them being Chinese and currently under house arrest in China, has sort of raised an awareness among the media and the think tank community in the Czech Republic, which I think is quite healthy. On top of the fact the Czech Republic is in, you know, situated in the middle of Europe, Eastern Europe, and there is a new government, and the Prime Minister has expressed very different views about China and Russia than the President who, as you suggested yourself, is more of an honorary figure. Mr. Wright. OK, great. Thank you very much and I yield back. Mr. Keating. Thank you. The chair recognizes Representative Wild from Pennsylvania. Ms. Wild. Thank you, Mr. Chair. And thank you to the witnesses for being here this morning. I have, as I know many people do, significant interest and concern about cybersecurity and the use of surveillance by the Chinese. Recently, in my home district office, I was visited by a young family who are Uyghurs and--I think I am pronouncing that correctly--it was a husband, a wife, and their three young daughters, two of whom had been born in China, one of whom was born in Pennsylvania. And they described for me that the wife parents have been sent to a detention camp where they are-- where they have both lost considerable weight, are receiving some kind of daily injections, are being generally mistreated. They shared with me that the Uyghurs make up approximately 11-1/2 million of the Chinese population. And they described for me the use of facial recognition technology that is being widely used to recognize the Uyghur people and that according to them, many are being taken right off the streets of China and sent to these detention facilities, or I do not even know if that is the right word. I honestly knew nothing about this until I had the visit from these people. But it caused me to do a little bit of followup reading and my understanding is that Chinese authorities and companies have developed and deployed tens of millions of surveillance cameras as well as facial, voice, iris, and other biometric collection equipment. And these technologies are believed to be used to target and track movements and internet use of ethnic Tibetans and Uyghurs, among others, and reports that I have seen suggest that Chinese companies have exported these kinds of systems to 18 countries at least. So my question is this and for Dr. Cooper or Dr. Kendall- Taylor or whoever feels qualified to answer it, what are the risks associated with these Chinese exports especially with respect to jeopardizing information that we share, the U.S. shares with our allies in Europe, as well as with respect to global human rights and individual privacy rights and what can we do in the cybersecurity and surveillance space to prevent this technology from being used in an abusive way? Mr. Cooper. Well, thank you for the question, Congresswoman. I think this is an important issue and something we have not talked about enough in the last few years. And I think the human rights community has done an amazing job of bringing this to light and some pretty courageous journalists as well. It is incredibly difficult to report now in Xinjiang. Even for the best reporters based in China, there are a lot of roadblocks to them reporting on the kinds of stories that you are talking about. And the U.S. Government's estimates at the moment are that between one and three million Uyghurs are in detention in northwestern China, which is a tremendous number of people, and it is hard to believe that this story hasn't garnered more attention. I think we do not---- Ms. Wild. That by the way was exactly my reaction. Mr. Cooper. Yes, exactly. And I think the human rights community here has been working incredibly hard to bring attention to this issue. I do not think we have seen a lot of great policy answers from anyone around the world other than bringing more transparency to the behavior that we are seeing occurring. And the one area where I think this touches the most on Europe is the current concern that some of us have that whether the Chinese are using the 17++1 institution or it is Germany or Italy or London's desire to have more Chinese investment, that we might see European countries not being as willing to speak out on these issues as we would want them to be. So I hope that we can address this in a coherent, united manner with our European allies. Ms. Kendall-Taylor. And could I just add one point? Ms. Wild. Sure, please do. Ms. Kendall-Taylor. I agree with everything that Zack just said. But it really, I mean it is such an important question and I am so glad that you raised it, because China is exporting its authoritarian tactics and that will create an environment more conducive to authoritarianism all around the globe. And so--and we should also note that in addition to the Belt and Road Initiative, there also is a component of this they are calling the Digital Silk Road and that will be an important vehicle through which they will be able to export and share some of these surveillance and other authoritarian best practices. And the other concern here is 5G. So why would we allow the Chinese Government to be building our 5G networks? Why would we put that responsibility in the hands of a government that has a long track record of surveillance and a track record of human rights abuses, and so that should raise concerns for all of us. And so if we are hesitant or it seems like the direction that this is going particularly in Europe is that some of these countries for obvious reasons do not want to outright ban Huawei, but if we can move toward kind of an objective list of criteria for selecting vendors that would address some of these issues and that are true to our values in the United States and Europe, that provides a more objective way, I think, for making decisions. And that would, because of all of the abuses that you have highlighted, effectively screen out Huawei and other providers. Ms. Wild. Thank you for that very useful information. I have dozens of questions I would love to ask you, but unfortunately my time is up. But I would like to followup at some point. Thank you. Mr. Keating. Thank you, Representative Wild, for those insightful questions. The chair recognizes Representative Burchett. Mr. Burchett. It is Burchett, Mr. Chairman. Mr. Keating. Burchett, sorry. Mr. Burchett. Burch like the tree, and ett like I just ett breakfast. Mr. Keating. This is the European influence, I think. Mr. Burchett. I guess it is. Mr. Keating. It is overtaking me this morning, I apologize. Mr. Burchett. That is all right. And thank you all for being here. I guess I would, you know, dealing with China, it seems that they have a tendency, maybe it is just my opinion, but they exploit either our stupidity, greed or arrogance, or a combination of all those things. And, Dr. Taylor, and I note you all are on the screen and currently I am on the screen, and I am wondering if that screen is made in China. But, Dr. Taylor, in your testimony you mentioned the importance of European initiatives such as permanent structured cooperation, PESCO, and the European Defense Fund to better prioritize issues pertaining to China in the Indo-Pacific region. These two initiatives and a potential EU army seem to be more duplicative and a competitor to NATO. Would it not make more sense for our NATO allies to just to pony up and spend more than 2 percent of their GDP on defense rather than waste money on silly and unworkable initiatives? Ms. Kendall-Taylor. I agree that the 2-percent is an important benchmark that all our European allies should be working toward. I think even when you talk to NATO officials that most of them are confident that the initiatives that I have talked about, PESCO, the European Defense Fund, and others, are not duplicative, but complementary to what NATO is achieving. And as long as they are rolled out in ways that are consistent and supportive and not redundant with what NATO is doing, then I think the United States should be encouraging rather than discouraging European efforts to do more for their own security and defense. I will also note that things like the EI2 initiative, France's European--what is it, EI2--European Intervention Initiative, also has the goal of doing more and allowing Europe to play a greater role in places like North Africa. Again, the more that our European allies can help us police and secure not only Europe, but places like North Africa, it allows the United States to pivot and focus more on the Indo-Pacific. Mr. Burchett. OK. And this is, I guess, for the entire committee. I am not sure who would be the most qualified to answer, but anybody that feels like they should, please do. You know, in Tennessee I was in the State legislature and there was an initiative to have these toll roads put in. And I am not going to debate the merits of those, one way or the other, but there was--I actually had put an amendment on the bill that said that they needed to be, at least one end of the toll road needed to be owned by an American entity, and immediately the support for the bill dropped. And that made me wonder too about the reports that Chinese companies currently own and have access to about 10 percent of the ports in Europe. And I was fortunate enough to go to Israel for 4 days and I noticed that their deepwater port was, in fact, constructed by the Chinese, which to me is very alarming. What is behind their strategy to gobble up these ports in Europe? Is it purely economic or do they have some long-term security interests? I think I probably know the answer to that, but I would like to hear what you all say. And could you all discuss the specific security risk to NATO allies of Chinese access to these European ports? Thank you all. Ms. Segal. Thank you for the question. I can start and maybe others will have their own views on this. I think the fact that China is investing abroad and has increased its investment abroad in and of itself is not the primary concern. The concern are the potentially strategic motivations behind that investment. And the difficulty then for recipient countries, including the United States and in Europe, is to differentiate which are those investments that an entity in China is making for its own economic interest and the recipient country is benefiting because it is getting capital that then fuels its economy, and which are the investments that actually go beyond that are of geostrategic import and have a strategic interest. And that is what these whole, the motivation behind these investment screening mechanisms like CFIUS like what has been adopted now at an EU-wide level in Brussels, that is what those mechanisms are designed to suss out. And so, I think it is important to differentiate those two. And the fact that this debate is being had and that the recipient countries are not sensitized to look out for what might be the strategic motivations behind these investments, that is the important balance to strike between pro-growth investments and investments---- Mr. Burchett. Excuse me, but, you know, it is kind of like up here when we talk about we are going to form a study committee and do some studying and is just going to sit on some shelf somewhere. Are they actually doing anything when they say that or is it just the money that they are getting? Because I have read some reports that some of the ports and projects that they have done, they will pull out or they will do subpar labor that what we would consider the standard here by our labor folks in this country. Ms. Segal. Right. And so those are related issues. One are the strategic kind of national security concerns which these mechanisms would pick up, the other is the quality of that Chinese investment. And the concerns behind Belt and Road investments are of both categories, but is actually that quality question and the debt sustainability question that is also something for recipient countries to think about. And so, among the initiatives that the U.S. has taken both to encourage allies to strengthen investment screening mechanisms is also an effort to get countries to strengthen their mechanisms for just evaluating the economic worth of such projects. So if what China is offering is an investment but one that comes with it strings that require Chinese workers to be used, come with it returns back to China that actually make the project not viable in the country, those are things that recipient countries when they are making their decisions about who to award the contract to, they should be sensitized to that and then make their decisions based on that sort of information. Ms. Kendall-Taylor. And maybe just really quickly to highlight the security concerns as we talked about, NATO mobility will be key when we are talking about Belt and Road infrastructure, so with the ports and rails in particular Chinese investment in those provide the capacity for China to slow a NATO response that makes it. They have the ability then to leverage to complicate our movement of people and troops across Europe and that is something that NATO is going to have to grapple with. Mr. Burchett. Thank you. Mr. Chairman, I apologize for running over, brother. Thank you. Mr. Keating. Those were great questions. I think also that we could followup beyond the ports and look at the rail and the testimony that was given before about how that screening mechanism did help or has helped delay and give greater scrutiny to the rail line between Hungary and Serbia too. So it would be interesting to see how that has worked and been effective. Representative Costa from California? Mr. Costa. Thank you very much, Mr. Chairman. I appreciate this important hearing. I am one of those that believe that Russia and China's interests do align and they are increasingly so. While they may not as you have testified today be coordinated to the degree that would further make their efforts more effective, clearly, I think we need to be concerned about it. I have some questions that really deal with the comments that I think the four of you made, and that is that for a more effective use of our ability to deal with both China and Russia that we need to be coordinated with our European allies. I think there was a consensus by all of you in that statement. And certainly, we know that Russia, going back to 2013 when General Gerasimov was talking about their strategies to undermine Western democracies by using the election process in Europe to destabilize that economy and also to undermine NATO as a defensive for all us, not only the Europeans but for the United States, and they have done that. They have been interfering in European elections for years and of course in our elections in 2016. So, I want to understand with all the challenges that Europe is facing with populism, with nationalism, with the refugee challenges that they are getting from the Middle East and from Africa, how you believe we can better coordinate our efforts with our European allies--they are not our adversaries, they are our allies where we share so many common values--in the backdrop of the comments that we have been making about NATO? Even though three administrations have agreed that 2 percent-plus is necessary for the NATO countries to commit to, but you add as you testified the steel and aluminum tariffs, you know, commenting that the basis is national security when these are our NATO partners. Very contradictory not to mention insulting, the potential of imposing auto tariffs, which is crazy, I mean the largest export of cars made in America is BMW, and that the statement that Europe is an adversary by our President, and then you add to that the cheerleading of Brexit that has taken place in this country by some, how can any of you on the panel articulate what our current administration's policy is toward our European allies? Mr. Le Corre. I can start to have a go at it, but it is not an easy answer to make. You know, I think, there is no evidence that there is coordination between Russian and Chinese actions in Europe. That there is a Chinese sort of---- Mr. Costa. No, but there could be in the future. Mr. Le Corre. There could be. And certainly, if you look at Greece, for example---- Mr. Costa. There interests align in a number of areas. Mr. Le Corre. Right, so the issue is really for countries such as Greece, Portugal that are NATO members as well as members of the---- Mr. Costa. And Italy. Mr. Le Corre. And Italy, they have been repeating that they remain, you know, involved in the alliance and the EU, but there might be some discussions to be having at NATO level on what it means for countries that are selling some of their national assets including, for example, the National Grid of Portugal---- Mr. Costa. Right. Mr. Le Corre [continuing]. To a nation like China, or to sell some of its territories in the Azores in the middle of the Atlantic to a Chinese scientific center. Mr. Costa. We have been very concerned about that, many of us, and we have tried to make those concerns known to the Department of Defense on that. But please, what is our policy? Can you articulate our policies toward Europe, our allies? Ms. Segal. I do not know if I want to articulate our policy not being a member of the administration, but I do think what you have identified is that there is a tension between the security issues and how we should be engaging with European partners and economic issues on how we engage. Mr. Costa. I think the Secretary General when he spoke to a joint session of Congress put it well. It is nice to have friends. And these relationships that we have had with our European allies for decades, the longest peacetime period in Europe, the last 70 years, in over 1,000 years is the result of these coordinated alliances that we have with NATO, with the European Union. And so I mean, I think you are struggling to suggest what the policy is part of the problem. We do not have a coordinated, clear policy toward our European allies. If we did, we would have a much more, I think, thoughtful address toward China and how we are dealing with China. I mean, I think that is the answer to the question. Mr. Cooper. Can I just make one very brief comment? I think there is a philosophical question about what we think leads to greater alliance cooperation and contributions. I think the administration's belief is you get more alliance coordination and cooperation when the leader of the alliance pushes its allies hard. I think a lot of the academic literature would say that you get allies cooperating more when they think there is a higher threat. So I think that is where a lot of this disjuncture is between the administration's strategy and what we are actually seeing from Europe. So as the Europeans get more concerned about Russia, they will contribute more to NATO. If they are not deeply concerned, they are not going to contribute up to the 2-percent level or beyond. Ms. Kendall-Taylor. Maybe just a really quick comment. I think what the strategy has been and it has been articulated by people like Assistant Secretary of State Wess Mitchell before he resigned, I mean, so this administration has rightly set out this vision of strategic competition putting China front and center. But where we break down and fall apart is by not prioritizing Europe and that relationship. And there has been a belief that we have to go after our European allies and correct imbalances in our relationship and once we correct those imbalances, then this administration, I think, incorrectly believes that we can pick up where we were and move on to confront China. So I think in my mind that is what the policy has been, China front and center, but with the incorrect assumption that if we bash our allies and correct the imbalances that then we are in a better place to address China. Mr. Costa. Well, and I think that is the feeling that you are receiving that the chairman and I receive when we go to Europe. We have been there two or three times this year and this is the constant questions that we are asked as to what really is our policy toward our allies to, you know, we used to be consistent in terms of our approach and they could always count on us, and there is a deep feeling today that that is no longer the case. And then therefore why should we cooperate with you if you are not going to be that friend, as the Secretary General stated last month that it is nice to have friends. And now that is all being undermined, I believe, and it is being questioned, unnecessarily so. No one disagrees with the 2-percent expenditure. Let me just ask one final question, if I might, Mr. Chair? Mr. Keating. It is all right. Mr. Guest. Mr. Costa. Because this is something that you and I have talked about. Would it--do you think if this subcommittee worked closer together with the European Parliament, they are having elections this month, and the European Commission as we go forward to address some of these issues that we are talking about today that that would be constructive and more helpful in terms of our partnership? Mr. Le Corre. If I can answer to that I think it would be an excellent idea for one simple reason. I believe many of the new mechanisms that have been introduced, which I was describing earlier, were originated in the European Parliament. The status economy, the market economy status that was denied to China by the EU 2 years ago originated, again this decision originated by the European Parliament and there are strong members of the European Parliament that have been sort of supporting, you know, actions for China, for example, especially on the reciprocity issues and intellectual property. So I think, you know, obviously this is a transition year, Congressman. There is going to be elections very soon. This country knows about elections too. And so it is going to be a difficult year for engaging with the European Parliament, but I believe from October again there will be new committees and people that will look very thoroughly into the issue of Chinese influence in Europe. Mr. Costa. Well, the chairman and I have expressed interest in doing so and I thank you for--I have exceeded my time, but we will followup on that. Mr. Keating. Thank you, Mr. Costa, for your work. And the chair thanks Mr. Guest for being patient through that questioning, and now the chair recognizes Mr. Guest from Mississippi. Mr. Guest. Thank you, Mr. Chairman. Before I begin my question, I have a report from the Center for International Private Enterprise entitled, ``Channeling the Tide: Protecting American Democracies Amid a Flood of Corrosive Capital.'' This was published last fall. This report examines the impact on the government norms, practices, and economic values in the countries that have received Chinese investment. I ask by unanimous consent this report be inserted into the record. Mr. Keating. Without objection. [The information referred to follows:] Mr. Guest. My question to the witnesses on the panel, as I understand it, the Chinese are using basically a multifaceted approach to either gain or to expand influence not just in Europe but around the world, things such as investment, trade, technology, education through the Confucius Institutes, but what I would like to talk about and focus my question on is the growing Russian-Chinese relationship. Of course, we see that in Latin America, particularly as it relates to Venezuela, where you have an unholy alliance, if you will, between Russia, China, and Cuba as they are continuing to prop up the Maduro regime. But I believe at least two of the witnesses here spoke of that in your written testimony. Ms. Kendall-Taylor, I think you said on page 5, you said ``The relationship between China and Russia are deepening. The growing alignment of their values and visions on how the world should be ordered raises the prospect that Moscow and Beijing will increasingly coordinate their efforts to undermine U.S. influence.'' And it was also addressed by you, Mr. Le Corre, I think on page 7, you actually referred to it as the ``emergence of a Russia-Chinese nexus and it directly affects NATO's primary mission. The relationship should not be exaggerated, but the two countries have conducted joint naval exercises.'' You also talk about military exchanges or military leadership exchanges. And so, my question to the panel and anyone can answer is, how concerned should we be about this growing nexus, as you referred to it, Mr. Le Corre, between China and Russia as we can see them continuing to work together and to work against American interest? Mr. Le Corre. Thank you, Congressman. I think, you know, the issue is to be looked at not just in Europe, but globally. Certainly if you look at the Belt and Road Initiative a lot of it has to do with Central Asia, for example, and parts of Asia that are under Russian influence. So I would say there is a real concern there. And the people of some of the Central Asian countries are very wary about the rise of China and the economic rise of China, and somewhat the Russian umbrella that used to be their protectorate, you know, and I am thinking of Kazakhstan and Tajikistan, for example, is no longer there because it is basically this collusion going on with China. As far as Europe is concerned, I think, you know, America should basically, you know, rise again in the eyes of many of these European citizens and offer an alternative narrative to the authoritarian narrative that is now sort of coming up in, you know, from China or from Russia. And, you know, this is like Greece, should basically look toward Western values and not toward, you know, authoritarian values, and unfortunately these are the values that China is bringing when investing in some of these countries. Ms. Kendall-Taylor. We talked about it a little bit earlier kind of all of the ways in which the relationship is growing, and I think as has been talked about the implication of that growing relationship is significant and I would put that close to the top of the No. 1 issue, or close to the top of the issues that I am concerned about. So in a world of great-power competition, there are three and the United States is not going to be alone on the side with one. We have talked about how the growing relationship, I think, is serving to undermine democracy particularly in Europe, but it is also the way that they are creating an alternative to democracy. China in particular demonstrates that the road to prosperity and democracy no longer runs through the United States. They are exporting their best practices. President Putin is showing other leaders that if, you know, that you can stand up to the United States and it is emboldening other leaders across the world. But it is more than a democracy and human rights issue. It is very much a national security issue. And I have given a couple of examples, I think, of how that synergy or how their coordination could affect the United States. But, really, at the most basic level you could imagine a scenario where Russia and China decide to make moves in their respective spheres of influence at the same time. So what happens and the United States would, and NATO in particular would struggle to respond to coordinated moves between Xi Jinping in the South China Sea and Putin in Europe. That would severely strain U.S. military capacity to respond to those challenges. So I think these are the types of things--that certainly is a long way off, but I think these are the types of things that policymakers need to be thinking about now, because we have to plan for those contingencies and also work to prevent the closening relationship from coming to fruition in ways that would have that much of a consequence. And I think there, when we talk about the importance of values and democracy, I mean getting our own house in order and providing an alternative, an attractiveness of a democratic model that other countries will want to emulate I think is one of the most important ways, that is kind of a two-for-one. It helps deter all of the kind of a hostile, malign actions that both Russia and China are taking both in the United States and Europe. So it is a two-for-one, but these are the types of things that I think we need to be thinking about now. Mr. Guest. Thank you. I yield back, Mr. Chairman. Mr. Keating. Thank you very much. The chair recognizes and we are going to let him--give him a chance to sit down, Representative Gonzalez from Texas. Thank you for joining us. I know it has been a busy morning. Representative Gonzalez. Mr. Keating. Thanks. He is yielding back. Just following up with what Representative Guest said, I think one of the key aspects of this morning's, among many, testimony from our witnesses was the concern for this growing relationship coordination and collaboration between Russia and China. And I think it makes the issue even more compelling from a U.S. standpoint of why we have to work hard to strengthen our existing relationship with our European Union coalition partners, that we have control over more than we do dealing with the activities of China and Russia. And I think that is one of the more important messages of this morning, also even beyond Europe and Eurasia to have the U.S. proactively get involved in providing alternatives and having a stronger role to try and combat that growing influence together it is important. I would just as part of my closing, and then I know that the vice chair has some final comments and perhaps a question as well, just one thought I had digging down to a specific and I am worried about the fractures that occur and that I see occurring in Europe. I understand Congress has a critical role going forward and we are exercising that in this committee and in the larger Foreign Affairs Committee. We are doing it in Armed Services and so many of our other committees trying to project that and actually have been, I think, in this short period of time very successful in doing so. But I want to give an example of something I hear from time to time and it is nothing to undercut our alliance with the U.K., our great ally, but we hear conversations from the administration, even from other members, talking about having a bilateral trade agreement with U.K. And even though they have to wait for Brexit to get over for anything like that to occur, having these discussions and having discussions about, you know, fast tracking when the time comes or prioritizing a bilateral agreement with U.K. but not having that kind of discussion with the rest of the EU, I see that as a growing concern of mine in terms of how that can fracture our relationship particularly during these difficult times of dealing with the Brexit issue. Could you comment on how that kind of discussion, although it might be well-intended, could have an unintended effect of further fracturing our relationship with the rest of the EU, which after all is 80 percent of our trading partners in Europe? If anyone wants to comment on that. Mr. Le Corre. Mr. Chairman, I do not know if you are referring to the missed opportunity of a meeting between the Secretary of State and the German Chancellor, but that was certainly not well taken in Germany. But meanwhile, I understand Secretary Pompeo went to London. Obviously, from my point of view as somebody looking at China, I think there are real concerns about the bilateral relationship between China and the U.K. As we have discussed earlier, the level of Chinese involvement, economic involvement in Britain is much higher than in any European country already, and the U.K. is certainly the U.S.', you know, oldest ally and there is a very strong link between the two countries. On the other hand, as you pointed out, 80 percent of the trade is done with the rest of Europe. And there is an integrated European market that is working quite well, and in fact, the pro-European sentiment has increased over the past 2 years ever since the referendum in the U.K. decided for Britain to leave, apparently. But it hasn't been done yet and the process is not completed. So I think, you know, looking at the European Union as a strong partner is something the U.S. should certainly do and the U.K. should try to be, I mean, you know, looked at as a European country not as a standalone country. It will remain part of Europe. In fact, you know, British officials do say that on a regular basis and I cannot see otherwise in terms of geographics. And, you know, vis-a-vis China or vis-a-vis Russia, I think, you know, the relationship will remain close between the EU and the U.K. and between the U.K. and the U.S. So, you know, I think these two things should be done in parallel. Mr. Keating. Great. Ms. Segal? Ms. Segal. Just to add to that, I think as your question references it has been a very complicated process between the EU and the U.K. ever since the Brexit vote and that issue is still not resolved. And I would make the argument also on the basis of what is in the U.S. national interest that we do not really want anything that is going to result in a destabilizing resolution of that issue. So any sort of interference that actually complicates and potentially destabilizes the outcome of how that Brexit vote is resolved is actually harmful to the United States. Mr. Keating. Yes. Well, I hope that our friends in Europe know from this committee and from a very strong bipartisan standpoint that we are sensitive to the issues that they are dealing with, particularly with elections coming up and dealing with the Brexit issue. And that as a Congress I can speak for this committee as well as the full committee, we are sensitive to that issue. We are not taking our relationship with our closest allies and our coalition for granted and we will continue to adopt that attitude, because the attitude is important too as substance in many instances as we see now. I now yield to the vice chairman of the committee who may have a final comment and a question. Ms. Spanberger. Thank you, Mr. Chairman. We have talked a lot today about 5G technology threaded throughout the conversation, but I did want to followup just in a closing statement with a question. So as we talk about 5G technology, recognizing the potential that it holds to transform telecommunications as we know it resulting in huge, potentially huge economic benefits to our citizens and American companies, we are facing challenges with companies that have close ties to the Chinese Government such as Huawei that are currently leading global competitors in early 5G equipment and software production. According to NATO's Cooperative Cyber Defence Centre of Excellence, Huawei's growing influence as a leading supplier of 5G technology in Europe could be exploited by China to engage in espionage, monitor foreign corporations and governments, and ultimately support Chinese military operations. My question as we close out this discussion is how can we ensure that the United States and our allies are not left behind by these technological advances and forced to choose between putting our data at risk and waiting around for the rest of the market to catch up, and how can we improve the competitiveness of U.S. companies in this space, specifically how can non-Chinese companies compete with Huawei given that its telecom networks typically cost 20 to 30 percent less than our competing products? Ms. Kendall-Taylor. So I think all of the kind of advantages that Huawei has you have rightly noted. Currently, the discounts that European companies are offered are somewhere in the realm of 20 to 30 percent. So Huawei is able to come in and because of the subsidies they receive from the State they are offering their services at a much discounted price. They are also vertically integrated, I understand, which means that Huawei is providing a soup-to-nuts solution that other providers just are not doing and they are ready to go now. So there is very valid concerns in Europe, I think, that by banning Huawei that we would delay the deployment of 5G networks in Europe. So there are all of these considerations and figuring out how to counter it, I think, is something that will be and has to be front and center in terms of priorities now. There is some really excellent work that is being done at the Center for New American Security and there should be a memo that is coming out soon that lays out a whole host of recommendations that would also address what the United States should be doing in terms of its own kind of domestic posture. And one of the things that you highlighted is rightfully making sure that the United States is prioritizing and investing in 5G as a foundation for American competitiveness. And we have to be able to offer an alternative and that is just not where we are at the moment. And it also highlights the need to work very closely with like-minded countries in Europe to do things like as we have already talked about, creating this objective screening criteria. So if countries in Europe are reticent to taking sides, which they are, they do not want to have to be seen as choosing between the United States and China, then going down this route where we are coming up with these objective criteria that providers have to meet in order to be allowed to be the provider of choice. That is an objective approach then, which essentially would screen out Huawei given all of the human rights and surveillance considerations that you highlighted. There are other opportunities too, making sure that 5G networks are secure by design from the start. And I think it is also incumbent on the United States to continue to make the case with Europeans about what our rationale is. Because there is obviously concerns by the Europeans that we are being protectionist, that we want to keep Huawei out, given the huge kind of economic and competitiveness implications that any country will have in being the 5G provider. So leaning on the intelligence community perhaps to be more forward-leaning where they can in terms of sharing intelligence or the rationale for why we are making the decisions that we can. We have seen that was really useful, for example, with the INF treaty. It took the intel community a very long time to share the information and data that was ultimately able to get the Europeans to come along with us, so that could be kind of a best practices case study that we could learn from. So, I think, generally speaking, there is a whole host and it is not a simple solution, but I would hopefully as soon as the CNAS report is out, would kind of recommend it to others because I think it has some really excellent suggestions. Ms. Spanberger. Thank you, Dr. Kendall-Taylor. Dr. Cooper? Mr. Cooper. Just one more comment to add on this. I think one of the challenges here is that the U.S. approach has largely been to exclude Huawei and ZTE and others from the U.S. market and there are lots of good reasons for that. But the reality is, is that is not going to work in Europe. It will work in some places in Europe, but broadly I think the Europeans are going to decide to mitigate the challenges inherent in Chinese 5G technology just the way they have in 3G and 4G. And so, I think we are going to have to come up with an approach and we might not like it, but one that accepts that we are going to be in a risk-mitigation world. And the problem we have is that we have spent so much time in the last few months explaining to our friends that you cannot mitigate the risk, that now when we come back and say, ``Well, here, let us help you mitigate it,'' it is a little confusing to them. And so we have got to shift our strategy, I think, pretty quickly and be just as nimble as the Chinese have been in changing how they talk about Huawei and 5G technology in general. Ms. Spanberger. Thank you. Mr. Le Corre? Mr. Le Corre. Thank you. Just a few comments. I think I agree with what Dr. Cooper just said. It is very difficult to change Europe when it comes to dealing with Chinese telecommunication companies. They have been there for quite some time and in many cases they have invested. They have hired local people. Not very many, in fact, and that may be a point that should be underlined that they have not created a lot of jobs, for example, and it is mainly about bringing technology into Europe. So investment might be the answer, because as we know Huawei was the first to invest in 5G technologies, you know, almost 10 years ago, and so the rest of the world and the West in particular has not done very much. So I would say that, you know, within each European country, especially those strong NATO allies of the United States and strong EU members, you know, there is a debate inside these countries within the security agencies, the defense establishments, let's say, and also, you know, the foreign ministries, the economics ministries, and the business community. But I would say sort of the sort of the very heavy-handed discourse coming out of China and which you pointed out yourself, or the other Congresswoman, I am sorry, the surveillance mechanisms, all this, this is not really helping China's image. And again, you know, information and explanation of what 5G actually is and what it is going to mean to live in a connected house in a connected city, smart city, that is something that people will need to know about and having, you know, counter offers will be critical. Ms. Spanberger. Thank you. I yield back, Mr. Chairman. Mr. Keating. Well, thank you. I want to thank our witnesses. I will tell you, this was an excellent hearing, excellent testimony and in a time when the full committee is looking at many of the challenges coming from China, we spent most of this morning looking at what the future challenge will be, not just the present, and I think that was very helpful to us as a committee and certainly helpful as a Congress. So thank you very much for your participation and we will look forward to further communications and any questions the members might have in writing. Thank you. [Whereupon, at 11:53 a.m., the subcommittee was adjourned.] APPENDIX [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]